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TITLE Vl contract, as it gives rise to reciprocal obligations.

SALES (Pio Barretto Sons, Inc. vs. Compania Maritima,


Chapter 1 62 SCRA 167).
NATURE AND FORM OF THE CONTRACT
- Neither is the delivery of the thing bought nor
the payment of the price necessary for the
Article 1458. By the contract of sale one of the contracting perfection of the contract of sale. Being
parties obligates himself to transfer the ownership of and to consensual, it is perfected by mere consent.
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent. Elements:
a) Essential elements – those without which, there can
A contract of sale may be absolute or conditional. be no valid sale:
- Consent or meeting of minds
SALE - A Determinable subject matter
- A nominate contract whereby one of the - Price certain in money or its equivalent
contracting parties obligates himself to transfer b) Natural elements – inherent in the contract, and
the ownership of and to deliver a determinate which in the absence of any contrary provision, are
thing and the other to pay therefor a price deemed to exist in the contract:
certain in money or its equivalent. - Warranty against eviction
- Warranty against hidden defects
Vendor/Seller Vendee/Buyer c) Accidental elements – may be present or absent
To transfer ownership To pay price certain in depending on the stipulation of the parties (e.g.:
(fundamental aim of the money or its equivalent conditions, interest, penalty, time or place of
contract of sale); and payment, etc.)

To deliver a determinate Essential Elements of the Contract of Sale


thing 1. Consent or meeting of the minds
- consent of the contracting parties by
NOTES: virtue of which the vendor obligates
- Delivery and payment in a contract of sale are so himself to transfer the ownership of and
interrelated and intertwined with each other that
to deliver a determinate ting, and the
without delivery of the goods there is no
corresponding obligation to pay. The two vendee obligates himself to pat therefor a
complement each other. It is clear that the two price certain in money or its equivalent.
elements cannot be dissociated, for the contract
of purchase and sale is essentially a bilateral

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 1
2. Determinate Subject Matter Consensual Perfected by mere consent
- object certain which is the subject matter Onerous To acquire the rights, valuable
of the contract. The object must be licit consideration must be given
and at the same time determinate or, at Principal For the contract of sale to validly exist,
there is no necessity for it to demand
least, capable of being made determinate
upon the existence of another valid
without the necessity of a new or further contract.
agreement between the parties. Commutative The values exchanged are almost
equivalent to each other
3. Price certain in Money or its Equivalent Bilateral Both parties are bound by obligations
- the cause of the obligation which is reciprocal dependent upon each other
established. The cause as far as the vendor Nominate Code refers to it by a special
is concerned is the acquisition of the price designation or name
certain in money or its equivalent, while
Aleatory contract: one of the parties or both
the cause as far as the vendee is
reciprocally bind themselves to give or to do
concerned is the acquisition of the thing something in consideration of what the other shall
which is the object of the contract. give or do upon the happening of an event which is
uncertain, or which is to occur at an indeterminate
QUESTION: What is the effect and/or consequence of the time. (Ex: Sale of sweepstakes ticket)
absence of consent of the owner in a contract of sale of
said property? Stages in the Contract of Sale
a. Generation or Negotiation
ANSWER: b. Perfection – meeting of the minds
- The contract of sale is void. One of the essential c. Consummation – when the object is delivered
requirements of a valid contract of sale is the and the price is paid
consent of the owner of the property.

Characteristics: COP CBN


a. Consensual;
b. Onerous;
c. Principal;
d. Commutative; In some cases, aleatory (emptio
spei);
e. Bilateral;
f. Nominate

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 2
1. NEGOTIATION/PREPARATORY 3. CONSUMMATION
A. OFFER QUESTION: How does the consummation stage in a
QUESTION: What are the rules in the conception stage contract of sale take place?
about the offer?
ANSWER: It takes place by the delivery of the thing
ANSWER: together with the payment of the price.
OFFER IS RULE
FLOATED AND Electronic Commerce Act (RA 8792)
IT IS: a) Electronic documents have the legal effect, validity
Offer is floated Prior to acceptance, may be or enforceability of any other document or legal
withdrawn at will by offeror but no writing
authority to modify it b) As long as electronic document maintains its
With a period Must be accepted within the period, integrity and reliability and is capable of being
otherwise, extinguished at the end of displayed to the person to whom it is to be
period and may be withdrawn at will presented, containing the electronic signature of the
by offeror but must not be arbitrary, person sending it. (Sec 7, 8 of RA 8792)
otherwise, liable for damages
With a condition Extinguished by happening/ non‐ Kinds of Sales
happening of condition a.) As to the nature of the subject matter:
without period/ Continues to be valid depending 1.) sale of real property
condition upon circumstances of time, place 2.) sale of personal property
and person
With a counter‐ Original offer is extinguished b.) As to the value of the things exchanged:
offer 1.) commutative sale
2.) aleatory sale
2. PERFECTION
QUESTION: When is a contract of sale deemed perfected? c.) As to whether the property is tangible or
intangible
1.) sale of property (tangible or corporeal)
ANSWER:
- GR: It is deemed perfected at the moment there is 2.) sale of a right
meeting of minds upon the thing which is the object
d.) as to the validity or defect of the transaction
of the contract and upon the price. (Art.1475, par.1)
1.) valid sale
- XPN:
2.) rescissible sale
- When the sale is subject to a suspensive condition
3.) voidable sale
by virtue of law or stipulation.
4.) unenforceable sale
5.) void sale

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 3
e.) As to the legality of the object Heirs of RomanaIngjutiro, et. al. v. Sps Leon Casals
1.) sale of a licit object and Lilia C. Casals, et. al
2.) sale of an illicit object - It is essential that the vendors be the owners of the
f.) As to the presence of absence of conditions:
property sold, otherwise they cannot dispose that
1.) absolute sale
2.) conditional sale which does not belong to them. Nemo dat quod non
habet (No one can give more than what he has)
g.) As to whether wholesale or retail
1.) wholesale Contract to sell
- if to be resold for a profit the goods - exclusive right and privilege to purchase an object.
being unaltered when resold, the - a bilateral contract whereby the prospective seller,
quantity being large. while expressly reserving the ownership of the
2.) retail subject property despite delivery thereof to the
prospective buyer binds himself to sell the said
h.) As when the price is tendered property exclusively to the prospective buyer upon
1.) cash sale fulfilment of the condition agreed upon, that is, full
2.) sale on instalment plan payment of the purchase price.

CASE LAWS: NOTE:


People’s Homesite v. Court of Appeals - Absent a proviso in the contract that the title to the
- If subdivision lot is sold to a buyer on condition that property is reserved in the vendor until full payment
the higher authorities would approve the same, of the purchase price or a stipulation giving the
there is as yet NO perfected sale. vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within the fixed
Sps. VivicencioBabasa and Elena Cantos Babasa v. period, the transaction is an absolute contract of
sale and not a contract to sell. (Dignos vs. CA [1988])
CA
- A deed of sale is ABSOLUTE in nature although a
- The contract of sale by itself is not a mode of
“conditional sale” absent such stipulation. In such acquiring ownership. The contact transfers no real
cases, ownership of the thing sold passes to the rights; it merely causes certain obligations to arise.
vendee upon the constructive or actual delivery
thereof.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 4
Conditional Sale Contract to Sell
As to reservation of title to the subject property
Contract of Contract to
In both cases the seller may reserve the title to the subject
Sale Sell
property until fulfillment of the suspensive condition i.e. full
1. Title passes to the buyer 1. Ownership is reserved in
payment of the price
upon delivery of the thing the seller and is not to pass
sold until full payment of the As to effect of fulfillment of suspensive condition
purchase price 1. Upon fulfillment of the 1. Upon fulfillment of the
2. Non-payment of the price 2. Full payment is a positive suspensive condition, the suspensive condition, which is
is a negative resolutory suspensive condition, the contract of sale is thereby the full payment of the
condition and the remedy of failure of which is not a perfected, such that if there purchase price, ownership will
the seller is to exact breach – casual or serious had been previous delivery not automatically transfer to
fulfilment or to rescind the but simply prevents the of the subject property to the buyer although the property
contract obligation of the vendor to the buyer, ownership thereto may have been previously
convey title from having automatically transfers to delivered to him. The
binding force the buyer by operation of prospective seller still has to
3. Vendor loses and cannot 3. Title remains in the law without any further act convey title to the prospective
recover ownership of the vendor if the vendee does by the seller. buyer by entering into a
thing sold and delivered until not comply with the contract of absolute sale.
the contract of sale is condition precedent of
resolved and set aside making payment at the time As to effect of sale of the subject property to 3rd persons
specified in the contract 1. Constructive /actual 1. Third person buying the
knowledge on the part of the property despite fulfilment of
“Sale” Distinguished from “Assignment of Property in 2nd buyer of the defect in the the suspensive condition
Favor of Creditors (Cession)” seller’s title renders him not a cannot be deemed a buyer in
- Art. 1255 of the Civil Code provides the concept of registrant in good faith. Such bad faith and prospective
cession that “debtor may cede or assign his second buyer cannot defeat buyer cannot seek the relief of
property to pay his creditors in payment of hide the first buyer’s title. Ratio: reconveyance of property.
debts. This cession, unless there is a stipulation to Fulfilment of the suspensive Exception: If There was no
the contrary, shall only release the debtor from conditions affects the seller’s previous sale of the property.
responsibility of the net proceeds of the thing title to the property and
assigned. The agreements which, on the effect of previous delivery of the
cession, are made between the debtor and his property automatically
creditors shall be governed by special laws.” transfers ownership/title to
the buyer.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 5
Manresa Definition: “consists in the abandonment
Article 1459. The thing must be licit and the vendor must
of all the property of the debtor for the benefit of
have a right to transfer the ownership thereof at the time it
his creditors in order that the latter may apply the
is delivered.
proceeds thereof to the satisfaction of heir credits.

Dation in Payment Cession Two Rules are given here:


1. One creditor is sufficient 1. There must be 2 or a. The object must be LICIT
more creditors b. The vendor must have the RIGHT to transfer
2. Not all properties of the 2. All the debtor’s OWNERSHIP at the time the object is delivered
debtor are conveyed properties are
conveyed
Licit object
3. Debtor may be solvent or 3. Cession takes place
insolvent only if the debtor is a) Word licit means lawful, i.e., within the
insolvent commerce of man
4. The creditor becomes the 4. The creditors do not b) Things may be illicit:
owner of the thing become owners of the - Per se (of its nature)
conveyed thing conveyed. - Per accidens (made illegal by
provision of the law)
Sale Distinguished from Lease a) If the object of the sale is illicit, the contract
- In a sale, the seller transfers ownership; in a lease,
is null and void. (Art. 1409), and cannot,
the lessor or landlord transfers merely the
temporary possession and use of the property. therefore, be ratified.
b) The right of redemption may be sold. So also
Kinds of Extrajudicial Foreclosure Sale may literary, artistic, and scientific works. A
1) Ordinary execution sale – governed by the usufruct may also be sold.
pertinent provisions of Rule 39 of the Rules
of Court The thing is licit when—
2) Judicial foreclosure sale – governed by the 1. Within the commerce of man (Art 1347, CC)
pertinent provisions of Rule 68 of the Rules Example of properties that are not within the
of Court
commerce of man:
3) Extrajudicial foreclosure sale – governed by
Act 3135, amended by Act 4118, “An Act to a. Those belonging to the State or its political
Regulate the Sale of Property Under Special subdivisions intended for public use or
Powers Inserted In or Annexed to Real Estate public service. (Art 420, CC).
Mortgages.” b. Church

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 6
c. Narcotics or dangerous drugs except upon right. Hence, a usufructuary may generally sell his
prescription usufructuary right.

Artates and Pojas v. Urbi, et. al. L-29421, January QUESTION: Should the seller be the owner at the time of
30, 1971 perfection of the contract?
- Under Section 118 of the Public Land Act (Com. Act
141), such homestead generally cannot be sold, ANSWER:
cannot be encumbered and cannot be held liable for - GR: No. Seller must have the right to transfer
the satisfaction of any debt CONTRACTED prior to
ownership at the time of delivery or
the expiration of the period of 5 years from and
after the date of the issuance of the patent or grant. consummation stage. He need not be the owner at
The sale, therefore of a homestead patent which was the time of perfection of the contract.
made less than 4 years after the acquisition of the - XPN: Foreclosure sale wherein the mortgagor
couple of the land is NOT VALID. should be the absolute owner.

Transfer of Ownership QUESTION: EJ was subjected to a buy‐bust operation


a) It is essential for a seller to transfer ownership (Art. where police officers posed to buy 500 pesos worth of
1458) and, therefore, the seller must be the owner of “S”. She was then charged with a violation of the
the subject sold. (Nobody can dispose of that which Dangerous Drugs Act for trafficking drugs. EJ uses as
does not belong to him – nemo dat quad non habet) defense her lack of possession of the object of the sale.
b) Although the seller must be the owner, he need not Would her contention free her from liability?
be the owner at the time that he is the owner at the
time of the perfection of the contract. It is sufficient ANSWER:
that he is he owner at the time the object is - No. Though she was not in possession of the
delivered. object of sale, Article 1459 merely requires that
c) The seller need not be the owner at the time of the vendor must have the right to transfer
perfection because, after all, “future things or ownership of the object sold at the time of
goods,” inter alia, may be sold. delivery. In the case at bar, though Beth is not the
d) There can be a sale of future property, there can owner, she had the right to dispose of the
generally be no donation of future property. (Art. prohibited drug. Ownership was thereafter
751, CC) acquired upon her delivery to the men in the alley
e) A person who has a right over a thing (although he after her payment of the price. (People v.
is not the owner of the thing itself) may sell such Ganguso, G.R. No. 115430, Nov. 23, 1995)

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 7
SALE BY A PERSON WHO DOES NOT OWN THE Note: Nemo dat quod non habet – you cannot give what
THING SOLD you do not have, properly applicable to the consummation
QUESTION: What is the status of a sale by a person who of a sale.
does not own the thing subject of the sale?
QUESTION: What is the legal effect of sale by a non‐
ANSWER: owner?
It depends upon the stage of the sale.
1. When seller is not owner at perfection stage – ANSWER:
the sale is valid. Ownership of the subject matter by GR: The buyer requires no better title to the goods
the seller at this stage is not an essential than the seller had; caveat emptor (buyer beware).
requirement for the validity of sale. It is necessary at XPN:
the time of delivery. Hence, a valid contract of sale 1. Estoppel – when the owner of the goods is by his
can cover subject matter that is not yet existing or conduct precluded from denying the seller’s
even a thing having only a potential existence at the authority to sell
time of perfection; or even a thing subject to a 2. When the contrary is provided for in recording laws
resolutory condition. 3. When the sale is made under statutory power of sale
or under the order of a court of competent
Note: If the seller later acquires title thereto and delivers it, jurisdiction
title passes by operation of law. 4. When the sale is made in a merchant’s store in
accordance with the Code of Commerce and special
When seller is not owner at consummation stage laws
a. Old view – the contract of sale is valid, but the 5. When a person who is not the owner sells and
transfer of title is void. (Mindanao‐Academy, Inc. v. delivers a thing, and subsequently acquired title
Yap, G.R. No. L‐17681, Feb. 26, 1965) thereto
b. New view – the sale by a non‐owner of the 6. When the seller has a voidable title which has not
subject property is void instead of treating the been avoided at the time of the sale
tradition/delivery aspect as having no effect on 7. Sale by co‐owner of the whole property or a definite
transferring ownership to the buyer. (DBP v. CA, portion thereof
G.R. No. 110053, Oct. 16, 1995) 8. Special rights of unpaid seller

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 8
QUESTION: What are the instances when the Civil Code Uy Piaco v. Micking, et. al., 10 Phil. 286
recognizes sale of things not actually or already owned - FACTS: A corporate stockholder sold his share o
by the seller at the time of sale? another, but the sale has not yet been recorded in
the books of the corporation. Is the sale valid?
ANSWER:
- HELD: As between the seller and the buyer, the sale
Sale of a thing having potential existence (Art.1461,
is perfectly valid since the seller was the owner of
NCC) the corporate shares. However, as between the
Sale of future goods (Art. 1462, NCC) corporation and the buyer, the latter has acquired
Contract for the delivery at a certain price of an only an EQUITABLE TITLE which may eventually
article, which the seller in the ordinary course of ripen into a legal title after he presents himself to
business manufactures/ procures for the general the corporation and performs the acts required to
market, whether the same is on hand at the time or effectuate the transfer.
not (Art. 1467, NCC)
Martin v. Reyes, et. al, 91 Phil. 666
- HELD: The vendor need not own the property at the
CASE LAWS
time of perfection, it s being sufficient that he be
Santos v. Macapinlac and Pinlac the owner at the time he is to deliver the object. The
- FACTS: A mortgaged his land to B, but sold the land contention that there is no sale is rather too
to C. give the effect of the transaction. technical a viewpoint. The deed of sale may be
placed in the same category as a promise to convey
- HELD: A, being the owner, could sell the property to the land not yet owned by the vendor – an obligation
C who after delivery became the owner, subject to which nevertheless may be enforced.
B’s right to foreclose the mortgage upon non-
payment of the mortgage credit. B does not have to Delpher Trades Corp. v. IAC, GR 69259, Jan. 26,
give C anything, even if the mortgage is foreclosed, 1989
for the simple reason that B did not sell the
- The Deed of Exchange of property between A and B
property to him. Neither did B receive the purchase
and Delpher cannot be considered a contract of sale.
price.
There was no transfer of actual ownership interests
by A and B to a third party. A and B merely
Note: B has no right to nullify the contract between A and C CHANGED their ownership from one form to
provided that C is in good faith. another. The ownership remained in the same
hands. Hence, Hydro has no basis for its claim of a
right of first refusal.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 9
Article 1460. A thing is determinate when it is
particularly designated or physically segregated from all Rule if New Agreement is Needed
others of the same class. - If there is a necessity of making a new agreement to
determine the amount and the quality of the object
The requisite that a thing be determinate is satisfied if at sold, this necessarily constitutes an obstacle to the
the time the contract is entered into, the thing is capable perfection of the contract.
of being made determinate without the necessity of a
new or further agreement between the parties.
Article 1461. Things having a potential existence may be
the object of the contract of sale.
Meaning of Determinate:
a) The object of the sale must be determinate, The efficacy of the sale of a mere hope or expectancy is
i.e., specific, but it is not essential really that deemed subject to the condition that the thing will come
at the time of perfection, the object be into existence.
already specific. It is sufficient that it ne
capable of being determinate without the The sale of a vain hope or expectancy is void.
need of any new agreement
b) However, from the viewpoint of risk or loss, Things With a Potential Existence
not until the object has really been made Sale of a thing having a potential existence: This is a
determinate can we say that the object has future thing that may be sold.
been lost, for as is well known, “generic (a) young animals not yet in existence or still ungrown
things cannot be lost.” fruits
(b) the wine that a particular vineyard is expected to
Yu Tek v. Gonzales produce
- FACTS: Seller sold 600 piculs of sugar to buyer. (c) the wool that shall, thereafter, grow upon a sheep
Because seller was not able to produce 600 piculs on (d) the expected goodwill of a business enterprise.
his sugar plantation he was not able to deliver. Is he
liable? Sale of a “mere hope or expectancy”
- The hope or expectancy already exists; what does
- HELD: Yes, because no specific lot of sugar can be not yet exist is the expected thing. Therefore, for the
pointed out as having been lost. Sugar here was still 2nd paragraph to have some sense, it should refer to
generic. a sale of “an expected thing,” not to the “hope or
expectancy”

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 10
Emptio Rei Speratae and Emptio Spei There may be a contract of sale of goods, whose
a) Emptio Rei Speratae – the sale of an acquisition by the seller depends upon a contingency
expected thing which may or may not happen.
b) Emptio Spei – the sale of the hope itself
Future goods are those still to be:
Emptio Rei Speratae Emptio Spei (a) Manufactured or printed
If the expected thing does not materialize: (b) Raised or future agricultural products
The sale is not effective It does not matter whether (c) Acquired by the seller after the perfection of the
the expected thing contract
materialize or not; what is (d) This is also referred to as the sale of “hereafter-
important is that the hope acquired” property
itself validly existed. (e) Things whose acquisition depends upon a
What it deals: contingency which may or may not happen
Deals with a future thing – Deals with a present thing –
that which is expected for certainly hope or Article 1463. The sole owner of a thing may sell an
expectancy already exists undivided interest therein.

Vain Hope or Expectancy Asian Terminals, Inc. v. Philam Insurance Co., Inc.
- If the hope or expectancy itself is vain, the sale is - A letter of credit (L/C) is a financial device
itself VOID. Be it noted that this is NOT an aleatory developed by merchants as a convenient and
contract for while in an aleatory contract there is an relatively safe mode of dealing with sale of goods to
element of chance, here, there is completely NO satisfy the seemingly irreconcilable interests of a
CHANCE. seller, who refuses to part with his goods before he
is paid, and a buyer, who wants to have control of
Article 1462. The goods which form the subject of a his goods before paying
contract of sale may be either existing goods, owned or
possessed by the seller, or goods to be manufactured,
raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called “future goods.”

