LAW Contract Part IV PDF

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Part IV- Rescissible Contracts, Voidable Contracts, Unenforceable Contracts, and Void Contracts The following are defective contracts, except: a. Rescissible contractsb. b. Voidable contracts c. Unenforceable contracts d. Void and inexistent contracts e. None of the above Answer E Is a remedy grante...

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Part IV- Rescissible Contracts, Voidable Contracts, Unenforceable Contracts, and Void Contracts 1. The following are defective contracts, except: a. Rescissible contractsb. b. Voidable contracts c. Unenforceable contracts d. Void and inexistent contracts e. None of the above

Answer E

2. Is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of the contract? a. Rescission b. Annulment C. Ratification d. Enforceability

Answer: A Note: Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone

3. Is a relief which the law grants on the premise that the contract is valid for the protection of one of the contracting parties and third persons from all injury and damage the contract may cause, or to protect some incompatible and preferential right created by the contract? a. Rescission b. Annulment C. Ratification d. Enforceability

Answer: A

Note: Rescission is a relief which the law grants on the premise that the contract is valid for the protection of one of the contracting parties and third persons from all injury and damage the contract may cause, or to protect some incompatible and preferential right created by the contract.

4. I. Rescission creates the obligation to return the object of the contract II. To rescind is to declare a contract void at its inception and to put an end to it as though it never was. a. Only I is true b. Only II is true c. Both are true d. Both are false

Answer: C Note: Rescission has the effect of unmaking a contract or its undoing from the beginning, and not merely its termination. Hence, rescission creates the obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. To rescind is to declare a contract void at its inception and to put an end to it as though it never was. It is not merely to terminate it and release the parties from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. Accordingly, when a decree for rescission is handed down, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation. The rescission has the effect of abrogating the contract in all parts. The Supreme Court ruled that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement; the question of whether a breach of contract is substantial depends upon the attending circumstances. 5. I. Rescission of a contract will be permitted for a slight or casual breach. II. Rescissible contracts, not being void, they remain legally effective until set aside in a rescissory action and may convey title. a. Only I is true b.Only II is true c. Both are true d. Both are false

Answer: B Note: Rescissible contracts, not being void, they remain legally effective until set aside in a rescissory action and may convey title

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6. The following are rescissible contracts, except: a. Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof. b. Those where one of the contracting party is incapacitated. c. Those agreed upon in representation of absentees, if the latter suffer lesion by more than one fourth of the value of the things which are the object thereof. d. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them.

Answer: B

Note: Article 1381 of the Civil Code provides that contracts entered into in fraud of creditors may be rescinded when the creditors cannot in any manner collect the claims due them. Article 1381 applies to contracts where the creditors are not parties, for such contracts are usually made without the knowledge. Thus, a creditor who is not a party to a contract can sue to rescind the contract to prevent fraud upon him. Or, the same creditor can instead choose to enforce the contract if a specific provision in the contract allows him to collect his claim, and thus protect him from fraud. 7. The following are rescissible contracts, except: a. Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof. b. Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority c. Those covered by statute of frauds. d. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them.

Answer: C

8. A person, usually a minor, who is under a guardian's charge or protection. a. Guardian b. Absentee C. Representative d. Ward

Answer: D

9. I. Rescission implies that there is a contract that, while initially valid, produces a lesion or pecuniary damage to someone. II. Elementary is the principle that the validity of a contract precludes its rescission. a. Only I is true b. Only II is true c. Both are true d. Both are false

Answer: A Note: Elementary is the principle that the validity of a contract does not preclude its rescission. Under Articles 1380 and 1381 (3) of the Civil Code, contracts that are otherwise valid between the contracting parties may nonetheless, be subsequently rescinded by reason of injury to third persons, like creditors. In fact, rescission implies that there is a contract that, while initially valid, produces a lesion or pecuniary damage to someone. 10. I. Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. II. To creditors seeking contract rescission on the ground of fraudulent conveyance rest the onus of proving by competent evidence the existence of such fraudulent intent on the part of the debtor. a. OnlyI is true b. Only II is true c. Both are true d. Both are false

Answer: C

Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. To creditors seeking contract rescission on the ground of fraudulent conveyance rest the onus of proving by competent evidence the existence of such fraudulent intent on the part of the debtor, albeit they may fall back on the disputable presumptions, if proper, established under Article 1387 of the Code. It cannot be overemphasized that rescission is generally unavailing should a third person, acting in good faith, is in lawful possession of the property that is to say, he is protected by law against a suit for rescission by the registration of the transfer to him in the registry

11. I. It cannot be overemphasized that rescission is generally unavailing should a third person, acting in bad faith, is in lawful possession of the property. II. Elementary is the principle that the validity of a contract does not preclude its rescission. a Only I is true

b. Only II is true c. Both are true d. Both are false

Answer: B

12. The exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to. a. Principal remedy b. Subsidiary remedy c. Primary remedy d. Secondary remedy

Answer: B Note: The term "subsidiary remedy" has been defined as the exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to. An action for rescission may not be raised or set up in a summary proceeding through a motion, but in an independent civil action and only after a full-blown trial. As Article 1383 of the Civil Code provides: Art. 1383. The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. Parenthetically, the rescissory action to set aside contracts in fraud of creditors is accion pauliana, essentially a subsidiary remedy accorded under Article 1383 of the Civil Code which the party suffering damage can avail of only when he has no other legal means to obtain reparation for the same. In net effect, the provision applies only when the creditor cannot recover in any other manner what is due him.

13. It is when the debtor has more liabilities than his assets. a. Liquidity b. Inliquidity c. Solvency d. Insolvency Answer: D

14. I. The purpose of rescission is to repair the damages caused.

II. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. a. Only I is true b. Only II is true c. Both are true d. Both are false

Answer: C

15. It entails the return of the benefits that each party may have received as a result of the contract. a. Mutual restitution b. Ratification c. Annulment d. Rescissions

Answer: A Note: Mutual restitution entails the return of the benefits that each party may have received as a result of the contract. This means bringing the parties back to their original status prior to the inception of the contract. Accordingly, when a decree for rescission is handed down, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation. The rescission has the effect of abrogating the contract in all parts....