Article 1191 of the Civil Code: Rescission for nonperformance
Status: In force
What does Article 1191 say?
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.
What does it mean in plain language?
Article 1191 of the Civil Code gives the injured party in a two-sided contract a choice when the other side does not comply: demand fulfillment or cancel (rescind) the obligation, with damages in either case. The Supreme Court allows rescission only for a substantial breach, not a slight one. The court decrees the rescission and may instead give the defaulting party more time if there is just cause.
How does it work in real life?
The machine that never came
Dante paid in full for a rice mill, but the seller never delivered it. This defeats the purpose of the sale. Under Article 1191, Dante may ask the court for rescission, with return of the price and damages, or for delivery with damages.
A one-day delay
A supplier delivered all the goods, but one day late, and the buyer suffered no real harm. Following Kaw, a slight breach with substantial compliance would not justify rescission, though damages may still be claimed.
The "automatic cancellation" clause
Liza's contract says the seller may cancel it on its own if she breaks any term. The seller cancels, and Liza disputes it. Following Kaw, only a court can settle whether the cancellation was proper.
What does this mean in practice?
- When a party is in delay is explained in Article 1169.
- Rescission for breach is different from annulling a voidable contract (Article 1390) and from void contracts: see void vs voidable contracts.
- Deadlines for suing on a written contract are in Article 1144.
- For free or low-cost legal help, see where to find legal help.
What does Article 1191 say?
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.
In plain words:
- Reciprocal obligations. The rule applies when both parties owe something to each other, as in a sale or a lease. The right to rescind is "implied": it exists even if the contract does not mention it.
- The choice. The injured party chooses fulfillment or rescission, with damages either way, and may switch to rescission if fulfillment becomes impossible.
- The court. The court decrees the rescission, unless there is just cause to give the other party a period to comply.
- Third persons. Rescission does not automatically undo the rights of others who acquired the thing in good faith.
When is the breach serious enough?
In Spouses Kaw v. Heirs of Nodalo (2024), the Court said rescission is not permitted for a slight or casual breach, only for breaches so substantial and fundamental that they defeat the object of the parties in making the agreement. It will not be granted:
- where the breach is only slight or casual;
- where there has been substantial compliance; and
- where the court finds valid reason for giving a period of fulfillment.
In Verga v. Harbor Star Shipping Services (2024), the failure to deliver the stock certificates in a sale of shares was held a substantial breach that gave rise to a right to rescind the sale.
Can one party cancel the contract without going to court?
The contract may contain a clause allowing one party to rescind on its own. In Kaw (2024), the Court said that even then, judicial validation of the unilateral rescission is necessary, because only the final judgment of a court can conclusively settle whether the action taken was correct in law.
What happens after rescission?
Article 1385 sets the effect:
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.
In The Wellex Group v. U-Land Airlines (2015), the Court said this mutual return applies to rescission under Article 1191. It also said rescission under Article 1191 is a principal action based on the breach, different from the rescission of contracts for lesion (unfair prejudice) under Articles 1381 to 1383.
Does it apply to a contract to sell?
In a contract to sell, the seller keeps ownership until the buyer pays the full price. In Kaw (2024), the Court said that when the buyer fails to pay the full price, rescission is not the remedy, because the non-payment simply prevents the seller's obligation to sell from arising. Rescission remains available for a different substantial breach of the contract.
Frequently asked questions
What is rescission under Article 1191?
It is the right of the injured party in a reciprocal obligation to cancel (resolve) the obligation when the other party does not comply. The injured party may instead demand fulfillment, with damages in either case.
Can a contract be rescinded for any breach?
No. In Spouses Kaw v. Heirs of Nodalo (2024), the Supreme Court said rescission is not permitted for a slight or casual breach, only for breaches so substantial and fundamental that they defeat the object of the agreement.
Is a court needed to rescind a contract?
Article 1191 says the court shall decree the rescission claimed. In Kaw (2024), the Court said that even when a contract allows one party to rescind on its own, judicial validation of that rescission is necessary, because only the final judgment of a court can conclusively settle whether it was correct in law.
What must be returned after rescission?
Article 1385 says rescission creates the obligation to return the things that were the object of the contract, with their fruits, and the price with its interest. In The Wellex Group v. U-Land Airlines (2015), the Court applied this to rescission under Article 1191.
Can the seller rescind a contract to sell if the buyer does not pay in full?
In Kaw (2024), the Court said that in a contract to sell, failure to pay the full price simply prevents the obligation to sell from arising, so rescission is not the remedy for that failure. Rescission is available for another substantial breach.
General information, not legal advice. For your case, ask a lawyer, the Public Attorney's Office (PAO) or the agency.
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