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 11
Article 1464. In the case of fungible goods, there may be Article 1465. Things subject to a resolutory condition
a sale of an undivided share of a specific mass, though may be the object of the contract of sale.
the seller purports to sell and the buyer to buy a definite
number, weight or measure of the goods in the mass, and Examples:
though the number, weight or measure of the goods in a) A property subject to reserve troncal may be sold.
the mass is undetermined. By such a sale the buyer b) A usufruct that may end when the naked owner
becomes owner in common of such a share of the mass becomes a lawyer may be sold
as the number, weight or measure bought bears to the c) A sold B the former’s land a retro. After delivery to B, B
number, weight or measure of the mass. If the mass becomes an absolute owner subject to the right of
contains less than the number, weight or measure redemption. This land may be sold by B to C, a stranger,
bought, the buyer becomes the owner of the whole mass subject to the right of redemption; i.e., C must respect
and the seller is bound to make good the deficiency from the right of A to redeem the property within the
goods of the same kind and quality, unless a contrary stipulated period if:
intent appears. 1) A’s right is registered
2) Or even if not, if C had actual knowledge of the
Example: right of redemption. (It has been held that actual
In a stock of rice, the exact number of cavans of knowledge is equivalent to registration)
which is still unknown, Jose buys 100 cavans. If
there are really 150, Jose becomes the co-owner of Article 1466. In construing a contract containing
the whole lot, his own share being 2/3 thereof. provisions characteristic of both the contract of sale and
of the contract of agency to sell, the essential clauses of
Forest Hills Golf and Country Club v. Vertox Sales the whole instrument shall be considered.
and Trading, Inc.
- The corporation whose shares of stocks are subject Contract of Sale Agency to Sell
of a transfer transaction (through sale, assignment, Price The buyer pays the The agent delivers the
donation or any other mode of conveyance) need not price price which in turn he
be a party to the transaction. get from his buyer
Ownership The buyer after The agent who is
- However, to bind the corporation as well as third delivery becomes the supposed to sell does
parties, it is necessary that the transfer is recorded owner not become the owner,
in the books of the corporation. even if the property has
already been delivered
to him

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 12
Warranty The seller warrants The agent who sells called commission has been given is immaterial.
assumes no personal (Quiroga v. Parsons Hardware Co., 38 Phil. 501)
liability as long as he
acts within his authority
Article 1467. A contract for the delivery at a certain price
and in the name of the
of an article which the vendor in the ordinary course of
principal.
his business manufactures or procures for the general
market, whether the same is on hand at the time or not,
BAR QUESTION:
is a contract of sale, but if the goods are to be
- X acquired a booklet of 10 sweepstakes tickets
manufactured specially for the customer and upon his
directly from the office of the PCSO. X paid P1,800
special order, and not for the general market, it is a
for the booklet, less the customary discount. What
contract for a piece of work.
was the legal nature of X’s act in acquiring the
tickets? Did he enter into a contract of purchase and
sale? Briefly explain your answer. Rules to determine if the contract is one of sale or
a piece of work
ANSWER: a) If ordered in the ordinary course of business –
- Yes, X entered into a contract of purchase and sale, SALE
notwithstanding the fact that he may be referred to b) If manufactured specially and not for the market –
as “agent” of the Sweepstakes Office, and the fact PIECE OF WORK CONTRACT
that he may be entitled to an “agent’s prize” should
one of the tickets purchased win a principal prize. Schools of Taught
The truth is that he is not required to re sell the a) Massachusetts Rule: If specially done at the order
tickets, and even if he were to do so, still failure on of another, this is a contract for a piece of work
the part of his purchasers to pay will not allow him - We follow Massachusetts Rule in the Philippines
to recover what he himself has paid to the office. b) New York Rule: If the thing already exists, it is a
Moreover, the delivery of the tickets to him SALE, if not, WORK
transferred their ownership to him; this is not true c) English Rule: If material is more valuable, SALE; if
in the case of an agency to sell. Furthermore, it has skill is more valuable, WORK
been said that in a contract of sale, the buyer pays
the price; while in agency to sell, the agent delivers QUERY:
the price. The mere fact that a “discount” or so - If I ask someone to construct a house for me, is this
a contract of sale or for a piece of work?

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 13
ANSWER:
- If he will construct on his own land, and I will get Article 1469. In order that the price may be considered
both the land and the house it would seem that this certain, it shall be sufficient that it be so with reference to
can be very well treated as a sale. another thing certain, or that the determination thereof
be left to the judgment of a specified person or persons.
Article 1468. If the consideration of the contract consists
partly in money, and partly in another thing, the Should such person or persons be unable or unwilling to
transaction shall be characterized by the manifest fix it, the contract shall be inefficacious, unless the parties
intention of the parties. If such intention does not clearly subsequently agree upon the price.
appear, it shall be considered a barter if the value of the
If the third person or persons acted in bad faith or by
thing given as a part of the consideration exceeds the mistake, the courts may fix the price.
amount of the money or its equivalent; otherwise, it is a
sale. Where such third person or persons are prevented from
fixing the price or terms by fault of the seller or the
Rules to determine whether contract is one of sale buyer, the party not in fault may have such remedies
or barter against the party in fault as are allowed the seller or the
a) First rule – intent buyer, as the case may be.
b) If the intent does not clearly appear –
1) If the thing is more valuable than money – Certainty of the Price
BARTER - The price must be certain; otherwise, there is no
2) If 50-50 – SALE true consent between the parties.
3) If thing is less valuable than he money – SALE
QUESTION: What is a price?
NOTE:
- In order to judge the intention, we must consider ANSWER:
the contemporaneous and consequent acts of the - Price signifies the sum stipulated as the equivalent
parties. of the thing sold and also every incident taken into
- The name given by the parties is presumptive, of consideration for the fixing of the price put to the
course, of their intention, but this may be rebutted. debit of the buyer and agreed to by him.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 14
REQUISITES FOR A VALID PRICE ANSWER:
QUESTION: What are the requisites of price? - Yes, for we cannot say that the consideration or
cause of the contract is the illegal currency. The real
ANSWER: Must be: consideration or cause is still be the VALUE or price
a) Real agreed upon.
b) In money or its equivalent
c) Certain or ascertainable at the time of the perfection Article 1470. Gross inadequacy of price does not affect a
of the contract contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or
HOW PRICE IS DETERMINED some other act or contract.
QUESTION: When is price certain?
QUESTION: What is the effect of gross inadequacy of price?
ANSWER:
a) If there is a stipulation ANSWER:
b) If it be with reference to another thing - GR: It does not affect the validity of the sale if it is
c) If the determination of the price is left to the fixed in good faith and without fraud
judgment of specified person(s) - XPN: CoRDS
d) By reference to certain fact(s) as referred to in Art. a) If Consent is vitiated (may be annulled or presumed
1472 (Art. 1469) to be equitable mortgage)
Note: If the price is based on estimates, it is uncertain. b) If the parties intended a Donation or some other
act/ contract
The price must be certain; otherwise, there is no c) If the price is so low as to be “Shocking to the
true consent between the parties conscience”
- There can be no sale without a price d) If in the event of Resale, a better price can be
- If the price is fixed but is later on remitted or obtained
condoned, this is perfectly all right, for then the
price would not be fictitious NOTE:
- The failure to pay the agreed price does not cancel a - GR: The validity of the sale is not necessarily
sale for lack of consideration, for the consideration affected where the law gives the owner the right to
is still there, namely, the price. redeem because the lesser the price, the easier it is
for the owner to effect redemption.
QUESTION: If the money is counterfeit, would sale be - XPN: While there is no dispute that mere inadequacy
still valid? of the price per se will not set aside a judicial sale of
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 15
real property, nevertheless, where the inadequacy of QUESTION: Is payment of the purchase price essential to
the price is purely shocking to the conscience, such transfer ownership?
that the mind revolts at it and such that a
reasonable man would neither directly or indirectly ANSWER:
be likely to consent to it, the same will be set aside. - Unless the contract contains a stipulation that
(Cometa v. CA 351 SCRA 294) ownership of the thing sold shall not pass to the
purchaser until he has fully paid the price,
QUESTION: What is considered reasonable price? ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery
ANSWER: thereof.
- Generally the market price at the time and place
fixed by the contract or by law for the delivery of In Case Contract Was Really a Donation
the goods. - It is possible that a donation, not a sale, was really
intended. In such a case, the parties may prove that
QUESTION: What is the effect on the contract of sale in the low price is sufficiently explained by the
case of a breach in the agreed manner of payment? consideration of liberality.

Article 1471. If the price is simulated, the sale is void, but


ANSWER:
the act may be shown to have been in reality a donation,
- None. It is not the act of payment of price that
or some other act or contract.
determines the validity of a contract of sale.
Payment of the price has nothing to do with the QUESTION: What is the effect if the price is simulated?
perfection of the contract, as it goes into the
performance of the contract. ANSWER:
- Failure to pay the consideration is different from - GR: Contract of sale is void.
lack of consideration. - XPN: The act may be shown to have been in reality a
- Failure to pay such results in a right to demand the donation or some other act or contract.
fulfillment or cancellation of the obligation under an
existing valid contract. On the other hand, lack of Simulated Price
consideration prevents the existence of a valid 1) The price must not be fictitious. Therefore, if the
contract. (Sps. Bernardo Buenaventura and price is merely simulated, the contract as a sale
Consolacion Joaqui v. CA, GR No. 126376, Nov. 20, is void. It may however, be valid as a donation or
2003) some other agreement provided the
requirements of donations or other agreements
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 16
have been complied with. If these requirements Certainty of Price of Securities
do not exist, then as a sale, the contract is - Example: I can sell to you today my Mont Blanc
absolutely void, not merely voidable. An action fountain pen at the price equivalent to the stock
for annulment is therefore essential. (De Belen v. quotation 2 days from today of 100 shares of PLDT.
Collector of Customs, 46 Phil. 241)
2) A simulated price is fictitious. There being no If Stock Market Price Cannot Be Ascertained
price, there is no cause or consideration; hence, - If the stock quotation price 2 days later cannot
the contract is void as a sale. However it is really be ascertained at that time, the sale is
enough that the price be agreed on at the time of inefficacious. Note the last clause in the article –
perfection. A rescission of the price will not “provided said amounts be certain.”
invalidate the sale.
3) If the sale of conjugal property is FICTITIOUS Article 1473. The fixing of the price can never be left to
and therefore non-existent, the widow who has the discretion of one of the contracting parties. However,
an interest in the property subject of the sale if the price fixed by one of the parties is accepted by the
may be allowed to contest the sale, even BEFORE other, the sale is perfected.
the liquidation of the conjugal partnership,
making the executor a party-defendant if he Price Cannot Be Left to One Party’s Discretion
refuses to do so. (Borromeo v. Borromeo, 98 - Reason why price fixing cannot be left to the
Phil. 432) discretion of one of them: the other could not have
consented to the price for he did not know what it
Castillo v. Castillo was.
- If a mother sells to her child property at a price very
much lower than what she had paid for it only three Article 1474. Where the price cannot be determined in
months before, it is an indication that the sale is accordance with the preceding articles, or in any other
fictitious. manner, the contract is inefficacious. However, if the
thing or any part thereof has been delivered to and
Article 1472. The price of securities, grain, liquids, and
appropriated by the buyer, he must pay a reasonable
other things shall also be considered certain, when the
price therefor. What is a reasonable price is a question of
price fixed is that which the thing sold would have on a
fact dependent on the circumstances of each particular
definite day, or in a particular exchange or market, or
case.
when an amount is fixed above or below the price on such
day, or in such exchange or market, provided said
amount be certain.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 17
Effect if the Price Cannot Be Determined Lu v. IAC, Heirs of Santiago Bustos and Josefina
- If the price cannot really be determined, the sale is Alberto
void for the buyer cannot fulfil his duty to pay. - If the condition precedent for the sale of the
- Of course, if the buyer has made use of it, he should property fails to materialize, there can be no
not be allowed to enrich himself unjustly at perfected sale.
another’s expense. So he must pay a “reasonable - The decisive legal circumstance is not where the
price.” The seller’s price, however, must be the one private receipts bore the elements of a sale. The real
paid if the buyer knew how much the seller was controversy is on whether the contract arising from
charging and there was an acceptance of the goods said receipts can be enforced in the light of the
delivered. Here, there is an implied assent to the priority right of petitioner under the registered
price fixed. contract. It is well-settled in this jurisdiction that
prior registration of a lien creates a preference,
Article 1475. The contract of sale is perfected at the since the act of registration shall be the operative
moment there is a meeting of minds upon the thing act to convey and affect the land.
which is the object of the contract and upon the price.
Requirements for Perfection
From that moment, the parties may reciprocally demand - When parties are face to face, when an offer is
performance, subject to the provisions of the law accepted without conditions and without
governing the form of contracts. qualifications. (A conditional acceptance is a counter-
offer.) (NOTE: If negotiated thru a phone, it is as if
Nature of Contract the parties are face to face.)
- Sale is a consensual contract (perfected by mere - When contract is thru correspondence or thru
consent). Therefore, delivery or payment is not telegram, there is perfection when the offeror
essential for perfection. receives or has knowledge of the acceptance by the
offeree. [NOTE: If the buyer has already accepted,
Pacific Oxygen and Acetylene Co. v. Central Bank but the seller does not know yet of the acceptance,
- The sale of foreign exchange of foreign currency is the seller may still withdraw. (Laudico v. Arias, 43
perfected from the moment the contract of such Phil. 270).]
sale is EXECUTED, not from the moment of payment - When a sale is made subject to a suspensive
or delivery of the amount of foreign currency to the condition, perfection is had from the moment the
creditor. condition is fulfilled.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 18
Atkins, Kroll and Co., Inc. v. B. Cua HianTek promis to buy and sell a determinate thing for a
- The sale was perfected in view of the acceptance of price certain is reciprocally demandable.”
the offer. The acceptance of an offer to sell by
promising to pay creates a bilateral contract, so Formalities for Perfection
much so that if the buyer had backed out after Under the Statute of Frauds, the sale of:
accepting by either refusing to get the thing sold or a) Real property (regardless of amount)
refusing to pay the price, he could be sued. b) Personal property – if P500 or more must be in
writing to be enforceable. (Art. 1403, No. 2, Civil
Roque v. Lapuz Code)
- In a contract to sell where ownership is retained by - If orally made, it cannot be enforced by a judicial
the seller and is not to pass until the full payment of action, except if it has been completely or partially
the price, such payment is a positive suspensive executed, or except if the defense of the Statute of
condition, the failure of which is not a breach, Frauds is waived. (Art. 1405, Civil Code)
casual or serious, but simply an event that - Also in writing should be sales which are to be
prevented the obligation of the vendor to convey performed only after more than 1 year (from the
title from acquiring binding force. time the agreement was entered into) – regardless as
to whether the property is real or personal, and
Republic v. CA, L-52774, Nov. 29, 1984 regardless of the price involved.
- Since NEDA kept the check proceeds of a sale for 7 -
months without any comment, it cannot now Cirilo Paredes v. Jose L. Espino
express its objections to the sale - The contract is enforceable. The Statute of Frauds
- Before perfection of the contract of sale, no mutual does not require that the contract itself be in
rights and obligations exist between the would-be writing. A written note or memorandum signed by
buyer and the would-be seller. The same thing is the party charged (Espino) is enough to make the
true when perfection is conditioned upon oral agreement enforceable. The letters written by
something, and that thing is not performed. (Roman Espino together constitute a sufficient
v. Grimalt, 6 Phil. 96) memorandum of the transaction; they are signed by
- It has been held that in our country, an accepted Espino, refers to the property sold, give its area, and
bilateral promise to buy and sell is in a sense similar the purchase price – the essential terms of the
to, but not exactly the same as, a perfect contract of contract. A “sufficient memorandum” does not have
sale. This is expressly permitted under the Civil to be a single instrument – it may be found in 2 or
Code, Art. 1479, first paragraph, which reads: “A more documents.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 19
PROBLEMS: - ANS: B is wrong because the contract in this case
a) A sold to B orally a particular parcel of land for P5 has already been executed. It is well known that the
million. Delivery and payment were to be made Statute of Frauds refers only to executory contracts.
four months later. When the date arrived, A refused
to deliver. So B sued to enforce the contract. If you - It is clear in the problem that the delivery of the
were A’s attorney, what would you do? land had been made and that there had been due
acceptance thereof. Indeed, to allow B to refuse to
- ANS: I would file a motion to dismiss on the pay would amount to some sort of fraud. As has
ground that there is no cause of action in view of been well said by the Supreme Court, the Statute of
the Statute of Frauds. If I do not file said motion, I Frauds was designed to prevent, and not to protect
still have another remedy. In my answer, I would fraud.
allege as a defense the fact that there is no written
contract. If I still do not do this, I have one more d) A sold to B in a private instrument a parcel of land
chance: I can object to the presentation of evidence for P5,000. B now wants A to place the contract in a
– oral testimony – on the point – but only if it does public instrument so that B could have the same
not appear on the face of the complaint that the registered in the Registry if Property. Is B given the
contract was ORAL. right to demand the execution of the public
instrument?
b) Give the effect of failure to do any of the things
enumerated in the preceding paragraph. - ANS: Yes. Under Art. 1357: “If the law requires a
document or other special form, as in the acts and
- ANS: The defense of the Statute of Frauds is contracts enumerated in Art. 1358, the contracting
deemed waived, and my client would be now parties may compel each other to observe that form,
compelled to pay, if the judge believes the testimony once the contract has been perfected. This right may
of the witnesses. be exercised simultaneously with the action upon
the contract.”
c) A sold to B orally a particular parcel of land for
P5,000. Delivery was made of the land. The Article 1357 can be availed provided:
payment of the price was to be made 3 months 1) The contract is VALID; and
later. At the end of the period, B refused to pay, 2) The contract is ENFORCEABLE, that is, it
and claimed in his defense the Statute of Frauds. Is does not violate the Statute of Frauds.
B correct?

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 20
- If the contract is oral but already executed legal or constructive. The rule is, therefore this:
completely or partially, Art. 1357 can be availed of, After delivery of the object, ownership is
for in this case the Statute of Frauds is not deemed transferred.
violated. b) A stipulation that even with delivery there will be
no change or transfer of ownership till the
- If a parcel of land is given by way of donation inter purchase price has been fully paid is valid but the
vivos, to be valid it must be in public instrument. stipulation is not binding on innocent third persons
Now then, if land is donated orally, Art. 1357 cannot such as customers at a store. The customers must
be used whether or not the land has been delivered. not be prejudiced.
This is because the donation is VOID. Before Art.
1357 is availed of, the contract must first of all be Earnshaw Docks and HI Works v. Coll. Of Int. Rev.
valid and perfected. - Even if the object sold has not yet been delivered,
once there has been a meeting of the minds, the sale
- Exempted from the rule is the case of donation is perfected and, therefore, the sales tax is already
propter nuptias of land, because here the law due. It accrues on perfection, not on the
expressly provides that as to formalities, such a consummation of the sale.
donation must merely comply with the Statute of
Frauds. (Art. 127, Civil Code) Therefore, even if Effect of Perfection
made orally, a donation propter nuptias of land, if - After perfection the parties must now comply with
already delivered, is enforceable and valid and Art. their mutual obligations.
1357 applies. Of course, if there has been no
delivery yet, the oral wedding gift of land is still
unenforceable and Art. 1357 cannot apply.

Perfection in the Case of Advertisements


- Advertisements are mere invitations to make an
offer (Art. 1325, Civil Code) and, therefore, one
cannot compel the advertiser to sell.

Transfer of ownership
a) Mere perfection of the contract does not transfer
ownership. Ownership of the object sold is
transferred only after delivery (tradition), actual,
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 21
Article 1476. In the case of a sale by auction: a) The bidder may retract his bid (Art. 1476[2])
Reason: Every bidding is merely an offer and,
(1) Where goods are put up for sale by auction in lots,
therefore, before it is accepted, it may be
each lot is the subject of a separate contract of sale.
withdrawn. The assent is signified on the part of
(2) A sale by auction is perfected when the auctioneer the seller by knocking down the hammer.
announces its perfection by the fall of the hammer, or in b) The auctioneer may withdraw the goods from the
other customary manner. Until such announcement is sale (Art. 1476[2]) Reason: This bid is merely an
made, any bidder may retract his bid; and the auctioneer offer, not an acceptance of an offer to sell.
may withdraw the goods from the sale unless the auction Therefore it can be rejected. What the auctioneer
has been announced to be without reserve. does in withdrawing is merely reject the offer.

