sales memaid beda.doc

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San Beda College of Law113

MEMORYAIDIN CIVIL LAW

SALES

SALE

A nominate contract whereby one ofthe contracting parties obligateshimself to transfer the ownership ofand to deliver a determinate thingand the other to pay therefor a pricecertain in money or its equivalent.

NOTES: Delivery and payment in acontract of sale are so interrelated andintertwined with each other that withoutdelivery of the goods there is nocorresponding obligation to pay. Thetwo complement each other. It is clear

that the two elements cannot bedissociated, for the contract of purchaseand sale is essentially a bilateralcontract, as it gives rise to reciprocalobligations. (Pio Barretto Sons, Inc. vs.Compania Maritima, 62 SCRA 167).

Neither is the delivery of the thingbought nor the payment of the pricenecessary for the perfection of thecontract of sale. Being consensual,it is perfected by mere consent.

Elements:a. Essential elements those without

which, there can be no valid sale:1. Consent or meeting of minds2. A Determinable subject matter3. Price certain in money or its

equivalentb. Natural elements inherent in the

contract, and which in the absenceof any contrary provision, aredeemed to exist in the contract:1. Warranty against eviction2. Warranty against hidden defects

c. Accidental elements may bepresent or absent depending on thestipulation of the parties (e.g.:conditions, interest, penalty, timeor place of payment, etc.)

Characteristics:1. Principal2. Consensual;3. Bilateral;4. Nominate;

5. Commutative; In some cases,

aleatory (emptio spei);6. Onerous.

* Aleatory contract: one of the parties orboth reciprocally bind themselves to giveor to do something in consideration ofwhat the other shall give or do upon thehappening of an event which isuncertain, or which is to occur at anindeterminate time. (Ex: Sale of sweepstakes ticket)

Contract to sell

exclusive right and privilege topurchase an object.

a bilateral contract whereby theprospective seller, while expresslyreserving the ownership of thesubject property despite deliverythereof to the prospective buyerbinds himself to sell the saidproperty exclusively to theprospective buyer upon fulfilment ofthe condition agreed upon, that is,full payment of the purchase price.

NOTE: Absent a proviso in the contractthat the title to the property is reservedin the vendor until full payment of thepurchase price or a stipulation giving thevendor the right to unilaterally rescindthe contract the moment the vendeefails to pay within the fixed period, thetransaction is an absolute contract ofsale and not a contract to sell. (Dignosvs. CA [1988])* The contract of sale by itself is not amode of acquiring ownership. The

contact transfers no real rights; itmerely causes certain obligations toarise.

Contract ofSale

Contract toSell

1. Title passes to thebuyer upon deliveryof the thing sold

1. Ownership isreserved in theseller and is not topass until fullpayment of thepurchase price

CIVIL LAW COMMITTEECHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad EDP : Alnaiza Hassiman, Dorothy Gayon SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma.RhodoraFerrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease),John StephenQuiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), AnthonyPurganan(LTD),Ma. Ricasion Tugadi (Conflicts of Law)


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2. Non-payment ofthe price is anegative resolutorycondition and theremedy of the selleris to exact fulfilmentor to rescind thecontract

2. Full payment is apositive suspensivecondition, the

failure of which isnot a breach

casual or seriousbut simplyprevents theobligation of thevendor to conveytitle from havingbinding force

3. Vendor loses andcannot recoverownership of thething sold anddelivered until thecontract of sale isresolved and set

aside

3. Title remains inthe vendor if thevendee does notcomply with thecondition

precedent ofmaking payment at

the time specifiedin the contract

Conditional Sale Contract toSell

As to reservation of title to the subjectproperty

In both cases the seller may reserve thetitle to the subject property untilfulfillment of the suspensive condition i.e.full payment of the price

As to effect of fulfillment of suspensivecondition

1. Upon fulfillment ofthe suspensivecondition, thecontract of sale isthereby perfected,such that if there hadbeen previous deliveryof the subjectproperty to the buyer,ownership theretoautomaticallytransfers to thebuyer by operationof law without any

further act by theseller.

1. Uponfulfillment of thesuspensivecondition, whichis the fullpayment of thepurchase price,ownership willnotautomaticallytransfer to thebuyer althoughthe property mayhave been

previouslydelivered to him.The prospectiveseller still hasto convey titleto the

prospectivebuyer byentering into acontract ofabsolute sale.

As to effect of sale of the subjectproperty to 3rd persons

1. Constructive/actual knowledge onthe part of the 2nd

buyer of the defect inthe sellers title

renders him not aregistrant in goodfaith. Such secondbuyer cannot defeatthe first buyers title.Ratio: Fulfilment ofthe suspensiveconditions affects thesellers title to theproperty and previousdelivery of thepropertyautomaticallytransfers

ownership/title to thebuyer.

