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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Article 1191 of the Civil Code provides two (2) remedies for breach of obligations: exact fullfilment and rescind the contract with payment of damages in either case. The rescission provided under said provision is applicable to reciprocal obligations.
Rescission on account of breach of reciprocal obligations is provided under Article 1191 of the Civil Code.
“Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.”
It is well to note that rescission under Article 1191 of the Civil Code gives the injured party two (2) remedies: first, exact fulfillment; and second, rescind the contract, with payment of damages in either case.
In the case of Camp John Hay Development Corporation v. Charter Chemical and Coating Corporation (G.R. No. 198849, August 7, 2019), the Supreme Court held that Article 1191 of the Civil Code refers to rescission applicable to reciprocal obligations. It is invoked when there is noncompliance by one (1) of the contracting parties in case of reciprocal obligations.
Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.
Rescission under Article 1191 will be ordered when a party to a contract fails to comply with his or her obligation. Rescission “is a principal action that is immediately available to the party at the time that the reciprocal obligation was breached.”
Rescission of the obligation under Article 1191 is a declaration that a contract is void at its inception. Its effect is to restore the parties to their original position, insofar as practicable. Mutual restitution is required in cases involving rescission under Article 1191. Where a contract is rescinded, 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.
Be that as it may, the Court, in Camp John Jay Development Corporation v. Charter Chemical and Coating Corporation (G.R. No. 225565, January 13, 2021), clarified that although rescission repeals the contract from its inception, it does not disregard all the consequences that the contract has created.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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