(3) A right to bid may be reserved expressly by on behalf Under what conditions may the seller bid? (Art.
of the seller, unless otherwise provided by law or by 1476, pars. 3 and 4)
stipulation. a) When such a right to bid was reserved;
b) And notice was given that the sale by auction is
(4) Where notice has not been given that a sale by auction subject to a right to bid on behalf of the seller
is subject to a right to bid on behalf of the seller, it shall
not be lawful for the seller to bid himself or to employ or When Seller May Employ Others to Bid for Him
induce any person to bid at such sale on his behalf or for - The seller may employ others to bid for him
the auctioneer, to employ or induce any person to bid at provided he has notified the public that the auction
such sale on behalf of the seller or knowingly to take any is subject to the right to bid on behalf of the seller.
bid from the seller or any person employed by him. Any (Art. 1476, par. 4) People who bid for the seller, but
sale contravening this rule may be treated as fraudulent are not themselves bound, are called “by-bidders” or
by the buyer. “puffers.” Without the notice, any sale contravening
the rule may be treated by the buyer as fraudulent.
When Sale by Auction is Perfected
- The sale is perfected when the auctioneer Veazie v. Williams
announces its perfection by the fall of the hammer - The sale can be annulled in view of the fraud. Had
or in other customary manner. the public been informed of the puffers, this would
have been different. To escape censure, notice of by
Before the Fall of the Hammer bids is essential. By-bidding, if secret, deceives and
 Before the hammer falls: involves a falsehood and is, therefore, bad. It is not
enough to apologize and say that by-bidding is after
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 22
all common. It does not matter that the owner did Kinds of delivery
not know of the auctioneer’s fraud. After all, the a) Actual (Art. 1497, Civil Code)
auctioneer was merely the agent. b) Constructive (Arts. 1498-1601, Civil Code),
including “any other manner signifying an
CFI of Rizal and Elena Ong Escutin v. CA and Felix agreement that the possession is transferred.” (Art.
Ong 1496, Civil Code)
- A private sale authorized by a probate court
cannot be assailed by a person who is not an C.N. Hodges, et. al. v. Jose Manuel Lezama, et.al. L-
“interested party” one who merely offered a higher 20630, Aug. 31, 1965
price (without actually buying the property) is not - If upon the sale by Hodges to Borja, Borja became
an “interested party.” It would have been different the owner thereof, then, upon Hodge’s purchase of
had there been a public auction. the shares at the foreclosure proceedings, Hodges
acquired ownership over the same. Stock Certificate
Republic v. Reyes-Bakunawa 18 must be cancelled; a new one must be given to
- A negotiated contract is one that is awarded on the Hodges; and eventually, a new one also issued to
basis of a direct agreement between the Government Gurrea after the deal between Hodges and Gurrea is
and the contractor without going through the finally settled.
normal procurement process, like obtaining the
prior approval from another authority, or a Article 1478. The parties may stipulate that ownership in
competitive bidding process. the thing shall not pass to the purchaser until he has
fully paid the price.
Article 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive When Ownership is Not Transferred Despite
delivery thereof. Delivery
- Generally, ownership is transferred upon delivery,
When Ownership is Transferred but even if delivered, the ownership may still be
- Ownership is not transferred by perfection but by with the seller till full payment of the price is made,
delivery. This is true even if the sale has been made if there is a stipulation to this effect. But, of course,
on credit; payment of the purchase price is NOT innocent third parties cannot be prejudiced.
essential to the transfer of ownership, as long as the
property sold has been delivered.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 23
Distinction between the First (Mutual Promise) and
Article 1479. A promise to buy and sell a determinate
the Second Paragraphs (Accepted Unilateral
thing for a price certain is reciprocally demandable.
Promise)
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the Mutual Promise Accepted Unilateral
promissor if the promise is supported by a consideration Promise
distinct from the price. There is a promise to buy Only one makes the promise.
and sell, clearly a bilateral This promise is accepted by
Distinction Between the First (Mutual Promise) and reciprocal contract. the other.
the Second Paragraphs (Accepted Unilateral
Promise) This is as good as a It is binding on the
- First Paragraph: A promises to buy something and perfected sale. Of course, no promissory only if the
B promises to sell it at an agreed price. (This is a title of dominion is promise is supported by a
promise to buy and sell, clearly a bilateral reciprocal transferred yet, the parties, consideration distinct from
contract.) Of course, no title of dominion is being given the right only to the price, which means that
transferred as yet, the parties, being given the right demand fulfilment or the option can still be
only to demand fulfillment or damages. damages. withdrawn, even if accepted,
- Second Paragraph: Only one makes the promise. if the same is not supported
This promise is accepted by the other. Hence, A by any consideration.
promises to sell to B accepts the promise, but does
not in turn promise to buy. Atkins, Kroll and Co., Inc. v. B. Cua Hian Tek
- If the option is given without a consideration, it is a
NOTE: mere offer of a contract of sale, which is not binding
- Generally, ownership is transferred upon delivery, until accepted. If, however, acceptance (of the sale)
but even if delivered, the ownership may still be is made before withdrawal, it constitutes a binding
with the seller till full payment of the price is made, contract of sale, even though the option was not
if there is a stipulation to his effect. But, of course, supported by a sufficient consideration.
innocent third parties cannot be prejudiced. The
stipulation is usually known as pactum reservati Meaning of ‘Policitacion’
dominii and is common in sales on the installment - Policitacion is a unilateral promise to buy or sell
plan. which is not accepted. This produces no juridical
effect and creates no legal bond. This is a mere

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 24
offer, and has not yet been conversed into a lot or an adequate substitute to the buyer. If the
contract. property has been sold to a 3rd person, and no other
lot is available, the buyer is entitled to a refund of
Bilateral Promise instalments paid plus 12% interest from date suit
- A bilateral promise to buy and sell a certain thing was filed.
for a price certain gives to the contracting parties
personal rights in that each has the right to demand Unilateral Promise
from the other the fulfilment of the obligation. - The acceptance of a unilateral promise to sell must
be plain, clear and unconditional. Therefore, if there
Borromeo v. Franco is a qualified acceptance with terms different from
- The agreement on B’s part to complete the title the offer, there is no acceptance, that is, there is no
papers is not a condition precedent of the sale, but a promise to buy and there is no perfected sale.
mere incidental stipulation. This is so because the (Beaumonth v. Prieto, 41 Phil. 670)
duty to deliver depends on the payment of the price,
and vice versa, but not on the perfection of the title Option
papers. It may be assumed that B is willing to but - An Option is an contract granting a person the
the property even with a defective title. privilege to buy or not to buy certain objects at any
- A mere executor sale, one where the seller merely time within the agreed period at a fixed price. The
promises to transfer the property at some future contract of option is a separate and distinct contract
date, or where some conditions have to be fulfilled from the contract which the parties may enter into
before the contract is converted from an executor to upon the consummation of the contract; therefore,
an executed one, does not pass ownership over the an option must have its own cause or consideration.
real estate that may have been sold. (McCullough (Enriquez de la Cavada v. Diaz, 37 Phil. 1982)
and Co. v. Berger, 43 Phil. 823) The parties can,
however, demand specific performance or damages Filemon H. Mendoza, et.al. v. Aquilina Comple
for the breach. (Mas v. Lanuza, et. al., 5 Phil. 457) - Comple is not required to sell the property to
Mendoza, for this was merely a unilateral promise
Palay, Inc. v. Clave on the part of Comple to sell, without a
- The seller of the subdivision lot unilaterally corresponding promise on the part of Mendoza to
rescinded the contract to sell but failed to give buy. Comple’s promise is not binding on him since
notice to the buyer of said rescission. The judge there was NO CONSIDERATION DISTINCT from the
declared the rescission illegal for want of the price. Hence, even if Comple’s promise had already
necessary notice and ordered the seller to return the been accepted by the would-be buyer, Comple could
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 25
still legally withdraw from the agreement. The a) Had the sale been perfected, the buyer would
answer would have been different, if Mendoza had have borne the loss, that is, he would still
himself promised to buy. have to pay for the object even if no delivery
has been made.
Article 1480. Any injury to or benefit from the thing sold, b) Article 1480 (pars. 1 and 2) clearly, states
after the contract has been perfected, from the moment that injuries between perfection and delivery
of the perfection of the contract to the time of delivery, shall be governed by Art. 1272, among
shall be governed by Articles 1163 to 1166, and 1262. others. And Art. 1262 says that “an
obligation which consists of a determinate
This rule shall apply to the sale of fungible things, made thing shall be extinguished if it should be
independently and for a single price, or without lost or destroyed without the fault of the
consideration of their weight, number, or measure. debtor, and before he has incurred in delay.”
(This means that the obligation of the seller
Should fungible things be sold for a price fixed according
to deliver is extinguished, but the obligation
to weight, number, or measure, the risk shall not be to pay is not extinguished.)
imputed to the vendee until they have been weighed, c) Article 1583 says: “In case of loss,
counted, or measured, and delivered, unless the latter deterioration, or improvement of the thing
has incurred in delay. before its delivery, the rule in Article 1189
shall be observed, the vendor being
Who bears the risk of loss? considered the debtor.” Article 1189, in turn,
- If object is lost BEFORE PERFECTION, the SELLER says in part: “If the thing is lost without the
bears the loss. fault of the debtor, the obligation shall be
- Reason: There was no contract, for there was extinguished.”
no cause or consideration. Being the owner, the d) Since the buyer gets the benefits during the
seller bears the loss. This means that he cannot intervening period, it is clear that he must
demand payment of the price. also shoulder the loss.
- If the object was lost AFTER DELIVERY to the buyer,
clearly, the BUYER bears the loss. (Res perit domino Exceptions:
– the owner bears the loss) a) If the object sold consist of fungibles sold for
- If the object is lost AFTER PERFECTION BUT BEFORE a price fixed according to weight, number or
DELIVERY, the BUYER bears the loss, as exception to measure. (Art. 1480, Civil Code)
the rule of res perit domino.
- Reasons:
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 26
b) If the seller is guilty of fraud, negligence, (c) Sale by description and sample –– must satisfy the
default or violation of contractual term. requirements in both, and not in only one.
(Arts. 1165, 1262, 1170, Civil Code)
c) When the object is generic because “genus The mere exhibition of the sample does not
never perishes” (genus nunquam perit) necessarily make it a sale by sample. This exhibition
must have been the sole basis or inducement of the
Article 1481. In the contract of goods by description or by sale.
sample, the contract may be rescinded if the bulk of the - A sale by sample may still be had even if the sample
goods delivered do not correspond with the description or was shown only in connection with a sale to the first
the sample, and if the contract be by sample as well as by purchaser.
description, it is not sufficient that the bulk of goods - There can be a sale by sample even if the sale is “as
correspond with the sample if they do not also is.”
correspond with the description.
Article 1482. Whenever earnest money is given in a
The buyer shall have a reasonable opportunity of contract of sale, it shall be considered as part of the price
comparing the bulk with the description or the sample. and as proof of the perfection of the contract.

Definitions of Sale By Description or By Sample ‘Earnest Money’ Defined


(a) Sale by description –– where seller sells things as - Earnest Money (Arras) is something of value t show
being of a certain kind, the buyer merely relying on that the buyer was really earnest, and given to the
the seller’s representations or descriptions. seller to bind the bargain.
Generally, the buyer has not previously seen the
goods, or even if he has seen them, he believes Significance of Earnest Money
(sometimes erroneously) that the description tallies Under the Civil Code, earnest money is considered:
with the goods he has seen. a) Part of the purchase price
(b) Sale by sample — that where the seller warrants - From the total price must be deducted the arras; the
that the bulk (not the major part or the majority of balance is all that has to be paid.
the goods but the goods themselves) of the goods b) As proof of the perfection of the contract
shall correspond with the sample in kind, quality,
and character. Only the sample is exhibited. The
bulk is not present, and so there is no opportunity
to examine or inspect it.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 27
Earnest money Money given as still be valid, since for validity of the sale, a public
consideration for an option instrument is not even essential.
Applies to a PERFECTED Option money applies to a
sale sale NOT yet perfected
Article 1484. In a contract of sale of personal property
the price of which is payable in installments, the vendor
The money is part of the The money is NOT part of
may exercise any of the following remedies:
purchase price the purchase price
(1) Exact fulfillment of the obligation, should the vendee
The buyer is required to The would-be buyer is not fail to pay;
pay the balance required to buy
(2) Cancel the sale, should the vendee’s failure to pay
When Arras Must Be Returned cover two or more installments;
- If merchandise cannot be delivered, the arras must
(3) Foreclose the chattel mortgage on the thing sold, if
be returned.
one has been constituted, should the vendee’s failure to
pay cover two or more installments. In this case, he shall
Article 1483. Subject to the provisions of the Statute of
have no further action against the purchaser to recover
Frauds and of any other applicable statute, a contract of
any unpaid balance of the price. Any agreement to the
sale may be made in writing, or by word of mouth, or
contrary shall be void.
partly in writing and partly by word of mouth, or may be
inferred from the conduct of the parties.
Requisites before Art. 1484 may be applied:
Statute of Frauds 1) What is sold is a Personal Property
- See comments under Article 1475 2) The sale must be on the Instalment plan
3) There must be a Contract
If Sale Is Made Thru an Agent 4) The contract must be one of Sale (absolute sale)
- The sale of a piece of land or interest therein when
made through an agent is void unless the agent’s Purpose of the Rules For Sale of Personal Property
authority is in writing. on the Installment Plan
- To prevent abuse in the foreclosure of chattel
Effect if Notary Public is Not Authorized mortgages by selling at a low price and then suing
- If the deed of sale of land is notarized by a notary for the deficiency, is the precise purpose of the
public whose authority had expired, the sale would article. Otherwise, the buyer would find himself
without the property, and still indebted.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 28
Alternative Remedies against further collection of the balance of the price
- The remedies enumerated are not cumulative. They does not apply.
are ALTERNATIVE, and if one is exercised, the others - The law says that any of the aforementioned
cannot be made use of. Indeed the election of one is remedies “may” be exercised by the seller.
a waiver of the right to resort to others. Therefore, he is not obliged to foreclose the chattel
mortgage even if there be one. He may still sue for
Zayco v. Luneta Motor Co. fulfilment or for cancellation (if he does not want to
- If the unpaid vendor of a vehicle sold on the foreclose).
instalment plan forecloses the chattel mortgage
executed on the property, but is not able to fully Instances when Art. 1484 cannot be applied
collect the debt, there is no right to recover the a) Article 1484 does not apply to a real estate
deficiency, and a stipulation to the contrary is void. - mortgage
- If the vendor assigns its right to a financing b) Article 1484 does not apply to the sale of
company, the latter may be regarded as a mere personal property on straight terms.
collecting agency of the vendor and cannot, - A sale on straight terms is one which the balance,
therefore, recover any deficiency. And even if the after the payment of the initial sum should be paid
financing company is a “distinct and separate in its totality at the time specified.
entity” from the seller, the same result obtains, for
an assignee cannot exercise any right not given to Sps. Romulo de la Cruz and Delia de la Cruz, et. al.
the assignor itself. v. ASIAN Consumer of Industrial Finance Corp.
and the Court of Appeals
Ridad v. Filipinas Investment and Finance - It is clear that while ASIAN eventually succeeded in
Corporation taking possession of the mortgaged vehicle, it did
- If a foreclosure of the mortgage is resorted to, there not pursue the foreclosure of the mortgage as
can be recovery in case of deficiency. Other chattels shown by the fact that no auction sale of the vehicle
given as security cannot be foreclosed upon if they was ever conducted. Thus, under the law, the
are not subject of the instalment sale. delivery of possession of the mortgaged property to
- If the seller selects remedy [foreclosure], but the the mortgagee, the herein appellee, can only operate
mortgage is not actually foreclosed, he can still avail to extinguish appellant’s liability if the appellee had
himself of the other remedies, such as the fulfilment actually caused the foreclosure sale of the
of the obligation to pay. mortgaged property when it recovered possession
- Where there has been no foreclosure of the chattel thereof. It is the fact of foreclosure and actual sale
mortgage or a foreclosure sale, the prohibition of the mortgaged chattel that bar recovery by the
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 29
vendor of any balance of the purchaser’s Non-Return of Installments Paid
outstanding obligation not satisfied by the sale. - As a general rule, it is required that a case of
rescission or cancellation of the sale requires
Article 1485. The preceding article shall be applied to mutual restitution, that is, all partial payments of
contracts purporting to be leases of personal property price or “rents” must be returned.
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.  However, by way of exception, it is valid t stipulate that
there should be NO returning of the price hat has been
Reason for Rule on Leases of Personal Property partially paid or the “rents” given, provided the
With Option to Buy stipulation is not unconscionable.
- This may really be considered a sale of personal
property in installments. SALE OF REAL PROPERTY IN INSTALLMENT
Meaning of the Clause “when the lessor has REPUBLIC ACT 6552
deprived the lessee of the possession or (The Maceda Law)
enjoyment of the thing”
- This means that for failure to pay, the “lessor” is AN ACT TO PROVIDE PROTECTION TO BUYERS OF
apparently exercising the right of an unpaid seller, REAL ESTATE ON INSTALLMENT PAYMENTS
and has taken possession of the property.
- Known as the “Realty Installment Buyer Protection
When “Lease” Construed as “Sale” Act.” (Section 1)
- Even if the word “lease” is employed, when a sale on
installment is evidently intended, it must be - Purpose: A public policy to protect buyers of real
construed as a sale. (Abello v. Gonzaga, 56 Phil. estate on installment payments against onerous and
132) oppressive conditions. (Section 2)

Article 1486. In the cases referred to in the two preceding - Coverage: All transactions or contracts involving
articles, a stipulation that the installments or rents paid the sale or financing of real estate on installment
shall not be returned to the vendee or lessee shall be payments, including condominium apartments
valid insofar as the same may not be unconscionable where the buyer has paid at least 2 years of
under the circumstances. installments (Section 3)

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 30
- Excludes: Industrial lots, commercial buildings and period of 60 days from the date the installment
sales to tenants under RA 344 as amended by RA became due. (Section 4)
6389 (Section 3) - If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel
- The buyer is entitled to the following rights in case the contract after 30 days from the receipt of the
he defaults in the payment of succeeding buyer of the notice of cancellation or the demand
installments: (Section 3) for rescission of the contract by a notarial act.
a) To pay, without additional interest, the unpaid (Section 4)
installments due within the total grace period
earned by him, which is fixed at the rate of 1 - Under Secs. 3 and 4, the buyer shall have the right to
month grace period for every 1 year of SELL his rights or ASSIGN the same to another
installment payments made person or to REINSTATE the contract by updating
- This right shall be exercised by the buyer only once the account during the grace period and before the
in every 5 years of the life of the contract and its actual cancellation of the contract. The deed of sale
extensions, if any or assignment shall be done by notarial act. (Section
b) If the contract is cancelled, the seller shall 5)
refund to the buyer the cash surrender value
(CSV) on the property equivalent to 50% of the - The buyer shall have the right to PAY IN ADVANCE
total payments made and, after 5 years of any installment or the FULL unpaid balance of the
installments, an additional 5% every year but not purchase price any time without interest and to have
to exceed 90% of the total payments made such full payment of the purchase price annotated
- The actual cancellation of the contract shall take in the certificate of title covering the property.
place after 30 days from the receipt of the buyer of (Section 6)
the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon - Raison d’ Etre of The Maceda Law
full payment of the CSV to the buyer - To help especially the low income lot buyers
- Downpayments, deposits or options on the contract delineating the rights and remedies of lot buyers
shall be included in the computation of the total and protect them from one-sided and pernicious
number of installments made contract stipulations
- To buyers of real estate on installment payments
- In the case where less than 2 years of installments against onerous and oppressive conditions. More
were paid, the seller shall give the buyer a grace specifically, the Act provided for the rights of the
buyer in case of default in the payment of
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 31
succeeding installments, where he has already paid
at least 2 years of installments.
Recto Law (Article 1484 of the Civil Code)

Maceda Law Upon the other hand, refers to sale of movables payable in
The Maceda Law (R.A. 6552) is applicable to sales of instalments and limiting the right of seller, in case of
immovable property on instalments. default by the buyer to one of the remedies, namely:
a) Exact (or specific) fulfilment;
In Rillo v Court of Appeals, 247 SCRA 431, the most b) Cancel the sale if two (2) or more instalments have not
important features, have been laid down, namely: been paid; and
a) After having paid instalment far at least two (2)
c) Foreclose the chattel mortgage. On the things sold, also
years, the buyer is entitled to a mandatory grace period
in case of default of two (2) or more instalments, with no
of one (1) month for every year of instalment payments
further action against the purchaser.
made, to pay the unpaid instalments without interest.

If the contract is cancelled, the seller shall refund to


Article 1487. The expenses for the execution and
the buyer the cash surrender value equivalent to 50% of
registration of the sale shall be borne by the vendor,
the total payments made, and after five years of
unless there is a stipulation to the contrary.
instalments, an additional 5% every year but not to
exceed 90% of the total payment made; and
The seller pays for the expenses of:
b) In case the instalments were paid less than two a) The execution (of the deed) of sale;
(2) years, the seller shall give the buyer a grace period b) Its registration.
of not less than 60 days.
Article 1488. The expropriation of property for public use
If that buyer fails to pay the installments due at the is governed by special laws.
expiration of the grace period, the seller may cancel the
contract after 30 days from receipt by the buyer of the Nature of Expropriation
notice of cancellation or demand for rescission by - Expropriation is involuntary in nature that is, he
notarial act. owner may be compelled to surrender the
property after all the essential requisites have
been complied with. Therefore, generally
expropriation does not result in a sale.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 32
- If the property owner voluntarily sells the Chapter 2
property to the government, this would be a CAPACITY TO BUY OR SELL
sale, and not an example of expropriation.
Article 1489. All persons who are authorized in this Code
Gutierrez v. CA to obligate themselves, may enter into a contract of sale,
- The Supreme Court held that the acquisition by saving the modifications contained in the following
the government of private properties through articles.
the exercise of eminent domain, said properties
being justly compensated, is a sale or exchange Where necessaries are sold and delivered to a minor or
within the meaning of the income tax laws and other person without capacity to act, he must pay a
profits derived therefrom are taxable as capital reasonable price therefor. Necessaries are those referred
gain; and this is although the acquisition was to in Article 290.
against the will of the owner of the property and
there was no meeting of the minds between the Incapacity to Buy May Be Absolute or Relative
parties. a) Absolute incapacity – when party cannot bind
himself in any case
Essential requisites of Expropriation b) Relative incapacity – when certain persons, under
certain circumstances, cannot buy certain property
a) Taking by competent authority
b) Observance of due process of law Purchase By Minors
c) Taking for public use - When minors buy, the contract is generally
d) Payment of just compensation voidable, but in the case of necessaries, “where
necessaries are sold and delivered to a minor or
- Just compensation is the market value PLUS the other person without capacity to act, he must
pay a reasonable price therefor. Necessaries are
consequential damages, if any, MINUS, the
those referred to in Art. 290.”
consequential benefits, if any. BUT the benefits
may be set off only against the consequential Godinez v Fong
damages, and not against the basic value of the - If a Filipino sells a parcel of land to a Chinese
property taken. who later sells the same to another Filipino, he
second same is VALID because the purpose of
the Constitution of preserving the land in favour
of Filipinos has not been frustrated.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 33
Article 1490. The husband and the wife cannot sell
property to each other, except: - This prohibition about donating to each other
applies also to COMMON-LAW husband and wife
(1) When a separation of property was agreed upon in on the theory that here there can be an even
the marriage settlements; or greater degree of undue influence; furthermore,
of they will be allowed while those lawfully
(2) When there has been a judicial separation of property married will generally be prohibited, this would
under Article 191. be giving a reward to illicit relationship.

