Short answer. Under Article 1380 of the Civil Code, a validly formed contract can be rescinded only in the cases established by law. Rescission is not available simply because one party changed their mind or because the deal turned out unfavorably — it requires a specific statutory ground recognized by the Civil Code.
What the law says
Contracts validly agreed upon may be rescinded in the cases established by law.
Civil Code, Article 1380 — Rescissible Contracts. Read the full provision →
Rescission and its place among contract remedies
Article 1380 introduces rescissible contracts as a distinct category in the Civil Code. A rescissible contract is one that is validly agreed upon — it meets all the requirements for a valid contract — but which, because of external circumstances, the law allows to be undone. This is different from a void contract, which never had legal effect, and from a voidable contract, which has defects in consent or capacity. Rescission operates on contracts that are legally sound in themselves but cause economic injury or harm that the law treats as a sufficient reason for reversal.
Only the cases established by law
The phrase in the cases established by law is the critical limitation. Rescission is not a general remedy for dissatisfied parties. A party cannot rescind a valid contract simply because they regret the deal, because prices changed, or because the contract turned out to be less advantageous than expected. The Civil Code enumerates the specific grounds for rescission in subsequent articles. Those grounds include contracts entered into by guardians or representatives that cause lesion to their wards, contracts in fraud of creditors, and contracts that are prejudicial to the party seeking rescission in ways the law specifically recognizes.
The nature of rescission as a remedy
When a court grants rescission, the effect is to restore the parties as closely as possible to the positions they were in before the contract. Things received under the rescinded contract must be returned: property goes back to the person who transferred it, money goes back to the payer. If return in kind is impossible — because the property has been transferred to a third party in good faith, for example — the rescinding party may claim damages instead. Rescission is therefore not purely a cancellation; it carries restitution consequences that courts must address when the remedy is granted.
Rescission distinguished from annulment
Rescission under Article 1380 addresses economically harmful but formally valid contracts. Annulment, by contrast, addresses contracts that are defective in consent — those affected by fraud, mistake, undue influence, or incapacity. Both remedies result in the undoing of the contract, but the grounds are different and so are the prescriptive periods and parties who may invoke them. A party who has grounds for both rescission and annulment must choose the appropriate remedy based on the specific defect in the contract and the remedy the facts support — these are distinct legal actions, not alternatives that can be combined freely.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Pryce Corporation vs. Philippine Amusement and Gaming Corporation, G.R. No. 157480, May 6, 2005 — read the decision on LawPhil →
- Salvador Adorable, et al. vs. Court of Appeals, et al, G.R. No. 119466, November 25, 1999 — read the decision on LawPhil →
- Ofelia C. Lavibo, et al. vs. Court of Appeals, et al, G.R. No. 123462, April 10, 1997 — read the decision on LawPhil →