Article 1381 Definition of Terms: 1.

Lesion is the injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. *To give rise to rescission, the lesion must be known or could have been known at the time making the contract, and not due to circumstances subsequent thereto or unknown to the parties. 2. Accion Pauliana rescissory action to set aside contracts in fraud and creditors A. Contract of Guardians General rule: when a guardian enters into a contract, involving the disposition of the wards property, he must secure the approval of the guardianship court. A guardian is authorized only to manage the estate of his ward; hence, he has no power of any portion thereof without approval of the court. Example: The purchase of equipment for the cultivation of lands belonging to the ward, the sale of the harvest of such lands, the purchase of materials for the repair of building, etc. These contracts would not require court approval, because they are made in the ordinary course of the management of the estate of the ward. If the required lesion exists, they are rescissible. But even if such lesion exists, the contract cannot be rescinded, if the guardian has secured the approval of the guardianship court for such contract. B. Contract for Absentees Same principle with art 1381 The powers and duties of a legal representative of an absentee, appointed by the court, are the same as those of guardians. C. Fraud of Creditors Guideline: These are contracts executed with the intention to prejudice the rights of creditors. Existence of credit: Only creditors can ask for the rescission of the contract. The remedy of rescission is available to all creditors who were already such at the time of the fraudulent alienation, when they cannot collect what is due them. Example: Where a sale of a shop and its contents is made by a debtor eleven days after a judgment against him has become final, said sale is presumed to have been effected in fraud, not only of the judgment creditor, but also of the other legitimate creditors by virtue of debts owing long overdue before the said sale; and although these latter creditor did not obtain a judgment until a couple of months after the sale, it is indisputable that they have been defrauded by such sale. [Panlilio vs Victorio, 35 Phil. 706]

Test of Fraud: whether the conveyance prejudice the rights of creditors? Example: The alienation must have been prejudicial to the creditor, it must have had the effect of making the debtor insolvent, having diminished his property to such an extent that he cannot pay the debt. D. Contracts on Things in Litigation A contract executed by the defendant in a suit involving the ownership or possession of a thing, when such contract is made without the knowledge and approval of the plaintiff or of the court. Example: Where X has brought an action to recover possession of a piece of land from Y, and during the pendency of the action Y sells the land to Z, the sale is rescissible and may be set aside at the instance of X when he obtains a judgment in his favour in his action against Y.