Reason why generally a husband and wife cannot Article 1491. The following persons cannot acquire by
sell to each other purchase, even at a public or judicial auction, either in
- To avoid prejudice to 3rd persons person or through the mediation of another:
- To prevent one spouse from unduly influencing
the other (1) The guardian, the property of the person or persons
- To avoid by indirection the violation of the who may be under his guardianship;
prohibition against donations
(2) Agents, the property whose administration or sale
Effect of Sale may have been intrusted to them, unless the consent of
- Generally, a sale by one spouse to another is
the principal has been given;
void
- However, not everybody can assail the validity
(3) Executors and administrators, the property of the
of the transaction. Thus, creditors who became
such AFTER the transaction cannot assail its estate under administration;
validity for the reason that they cannot be said
to have been prejudiced. (4) Public officers and employees, the property of the
- But PRIOR creditors as well as the heirs of either State or of any subdivision thereof, or of any
spouse may invoke the nullity of the sale government-owned or controlled corporation or
- The spouses themselves since they are parties institution, the administration of which has been
to an illegal act cannot avail themselves of the intrusted to them; this provision shall apply to judges and
illegality of the sale. The law will generally leave government experts who, in any manner whatsoever,
them as they are.
take part in the sale;
- Under the 2 exceptions under Art. 1490, the sale
is generally valid, but should there be vitiated
consent, the sale is voidable.
- Just as married couple cannot generally sell to
each other, they also cannot donate to each
other. (Art. 87, Family Code)

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 34
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and do otherwise would be a breach of professional
employees connected with the administration of justice, conduct and would constitute malpractice.
the property and rights in litigation or levied upon an - But assigning the amount of the judgment by
execution before the court within whose jurisdiction or the client to his attorney, who did NOT take any
part is the case where said judgment was
territory they exercise their respective functions; this
rendered, is valid.
prohibition includes the act of acquiring by assignment - A thing is said to be in litigation not only if
and shall apply to lawyers, with respect to the property there is some contest or litigation over it in
and rights which may be the object of any litigation in court, but also from the moment that it became
which they may take part by virtue of their profession; subject to the judicial action of the judge.
- Art. 1491 does not prohibit a lawyer from
(6) Any others specially disqualified by law. acquiring a certain percentage of the value of
the properties in litigation that may be awarded
to his client. A contingent fee based on such
Persons Relatively Incapacitated to Buy value is allowed.
- This article refers to relative incapacity. - If the attorney participates in the sale, not as
buyer but as AGENT for the buyer, there is no
Reason for the Law violation of the law.
- Public policy prohibits the transactions in view
of the fiduciary relationship involved. Fabillo v. IAC
- Art. 1491 of the Civil Code applies only if the
Purchase Thru Another sale or assignment of the property takes place
- “Thru the mediation of another” — this must be during the PENDENCY of the litigation involving
proved, that is, that there was really an the client’s property. A contract between a
agreement between the intermediary and the lawyer and his client stipulating a contingent fee
person disqualified; otherwise, the sale cannot is not covered by the said prohibition because
be set aside. the payment of said fee is not made during the
pendency of the litigation but only AFTER
Purchase By Agent for Himself JUDGMENT has been rendered in the case
- An agent is not allowed, without his principal’s handled by the lawyer.
permission, to sell to himself what he has been
ordered to buy; or to buy for himself what he
has been ordered to sell.

Purchase By Attorney
- A lawyer is not allowed to purchase the
property of his client which is in litigation. To

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 35
Article 1492. The prohibitions in the two preceding
articles are applicable to sales in legal redemption, 2) specific performance as to remainder by payment
compromise and renunciations. of proportional price]

Cross reference (refer to the following articles):


Article 1494. Where the parties purport a sale of specific
a) Legal redemption (Art. 1619, Civil Code)
b) Compromises (Art. 2028, Civil Code) goods, and the goods without the knowledge of the seller
c) Renunciation (Arts. 6 and 1270, Civil Code) have perished in part or have wholly or in a material
part so deteriorated in quality as to be substantially
Chapter 3 changed in character, the buyer may at his option treat
EFFECTS OF THE CONTRACT WHEN THE THING SOLD the sale:
HAS BEEN LOST
(1) As avoided; or
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the contract (2) As valid in all of the existing goods or in so much
has been entirely lost, the contract shall be without any thereof as have not deteriorated, and as binding the
effect. buyer to pay the agreed price for the goods in which the
ownership will pass, if the sale was divisible.
But if the thing should have been lost in part only the
vendee may choose between withdrawing from the
Loss of Specific Goods
contract and demanding the remaining part, paying its (a) This article practically reiterates the principles
price in proportion to the total sum agreed upon. involved in the preceding article.
Loss of Object Before Sale (b) Again the remedies are:
- This refers to a case of loss of the object even 1) cancellation (avoidance);
before the perfection of the contract. It is 2) or specific performance as to the remaining
existing goods (if the sale was divisible).
evident that there would be no cause or
consideration; hence, the contract is void.
Observe that it is the seller here who naturally Chapter 4 OBLIGATIONS OF THE VENDOR
will have to bear the loss. Section 1 GENERAL PROVISIONS

Complete Loss Distinguished from Partial Loss Article 1495. The vendor is bound to transfer the
Note the difference in the rules ownership of and deliver, as well as warrant the thing
(a) When the object has been COMPLETELY LOST; which is the object of the sale.
(b) When the object has been PARTLY or PARTIALLY
LOST. [Remedies:
1) withdrawal (or rescission)

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 36
Obligations of Vendor Real or Actual Delivery
(a) to transfer ownership (cannot be waived) - Art. 1497 speaks of real or actual delivery
(b) to deliver (cannot be waived) (actual tradition).
(c) to warrant the object sold (this can be waived or
modified since warranty is not an essential element Meaning of Tradition
of the contract of sale) - Tradition, or delivery, is a mode of acquiring
(d) to preserve the thing from perfection to delivery, ownership, as a consequence of certain
otherwise he can be held liable for damages. contracts such as sale, by virtue of which,
actually or constructively, the object is placed in
Effect of Non-Delivery the control and possession of the vendee.
- If the seller fails to deliver, and the buyer has no
fault, the latter may ask for the resolution or Kinds of Delivery or Tradition
rescission of the contract. (a) Actual or real. (Art. 1497, Civil Code).
(b) Legal or constructive
Article 1496. The ownership of the thing sold is acquired 1) legal formalities.
by the vendee from the moment it is delivered to him in 2) symbolical tradition or traditio simbolica
any of the ways specified in Articles 1497 to 1501, or in - (such as the delivery of the key of the place
any other manner signifying an agreement that the where the movable sold is being kept). (Art.
possession is transferred from the vendor to the vendee. 1498, par. 2, Civil Code).
3) traditio longa manu
Ownership is Transferred Generally Only by (by mere consent or agreement) if the
Delivery movable sold cannot yet be transferred to the
- As a rule, in the absence of agreement, possession of the buyer at the time of the
ownership is not transferred, even if sold, sale. (Art. 1499, Civil Code).
unless there has been a delivery. 4) traditio brevi manu (if the buyer had
already the possession of the object even
Section 2 before the purchase, as when the tenant of a
DELIVERY OF THE THING SOLD car buys the car, that is, his possession as an
owner). (Art. 1499, Civil Code).
Article 1497. The thing sold shall be understood as 5) traditio constitutum possessorium
delivered, when it is placed in the control and possession (opposite of traditio brevi manu) possession
of the vendee. as owner changed, for example, to possession
as a lessee.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 37
Article 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to Effect of Non-Payment of Price
the delivery of the thing which is the object of the - Execution of the deed of sale, in the absence of
contract, if from the deed the contrary does not appear any defect, transfers delivery, even if the selling
or cannot clearly be inferred. price, in whole or in part has not yet been paid,
for it is not payment that transfers ownership.
With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or Article 1499. The delivery of movable property may
depository where it is stored or kept. likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be
Two Kinds of Constructive Delivery (Thru Legal transferred to the possession of the vendee at the time of
Formalities and Thru Traditio Simbolica) the sale, or if the latter already had it in his possession
Art. 1498 treats of two kinds of constructive delivery: for any other reason.
(a) by legal formalities (1st par.) applies to real and
personal property since the law does not Traditio Longa Manu and Traditio Brevi Manu
distinguish. (a) The first part deals with traditio longa manu.
(b) traditio simbolica. (2nd par.) (b) The second part deals with traditio brevi manu.

Article 1500. There may also be tradition constitutum


Rules on Constructive Delivery possessorium.
(a) If a seller has no actual possession, he cannot
transfer ownership by constructive delivery. Traditio Constitutum Possessorium
(b) There can be no constructive delivery by means (a) For meaning of traditio constitutum
of a public instrument if there is a stipulation to possessorium, see comment No. 4 under Art. 1497,
that effect. supra.
(c) The Civil Code does not provide that the (b) The basis here is consent.
execution of the deed is a conclusive presumption of (c) Where a seller continues to occupy the land as
the delivery of possession. tenant, the possession, by fiction of law, is deemed
to be constituted in the buyer.
Roque v. Lapuz
- If in a purported sale, a deed of conveyance is
not executed, this can mean that the parties did
not intend to immediately transfer the
ownership of the real property involved.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 38
Article 1501. With respect to incorporeal property, the (2) If he does not signify his approval or acceptance to
provisions of the first paragraph of Article 1498 shall the seller, but retains the goods without giving notice of
govern. In any other case wherein said provisions are not rejection, then if a time has been fixed for the return of
applicable, the placing of the titles of ownership in the the goods, on the expiration of each time, and, if no time
possession of the vendee or the use by the vendee of his has been fixed, on the expiration of a reasonable time.
rights, with the vendor’s consent, shall be understood as What is a reasonable time is a question of fact.
a delivery.
Transaction ‘On Sale or Return’
Delivery of Incorporeal Property - The first paragraph refers to a transaction “on
Incorporeal properties may be delivered: sale or return.”
(a) by constructive tradition — execution of public
instrument. Some Rules on Sale ‘On Approval or Trial or
(b) by quasi-tradition — placing of titles of Satisfaction’
ownership in the possession of the buyer, or the use (a) The risk of loss remains with seller, although
by the buyer of his rights, with the seller’s consent. there has been delivery, until the sale becomes
absolute.
(b) Risk of loss remains with seller although there
Article 1502. When goods are delivered to the buyer “on
has been delivery, if the sale has not yet become
sale or return” to give the buyer an option to return the
absolute.
goods instead of paying the price, the ownership passes
to the buyer on delivery, but he may revest the ownership
Exceptions:
in the seller by returning or tendering the goods within
1) if buyer is at fault;
the time fixed in the contract, or, if no time has been fixed,
2) if buyer had expressly agreed to bear loss.
within a reasonable time.
(c) Buyer must give goods a trial except when it is
When goods are delivered to the buyer on approval or on
evident that it cannot perform the work intended.
trial or on satisfaction, or other similar terms, the
(d) Period within which buyer must signify his
ownership therein passes to the buyer:
acceptance commences to run only when all the
parts essential for the operation of the object have
(1) When he signifies his approval or acceptance to the
been delivered.
seller or does any other act adopting the transaction;
(e) If it is stipulated that a third person must satisfy
approval or satisfaction, the provision is valid, but
the third person must be in good faith. If refusal to
accept is not justified, seller may still sue.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 39
(f) Generally, the sale and delivery to a buyer who is
the bill of exchange, the buyer is bound to return the bill
an expert on the object purchased is NOT obviously
of lading if he does not honor the bill of exchange, and if
a sale on approval, trial, or satisfaction.
he wrongfully retains the bill of lading he acquires no
added right thereby. If, however, the bill of lading
Article 1503. Where there is a contract of sale of specific
provides that the goods are deliverable to the buyer or to
goods, the seller may, by the terms of the contract,
the order of the buyer, or is indorsed in blank, or to the
reserve the right of possession or ownership in the goods
buyer by the consignee named therein, one who
until certain conditions have been fulfilled. The right of
purchases in good faith, for value, the bill of lading, or
possession or ownership may be thus reserved
goods from the buyer will obtain the ownership in the
notwithstanding the delivery of the goods to the buyer or
goods, although the bill of exchange has not been
to carrier or other bailee for the purpose of transmission
honored, provided that such purchaser has received
to the buyer.
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the
Where goods are shipped, and by the bill of lading the
facts making the transfer wrongful.
goods are deliverable to the seller or his agent, or to the
order of the seller or of his agent, the seller thereby
reserves the ownership in the goods. But, if except for the Reservation of Ownership Despite Delivery
form of the bill of lading, the ownership would have (a) The article applies only to the sale of “specific
passed to the buyer on shipment of the goods, the seller’s goods.”
property in the goods shall be deemed to be only for the (b) Although delivery has been made, seller may
purpose of securing performance by the buyer of his reserve ownership till certain conditions are fulfilled.
obligations under the contract. Of course, the most important controlling element is
the INTENTION.
Where goods are shipped, and by the bill of lading the - As a general rule, the seller, as the owner,
goods are deliverable to order of the buyer or of his bears the risk of loss in line with the
agent, but possession of the bill of lading is retained by principle of “res perit domino” (owner
the seller or his agent, the seller thereby reserves a right bears the loss).
to the possession of the goods as against the buyer.

Where the seller of goods draws on the buyer for the


price and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment of

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 40
Article 1504. Unless otherwise agreed, the goods remain (1) The provisions of any factors’ acts, recording laws, or
at the seller’s risk until the ownership therein is any other provision of law enabling the apparent owner
transferred to the buyer, but when the ownership therein of goods to dispose of them as if he were the true owner
is transferred to the buyer the goods are at the buyer’s thereof;
risk whether actual delivery has been made or not, except
that: (2) The validity of any contract of sale under statutory
power of sale or under the order of a court of competent
(1) Where delivery of the goods has been made to the jurisdiction;
buyer or to a bailee for the buyer, in pursuance of the
(3) Purchases made in a merchant’s store or in fairs, or
contract and the ownership in the goods has been
markets, in accordance with the Code of Commerce and
retained by the seller merely to secure performance by
special laws.
the buyer of his obligations under the contract, the goods
are at the buyer’s risk from the time of such delivery.
Generally, Buyer Acquires Merely the Seller’s
(2) Where actual delivery has been delayed through the Rights
fault of either the buyer or seller the goods are at the risk - The general rule is no one can give what he does
of the party in fault. not have –– nemo dat quod non habet.
Therefore, even if a person be a bona fi de
Risk of Loss purchaser, he succeeds only to the rights of the
- Under this article, the risk of loss of specific vendor.
goods is borne by the seller as a general rule,
until ownership is transferred. Exceptions
(a) When the owner of the goods by his conduct
precluded from denying the seller’s authority.
Article 1505. Subject to the provisions of this Title, where
Example: If A sells B’s property to C, and B
goods are sold by a person who is not the owner thereof,
consents, B is estopped from denying A’s
and who does not sell them under authority or with the
authority to sell. (Gutierrez Hermanos v.
consent of the owner, the buyer acquires no better title to
Orense, 28 Phil. 571).
the goods than the seller had, unless the owner of the
(b) Second paragraph (Nos. 1, 2, 3) of Article 1505.
goods is by his conduct precluded from denying the
seller’s authority to sell.
Some Recording Acts
(a) Sale of large cattle — no transfer of large cattle
Nothing in this Title, however, shall affect:
shall be valid unless the same is registered, and a
certificate of transfer obtained
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 41
(b) Land registration law. (Act 496).
(c) Sale of vessels –– record at each principal port of Article 1507. A document of title in which it is stated that
entry. the goods referred to therein will be delivered to the
bearer, or to the order of any person named in such
Article 1506. Where the seller of goods has a voidable title document is a negotiable document of title.
thereto, but his title has not been avoided at the time of
the sale, the buyer acquires a good title to the goods, What ‘Document of Title’ Includes
provided he buys them in good faith, for value, and (a) any bill of lading
without notice of the seller’s defect of title. (b) dock warrant
(c) quedan
Reasons for the Law (d) warehouse receipt or order
(a) Before a voidable contract is annulled it is (e) any other document used as proof of
considered valid. possession or as authority to transfer the goods
(b) Where one of two innocent parties must suffer, represented by the document.
he who placed the offender in a position to do
wrong must suffer. Negotiable Document of Title
The document is negotiable if:
Purchase from a Thief a) the goods are deliverable to bearer
QUESTION: Can a buyer acquire title from a thief (a person - (“deliver to bearer”);
who stole and then sold the goods to him)? b) or if the goods are deliverable to the order of a
certain person
ANSWER: - (“deliver to the order of X”; “deliver to Mr. X or his
- No, because the owner has been unlawfully order”).
deprived of it. Hence, the true owner can get it
back without reimbursement. NOTE:
- If the buyer had acquired the stolen automobile - If the document states that “the goods have already
at a public auction, even if he be in good faith, been delivered to the order of the buyer,” it is not
the true owner can still get it from him, but this negotiable because what is needed is future delivery.
time he would be entitled to reimbursement. (Hixson v. Ward, 1929, 354 Ill. App. 505).]
- A negotiable warehouse receipt is a document of
title, but a mere order to the warehouseman to
deliver certain deposited goods to the order of a

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 42
certain person, is not a negotiable document of title;  The holder can just transfer it to a
this is merely a warehouse delivery order. friend, and the friend will be entitled
- to the goods.)
Article 1508. A negotiable document of title may be (b) If “deliverable to the order of a certain
negotiated by delivery: person” AND that person has indorsed it in
blank merely (put his name at the back) or
(1) Where by the terms of the document the carrier, indorsed it to bearer (at the back, he placed
warehouseman or other bailee issuing the same “deliver to bearer” and then he signed his
undertakes to deliver the goods to the bearer; or name).
- The document can now be negotiated by mere
(2) Where by the terms of the document the carrier, delivery.
warehouseman or other bailee issuing the same
undertakes to deliver the goods to the order of a specified Article 1509. A negotiable document of title may be
person and such person or a subsequent indorsee of the negotiated by the indorsement of the person to whose
document has indorsed it in blank or to the bearer. order the goods are by the terms of the document
deliverable. Such indorsement may be in blank, to
Where by the terms of a negotiable document of title the bearer or to a specified person. If indorsed to a specified
goods are deliverable to bearer or where a negotiable person, it may be again negotiated by the indorsement
document of title has been indorsed in blank or to bearer, of such person in blank, to bearer or to another
any holder may indorse the same to himself or to any specified person. Subsequent negotiations may be made
specified person, and in such case the document shall in like manner.
thereafter be negotiated only by the endorsement of such
indorsee. Negotiation by Indorsement and Delivery
- This refers to negotiation by:
How Negotiable Document of Title is Negotiated  indorsement and
- There are two forms of negotiating a negotiable  delivery.
document of title:
(a) mere delivery; Effect of Undated Indorsement
(b) indorsement PLUS delivery. - It is not necessary to date an indorsement because
no additional protection is given thereby to
When Mere Delivery is Sufficient businessmen.
- Mere delivery (handing over) is sufficient —
(a) If “deliverable to bearer.”
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 43
Article 1511. A document of title which is not in such
Effect of Indorsement and Delivery form that it can be negotiated by delivery may be
- Indorsement and delivery of a negotiable quedan transferred by the holder by delivery to a purchaser or
ipso facto transfer possession and ownership of the donee. A non-negotiable document cannot be negotiated
property referred to therein. (Philippine Trust Co. v. Effect
and the of Delivery
endorsement Whena Document
of such Cannot
document gives theBe
Nat. Bank, 42 Phil. 413). Negotiated
transferee By Mere
no additional Delivery
right.

Example of 1st sentence of Article


Article 1510. If a document of title which contains an
- A document of title was non-negotiable. May it still
undertaking by a carrier, warehouseman or other
be given or assigned to another?
bailee to deliver the goods to bearer, to a specified
ANSWER:
person or order of a specified person or which contains
- Yes, but this does not have the effect of a
words of like import, has placed upon it the words “not
negotiation. It is a mere transfer or assignment.
negotiable,” “non-negotiable” or the like, such document
may nevertheless be negotiated by the holder and is a
Effect of Negotiation and Indorsement of Non-
negotiable document of title within the meaning of this
Negotiable Instrument
Title. But nothing in this Title contained shall be
Example of 2nd sentence of Article
construed as limiting or defining the effect upon the
A document of title contained the words “deliver to Mr. X.”
obligations of the carrier, warehouse man, or other
This is therefore non-negotiable. May it be negotiated?
bailee issuing a document of title or placing thereon the
words “not negotiable,” “non-negotiable,” or the like. ANSWER: No, but it may be transferred.

Article 1512. A negotiable document of title may be


Example: negotiated:
A negotiable document of title was marked “non-
negotiable” by the warehouseman (or carrier or depositary). 1) (1) By the owner thereof; or
Is it still negotiable?
2) (2 )By any person to whom the possession or custody of
ANSWER: Yes, insofar as the various holders of the note the document has been entrusted by the owner, if, by
are concerned, the note is still negotiable. Regarding the the terms of the document the bailee issuing the
intent or liability of the maker, this Article does not deal document undertakes to deliver the goods to the order
with the same. of the person or to

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 44
whom the possession custody of the document has been
entrusted, or if at the time of such entrusting the Purpose of the article
document is in such form that it may be negotiated by - The document should be made to really represent
delivery. the depositor’s right to the goods.

Article 1514. A person to whom a document of title has


Who May Negotiate Negotiable Document of Title been transferred, but not negotiated, acquires thereby,
- This Article speaks of the person who may negotiate as against the transferor, the title to the goods, subject
a negotiable document of title. to the terms of any agreement with the transferor.

Example: If the document is non-negotiable such person also


A document of title contained the following words: “Deliver acquires the right to notify the bailee who issued the
to the order of X or to the order of the person to whom this document of the transfer thereof, and thereby to
document has been entrusted by X.” Later, X entrusted the acquire the direct obligation of such bailee to hold
document to Y. May Y negotiate the same by indorsement? possession of the goods for him according to the terms
of the document.
ANSWER: Yes.
Prior to the notification to such bailee by the transferor
Article 1513. A person to whom a negotiable document or transferee of a non-negotiable document of title, the
of title has been duly negotiated acquires thereby: title of the transferee to the goods and the right to
acquire the obligation of such bailee may be defeated
(1) Such title to the goods as the person negotiating the by the levy of an attachment of execution upon the
document to him had or had ability to convey to a goods by a creditor of the transferor, or by a
purchaser in good faith for value and also such title to notification to such bailee by the transferor or a
the goods as the person to whose order the goods were subsequent purchaser from the transferor of a
to be delivered by the terms of the document had or subsequent sale of the goods by the transferor.
had ability to convey to a purchaser in good faith for
value; and Rights of Mere Transferee
- This Article deals with the rights of a transferee, not
(2) The direct
Rights obligation
of Person of theNegotiable
to Whom bailee issuing
Documentthe Is the
document to hold possession of the goods for him
Negotiated rights of a person to whom the document was negotiated.
according
- This to the terms
Article speaksofofthe document
some as fully
of the rights of aasperson
if
such bailee had contracted
to whom directly
a negotiable with him.
document of title has been
negotiated.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 45
Who Can Defeat Rights of Transferee Article 1516. A person who for value negotiates or
- The third paragraph refers to the persons who can transfers a document of title by indorsement or
defeat the right of the transferee PRIOR to the delivery, including one who assigns for value a claim
notification. secured by a document of title unless a contrary
intention appears, warrants:
Article 1515. Where a negotiable document of title is
(1) That the document is genuine;
transferred for value by delivery, and the indorsement
of the transferor is essential for negotiation, the (2) That he has a legal right to negotiate or transfer it;
transferee acquires a right against the transferor to
compel him to indorse the document unless a contrary (3) That he has knowledge of no fact which would
intention appears. The negotiation shall take effect as of impair the validity or worth of the document; and
the time when the indorsement is actually made.
(4) That he has a right to transfer the title to the goods
Rule if Indorsement is Needed for Negotiation and that the goods are merchantable or fi t for a
Example: particular purpose, whenever such warranties would
A document of title contained the words “deliver to X have been implied if the contract of the parties had
or his order.” X wanted to negotiate it to Y, but instead of been to transfer without a document of title the goods
indorsing it, he merely delivered it to Y. Has there been a represented thereby.
negotiation?
Warranties in Negotiation or Transfer
(a) This refers to warranties
ANSWER: No, because ofthe non-indorsement. But Y
1) by a person who negotiates;
acquires a right to compel X to indorse it provided that:
2) by a person who assigns or transfers for value.
(a) Y paid value for the document; and
(b) no contrary intention appears.
(b) Note that there are warranties
1) about the document;
2) about the right to the document;
3) about the goods represented by the document.

