161.

A thing is lost when it, except:

A. Perishes.

B. Goes out of commerce.

C. Disappears in such a way that its existence is unknown or it cannot be recovered.

D. Deteriorates.

D. (Art. 1189, NCC)

162. It gives a right to enjoy the property of another with the obligation of preserving its form and
substance, unless the title constituting it or the law otherwise provides.

A. Lease

B. Antichresis

C. Usufruct

D. Commodatum

C. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and
substance, unless the title constituting it or the law otherwise provides (Art. 562, NCC).

163. A person who has the right to the benefits of another’s property.

A. Lessor

B. Antichretic creditor

C. Usufructuary
D. Bailor

C. Usufructuary, is one having the right to a usufruct; specifically, a person who has the right to the
benefits of another’s property (Black’s Law Dictionary, p. 1580, Eight Edition).

The rights of the usufructuary are:

1. The usufructuary may make on the property held in usufruct such useful improvements or expenses
for mere pleasure as he may deem proper, provided he does not after its form or substance; but he shall
have no right to be indemnified therefor. He may, however, remove such improvements, should it be
possible to do so without damage to the property (Art. 579, NCC).

2. The usufructuary may set off the improvements he may have made on the property against any
damage to the same (Art. 580, NCC).

164. I. When the conditions have for their purpose the extinguishment of an obligation to give, the
parties, upon the fulfillment of said conditions, shall return to each other what they have received.

II. 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.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

165. It has the effect of “unmaking a contract, or its undoing from the beginning, and not merely its
termination.”
A. Rescission

B. Specific performance

C. Annulment

D. Void

A. Rescission has the effect of “unmaking a contract, or its undoing from the beginning, and 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 though in 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 (Unlad Resources Development Corporation, et.al. vs. Renato P. Dragon, et.al., G.R. No.
149338, July 28, 2008).

Extrajudicial rescission of a contract is not possible without an express stipulation to that effect (Spouses
Reynaldo Alcaraz and Esmeralda Alcaraz vs. Pedro M. Tangga-an, et.al., G.R. No. 128568, April 9, 2003).

The Supreme Court, however, has held in Tan v. Court of Appeals, that:

The power to rescind obligation is implied in reciprocal ones in case one of the obligors should not
comply with what is incumbent upon him x x x. However, it is equally settled that, in the absence of a
stipulation to the contrary, this power must be invoked judicially; it cannot exercised solely on a party’s
own judgment that the other has committed a breach of the obligation. Where there is nothing in the
contract empowering a party to rescind it without resort to the courts, such party’s action in unilaterally
terminating the contract x x x is unjustified (Victoria Ong, vs. Ernesto Bognalbal and CA, G.R. No. 149140,
September 12, 2006).

166. Are those which arise from the same cause, wherein each party is a debtor and a creditor of the
other, such that the performance of one is conditioned upon the simultaneous fulfillment of the other?

A. Unilateral obligation

B. Reciprocal obligation

C. Real obligation

D. Personal obligation
B. Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and
a creditor of the other, such that the performance of one is conditioned upon the simultaneous
fulfillment of the other. From the moment one of the parties fulfills his obligation, delay by the other
party begins (ASJ Corporation and Antonio San Juan vs. Sps. Efren & Maura Evangelista, G.R. No. 158086,
February 14, 2008).

167. I. Rescission is allowed only where the breach is substantial and fundamental to the fulfillment of
the obligation.

II. The right to rescind may be waived expressly only.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

A. The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on
a breach of faith by the other party that violates the reciprocity between them (Virgilio R. Romero vs. CA
and Enriqueta Chua Vda. De Ongsiong, G.R. No. 107207, November 23, 1995). Rescission, however, is
allowed only where the breach is substantial and fundamental to the fulfillment of the obligation (Fidela
del Castillo Vda. De Mistica vs. Spouses Bernardino Naguiat and Maria Paulina Gerona-Naguiat, G.R. No.
137909, December 11, 2003).

Article 1191 of the Civil Code provides that the power to rescind obligation is implied in reciprocal ones,
in case one of the obligors should not comply with what is incumbent upon him. The rescission referred
to in this article, more appropriately referred to as resolution, is not predicated on injury to economic
interests on the part of the party plaintiff, but of breach of faith by the defendant which is violative of
the reciprocity between the parties. The right to rescind may be waived, expressly or impliedly (Sps. Lino
Francisco and Guia Francisco vs. DEAC Construction, Inc., and Geomar A. Dadula, G.R. No. 171312,
February 4, 2008).

168. It means bringing the parties back to their original status prior to the inception of the contract.
A. Mutual rescission

B. Mutual annulment

C. Mutual restitution

D. Mutual ratification

C. Mutual restitution is required in cases involving rescission under Article 1191. This means bringing the
parties to their original status prior to the inception of the contract. Article 1385 of the Civil Code
provides the effects of rescission, to wit:

ART. 1385. 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.

Neither shall rescission take place when the things which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.

169. I. The rescission has the effect of abrogating the contract in some parts.

II. 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.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

B
170. I. The power to rescind obligations is implied in reciprocal ones in case of one of the obligors
should not comply with what is incumbent upon him.

II. It is settled that, in the absence of a stipulation to the contrary, power to rescind obligations must be
invoked judicially.

A. Only I is true

B. Only II is true

C. Both are true

D. Both are false

C. The right to rescind a contract arises once the other party defaults in the performance of his
obligation.