1. Third personbuying theproperty despitefulfilment of thesuspensive

condition cannotbe deemed abuyer in badfaith andprospectivebuyer cannotseek the relief ofreconveyance ofproperty.Exception: IfThere was noprevious sale ofthe property.

OBJECTS OF SALERequisites:1. THINGS:

a) determinate or determinable(Arts. 1458, 1460)b) lawful (Arts 1347, 1409 [1,4]c) should not be impossible (Art.1348) e.g. must be within thecommerce of man

2. RIGHTS must be transmissibleExceptions:-future inheritance- service

Emptio reisperatae

Emptio spei

1. Sale of an expectedthing

1. Sale of a merehope or expectancythat the thing willcome to existence;Sale of the hopeitself

2. Sale is subject to

the condition that thething will exist; if itdoes not, there is nocontract

2. Sale produces

effect even if thething does notcome intoexistence, unless itis a vain hope

3. The uncertainty iswith regard to thequantity and quality ofthe thing and not theexistence of the thing

3. The uncertaintyis with regard tothe existence ofthe thing

4. Object is a futurething

4. Object is apresent thing whichis the hope orexpectancy



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NOTE: In case of doubt the presumptionis in favor of emptio rei speratae whichis more in keeping with the commutativecharacter of the contract

Goods which may be Object of Salea. Existing goods goods owned or

possessed by the seller.b. Future goods goods to be

manufactured, raised or acquired bythe seller after the perfection of thecontract.

NOTES:

A sale of future goods is valid only asan executory contract to be fulfilledby the acquisition and delivery ofgoods specified.

While there can be sale of futureproperty, there can generally be nodonation of future property (Article751 Civil Code)

Future inheritance cannot be sold.

A contract of sale or purchase ofgoods to be delivered at a futuretime, if entered into without theintention of having any goods passfrom one party to another, but withan understanding that at theappointed time, the purchaser is

merely to receive or pay thedifference between the contract andthe market prices, is illegal. Suchcontract falls under the definition offutures in which the partiesmerely gamble on the rise or fall inprices and is declared null and voidby law. (Art. 2018, NCC) (OnapalPhil. Commodities, Inc. vs. CA[1993])

Instances when the Civil Code

recognizes sale of things notactually or already owned by theseller at the time of the sale:

1. Sale of a thing having potentialexistence (Article 1461)

2. Sale of future goods (Article 1462)3. Contract for the delivery at a certain

price of an article which the vendorin the ordinary course of thebusiness manufactures or procuresfor the general market, whether thesame is on hand at the time or not(Article 1467)

Sale Agency to sell1. Buyer receivesthe goods as owner

1. Agent receivesthe goods as goods

of the principal whoretains hisownership overthem

2. Buyer pays theprice

2. Agent deliversthe price which inturn he got from hisbuyer

3. Buyer, as ageneral rule, cannotreturn the objectsold

3. Agent can returnthe goods in case heis unable to sell thesame to a thirdperson

4. Seller warrants

the thing sold

4. Agent makes no

warranty for whichhe assumes personalliability as long ashe acts within hisauthority and in thename of the seller

5. Buyer can dealwith the thing soldas he pleases beingthe owner

5. Agent in dealingwith the thingreceived, must actand is boundaccording to theinstructions of theprincipal

Contract forPiece of Work

Sale

1. The thingtransferred is onenot in existence andwhich never wouldhave existed but forthe order of theparty desiring toacquire it

1. The thingtransferred is onewhich would haveexisted and wouldhave been thesubject of sale tosome other person,even if the orderhad not been given

2. The servicesdominate thecontract even

though there is asale of goodsinvolved

2. The primaryobjective of thecontract is a sale of

the manufactureditem; it is a sale ofgoods even thoughthe item ismanufactured bylabor furnished bythe seller and uponprevious order ofthe customer

3. Not within theStatute of Frauds

3. Within theStatute of Frauds



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Rules to determine if the contract isone of Sale or Piece of work:

a. If ordered in the ordinary course ofbusiness saleb. If manufactured specially for the

customer and upon his special order,and not for the market piece ofwork

SCHOOLS OF THOUGHT:a) Massachusetts rule: If

specifically done at the order ofanother, this is a contract for apiece of work. (Philippineapplication)

b) New York rule: If thing alreadyexists-SALE; if not-WORK

c) English rule: If material is morevaluable-SALE; if skill is morevaluable-WORK

BARTER

contract whereby one of the partiesbinds himself to give one thing inconsideration of the other's promiseto give another thing.