Effect of Indorsee’s Knowledge of Forged


Indorsement
- He does not acquire a valid title to the document.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 46
Article 1517. The indorsement of a document of title shall ANSWER: Yes, notwithstanding the theft by T. Reason: S is
not make the indorser liable for any failure on the part of a purchaser for value in good faith; that is, S did not know
the bailee who issued the document or previous indorsers that the document had been stolen by T.
thereof to fulfill their respective obligations.
Article 1519. If goods are delivered to a bailee by the
Non-liability of Indorser for Failure of Bailee to owner or by a person whose act in conveying the title to
Comply them to a purchaser in good faith for value would bind
- Failure of the bailee or the previous indorsers to the owner and a negotiable document of title is issued for
comply with their obligations does not make the them they cannot thereafter, while in possession of such
present indorsers liable. bailee, be attached by garnishment or otherwise, or be
levied under an execution unless the document be first
Reason: The indorser warrants only the things surrendered to the bailee or its negotiation enjoined. The
mentioned in the preceding article. bailee shall in no case be compelled to deliver up the
actual possession of the goods until the document is
Article 1518. The validity of the negotiation of a surrendered to him or impounded by the court.
negotiable document of title is not impaired by the fact
that the negotiation was a breach of duty on the part of This Article speaks of two important things (if the
the person making the negotiation, or by the fact that the document is negotiable):
owner of the document was deprived of the possession of (a) Generally no attachment or levy, except:
the same by loss, theft, fraud, accident, mistake, duress, or 1) if the document is surrendered to bailee;
conversion, if the person to whom the document was 2) or the negotiation of the document enjoined.
negotiated or a person to whom the document was (b) The bailee (or depositary or carrier) cannot be
subsequently negotiated paid value therefor in good faith compelled to surrender the goods except:
without notice of the breach of duty, or loss, theft, fraud, 1) if the document is surrendered to him;
accident, mistake, duress or conversion. 2) or the document is impounded by the court.

Article 1520. A creditor whose debtor is the owner of a


negotiable document of title shall be entitled to such aid
Effect if Owner of Document Was Deprived of It
from courts of appropriate jurisdiction by injunction and
Example: A document of title contained the words “deliver
otherwise in attaching such document or in satisfying the
to bearer.” The document was stolen by T; T subsequently
claim by means thereof as is allowed at law or in equity in
indorsed it to S, a purchaser in good faith. Is the
regard to property which cannot readily be attached or
negotiation to S valid?
levied upon by ordinary legal process.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 47
Right of Creditor Specifications for the Delivery
- Here, special aid is to be given to the creditor This Article provides for the:
because the document concerned is negotiable. a) place of delivery;
Attachment is not easily made. b) time of delivery;
c) manner of delivery.
Article 1521. Whether it is not for the buyer to take
possession of the goods or for the seller to send them to Place of Delivery
the buyer is a question depending in each case on the (a) Should the seller send the goods or should the buyer get
contract, express or implied, between the parties. Apart them? ANS.: This depends on the:
from any such contract, express or implied, or usage of 1) agreement (express or implied);
trade to the contrary, the place of delivery is the seller’s 2) if no agreement — get the USAGE of trade;
place of business if he has one, and if not his residence; 3) if no usage — the buyer must get them at the
but in case of a contract of sale of specific goods, which to seller’s business place or residence.
the knowledge of the parties when the contract or the sale
was made were in some other place, then that place is the Exception — In the place where the specific goods are
place of delivery. found.
Where by a contract of sale the seller is bound to send the (b) There is sufficient delivery when a fortuitous event
goods to the buyer but no time for sending them is fixed, prevents delivery at the actual place agreed upon, forcing a
the seller is bound to send them within a reasonable time. delivery at a place near the original one.
(c) There is sufficient delivery when the original place is
Where the goods at the time of sale are in the possession changed, but the buyer accepted the goods at a different
of a third person, the seller has not fulfilled his obligation place without complaint so long as the seller was in good
to deliver to the buyer unless and until such third person faith.
acknowledges to the buyer that he holds the goods on the
buyer’s behalf. Time of Delivery
(a) Delivery (if to be made by seller) must be within a
Demand or tender of delivery may be treated as reasonable time, in the absence of express agreement. (Art.
ineffectual unless made at a reasonable hour. What is a 1521, par. 2).
reasonable hour is a question of fact. (b) What is a reasonable time is a question of fact,
depending upon circumstances provable even by evidence
Unless otherwise agreed, the expenses of and incidental to
aliunde (extrinsic evidence).
putting the goods into a deliverable state must be borne
(c) Among the circumstances that may be considered are
by the seller.
the following:
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 48
Article 1522. Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the buyer
1) character of the goods; may reject them, but if the buyer accepts or retains the
2) purpose intended; goods so delivered, knowing that the seller is not going to
3) ability of seller to produce the goods; perform the contract in full, he must pay for them at the
4) transportation facilities; contract rate. If, however, the buyer has used or disposed
5) distance thru which the goods must be of the goods delivered before he knows that the seller is
carried; not going to perform his contract in full, the buyer shall
6) usual course of business in that particular not be liable for more than the fair value to him of the
trade. goods so received.
(d) If a delivery is to be made “at once,” “promptly,” or “as
soon as possible,” a reasonable time must necessarily be Where the seller delivers to the buyer a quantity of goods
given. larger than he contracted to sell, the buyer may accept the
(e) Premature delivery generally is not allowed because a goods included in the contract and reject the rest. If the
term is for the benefit of both parties. buyer accepts the whole of the goods so delivered he must
pay for them at the contract rate.
Manner of Delivery When Goods Are in the Hands
Where the seller delivers to the buyer the goods he
of a Third Person
contracted to sell mixed with goods of a different
- It is essential here that the third person
description not included in the contract, the buyer may
acknowledges that he holds the goods on behalf of
accept the goods which are in accordance with the
the buyer (otherwise, Art. 1521 149 CIVIL CODE OF
contract and reject the rest.
THE PHILIPPINES the seller shall not yet be complied
with his duty to deliver). (Art. 1521, par. 3). In the preceding two paragraphs, if the subject matter is
indivisible, the buyer may reject the whole of the goods.
QUESTION: Who pays expenses for putting the goods in a
deliverable state? The provisions of this article are subject to any usage of
trade, special agreement, or course of dealing between the
ANSWER: The seller, unless otherwise agreed. parties.

QUESTION: When Demand or Tender of Delivery Must Be


Made When must demand or tender of delivery be made? Rules when the Quantity Is LESS than that Agreed
Upon
ANSWER: In the absence of agreement, at a reasonable a. Buyer may REJECT;
hour. (This is a question of fact.) b. Or buyer may ACCEPT what have been
delivered, at the contract rate.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 49
Unless otherwise authorized by the buyer, the seller must
Rules When the Quantity Is MORE than the make such contract with the carrier on behalf of the buyer
Agreement as may be reasonable, having regard to the nature of the
a. Buyer may reject ALL. He must not be goods and the other circumstances of the case. If the seller
burdened with the duty of segregation, if he omit so to do, and the goods are lost or damaged in course
does not so desire. of transit, the buyer may decline to treat the delivery to
b. Buyer may accept the goods agreed upon and the carrier as a delivery to himself, or may hold the seller
reject the rest. responsible in damages.
c. If he gets all, he must pay for them at the
contract rate. (Art. 1622, par. 2). Unless otherwise agreed, where goods are sent by the
seller to the buyer under circumstances in which the seller
Implied Acceptance knows or ought to know that it is usual to insure, the seller
- Acceptance, even if not express, is implied when the must give such notice to the buyer as may enable him to
buyer exercises acts of ownership over the excess insure them during their transit, and, if the seller fails to
goods. do so, the goods shall be deemed to be at his risk during
such transit.
Rule When Quality is Different Where the seller
delivers to the buyer the goods agreed upon Kinds of Delivery to Carrier Delivery to carrier
MIXED with goods of a different description, the may be:
buyer may: (a) C.I.F. (cost, insurance, freight) — (Since the selling price
a. accept the goods which are in accordance includes insurance and freight, it is understood that said
with the contract, and insurance and freight should now be paid by the seller.)
b. reject the rest (b) F.O.B. (free on board)
The sale may be:
Article 1523. Where, in pursuance of a contract of sale, 1) f.o.b. at the place of shipment (here, the
the seller is authorized or required to send the goods to buyer must pay the freight).
the buyer, delivery of the goods to a carrier, whether 2) f.o.b. alongside (the vessel) (here, also from
named by the buyer or not, for the purpose of the moment the goods are brought alongside
transmission to the buyer is deemed to be a delivery of the the vessel, the buyer must pay for the freight
goods to the buyer, except in the cases provided for in or expenses).
Article 1503, first, second and third paragraphs or unless 3) f.o.b. at the place of destination (here, the
a contrary intent appears. seller must pay the freight, since the contract
states “free on board till destination).

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 50
Article 1524. The vendor shall not be bound to deliver the
thing sold, if the vendee has not paid him the price, or if
no period for the payment has been fixed in the contract. a. If only part of the price has been paid or
tendered, the seller is still an “unpaid seller.”
QUESTION: When is the vendor not obliged to make Notice that the law uses “the whole of the
delivery after the perfection of the contract of sale? Explain price.” (Art. 1525, par. 1, Civil Code).
briefly. b. Mere delivery of a negotiable instrument does
ANSWER: The vendor is not obliged to make said delivery not extinguish the obligation of the buyer to
in the following cases: pay because it may be dishonored. Therefore,
a. if the vendee has not paid him the price — the seller is still an unpaid seller, if say, a
for, after all, the delivery and the payment dishonor indeed is made.
are reciprocal obligations.
b. if no period for the payment has been fixed
Article 1526. Subject to the provisions of this title,
in the contract –– otherwise, the vendor
notwithstanding that the ownership in the goods may
might play a futile “waiting game.”
have passed to the buyer, the unpaid seller of goods, as
c. Even if a period for such payment has been
such, has:
fixed in the contract — if the vendee has lost
the right to make use of the period and still (1) A lien on the goods or right to retain them for the price
refuses to pay. while he is in possession of them;

Article 1525. The seller of goods is deemed to be an (2) In case of the insolvency of the buyer, a right of
unpaid seller within the meaning of this Title: stopping the goods in transitu after he has parted with the
possession of them;
(1) When the whole of the price has not been paid or
tendered; (3) A right of resale as limited by this Title;

(2) When a bill of exchange or other negotiable instrument (4) A right to rescind the sale as likewise limited by this
has been received as conditional payment, and the Title. Where the ownership in the goods has not passed to
condition on which it was received has been broken by the buyer, the unpaid seller has, in addition to his other
reason of the dishonor of the instrument, the insolvency of remedies, a right of withholding delivery similar to and
the buyer, or otherwise. In Articles 1525 to 1535 the term coextensive with his rights of lien and stoppage in transitu
“seller” includes an agent of the seller to whom the bill of where the ownership has passed to the buyer.
lading has been indorsed, or a consignor or agent who has
himself paid, or is directly responsible for the price, or any
otherWhen Seller
person whoisisDeemed an “Unpaid
in the position Seller”
of a seller.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 51
Rights of an Unpaid Seller This Article gives at Article 1528. Where an unpaid seller has made part
least 4 rights to the unpaid seller: delivery of the goods he may exercise his right of lien on
a. possessory lien (in the nature of a pledge); the remainder, unless such part delivery has been made
b. right of stoppage in transitu (available if under such circumstances as to show an intent to waive
seller has parted with the possession); the lien or right of retention.
c. right of resale;
d. right to rescind the sale. Possessory Lien After Partial Delivery
a. This refers to a possessory lien even after a
Possessory Lien partial delivery.
- The possessory lien is lost after the seller loses b. The lien however may be waived expressly or
possession but his lien (no longer possessory) as an impliedly.
unpaid seller remains.
The partial delivery may have been made under
Article 1527. Subject to the provisions of this Title, the such circumstances as to show an intent to waive:
unpaid seller of goods who is in possession of them is a. the lien;
entitled to retain possession of them until payment or b. or right of retention.
tender of the price in the following cases, namely:

(1) Where the goods have been sold without any Article 1529. The unpaid seller of goods loses his lien
stipulation as to credit; thereon:

(2) Where the goods have been sold on credit, but the term (1) When he delivers the goods to a carrier or other bailee
of credit has expired; for the purpose of transmission to the buyer without
reserving the ownership in the goods or the right to the
(3) Where the buyer becomes insolvent. possession thereof;

The seller may exercise his right of lien notwithstanding (2) When the buyer or his agent lawfully obtains
that he is in possession of the goods as agent or bailee for possession of the goods;
the buyer.
(3) By waiver thereof. The unpaid seller of goods, having
- This article refers to the cases when the unpaid a lien thereon, does not lose his lien by reason only that he
seller has a possessory lien. has obtained judgment or decree for the price of the
goods.
NOTE: This possessory lien, however, remains only so long
as the property is still with the vendor.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 52
When Possessory Lien is Lost Who May Exercise the Right of Stoppage in
a. This refers to the instances when “the lien is Transitu
lost.” - The right of stoppage in transitu may be exercised
b. The lien lost is only the possessory lien and by any person who as between himself and a
not the vendor’s lien on the price. purchaser, may be regarded as an unpaid vendor.

PROBLEM: S delivered the goods to the carrier for Article 1531. Goods are in transit within the meaning of
transmission to the buyer. He, however, reserved his right the preceding article:
to the ownership in the goods. Does he lose his possessory
lien? (1) From the time when they are delivered to a carrier by
land, water, or air, or other bailee for the purpose of
ANSWER: No, in view of the reservation. transmission to the buyer, until the buyer, or his agent in
that behalf, takes delivery of them from such carrier or
other bailee;
Article 1530. Subject to the provisions of this Title, when
the buyer of goods is or becomes insolvent, the unpaid (2) If the goods are rejected by the buyer, and the carrier
seller who has parted with the possession of the goods has or other bailee continues in possession of them, even if the
the right of stopping them in transitu, that is to say, he seller has refused to receive them back.
may resume possession of the goods at any time while
they are in transit, and he will then become entitled to the Goods are no longer in transit within the meaning of the
same rights in regard to the goods as he would have had preceding article:
if he had never parted with the possession.
(1) If the buyer, or his agent in that behalf, obtains
Right of Stoppage in Transitu delivery of the goods before their arrival at the appointed
- This refers to the right of stoppage in transitu, destination;
available to the unpaid seller —
(2) If, after the arrival of the goods at the appointed
a. if he has parted with the possession of the
destination, the carrier or other bailee acknowledges to
goods;
the buyer or his agent that he holds the goods on his
b. AND if the buyer is or becomes insolvent.
behalf and continues in possession of them as bailee for
the buyer or his agent; and it is immaterial that further
Meaning of Insolvency in the Article
destination for the goods may have been indicated by the
- The insolvency referred to need not be judicially
buyer;
declared.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 53
Article 1532. The unpaid seller may exercise his right of
stoppage in transitu either by obtaining actual possession
(3) If the carrier or other bailee wrongfully refuses to
of the goods or by giving notice of his claim to the carrier
deliver the goods to the buyer or his agent in that behalf.
or other bailee in whose possession the goods are. Such
If the goods are delivered to a ship, freight train, truck, or notice may be given either to the person in actual
airplane chartered by the buyer, it is a question depending possession of the goods or to his principal. In the latter
on the circumstances of the particular case, whether they case the notice, to be effectual, must be given at such time
are in the possession of the carrier as such or as agent of and under such circumstances that the principal, by the
the buyer. exercise of reasonable diligence, may prevent a delivery to
the buyer.
If part delivery of the goods has been made to the buyer,
or his agent in that behalf, the remainder of the goods When notice of stoppage in transitu is given by the seller
may be stopped in transitu, unless such part delivery has to the carrier, or other bailee in possession of the goods,
been under such circumstances as to show an agreement he must redeliver the goods to, or according to the
with the buyer to give up possession of the whole of the directions of, the seller. The expenses of such delivery
goods. must be borne by the seller. If, however, a negotiable
document of title representing the goods has been issued
by the carrier or other bailee, he shall not be obliged to
When Goods are in Transit or Not deliver or justified in delivering the goods to the seller
(a) This Article refers to the instances when the unless such document is first surrendered for cancellation.
goods are still considered “in transit” and
when “no longer in transit.” How the Right of Stoppage in Transitu May Be
(b) The right to get back the goods exists only Exercised
when the goods are still in transitu. a) Obtaining actual possession.
(c) Taking of the property in transit by an b) Giving notice of the claim.
unauthorized agent of the buyer does not
extinguish the right of stoppage in transitu. To whom Notice is Given Notice is given either:
a) to the person in actual possession of the goods;
Effect of Refusal to Receive b) or to his principal.
- If upon arrival the buyer “unjustifiably refuses to
receive the goods, the goods are still in transitu and Effects of the Exercise of the Right After the
therefore, the seller may still exercise the right of exercise of the right of stoppage in transitu, the
stoppage.” consequential effects are:
a) the goods are no longer in transitu;

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 54
b) the contract of carriage ends; instead, the
It is not essential to the validity of a resale that notice of
carrier now becomes a mere bailee, and will
the time and place of such resale should be given by the
be liable as such;
seller to the original buyer
c) the carrier should not deliver anymore to the
buyer or the latter’s agent; otherwise, he will The seller is bound to exercise reasonable care and
clearly be liable for damages; judgment in making a resale, and subject to this
d) the carrier must redeliver to, or according to requirement may make a resale either by public or private
the directions of, the seller. sale. He cannot, however, directly or indirectly buy the
goods.
Article 1533. Where the goods are of perishable nature, or
where the seller expressly reserves the right of resale in
case the buyer should make default, or where the buyer Right of Resale
has been in default in the payment of the price for an This article deals when the right of RESALE exists:
unreasonable time, an unpaid seller having a right of lien a. perishable goods
or having stopped the goods in transitu may resell the b. express stipulation
goods. He shall not thereafter be liable to the original c. unreasonable default
buyer upon the contract of sale or for any profit made by
such resale, but may recover from the buyer damages for Right, Not Duty, to Resell
any loss occasioned by the breach of the contract of sale. The article confers on the seller a right to resell (to
enforce his lien after title has passed) but does not
Where a resale is made, as authorized in this article, the impose upon him the duty to resell.
buyer acquires a good title as against the original buyer.

It is not essential to the validity of a resale that notice of


an intention to resell the goods be given by the seller to
the original buyer. But where the right to resell is not
based on the perishable nature of the goods or upon an
express provision of the contract of sale, the giving or
failure to give such notice shall be relevant in any issue
involving the question whether the buyer had been in
default for an unreasonable time before the resale was
made.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 55
Article 1534. An unpaid seller having the right of lien or Article 1535. Subject to the provisions of this Title, the
having stopped the goods in transitu, may rescind the unpaid seller’s right of lien or stoppage in transitu is not
transfer of title and resume the ownership in the goods, affected by any sale, or other disposition of the goods
where he expressly reserved the right to do so in case the which the buyer may have made, unless the seller has
buyer should make default, or where the buyer has been assented thereto.
in default in the payment of the price for an unreasonable
time. The seller shall not thereafter be liable to the buyer If, however, a negotiable document of title has been issued
upon the contract of sale, but may recover from the buyer for goods, no seller’s lien or right of stoppage in transitu
damages for any loss occasioned by the breach of the shall defeat the right of any purchaser for value in good
contract. faith to whom such document has been negotiated,
whether such negotiation be prior or subsequent to the
The transfer of title shall not be held to have been notification to the carrier, or other bailee who issued such
rescinded by an unpaid seller until he has manifested by document, of the seller’s claim to a lien or right of
notice to the buyer or by some other overt act an intention stoppage in transitu.
to rescind. It is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to Effect if Buyer Has Already Sold the Goods
give notice to the buyer of the intention to rescind shall be (a) Generally, the unpaid seller’s right of LIEN or STOPPAGE
relevant in any issue involving the question whether the IN TRANSITU remains even if the buyer has sold or
buyer had been in default for an unreasonable time otherwise disposed of the goods.
before the right of rescission was asserted.

Right to Rescind the Transfer of Title (b) Exceptions:


(a) This Article refers to the right to rescind the transfer of 1) When the seller has given his consent
title and to resume the ownership in the goods. thereto.
(b) This applies in case there has been: 2) When the purchaser or the buyer is a
1) express stipulation or reservation; purchaser for value in good faith of a
2) unreasonable default. negotiable document of title.
(c) Note that damages may be recovered for the breach of
contract. Article 1536. The vendor is not bound to deliver the thing
(d) What should be done in order to rescind the transfer of sold in case the vendee should lose the right to make use
title? ANS.: There must be notice to the buyer or there must of the term as provided in article 1198.
be an overt act showing an intention to rescind.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 56
When Seller is Not Bound to Deliver Because Buyer Duty to Preserve
Has Lost the Benefit of the Term Under Art. 1198, - This article implicitly reiterates the duty of the seller
the debtor shall lose every right to make use of to PRESERVE.
the period:
a) When after the obligation has been - Naturally, a fortuitous event excuses the seller.
contracted, he becomes insolvent, unless he - But since a fortuitous event is never presumed, the
gives a guaranty or security for the debts; loss of the property because of such event is
b) When he does not furnish to the creditor the naturally to be proved by the seller.
guaranties which he has promised;
c) When by his own acts he has impaired said
Article 1538. In case of loss, deterioration or improvement
guaranties or securities after their
of the thing before its delivery, the rules in article 1189
establishment, and when through a
shall be observed, the vendor being considered the debtor.
fortuitous event they disappear, unless he
immediately gives new ones equally Note: This article reiterates the rule that from time of
satisfactory; perfection to delivery, risk is borne by the buyer.
d) When the debtor violates any undertaking, in
consideration of which the creditor agreed to Article 1539. The obligation to deliver the thing sold
the period; includes that of placing in the control of the vendee all
e) When the debtor attempts to abscond. In the that is mentioned in the contract, in conformity with the
cases enumerated, the vendor is not bound to following rules.
deliver.
If the sale of real estate should be made with a statement
of its area, at the rate of a certain price for a unit of
measure or number, the vendor shall be obliged to deliver
Article 1537. The vendor is bound to deliver the thing sold
to the vendee, if the latter should demand it, all that may
and its accessions and accessories in the condition in
have been stated in the contract; but, should this be not
which they were upon the perfection of the contract. All
possible, the vendee may choose between a proportional
the fruits shall pertain to the vendee from the day on
reduction of the price and the rescission of the contract,
when the contract was perfected.
provided that, in the latter case, the lack in the area be not
less than one-tenth of that stated.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 57
The same shall be done, even when the area is the same, if Article 1540. If, in the came of the preceding article, there
any part of the immovable is not of the quality specified in is a greater area or number in the immovable than that
the contract. stated in the contract, the vendee may accept the area
included in the contract and reject the rest. If he accepts
The rescission, in this case, shall only take place at the will the whole area, he must pay for the same at the contract
of the vendee, when the inferior value of the thing sold rate.
exceeds one-tenth of the price agreed upon. Example:
A buys from B a piece of land supposed to contain 1,000
Nevertheless, if the vendee would not have bought the square meters at the rate of P10,000 a square meter. But
immovable had he known of its smaller area or inferior the land really contains 1,500 square meters. What can A
quality, he may rescind the sale. do?

This Article Refers to the Sale of Real Estate By the ANSWER: A may accept 1,000 square meters and reject the
Unit extra 500, in which case he will pay only P10 million.
However, A is also allowed to accept all of the 1,500 square
Virgilio Dionisio v. Hon. Vicente Paterno meters, but he must pay P15 million. A is in no case
- If a contract is a “unit price contract” (as allowed to rescind the contract, for such a remedy is not
distinguished from a “lump sum contract”) payment allowed him under this article.
will be made only on the basis of contractual items
actually performed, in accordance with the given Article 1541. The provisions of the two preceding articles
plans and specifications. shall apply to judicial sales.

- In such a “unit price contract,” the amount agreed


upon is generally merely an estimate, and may be Article 1542. In the sale of real estate, made for a lump
reduced or increased depending upon the quantities sum and not at the rate of a certain sum for a unit of
performed multiplied by the unit prices previously measure or number, there shall be no increase or decrease
agreed upon. of the price, although there be a greater or less area or
number than that stated in the contract.
- For a “unit price” formula to be applied, there must
be a stipulation to such effect. Incidentally, a The same rule shall be applied when two or more
contractor may not be awarded a compensation for immovable are sold for a single price; but if, besides
his services, arising from a price adjustment due to mentioning the boundaries, which is indispensable in
inflation. every conveyance of real estate, its area or number should
be designated in the contract, the vendor shall be bound to

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 58
to deliver all that is included within said boundaries, even Delivery of All the Land Included in the
when it exceeds the area or number specified in the Boundaries
contract; and, should he not be able to do so, he shall - What is important is the delivery of all the land
suffer a reduction in the price, in proportion to what is included in the boundaries:
lacking in the area or number, unless the contract is a. If this is done, there is compliance with the
rescinded because the vendee does not accede to the contract and the greater or lesser area is
failure to deliver what has been stipulated. immaterial. So apply paragraph 1 of this
article.
Sale for a Lump Sum (A Cuerpo Cierto) b. If this is not done, there is really no faithful
- Here, the sale is made for a lump sum (a cuerpo compliance with the contract and so
cierto or por precio alzado) not at the rate per unit. paragraph 2 should be applied.

Example Effect of Gross Mistake


- A buys a piece of land from B at the lump sum of - Regarding paragraph 1, although ordinarily there
P10 million. In the contract, the area is stated to be can be no rescission or reduction or increase
1,000 square meters. The boundaries are of course whether the area be greater or lesser, still there are
mentioned in the contract. Now then it was instances in which equitable relief may be granted to
discovered that the land within the boundaries the purchaser as where the deficiency is very great,
really contains 1,500 square meters. Is B bound to for under such circumstances, GROSS MISTAKE may
deliver the extra 500? be inferred. (Asiain v. Jalandoni, 45 Phil. 296 and
Garcia v. Velasco, 40 O.G. No. 2, p. 268).
ANSWER: Yes. Furthermore, the price should not be
increased. This is so because B should deliver all which are Article 1543. The actions arising from Articles 1639 and
included in the boundaries. If B does not deliver the 1642 shall prescribe in six months, counted from the day
remaining 600, A has the right –– of delivery.
(a) either to rescind the contract for the seller’s
failure to deliver what has been stipulated, or
(b) to pay a reduced proportional price, namely 2/3
of the original price. This is so because he really gets
only 2/3 of the land included within the boundaries
(1,000 sq.m. out of 1,500 sq.m.).

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 59
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
e) The Article, however, applies to a double donation
the person who may have first taken possession thereof in (Cagaoan v. Cagaoan, 43 Phil. 554) and to sales
good faith, if it should be movable property. made by a principal and his agent of the same
property.
Should it be immovable property, the ownership shall f) Reason for the rule on preference: True, no one can
belong to the person acquiring it who in good faith first sell what he does not own, but this is merely the
recorded it in the Registry of Property. general rule.

Illustration of Rules as to Personal Property


Should there be no inscription, the ownership shall pertain
- In the case of Tomasi v. Villa-Abrille, L-7404, Aug.
to the person who in good faith was first in the possession;
21, 1958, the Surplus Property Commission sold to
and in the absence thereof, to the person who presents the
a buyer “all the movable goods” in a base area in
oldest title, provided there is good faith.
Guiuan, Samar. The buyer then immediately took
possession of all the movable properties located
Rules of Preference in Case of Double Sale within the area. Subsequently, however, the
(a) Personal property –– possessor in good faith. Commission also sold to another the same
(b) Real property — properties in the same area.
1) registrant in good faith; - The second buyer then fi led suit to have himself
2) possessor in good faith; declared the owner of the properties entitled to the
3) person with the oldest title in good faith. possession of the same.
- The Supreme Court ruled in favor of the first buyer
NOTE: because it was he who had first taken possession in
a) Registration here requires actual recording: hence, if good faith of the properties.
the property was never really registered as when the
registrar forgot to do so although he has been
Illustration of Rules as to Real Property
handed the document, there is no registration.
b) Possession here is either actual or constructive since - A sold land to B. Subsequently, A sold the same land
the law makes no distinction. (Sanchez v. Ramos, to C who in good faith registered it in his name. Who
40 Phil. 614). should be considered the owner?
c) Title in this Article means title because of the sale,
and not any other title or mode of acquiring - ANSWER: C in view of the registration in good faith.
property.
d) Note that in all the rules there must be good faith;
Astorga v. Court of Appeals
otherwise, the order of preference does not apply.
- The second buyer of property (real estate) is
preferred over the first buyer if the second buyer

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Bachelor of Laws SALES
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was the first to register the property in good faith in ANSWER: Yes. Under the established principles of land
the Registry of Deeds. registration, a person dealing with registered land may
generally rely on the correctness of a certificate of title and
Aviles v. Arcega the law will in no way obliged him to go beyond it to
- FACTS: Land was sold to A in a public instrument determine the legal status of the property. (Naawan
which stated that delivery would be after 4 months. Community Rural Bank, Inc. v. CA & Spouses Alfredo and
Same land was sold to C who took actual material Annabelle Lumo, supra).
possession. Who should be preferred?
- HELD: C should be preferred because A did not even Section 3
have symbolic or constructive possession since the CONDITIONS AND WARRANTIES
contract itself stated implicitly that possession was
NOT at that time being transferred. Article 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is not
Bautista v. Sioson
- FACTS: S sold land to B. Then S became B’s tenant. performed, such party may refuse to proceed with the
Subsequently, S sold the same property to C. Neither contract or he may waive performance of the condition. If
sale was registered. Who should be the owner, B or the other party has promised that the condition should
C? happen or be performed, such first mentioned party may
- HELD: B is the owner. Art. 1544 does not apply also treat the non-performance of the condition as a
because it applies only when one owner sold to two
breach of warranty.
or more persons. Here, S had long ceased to be the
owner for B had already acquired full dominion over
the property. (See also Lichauco v. Berenguer, 39 Where the ownership in the thing has not passed, the
Phil. 643). buyer, may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
NOTE: Art. 1544 relating to double sales does not apply to warranted expressly or by implication in the contract of
a situation where the earlier transaction is pacto de retro sale as a condition of the obligation of the buyer to
sale of an unregistered land and the subsequent is a perform his promise to accept and pay for the thing.
donation of the land by the vendor a retro.
Presence of Conditions and Warranties
QUESTION: Can a person dealing with registered land
possess the legal right to rely on the force of the Torrens a. Conditions may be waived.
Certificate of Title and to dispense with the need to inquire b. Conditions may be considered as warranties.
further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry?

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 61
Article 1546. Any affirmation of fact or any promise by (2) An implied warranty that the thing shall be free from
the seller relating to the thing is an express warranty if any hidden faults or defects, or any charge or
the naturel tendency of such affirmation or promise is to encumbrance not declared or known to the buyer.
induce the buyer to purchase the same, and if the buyer
purchases the thing relying thereon. No affirmation of the This article shall not, however, be held to render liable a
value of the thing, nor any statement purporting to be a sheriff, auctioneer, mortgagee, pledgee or other person
statement of the seller’s opinion only, shall be construed as professing to sell by virtue of authority in fact or law, for
a warranty, unless the seller made such affirmation or the sale of a thing in
statement as an expert and it was relied upon by the
buyer. Implied Warranties Against Eviction and Against
Hidden Defect
When is There a Warranty? a. This Article is fundamentally important.
A good test: b. A buyer at a tax sale is supposed to take all
a. If buyer is ignorant, there is a warranty. the chances because there is no warranty on
b. If the buyer is expected to have an opinion the part of the State and a sheriff does not
AND the seller has no special opinion, there guarantee title to the property he sells.
is no warranty. c. In general, the actions based on the implied
warranties prescribe in 10 years since these
Effect of Dealer’s Talk obligations are imposed by law. Special
- Dealer’s talk like “excellent,” cannot be considered provisions, of course, found in the
as an express warranty. succeeding articles will naturally prevail.
- A little exaggeration is apparently allowed by the
law as a concession to human nature. Subsection 1
WARRANTY IN CASE OF EVICTION
Article 1547. In a contract of sale, unless a contrary
intention appears, there is: Article 1548. Eviction shall take place whenever by a final
judgment based on a right prior to the sale or an act
(1) An implied warranty on the part of the seller that he imputable to the vendor, the vendee is deprived of the
has a right to sell the thing at the time when the whole or of a part of the thing purchased.
ownership is to pass, and that the buyer shall from that
time have and enjoy the legal and peaceful possession of The vendor shall answer for the eviction even though
the thing; nothing has been said in the contract on the subject.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 62
The contracting parties, however, may increase, diminish,
or suppress this legal obligation of the vendor.
Defendant in Suit
Warranty in Case of Eviction - In a proper case, the suit for the breach can be
- The warranty in case of eviction is a natural element directed only against the immediate seller, not
in the contract of sale; hence, the vendor answers sellers of the seller unless such sellers had promised
for eviction even if the contract be silent on this to warrant in favor of later buyers or unless the
point. immediate seller has expressly assigned to the buyer
his own right to sue his own seller.
Responsibility of Seller
The seller is responsible for:
(a) his own acts; Article 1549. The vendee need not appeal from the
(b) those of his predecessors-in-interest. decision in order that the vendor may become liable for
eviction.
He is not responsible for dispossession due to:
(a) acts imputable to the buyer himself; Vendee Need Not Appeal
(b) fortuitous events. - If the lower court evicts the buyer, he does not need
to appeal to the appellate courts before he can sue
Essential Elements for Eviction for damages. However, the decision must of course
a) There is a final judgment; be final.
b) The purchaser has been deprived in whole or in part
Article 1550. When adverse possession had been
of the thing sold;
c) The deprivation was by virtue of a right prior to the commenced before the sale but the prescriptive period is
sale (or one imputable to the seller) effected by the completed after the transfer, the vendor shall not be liable
seller; for eviction.
d) The vendor has been previously notified of the
complaint for eviction at the instance of the Effect if Adverse Possession Began Before the Sale
purchaser. - The rule applies only if there was reasonable
opportunity to interrupt the prescription; otherwise,
Plaintiff in Suit it would be unfair.
- In general, it is only the buyer in good faith who
may sue for the breach of warranty against eviction.
If he knew of possible dangers, chances are that he
assumed the risk of eviction.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 63
Article 1551. If the property is sold for non-payment of Article 1554. If the vendee has renounced the right to
taxes due and not made known to the vendee before the warranty in case of eviction, and eviction should take
sale, the vendor is liable for eviction. place, the vendor shall only pay the value which the thing
sold had at the time of the eviction. Should the vendee
Example: have made the waiver with knowledge of the risks of
- A has land, the taxes on which he has not paid. A eviction and assumed its consequences, the vendor shall
sells it to B. Later, the land is sold at public auction not be liable.
for the non-payment of taxes and B is evicted. A is
responsible, but only if B did not know at the time
of the sale that A had not paid the taxes thereon. Waiver By the Buyer
The waiver by the buyer may have been made:
Article 1552. The judgment debtor is also responsible for (a) without knowledge of risk of eviction (waiver
eviction in judicial sales, unless it is otherwise decreed in cons-ciente);
the judgment. (b) with knowledge of risk of eviction (waiver
intencionada).
Eviction in Case of Judicial Sales
- It has been held universally that in case of failure of Effects
title, a purchaser in good faith at a judicial sale is (a) In the first case, value at time of eviction should
entitled to recover the purchase money from the be returned. Reason: This is a case of solutio
officer if the funds are still in his hands or from the indebiti, “undue payment.”
judgment debtor. (b) In the second case, nothing need be returned.
This is aleatory in nature, and buyer assumes the
Article 1553. Any stipulation exempting the vendor from consequences.
the obligation to answer for eviction shall be void, if he
acted in bad faith. Article 1555. When the warranty has been agreed upon or
nothing has been stipulated on this point, in case eviction
Effect of Stipulation Waiving Liability for Eviction occurs, the vendee shall have the right to demand of the
(a) If seller was in good faith –– the exemption is vendor:
valid, but without prejudice to Art. 1554.
(b) If seller was in good faith –– the stipulation is
VOID.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 64
(1) The return of the value which the thing sold had at
the time of the eviction, be it greater or less than the price
Query: Why is Rescission Not a Remedy in Case of
of the sale;
TOTAL Eviction?
- The remedy of rescission contemplates that the
(2) The income or fruits, if he has been ordered to deliver
one demanding it is able to return whatever he has
them to the party who won the suit against him;
received under the contract; and when this cannot
be done, rescission cannot be carried out.
(3) The costs of the suit which caused the eviction, and, in
a proper case, those of the suit brought against the vendor
Article 1556. Should the vendee lose, by reason of the
for the warranty;
eviction, a part of the thing sold of such importance, in
relation to the whole, that he would not have bought it
(4) The expenses of the contract, if the vendee has paid
without said part, he may demand the rescission of the
them;
contract; but with the obligation to return the thing
without other encumbrances than those which it had
(5) The damages and interests, and ornamental expenses,
when he acquired it.
if the sale was made in bad faith.

He may exercise this right of action, instead of enforcing


What Seller Must Give in Case of Eviction Keyword the vendor’s liability for eviction.
— VICED
V — value The same rule shall be observed when two or more things
I — income (or fruits) have been jointly sold for a lump sum, or for a separate
C — costs price for each of them, if it should clearly appear that the
E — expenses vendee would not have purchased one without the other.
D — damages (and interests and ornamental
expenses) if seller was in bad faith Rules in Case of Partial Eviction
(a) The Article deals with a case of partial eviction.
Rule as to Income or Fruits (b) Remedy here is either:
- If the court does not order the buyer to deliver the 1) rescission, or
income or fruits to the winner, said buyer would be 2) enforcement of warranty.
entitled to them.
- This is fair for after all, in the meantime, the seller
was using the price money without interest.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 65
Article 1557. The warranty cannot be enforced until a
final judgment has been rendered whereby the vendee registration and the opposition thereto. (Lascano v.
loses the thing acquired or part thereof. Gozun, 40 O.G., p. 233 [C.A.]).

Necessity of Final Judgment


- A judgment becomes final if on appeal, the decision Article 1560. If the immovable sold should be encumbered
with any non-apparent burden or servitude, not
decreeing the eviction is affirmed; or if within the
mentioned in the agreement, of such nature that it must
period within which to appeal, no appeal was made.
be presumed that the vendee would not have acquired it
- It should be noted that under Art. 1549, the vendee
had he been aware thereof, he may ask for the rescission
need not appeal from the decision of the lower
of the contract, unless he should prefer the appropriate
court.
indemnity. Neither right can be exercised if the non-
- Thus, it is sufficient that the judgment be FINAL as
apparent burden or servitude is recorded in the Registry
understood hereinabove, before the warranty can be
of Property, unless there is an express warranty that the
enforced.
thing is free from all burdens and encumbrances.
Article 1558. The vendor shall not be obliged to make
good the proper warranty, unless he is summoned in the Within one year, to be computed from the execution of the
suit for eviction at the instance of the vendee. deed, the vendee may bring the action for rescission, or
sue for damages.
Reason for the Summoning
One year having elapsed, he may only bring an action for
- Object is to give vendor opportunity to show that
damages within an equal period, to be counted from the
the action against the buyer is unjust.
date on which he discovered the burden or servitude.

Article 1559. The defendant vendee shall ask, within the


Rules in Case of Non-Apparent Servitudes
time fixed in the Rules of Court for answering the
(a) The defect contemplated in this Article is really a
complaint, that the vendor be made a co-defendant.
sort of “hidden defect” but remedy is similar to that
provided in the case of eviction.
Rule in Registration Proceedings (b) Remedies: If made within a year:
- This Article applies only when the buyer is the 1) rescission;
defendant, hence, when the buyer is the petitioner in 2) damages; If after one year, only damages.
a registration proceeding and he loses, the formal
notice here is not a condition precedent. It is enough
that he advise the seller of the application for
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 66
Effect if Burden or Easement is Registered (c) The defect must ordinarily have been excluded
- No remedy if the burden is registered, EXCEPT if from the contract;
there is an express warranty that the thing is free (d) The defect must be important (renders thing
from all burdens and encumbrances. UNFIT or considerably decreases FITNESS);
(e) The action must be instituted within the statute
Effect of Form of the Sale of limitations.
This article is applicable whether sale is:
(a) in public instrument; Article 1562. In a sale of goods, there is an implied
(b) in private instrument; warranty or condition as to the quality or fi tness of the
(c) made orally. goods, as follows:

Subsection 2 (1) Where the buyer, expressly or by implication, makes


WARRANTY AGAINST HIDDEN DEFECTS OF OR known to the seller the particular purpose for which the
ENCUMBRANCES UPON THE THING SOLD goods are acquired, and it appears that the buyer relies
on the seller’s skill or judgment (whether he be the grower
Article 1561. The vendor shall be responsible for warranty or manufacturer or not), there is an implied warranty that
against the hidden defects which the thing sold may have, the goods shall be reasonably fit for such purpose;
should they render it unfit for the use for which it is
intended, or should they diminish its fitness for such use (2) Where the goods are bought by description from a
to such an extent that, had the vendee been aware thereof, seller who deals in goods of that description (whether he
he would not have acquired it or would have given a be the grower or manufacturer or not), there is an implied
lower price for it; but said vendor shall not be answerable warranty that the goods shall be of merchantable quality.
for patent defects or those which may be visible, or for
those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known Meaning of Merchantable Quality
them. - Fit for the general purpose of a thing, and not
necessarily the particular purpose for which it has
Requisites to Recover Because of Hidden Defects been acquired.
(a) The defect must be hidden (not known and could
not have been known); Rule When Quantity, Not Quality, Is Involved
(b) The defect must exist at the time the sale was -nWhere the agreement is that all the tobacco in a
made; certain place would be taken, the obligation is
absolute, and does not depend upon the quality of
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 67
Article 1566. The vendor is responsible to the vendee for
the tobacco, since here it was not the quality that any hidden faults or defects in the thing sold, even though
counted. (McCullough v. Aenile & Co., 3 Phil. 285). he was not aware thereof.

Article 1563. In the case of contract of sale of a specified This provision shall not apply if the contrary has been
article under its patent or other trade name, there is no stipulated, and the vendor was not aware of the hidden
warranty as to its fitness for any particular purpose, faults or defects in the thing sold.
unless there is a stipulation to the contrary.
Responsibility for Hidden Defects Even if Seller
Effect of Sale Under the Patent Name or Trade Was in Good Faith
Name Why is the seller responsible for hidden defects even
- Note that here there is generally no warranty as to if he is in good faith?
the article’s “fitness for any particular purpose.”
ANSWER: Because he has to repair the damage done.