NOTE: The only point differencebetween contract of sale and barter is inthe element which is present in sale butnot in barter, namely: price certain inmoney or its equivalent

NOTE: If the consideration is partly inmoney and partly in another thing,determine:

a. The manifest intention of theparties

b. If the intent is not clear, applythe following rules:1. If the thing is more valuable

than money barter2. If the money and the thingare of equal value sale

3. If the thing is less valuablethan money sale

Sale Dation in Payment1. No pre-existing

credit1. Pre-existing credit

2. Obligations arecreated

2. Obligations areextinguished

3. Consideration onthe part of the seller

3. Consideration ofthe debtor is the

is the price; on thepart of the buyer isthe acquisition ofthe object

extinguishment ofthe debt; on the partof the creditor, it isthe acquisition ofthe object offered inlieu of the originalcredit

4. Greater freedomin determiningthe price

4. Less Freedom indetermining theprice

5. Buyer still has topay the price

5. The payment isreceived by thedebtor beforethe contract isperfected.

PRICE

The sum stipulated as the equivalentof the thing sold and also everyincident taken into consideration forthe fixing of the price, put to thedebit of the vendee and agreed to byhim.

Requisites:1. Certainty or ascertainable at the

time of perfection2. Real, not fictitious3. In some cases, must not be

grossly inferior to the value ofthe thing sold.4. Paid in money or its equivalent

Certainty

It is not necessary that the certaintyof the price be actual or determinedat the time of the execution of thecontract. The price is certain in thefollowing cases:1. If the parties have fixed or

agreed upon a definite amount;NOTE: The fixing of the price can

never be left to the discretion of oneof the contracting parties. Howeverif the price fixed by one of theparties is accepted by the other, thesale is perfected.2. If it be certain with reference to

another thing certain3. If the determination of the price

is left to the judgment of aspecified person or persons evenbefore such determination



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4. In the cases provided under Art.1472 NCC

Effect when the price is fixed by thethird person designated:GENERAL RULE: Price fixed by a thirdperson designated by the parties isbinding upon them.EXCEPTIONS:

1. When the third person acts inbad faith or by mistake

2. When the third person disregardsthe specific instructions or theprocedure marked out by theparties

Effect when the price is not fixed bythe third person designated:

1. If the third person refuses orcannot fix the price, thecontract shall becomeineffective, unless the partiessubsequently agree upon theprice

2. If the third person is preventedfrom fixing the price by the faultof the seller or buyer, the partynot in fault may obtain redressagainst the party in fault

Effect of Gross Inadequacy of Price:1. Voluntary salesGENERAL RULE: Mere inadequacy ofthe price does not affect validity of thesale.

A valuable consideration, howeversmall or nominal, if given orstipulated in good faith is, in theabsence of fraud, sufficient.(Rodriguez vs. CA, 207 SCRA 553)

Future inheritance cannot be sold.

EXCEPTIONS:a. Where low price indicates vice of

consent, sale may be annulled;or contract is presumed to be anequitable mortgage

b. Where the price is so low as tobe shocking to conscience,sale may be set aside.

2. Involuntary or Forced sales

GENERAL RULE: Mere inadequacy ofthe price is not a sufficient ground forthe cancellation of the sale if property isreal.

EXCEPTIONS:

a. Where the price is so low as tobe shocking to the moralconscience, judicial sale ofpersonal property will be setaside

b. In the event of a resale, a betterprice can be obtained

NOTE: The validity of the sale is notnecessarily affected where the law givesto the owner the right to redeem, uponthe theory that the lesser the price, theeasier it is for the owner to effectredemption.

Effect where price is simulated1. If it is shown to have been in reality

a donation or some other act orcontract

The sale is void but the act orcontract may be valid as adonation

2. If notThe contract is void and inexistent

Effect of Failure to determine price:1. Where contract executory

The contract is inefficacious2. Where the thing has been delivered

to and appropriated by the buyer

The buyer must pay a reasonableprice therefore

Reasonable price generally the marketprice at the time and place fixed by the

contract or by law for the delivery of thegoods

PERFECTION OF SALEGENERAL RULE: It is perfected at themoment there is meeting of the mindsupon a determinate thing (object), and acertain price (consideration), even ifneither is delivered. A choice betweenrescission and fulfilment, with damagesin either case)



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NOTE: Sale is a consensual contract;Hence, delivery and payment are notessential for its perfectionEXCEPTION: When the sale is subject

to a suspensive condition by virtue oflaw or stipulation.* The terms and conditions of paymentare merely accidental, not essentialelements of the contract of sale exceptwhere the partied themselves stipulatethat in addition to the subject-matterand the price, they are essential ormaterial to the contract.