Article 1564. An implied warranty or condition as to the


De Santos v. IAC
quality or fitness for a particular purpose may be annexed
A purchaser in good faith and for value is one who
by the usage of trade.
buys property of another, without notice that some
other person has a right to or interest in such
Effect of Usage of Trade property and pays a full and fair price for the same,
- Reason for the Article. The parties are presumed to at the time of such purchase or before he has notice
be acquainted with the usages of trade. of the claim or interest of some other person in the
property.
Article 1565. In the case of a contract of sale by sample, if
the seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from any Article 1567. In the cases of Articles 1561, 1562, 1564,
defect rendering them unmerchantable which would not 1565 and 1566, the vendee may elect between
be apparent on reasonable examination of the sample. withdrawing from the contract and demanding a
proportionate reduction of the price, with damages in
Rule in Case of ‘Sale By Sample’
either case.
- Example: In the sale of candies or potatoes or
washing machines by sample, there is warranty of Remedies in Case of Hidden Defects
“merchantability.” (a) withdrawal or rescission (accion redhibitoria)
plus damages;

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 68
(b) proportionate reduction (accion quanti minores o Here the hidden defect was NOT the cause of the
estimatoria) –– reduction in the price, plus damages. loss. The cause was either:
1) a fortuitous event;
Applicability to Lease 2) or thru the fault of the buyer.
- This warranty in sales is applicable to lease. (Yap v.
Ticoqui, 13 Phil. 433). The difference (price minus value at loss) represents
generally the decrease in value due to the hidden
Article 1568. If the thing sold should be lost in defect (hence, the amount by which the seller was
consequence of the hidden faults, and the vendor was enriched at the buyer’s expense).
aware of them, he shall bear the loss, and shall be obliged
to return the price and refund the expenses of the Article 1570. The preceding articles of this Subsection
contract, with damages. If he was not aware of them, he shall be applicable to judicial sales, except that the
shall only return the price and interest thereon, and judgment debtor shall not be liable for damages.
reimburse the expenses of the contract which the vendee
might have paid. Applicability to Judicial Sales
- While the preceding articles apply to judicial sales,
still no liability for damages will be assessed against
Effect of Loss of the Thing Because of the Hidden the judgment debtor in view of the compulsory
Defects nature of the sales.
- Note that whether the seller knew or did not know
of the defects, he is still responsible. Article 1571. Actions arising from the provisions of the
- However, in case of ignorance, there will be no preceding ten articles shall be barred after six months,
liability for damages. from the delivery of the thing sold.

Article 1569. If the thing sold had any hidden fault at the Effect of Mere Notification
time of the sale, and should thereafter be lost by a - The buyer notifies the seller of the existence of the
fortuitous event or through the fault of the vendee, the hidden defect, but does not sue within 6 months,
latter may demand of the vendor the price which he paid, the action will of course prescribe.
less the value which the thing had when it was lost.

If the vendor acted in bad faith, he shall pay damages to


the vendee.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 69
Article 1572. If two or more animals are sold together
whether for a lump sum or for a separate price for each When No Warranty Against Hidden Defects Exists
of them, the redhibitory defect of one shall only give rise - Re “livestock sold as condemned,” the fact that the
to its redhibition, and not that of the others; unless it livestock is condemned must be communicated to
should appear that the vendee would not have purchased the buyer; otherwise, the seller is still liable.
the sound animal or animals without the defective one.
Article 1575. The sale of animals suffering from
The latter case shall be presumed when a team, yoke, contagious diseases shall be void. A contract of sale of
pair, or set is bought, even if a separate price has been animals shall also be void if the use or service for which
fixed for each one of the animals composing the same. they are acquired has been stated in the contract, and
they are found to be unfit therefor.
Sale of Two or More Animals Together
(a) Note that generally, a defect in one should not Void Sales of Animals
affect the sale of the others. - The Article speaks of 2 kinds of void sales with
(b) This is true whether the price was a lump sum, respect to animals.
or separate for each animal.
(c) Note, however, the exception (team, etc.). Article 1576. If the hidden defect of animals, even in case
a professional inspection has been made, should be of
Article 1573. The provisions of the preceding article with
such a nature that expert knowledge is not sufficient to
respect to the sale of animals shall in like manner be
discover it, the defect shall be considered as redhibitory.
applicable to the sale of other things.
But if the veterinarian, through ignorance or bad faith
should fail to discover or disclose it, he shall be liable for
Applicability of Art. 1572 to Sale of Other Things damages.
- Note that the rule stated in Art. 1572 (while
expressly referring only to animals) has been made
Article 1577. The redhibitory action, based on the faults or
applicable to the sale of other things.
defects of animals, must be brought within forty days
from the date of their delivery to the vendee.
Article 1574. There is no warranty against hidden defects
of animals sold at fairs or at public auctions, or of
This action can only be exercised with respect to faults and
livestock sold as condemned.
defects which are determined by law or by local customs.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 70
QUESTION: For what causes of action, if any, does the new
Civil Code provide a period of limitation of: Remedies of Buyer of Animals With Redhibitory
ANSWER: Defects
Forty Days –– the redhibitory action, based on the (a) withdrawal or rescission (plus damages)
frauds or defects of animals. (Art. 1577). (b) proportionate reduction in price (plus damages).
Six Months:
1) breach of warranty against hidden defects;
Article 1581. The form of sale of large cattle shall be
rescission of the contract because of the same; or
governed by special laws.
proportionate reduction in the price because of the
same. (Arts. 1561-1571, Civil Code).
2) rescission or proportionate reduction in the price Chapter 5
for sales of real estate either by the unit or for a OBLIGATIONS OF THE VENDEE
lump sum, because of failure to comply with the
provisions of the contract. Article 1582. The vendee is bound to accept delivery and
to pay the price of the thing sold at the time and place
Article 1578. If the animal should die within three days stipulated in the contract.
after its purchase, the vendor shall be liable if the disease
which cause the death existed at the time of the contract. If the time and place should not have been stipulated, the
payments must be made at the time and place of the
delivery of the thing sold.
Article 1579. If the sale be rescinded, the animal shall be
returned in the condition in which it was sold and
delivered, the vendee being answerable for any injury due Principal Obligations of the Buyers
to his negligence, and not arising from the redhibitory The buyers must:
fault or defect. (a) accept delivery;
(b) pay the
Article 1580. In the sale of animals with redhibitory
defects, the vendee shall also enjoy the right mentioned in Effect of Delivery
Article 1567; but he must make use thereof within the When No Time Has Been Fixed for Payment of the Price
same period which has been fixed for the exercise of the - If seller has delivered but no time has been fixed for
redhibitory action. the payment of the price, the seller may require
payment to be made at any time after delivery.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 71
Unless otherwise agreed, when the seller tenders delivery
- The buyer here has the duty to pay the price of goods to the buyer, he is bound, on request, to afford
immediately upon demand. the buyer a reasonable opportunity of examining the
goods for the purpose of ascertaining whether they are in
Article 1583. Unless otherwise agreed, the buyer of goods conformity with the contract.
is not bound to accept delivery thereof by installments.
Where goods are delivered to a carrier by the seller, in
Where there is a contract of sale of goods to be delivered accordance with an order from or agreement with the
by stated installments, which are to be separately paid for, buyer, upon the terms that the goods shall not be
and the seller makes defective deliveries in respect of one delivered by the carrier to the buyer until he has paid the
or more installments, or the buyer neglects or refuses price, whether such terms are indicated by marking the
without just cause to take delivery of or pay for one or goods with the words “collect on delivery,” or otherwise,
more installments, it depends to each case on the terms of the buyer is not entitled to examine the goods before the
the contract and the circumstances of the case, whether payment of the price, in the absence of agreement or
the breach of contract is so material as to justify the usage of trade permitting such examination.
injured party in refusing to proceed further and suing for
damages for breach of the entire contract, or whether the When Buyer Has Right to Examine
breach is severable, giving rise to a claim for - Generally, the buyer is entitled to examine the
compensation but not to a right to treat the whole contract goods prior to delivery. And this is true even if the
as broken. goods are shipped F.O.B. (free on board).

Generally No Delivery By Installments When Buyer Has No Right to Examine


Reason: performance must generally be complete. (a) when there is a stipulation to this effect.
Exception to Rule: express provisions. (b) when the goods are delivered C.O.D. — unless
there is an agreement or a usage of trade
Article 1584. Where goods are delivered to the buyer, PERMITTING such examination.
which he has not previously examined, he is not deemed to
Article 1585. The buyer is deemed to have accepted the
have accepted them unless and until he has had a
goods when he intimates to the seller that he has accepted
reasonable opportunity of examining them for the purpose
them, or when the goods have been delivered to him, and
of ascertaining whether they are in conformity with the
he does any act in relation to them which is inconsistent
contract if there is no stipulation to the contrary.
with the ownership of the seller, or when, after the lapse
of a reasonable time, he retains the goods without
intimating to the seller that he has rejected them.

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When There is Acceptance of the Goods Effect if Buyer Justifiably Refuses to Accept the
The Article gives three ways of accepting the goods: Delivery
(a) express acceptance (a) buyer has no duty to return the goods to the
(b) when buyer does an act which only an owner can seller
do b) mere notification to seller of refusal will suffice
(c) failure to return after reasonable lapse of time (c) but buyer may make himself a voluntary
depositary –– in which case he must safely take
care of them in the mean time
Article 1586. In the absence of express or implied
agreement of the parties, acceptance of the goods by the
Article 1588. If there is no stipulation as specified in the
buyer shall not discharge the seller from liability in
first paragraph of article 1523, when the buyer’s refusal
damages or other legal remedy for breach of any promise
to accept the goods is without just cause, the title thereto
or warranty in the contract of sale. But, if, after
passes to him from the moment they are placed at his
acceptance of the goods, the buyer fails to give notice to
disposal.
the seller of the breach in any promise of warranty within
a reasonable time after the buyer knows, or ought to know
Effect if Buyer Unjustifiably Refuses to Accept the
of such breach, the seller shall not be liable therefor.
Delivery
- Generally, the buyer becomes the owner.
Even if Buyer Accepts, Seller Can Still Be Liable Exception — when there is a contrary stipulation or
(a) Reason for the last sentence. To prevent after when the seller reserves the ownership as a sort of
thoughts or belated claims. security for the payment of the price.
(b) The buyer is allowed to set up the breach of the
warranty or promise as a set-off or Article 1589. The vendee shall owe interest for the period
counterclaim for the price. between the delivery of the thing and the payment of the
price, in the following three cases:
Article 1587. Unless otherwise agreed, where goods are
(1) Should it have been so stipulated;
delivered to the buyer, and he refuses to accept them,
having the right to do, he is not bound to return them to
(2) Should the thing sold and delivered produce fruits or
the seller, but it is sufficient if he notifies the seller that he
income;
refuses to accept them. If he voluntarily constitutes himself
a depositary thereof, he shall be liable as such.
(3) Should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 73
When Buyer Has to Pay for Interest on the Price When Buyer May Suspend the Payment of the
- This Article answers the question: “In what cases is Price
the buyer liable for interest on the price?” The buyer may SUSPEND the payment of the price if:
- ANSWER: If the buyer fails to give the money after (a) There is a well-grounded fear (fundado temor).
the contract is notarized, although he had (b) The fear is because of:
previously promised to do so, there is default with 1) a vindicatory action or action to recover, or
liability for legal interest. 2) a foreclosure of mortgage.

The Three Cases Contemplated Article 1591. Should the vendor have reasonable grounds
(a) In No. (1), no demand is needed. to fear the loss of immovable property sold and its price,
(b) In No. (2), the reason for the law is that the he may immediately sue for the rescission of the sale.
fruits or income is sufficient to warrant the
payment of interest. Should such ground not exist, the provisions of Article
(c) In No. (3), “default” is mora, called “in delay” 1191 shall be observed.
under the provisions of the Civil Code.
When Seller May Immediately Sue for the
Rule for Monetary Obligations Rescission of the Sale
- In a monetary obligation (like the obligation to pay The seller must have reasonable grounds to fear:
the purchase price) in the absence of stipulation, (a) LOSS of the immovable property sold, and
legal interest takes the place of damages. (b) LOSS of the price. So, if the buyer is
squandering his money, but the immovable property
Article 1590. Should the vendee be disturbed in the remains untouched, this article cannot apply.
possession or ownership of the thing acquired, or should
he have reasonable grounds to fear such disturbance, by a Article 1592. In the sale of immovable property, even
vindicatory action or a foreclosure of mortgage, he may though it may have been stipulated that upon failure to
suspend the payment of the price until the vendor has pay the price at the time agreed upon the rescission of the
caused the disturbance or danger to cease, unless the contract shall of right take place, the vendee may pay
latter gives security for the return of the price in a proper even after the expiration of the period, as long as no
case, or it has been stipulated that, notwithstanding any demand for rescission of the contract has been made upon
such contingency, the vendee shall be bound to make the him either judicially or by a notarial act. After the
payment. A mere act of trespass shall not authorize the demand, the court may not grant him a new term.
suspension of the payment of the price.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 74
Rescission of Sale of Real Property Article 1593. With respect to movable property, the
(a) This is only applicable to a sale of real property, rescission of the sale shall of right take place in the
not to a contract TO SELL real property or to a interest of the vendor, if the vendee, upon the expiration of
promise TO SELL real property, where title remains the period fixed for the delivery of the thing, should not
with the vendor until fulfillment of a positive have appeared to receive it, or having appeared he should
suspensive condition, such as the full payment of not have tendered the price at the time, unless a longer
the price. period has been stipulated for its payment.
(b) This article applies whether or not there is a
stipulation for automatic rescission. The law says Rescission of Sale of Personal Property
“even though.” (a) This article should apply only if the object sold
(c) The demand may be: has not been delivered to the buyer.
1) judicial (b) If there has already been delivery, other articles,
2) extrajudicial (this must however be by like Art. 1191 would be applicable. In this case
notarial act). automatic rescission is not allowed.
(d) The demand is not for the payment of the price,
but for the RESCISSION of the contract. If the Chapter 6
demand for such rescission comes only AFTER the ACTIONS FOR BREACH OF CONTRACT OF SALE OF
offer to pay the balance (accompanied by a postal GOODS
money order for the amount due), the automatic
rescission cannot of course legally take place. Article 1594. Actions for breach of the contract of sale of
(e) The demand is not for the payment of the price goods shall be governed particularly by the provisions of
BUT for the RESCISSION of the contract. this Chapter, and as to matters not specifically provided
for herein, by other applicable provisions of this Title.
Roque v. Lapuz
- Art. 1592 of the Civil Code, which speaks of the Governing Law for Actions for Breach of the
rescission of contracts of sale of real property, does Contract of Sale of Goods
not apply to contracts to sell real property on - Note that this chapter is not applicable to sale of
installments. real property.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 75
Article 1595. Where, under a contract of sale, the
ownership of the goods has passed to the buyer, and he
wrongfully neglects or refuses to pay for the goods Example of paragraph 2:
according to the terms of the contract of sale, the seller - The seller and buyer agreed that payment would be
may maintain an action against him for the price of the made on Jul. 15, although the goods would be
goods. delivered only on Jul. 30. On Jul. 15, the seller may
sue for the price. The buyer is allowed to refuse to
Where, under a contract of sale, the price is payable on a pay if before the judgment in such action, he is able
certain day, irrespective of delivery or of transfer of title, to prove that the seller has no intention anyway of
and the buyer wrongfully neglects or refuses to pay such delivering the goods on Jul. 30.
price, the seller may maintain an action for the price,
although the ownership in the goods has not passed. But it Example of paragraph 3:
shall be a defense to such an action that the seller at any - Seller and buyer agreed that payment and delivery
time before the judgment in such action has manifested would be made on July 15. On said date, seller may
an inability to perform the contract of sale on his part or offer to deliver the goods to the buyer, and if buyer
an intention not to perform it. refuses to receive the goods, the seller can tell the
buyer, “I am holding the goods, no longer as the
Although the ownership in the goods has not passed, if seller, but as your depositary. You are now the
they cannot readily be resold for a reasonable price, and if owner of the goods.” The seller can now maintain an
the provisions of Article 1596, fourth paragraph, are not action for the price. This can be done if:
applicable, the seller may offer to deliver the goods to the (1) The goods cannot readily be resold for a
buyer, and, if the buyer refuses to receive them, may reasonable price, and
notify the buyer that the goods are thereafter held by the 2) If the provisions of Art. 1596, par. 4 are
seller as bailee for the buyer. Thereafter, the seller may not applicable.
treat the goods as the buyer’s and may maintain an action
for the price. Article 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may
maintain an action against him for damages for non-
Example of paragraph 1: acceptance.
- Machines having been sold and delivered to the
buyer, if the buyer refuses to pay therefor, the seller The measure of damages is the estimated loss directly and
may sue for the price. naturally resulting in the ordinary course of events from
the buyer’s breach of contract.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 76
Where there is an available market for the goods in Article 1597. Where the goods have not been delivered to
question, the measure of damages is, in the absence of the buyer, and the buyer has repudiated the contract of
special circumstances showing proximate damage of a sale, or has manifested his inability to perform his
different amount, the difference between the contract obligations thereunder, or has committed a breach
price and the market or current price at the time or times thereof, the seller may totally rescind the contract of sale
when the goods ought to have been accepted, or, if no by giving notice of his election so to do to the buyer.
time was fixed for acceptance, then at the time of the
refusal to accept. When Seller May Totally Rescind the Contract of
Sale
If, while labor or expense of material amount is necessary (a) This Article which deals with the instances
on the part of the seller to enable him to fulfill his when the seller may totally rescind the contract of
obligations under the contract of sale, the buyer sale, applies only if the goods have not yet been
repudiates the contract or notifies the seller to proceed no delivered.
further therewith, the buyer shall be liable to the seller for (b) The automatic rescission here requires notice
labor performed or expenses made before receiving notice thereof to the buyer.
of the buyer’s repudiation or countermand. The profit the
seller would have made if the contract or the sale had Article 1598. Where the seller has broken a contract to
been fully performed shall be considered in awarding the deliver specific or ascertained goods, a court may, on the
damages. application of the buyer, direct that the contract shall be
performed specifically, without giving the seller the option
QUESTION: What action or actions are available to the of retaining the goods on payment of damages. The
seller of the goods in case the buyer wrongfully refuses to judgment or decree may be unconditional, or upon such
accept the goods sold? terms and conditions as to damages, payment of the price
and otherwise, as the court may deem just.
ANSWER:
(a) Maintain an action for damages because of the Rule When Seller Has Broken a Contract to Deliver
non- acceptance. Specific or Ascertained Goods
(b) Hold the goods as bailee for the buyer and (a) Observe that here the seller is guilty; hence, there
bring an action for the price. is no right of retention on his part even if said seller
(c) Ask for the resolution of the contract for is willing to pay damages.
failure of the buyer to fulfill his obligations. (b) Note that there must be an order from the court
for the specific performance.
(c) Note further that the court may make the order
on the application of the buyer.
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Bachelor of Laws SALES
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Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election: Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon
(1) Accept or keep the goods and set up against the seller, the returning or offering to return the goods. If the price or
breach of warranty by way of recoupment in diminution or any part thereof has already been paid, the seller shall be
extinction of the price; liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately
(2) Accept or keep the goods and maintain an action against after an offer to return the goods in exchange for
the seller for damages for the breach of warranty; repayment of the price.

(3) Refuse to accept the goods, and maintain an action Where the buyer is entitled to rescind the sale and elects to
against the seller for damages for the breach of warranty; do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to
(4) Rescind the contract of sale and refuse to receive the hold the goods as bailee for the seller, but subject to a lien
goods or if the goods have already been received, return to secure payment of any portion of the price which has
them or offer to return them to the seller and recover the been paid, and with the remedies for the enforcement of
price or any part thereof which has been paid. such lien allowed to an unpaid seller by Article 1526. (5)

When the buyer has claimed and been granted a remedy in In the case of breach of warranty of quality, such loss, in
anyone of these ways, no other remedy can thereafter be the absence of special circumstances showing proximate
granted, without prejudice to the provisions of the second damage of a greater amount, is the difference between
paragraph of Article 1191. the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered
Where the goods have been delivered to the buyer, he cannot to the warranty.
rescind the sale if he knew of the breach of warranty when
he accepted the goods without protest, or if he fails to notify
the seller within a reasonable time of the election to rescind, Effect if Buyer Selects Any of the Four Remedies
or if he fails to return or to offer to return the goods to the Given
seller in substantially as good condition as they were in at - If the buyer has selected any of the remedies, and
the time the ownership was transferred to the buyer. But if has been GRANTED the same, no other remedy can
deterioration or injury of the goods is due to the breach of be given. However, the second paragraph of Art.
warranty, such deterioration or injury shall not prevent the 1191 will still apply.
buyer from returning or offering to return the goods of the
seller and rescinding the sale.

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Bachelor of Laws SALES
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Chapter 7 (c) If the terms of the pacto de retro sale are clear
EXTINGUISHMENT OF SALE and the contract is not assailed as false nor its
authenticity challenged, the literal sense of its terms
Article 1600. Sales are extinguished by the same causes as
shall be given effect.
all other obligations, by those stated in the preceding
articles of this Title, and by conventional or legal
Effect of Inadequacy of Price
redemption.
- In a sale with pacto de retro, the inadequacy of the
How Sales Are Extinguished price cannot be considered a ground for rescinding
Sales are extinguished: the contract.
(a) by same causes as in other obligations (such as
Article 1602. The contract shall be presumed to be an
novation);
equitable mortgage, in any of the following cases:
(b) by redemption (whether conventional or legal).

(1) When the price of a sale with right to repurchase is


Applicability of the Article to Both Consummated
usually inadequate;
and Perfected Contracts
- This Article applies both to consummated contracts
(2) When the vendor remains in possession as lessee or
and those which are merely perfected contracts of
otherwise;
sale, since no distinction is made in this provision.

(3) When upon or after the expiration of the right to


Section 1
repurchase another instrument extending the period of
CONVENTIONAL REDEMPTION
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
Article 1601. Conventional redemption shall take place
purchase price;
when the vendor reserves right to repurchase the thing
sold, with the obligation to comply with the provisions of
(5) When the vendor binds himself to pay the taxes on the
Article 1616 and other stipulations which may have been
thing sold;
agreed.

(6) In any other case where it may be fairly inferred that


When Conventional Redemption Takes Place
the real intention of the parties is that the transaction
(a) Conventional redemption is also called the right
shall secure the payment of a debt or the performance of
to redeem.
any other obligation.
(b) There cannot be conventional redemption unless
it has been stipulated upon in the contract of sale.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 79
In any of the foregoing cases, any money, fruits or other
benefit to be received by the vendee as rent or otherwise Remedy of Reformation
- To correct the instrument so as to make it express
shall be considered as interest which shall be subject to the
the true intent of the parties, reformation may be
usury laws.
availed of.

Definition of Equitable Mortgage Article 1606. The right referred to in Article 1601, in the
- One which although lacking in some formality, form absence of an express agreement, shall last four years
or words, or other requisites demanded by a statute from the date of the contract.
nevertheless reveals the intention of the parties to
charge a real property as security for a debt, and Should there be an agreement, the period cannot exceed
contains nothing impossible or contrary to law. ten years.

Effect of Stipulation Providing for a Renewal of However, the vendor may still exercise the right to
the Pacto de Retro repurchase within thirty days from the time final
- In a contract of sale con pacto de retro it was judgment was rendered in a civil action on the basis that
agreed that after the period fixed for the repurchase, the contract was a true sale with right to repurchase.
the buyer does not become the owner but a new
pacto de retro document shall be issued. Time Within Which to Redeem
(a) Meaning of express agreement:
Article 1603. In case of doubt, a contract purporting to be - This refers to the time.
a sale with right to repurchase shall be construed as an (b) Rules:
equitable mortgage. 1) No time agreed upon — 4 years from
date of contract.
2) Time agreed upon — period cannot
Article 1604. The provisions of Article 1602 shall also exceed 10 years.
apply to a contract purporting to be an absolute sale.
Reason for Limiting the Period of Redemption
- The law does not favor suspended ownership.
Article 1605. In the cases referred to in Articles 1602 and
1604, the apparent vendor may ask for the reformation of
the instrument.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 80
Article 1607. In case of real property, the consolidation of
ownership in the vendee by virtue of the failure of the Right to Repurchase
vendor to comply with the provisions of Article 1616 shall - This right of the seller to exercise the right to
not be recorded in the Registry of Property without a repurchase is a real right.
judicial order, after the vendor has been duly heard.
Article 1609. The vendee is subrogated to the vendor’s
Reason for the Judicial Order Before Registration rights and actions.
of the Consolidation of Ownership
- After all, the “sale” may really be an equitable Note:
mortgage, so the vendor must be heard. The law - A sale with the right to repurchase transfers to the
seeks to prevent usurious transactions. buyer all the elements of ownership subject to a
resolutory condition.
Effect of Failure to Comply With a Certain - Proper registration of the contract of sale with pacto
Condition de retro is notice to all those dealing with the
- excuse the Seller a retro from effecting the property of the character of the agreement entered
repurchase within the time stipulated. into and duly recorded.

De Bayquen v. Baloro Examples of Rights of Vendor Transferred


- If the contract between the parties is a deed of sale to the Vendee
with right to repurchase, once the seller a retro fails (a) Right to mortgage the property (provided seller is
to redeem within the stipulated period, ownership really the owner);
thereof becomes vested or consolidated by (b) Right to continue prescription;
operation of law on the buyer. There is no need for a (c) Right to receive fruits. Thus, the seller in making
hearing. The judicial hearing contemplated by Art. the repurchase, has no right to require the buyer to
1607 of the Civil Code refers not to the make an accounting of the products received from
consolidation itself but to the registration of the the land.
consolidation.
Article 1610. The creditors of the vendor cannot make use
Article 1608. The vendor may bring his action against
of the right of redemption against the vendee, until
every possessor whose right is derived from the vendee,
even if in the second contract no mention should have
Note:
been made of the right to repurchase, without prejudice to
- The buyer a retro as a rule therefore possesses a
the provisions of the Mortgage Law and the Land
better right to the property than the creditors of the
Registration Law with respect to third persons.
seller.
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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 81
- This Article is a practical example of Art. 1177 Rule When Property Owned in Common is Sold by
which allows creditors to exercise rights of debtor the Co-Owners Jointly and in the Same Contract
after proceeding against the properties of the Example:
debtor. - A, B, and C jointly and in the same contract sold an
undivided piece of land with the right to repurchase.
Reason Why There Should First Be an Exhaustion - The buyer a retro was X. Prior to the expiration of
- It would be detrimental to the stability of property if the period of redemption, A wanted to repurchase
we were to countenance an excessive use of the the whole land. X refused, alleging that A was
resolutory action. entitled merely to repurchase A’s share. Is X correct?

Article 1611. In a sale with a right to repurchase, the ANSWER:


vendee of a part of an undivided immovable who - Yes, by express provisions of the law.
acquires the whole thereof in the case of Article 498, may - None of the co-owners in this case is allowed to
compel the vendor to redeem the whole property, if the exercise the right to redeem for more than his
latter wishes to make use of the right of redemption. respective share.

Reason for the Law Article 1613. In the case of the preceding article, the
- If the law were otherwise, then in the example given, vendee may demand of all the vendors or co-heirs that
should S be allowed to repurchase only half of the they come to an agreement upon the repurchase of the
property, there would again be co-ownership. It whole thing sold; and should they fail to do so, the
should be remembered that co-ownership is NOT vendee cannot be compelled to consent to a partial
looked upon favorably by the law. redemption.

Article 1612. If several persons, jointly and in the same Reason for the Law
contract, should sell an undivided immovable with a - The law is against co-ownership.
right of repurchase, none of them may exercise this
right for more than his respective share. Article 1614. Each one of the co-owners of an undivided
immovable who may have sold his share separately, may
The same rule shall apply if the person who sold an independently exercise the right of repurchase as
immovable alone has left several heirs, in which case regards his own share, and the vendee cannot compel
each of the latter may only redeem the part which he him to redeem the whole property.
may have acquired.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 82
When Co-Owners Sell Their Shares Separately Article 1616. The vendor cannot avail himself of the
- Notice that in this Article, the selling was made right of repurchase without returning to the vendee
SEPARATELY, whereas in Art. 1612 it was made the price of the sale, and in addition:
“JOINTLY AND IN THE SAME CONTRACT.”
(1) The expenses of the contract, and any other
Article 1615. If the vendee should leave several heirs, legitimate payments made by reason of the sale;
the action for redemption cannot be brought against
each of them except for his own share, whether the (2) The necessary and useful expenses made on the
thing be undivided, or it has been partitioned among thing sold.
them. But if the inheritance has been divided, and the
thing sold has been awarded to one of the heirs, the
What Seller Must Give Buyer if Redemption is
action for redemption may be instituted against him
Made
for the whole.
The seller, if he wants to redeem, must give to the buyer:
(a) the price;
Example: (b) expenses of the contract;
- A sold a piece of land to B with pacto de retro. B (c) any other legitimate payments made by reason
dies leaving C, D, and E as heirs. of the sale;
- A brought an action for redemption against C. Can C (d) the necessary expenses made on the thing sold;
be compelled to resell the whole property? (e) the useful expenses on the thing sold.

ANSWER: Price to Be Returned Not the Value


- As a rule, C can be compelled to sell his share only - This refers to the price paid to the seller by the
whether the land be still undivided or already buyer, NOT the VALUE of the thing at the time of
partitioned among C, D, and E. repurchase.
- But if the inheritance has already been divided, and
the land sold has been awarded to C, then A can The Expenses of the Contract
institute the action for redemption against C for the - It must be remembered that under Art. 1478, “the
whole land. expenses for the execution and registration of the
sale shall be borne by the vendor, unless there is a
stipulation to the contrary.”

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 83
The Necessary and Useful Expenses Reason for Prorating in the Second Paragraph
- These must be reimbursed for the buyer a retro is - OWNERSHIP during the period concerned.
considered in the same category as a possessor in
good faith. Article 1618. The vendor who recovers the thing sold
shall receive it free from all charges or mortgages
No Reimbursement for Land Taxes constituted by the vendee, but he shall respect the
- The buyer a retro is not entitled to be reimbursed leases which the latter may have executed in good
for land taxes because these taxes are not faith, and in accordance with the custom of the place
considered expenses on the property. where the land is situated.

Effect if Buyer Tells Seller That Redemption Would Lease


Be Refused - This includes leases which are registered and those
- If the buyer a retro had previously notified the seller which are not. Note, however, that they must have
that redemption would be refused, said seller is not been executed in good faith and must be in accord
obliged to offer payment to redeem. with local customs.

Article 1617. If at the time of the execution of the sale Section 2


there should be on the land, visible or growing fruits, LEGAL REDEMPTION
there shall be no reimbursement for or prorating of
those existing at the time of redemption, if no Article 1619. Legal redemption is the right to be
indemnity was paid by the purchaser when the sale subrogated, upon the same terms and conditions
was executed. stipulated in the contract, in the place of one who
acquires a thing by purchase or dation in payment, or
Should there have been no fruits at the time of the by any other transaction whereby ownership is
sale, and some exist at the time of redemption, they transmitted by onerous title.
shall be prorated between the redemptioner and the
vendee, giving the latter the part corresponding to the Legal Redemption
time he possessed the land in the last year, counted - Legal redemption is created by law. Under this
from the anniversary of the date of the sale. Article, it can be exercised against a transferee who
gets the property because of:
(a) purchase, or
(b) dation in payment, or

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Bachelor of Laws SALES
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(c) any other transaction whereby ownership is Article 1620. A co-owner of a thing may exercise the
transmitted by onerous title. right of redemption in case the shares of all the other co-
owners or of any of them, are sold to a third person. If
Pre-emption and Redemption Distinguished the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.

PRE-EMPTION REDEMPTION
Should two or more co-owners desire to exercise the right
(a) arises before sale (a) arises after sale of redemption, they may only do so in proportion to the
(b) no rescission because (b) there can be rescission of share they may respectively have in the thing owned in
no sale as yet exists the original sale common.
(c) the action here is (c) the action here is directed
directed against prospective against the buyer
seller Right of Legal Redemption of Co-Owner
(a) Reason for the law: To minimize co-ownership.
Basis of Legal Redemption (b) Note that for Art. 1620 to apply, the share must
- This right is not predicated on any proprietary right, have been sold to a third person. Hence, if the
which after the sale of the property on execution, leaves purchaser is also a co-owner, there is no legal
the judgment debtor and vests in the purchaser, but on a redemption.
bare statutory privilege to be exercised only by the persons
named in the statute. Who Can Exercise the Right of Legal Redemption
(a) The right of legal redemption lies in all co-
Property Affected tenants of the things held in common.
- Legal redemption can be effected against either (b) This right is granted not only to the original co-
movable or immovable property. owners but applies to all those who subsequently
acquire their respective shares while the community
subsists.

Federis v. Sunga
- If property has been partitioned, a former co-heir or
co-owner has no right of redemption or pre-emption
and cannot complain that he was not served notice
of the disposition of the property.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 85
Entire Amount of Redemption Against Whom Right Can Be Exercised
- The co-owner who desires to redeem must tender - This right may be exercised only against a stranger
the entire amount of the redemption price or validly - Not against an adjacent rural owner who purchases
consign the same in court. the property.
- This is needed to show good faith.
Fabia v. Intermediate Appellate Court
Article 1621. The owners of adjoining lands shall also - The legal right of redemption of rural land refers to
have the right of redemption when a piece of rural land, land that will be used for agricultural, not
the area of which does not exceed one hectare, is residential purposes.
alienated, unless the grantee does not own any rural - We must consider the legislative intent.
land.
Article 1622. Whenever a piece of urban land which is so
This right is not applicable to adjacent lands which are small and so situated that a major portion thereof
separated by brooks, drains, ravines, roads and other
cannot be used for any practical purpose within a
apparent servitudes for the benefit of other estates.
reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any
If two or more adjoining owners desire to exercise the adjoining land has a right of pre-emption at a
right of redemption at the same time, the owner of the
reasonable price.
adjoining land of smaller area shall be preferred; and
should both lands have the same area, the one who first
If the re-sale has been perfected, the owner of the
requested the redemption. adjoining land shall have a right of redemption, also at a
Legal Redemption by Adjacent Owner of Rural
reasonable price.
Property
(a) Reason for the law: To foster the development
When two or more owners of adjoining lands wish to
of agricultural areas by adjacent owners who may
exercise the right of pre-emption or redemption, the
desire the increase for the improvement of their
owner whose intended use of the land in question
own land. appears best justified shall be preferred.
(b) Reason for paragraph 2: Here the properties
cannot be said to be adjacent. Proof of being non-
adjacent is on grantee. Legal Pre-emption and Redemption by Adjacent
Owners of Urban Property
There are 2 rights here:
- pre-emption (par. 1) and
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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 86
- redemption (par. 2) Notification to Buyer That Redemption Would Be
Exercised
Article 1623. The right of legal pre-emption or - The would-be redemptioner is not required to notify
redemption shall not be exercised except within thirty the buyer, previous to bringing an action to compel
days from the notice in writing by the prospective redemption.
vendor, or by the vendor, as the case may be. The deed - The general practice, however, is to first notify so
of sale shall not be recorded in the Registry of Property, that judicial trouble can be avoided.
unless accompanied by an affidavit of the vendor that he
has given written notice thereof to all possible Redemption Offer Must Be With Legal Tender
redemptioners. - When the right of redemption is exercised (whether
it be conventional or legal redemption) the offer to
The right of redemption of co-owners excludes that of redeem must be in legal tender. Thus, if a check is
adjoining owners. offered, it is as if no tender had been made.

Note: Mariano v. CA
- The right of legal redemption is SUBSTANTIVE. - In the absence of a written notification of the sale by
- The periods given in the law are conditions the vendor, the 30-day period cannot be said to have
precedent, and not periods of prescription. The even begun to run. Thus, respondents have not lost
offer to exercise the right of redemption must be their right to redeem.
within the period stipulated by the law, for said
periods are requisites for the legal and effective Chapter 8
exercise of the right. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL
RIGHTS
Doromal v. Court of Appeals
- The 30-day notice in writing referred to in Art. 1623 Article 1624. An assignment of credits and other
should be counted from notice, not of the perfected incorporeal rights shall be perfected in accordance with
sale, but of the actual execution and delivery of the the provisions of Article 1475.
document of sale.

Preference of Co-Owners Assignment of Credits and Rights


- Co-owners are preferred over adjacent owners. - Assignment is the process of transferring
gratuitously or onerously the right of the assignor to

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 87
the assignee, who would then be allowed to proceed Rule if a Third Party Has the Funds
against the debtor. - Should there be an agreement between an obligee
and an obligor that debt should be paid out of a
Article 1625. An assignment of a credit, right or action fund belonging to the obligor in the hands of a third
shall produce no effect as against third persons, unless it party and the agreement is communicated to such
appears in a public instrument, or the instrument is third party and is assented to by him, this will be
recorded in the Registry of Property in case the effective in equity to transfer an interest in such
assignment involves real property. fund to the extent of the debt, to the obligee.

Effectivity Against Third Persons South City Homes, Inc., Fortune Motors (Phils.),
(a) if personal property is involved — a public Palawan Lumber Manufacturing Corp. v. BA
instrument is needed to make the assignment Finance Corp.
effective against third persons. - In an assignment, the debtor’s consent is not
(b) if real property is involved –– registration in the essential for the validity of the assignment his
Registry of Property would be needed. knowledge thereof affecting only the validity of the
payment he might make.
Mortgage
- A mortgage that is assigned is valid between the Article 1627. The assignment of a credit includes all the
parties even if the assignment is not registered, accessory rights, such as a guaranty, mortgage, pledge
because registration is only essential to prejudice or preference.
third parties. (Villanueua v. Perez, et al., 928).
Rights Included in the Assignment of a Credit
Gratuitous Assignments Accessory rights are included such as:
- A gratuitous assignment is a DONATION and must (a) guaranty,
therefore comply with the formalities of a donation. (b) mortgage,
(c) pledge,
Article 1626. The debtor who, before having knowledge (d) preference.
of the assignment, pays his creditor shall be released
from the obligation.

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Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 88
Article 1628. The vendor in good faith shall be Article 1629. In case the assignor in good faith should
responsible for the existence and legality of the credits at have made himself responsible for the solvency of the
the time of the sale, unless it shall have been sold as debtor, and the contracting parties should not have
doubtful; but not for the solvency of the debtor, unless it agreed upon the duration of the liability, it shall last for
has been so expressly stipulated or unless the insolvency one year only, from the time of the assignment if the
was prior to the sale and of common knowledge. period had already expired.

Even in these cases he shall only be liable for the price If the credit should be payable within a term or period
received and for the expenses specified in No. 1 of Article which has not yet expired, the liability shall cease one
1616. The vendor in bad faith shall always be year after the maturity.
answerable for the payment of all expenses, and for
damages. Duration of the Warranty for the Debtor’s
Solvency
Warranties in the Assignment of a Credit (a) time agreed upon
(a) This Article talks of two kinds of warranties: (b) if no time was agreed upon
1) objective — the credit itself (its existence and 1) one year from ASSIGNMENT — if debt was
legality). already due
2) subjective — the person of the debtor (his 2) one year from MATURITY if debt was not yet
solvency). due
(b) This Article also distinguishes between the liabilities of
the seller in good faith and the seller in bad faith. Article 1630. One who sells an inheritance without
enumerating the things of which it is composed, shall
‘Assignment of Credit’ Defined only be answerable for his character as an heir.
- It is the process of transferring the right of the
assignor to the assignee, who would then be allowed Warranty of a Person Who Sells an Inheritance
to proceed against the debtor. It may be done either Without an Enumeration of the Things Included
gratuitously or onerously, in which case, the Therein
assignment has an effect similar to that of a sale. - If there is a sale of an enumerated list of future
inheritance, this is prohibited, as a rule.
- Present inheritance may be sold and this is what the
Article contemplates. Since the sale does not
enumerate the specific things sold, the warranty
only extends to the fact of HEIRSHIP.
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 89
Sale of Future Inheritance
Article 1633. The vendee shall, on his part, reimburse
- If the future inheritance is sold without specification
the vendor for all that the latter may have paid for the
of properties, this would only be a sale of future
debts of and charges on the estate and satisfy the credits
hereditary rights, and hence, is permissible.
he may have against the same, unless there is an
-
agreement to the contrary.
Article 1631. One who sells for a lump sum the whole of
certain rights, rents, or products, shall comply by Corresponding Duty of a Buyer
answering for the legitimacy of the whole in general; but - The Article is clearly just and fair.
he shall not be obliged to warrant each of the various
parts of which it may be composed, except in the case of
Article 1634. When a credit or other incorporeal right in
eviction from the whole or the part of greater value.
litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the price
Sale For a Lump Sum of the Whole of Certain the latter paid therefor, the judicial costs incurred by
Rights, Rents, or Products him, and the interest on the price from the day on which
- The warranty is on the LEGITIMACY of the whole. the same was paid.

A credit or other incorporeal right shall be considered in


Article 1632. Should the vendor have profited by some of litigation from the time the complaint concerning the
the fruits or received anything from the inheritance sold, same is answered.
he shall pay the vendee thereof, if the contrary has not
been stipulated. The debtor may exercise his right within thirty days from
the date the assignee demands payment from him.
Rule if Vendor Still Profits Despite Sale of the
Inheritance
- Since the vendor has already sold the inheritance, he Reason for the law:
should not profit except, of course, insofar as the - Equity. Besides, this will prevent speculation on the
price is concerned. part of the assignee.
- Hence, the obligation to pay, as a rule.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 90
Article 1635. From the provision of the preceding article
Chapter 9
shall be excepted the assignments or sales made:
GENERAL PROVISIONS

(1) To a co-heir or co-owner of the right assigned; Article 1636. In the preceding articles in this Title
governing the sale of goods, unless the context or subject
(2) To a creditor in payment of his credit; matter otherwise requires:

(3) To the possessor of a tenement or piece of land which (1) “Document of title to goods” includes any bill of
is subject to the right in litigation assigned. lading, dock warrant, “quedan,” or warehouse receipt or
order, for the delivery of goods, or any other document
Reason for paragraph 1: used in the ordinary course of business in the sale or
- The law does not favor co-ownership. transfer of goods, as proof of the possession or control of
the goods, or authorizing or purporting to authorize the
Reason for paragraph 2: possessor of the document to transfer or receive, either
- The presumption here that the assignment is above by indorsement or by delivery, goods represented by
suspicion. The assignment here in the form of such document.
“dacio en pago” is, thus, perfectly legal.
“Goods” includes all chattels personal but not things in
Example of paragraph 3: action or money of legal tender in the Philippines. The
- A mortgaged his land to B, but A sold it to C. Later term includes growing fruits or crops.
while suit is pending, C acquires mortgage credit
assigned to him by B. A has no right to redeem the “Order” relating to documents of title means an order by
mortgage credit. This is because C’s purpose is indorsement on the documents.
presumably to preserve the tenement.
“Quality of goods” includes their state or condition.

“Specific goods” means goods identified and agreed


upon at the time a contract a sale is made.

Ma. Tiffany T. Cabigon


Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 91
being that the land belongs to the State), and the
An antecedent or pre-existing claim, whether for money
claim or interest is based only on this imperfect
or not, constitutes “value” where goods or documents of
title, or by virtue of open, adverse, and continuous
title are taken either in satisfaction thereof or as security
possession.
therefor.

(2) A person is insolvent within the meaning of this Title - END -


who either has ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they
become due, whether insolvency proceedings have been
commenced or not.
THANK YOU
(3) Goods are in a “deliverable state” within the meaning
YOUR DREAM HAS THE POWER TO SET
Definition of Certain Terms
of this Title when they are in such a state that the buyer YOUR HEART ON FIRE.
- The Article defines certain terms in connection with
would, under the contract, be bound to take delivery of
the sale of goods.
them.
- Note that real properties are NOT involved here. - ELEANOR ROOSEVELT
Article 1637. The provisions of this Title are subject to
the rules laid down by the Mortgage Law and the Land
Registration Law with regard to immovable property.

Protection to Innocent Third Persons in


Connection With the Sale of REAL Property
- Note the reference to:
(a) The Mortgage Law
(b) The Land Registration Law

Republic v. Aquino
- The principal distinction between the Land
Registration Law and the Public Land Law is that in
the first, there is already a title which is to be
confirmed by the first court, while in the second,
there is only an imperfect title (the presumption
Ma. Tiffany T. Cabigon
Bachelor of Laws SALES
University of Negros Occidental-Recoletos Page 92