Requirements for perfectiona. When parties are face to face

When an offer is accepted without

conditions or qualificationsNOTES:

A conditional acceptance is acounter-offer

when negotiated thru phone it isas if it is negotiated face to face

b. When contract is thrucorrespondence or thru telegram

When the offeror receives or hasknowledge of the acceptance by theoffereeNOTE: If the buyer has already

accepted but the seller does notknow yet of the acceptance, theseller may still withdraw

c. When a sale is subject to asuspensive condition

From the moment the condition isfulfilled

TRANSFER OF OWNERSHIPGENERAL RULE: While a contract ofsale is consensual, ownership of thething sold is acquired only upon itsdelivery, actual or constructive, to the

buyer. (Daus vs. Sps. De Leon, 16 June2003)

This is true even if the purchasehas been made on credit.Payment of the purchase price isnot essential to the transfer ofownership, as long as theproperty sold has beendelivered. (Sampaguita Pictures,Inc vs. Jalwindor Manufacturers,Inc. 93 SCRA 420)

Nonpayment only creates a rightto demand payment or to rescindthe contract, or to criminalprosecution in the case of

bouncing checks. (EDCAPublishing and DistributingCorp. vs. Santos, 184 SCRA 614)

EXCEPTIONS:1. Contrary stipulation or Pactum

reservati dominii (contractualreservation of title) a stipulation,usually in sales by installment,whereby, despite delivery of theproperty sold, ownership remainswith the seller until full payment ofthe price is made.

2. Contract to sell3. Contract of insurance a perfected

contract of sale, even withoutdelivery, vests in the vendee anequitable title, an existing interestover the goods sufficient to be thesubject of insurance

RULES GOVERNING AUCTION SALES1. Sales of separate lots by auction areseparate contracts of sale.2. Sale is perfected by the fall of thehammer3. Seller has the right to bid in theauction, provided: a) such right was reserved b) notice was given that the sale wassubject to a right to bid on behalf of theseller c) right is not prohibited by law or bystipulation4. Advertisements for bidders are simplyinvitations to make proposals, and theadvertiser is not bound to accept thehighest or lowest bidder, unless the

contrary appears.

EFFECT OF PROMISE TREATED UNDERART. 1479 Civil Code:Accepted unilateral promise to sell or

buy

Only one makes the promise, thispromise is accepted by the other.Example: A promises to sell to B, Baccepts the promise, but does not inturn promise to buy.



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does not bind the promissor even ifaccepted and may be withdrawnanytime.

NOTE: Pending notice of its withdrawal,

the accepted promise partakes thenature of an offer to sell which ifaccepted, results in a perfected contractof sale (Sanchez vs. Rigos 45 SCRA3 68).In other words, if the acceptance ismade before withdrawal, it constitutes abinding contract of sale although theoption is given without consideration.

if the promise is supported by aconsideration distinct and separatefrom the price (option money), itsacceptance will give rise to aperfected contract.

Bilateral promise to buy and sell

One party accepts the otherspromise to buy and the latter, theformers promise to sell adeterminate thing for a price certain

it is reciprocally demandable

It requires no consideration distinctfrom the selling priceNOTE: this is as good as a perfectedsale. No title of dominion istransferred as yet, the parties beinggiven only the right to demandfulfillment or damages.

Policitation

An unaccepted unilateral promise tobuy or sell. Even if accepted by theother party, it does not bind thepromissor and maybe withdrawnanytime. This is a mere offer, andhas not yet been converted into acontract.

Option contract A contract granting a privilege in one

person, for which he has paid aconsideration, which gives him theright to buy certain merchandise, atanytime within the agreed period, ata fixed price.

An option without consideration isvoid and the effect is the same as ifthere was no option

* However, in Sanchez vs. Rigos (1972),even though the option was not

supported by a consideration, themoment it was accepted, a perfectedcontract of sale resulted, applying Art.1324 of the NCC. In view of the ruling of

the Supreme Court, the only importanceof the consideration for an option is thatthe option cannot be withdrawn by thegrantor after acceptance.* In an option to buy, the party who hasan option may validly and effectivelyexercise his right by merely notifying theowner of the formers decision to buyand expressing his readiness to pay thestipulated price.

Right of First Refusal

It is a right of first priority all things

and conditions being equal; thereshould be identity of the terms andconditions to be offered to theoptionee and all other prospectivebuyers, with optionee to enjoy theright of first priority. A deed of saleexecuted in favor of a third partywho cannot be deemed a purchaserin good faith, and which is inviolation of the of the right of firstrefusal granted to the optionee isNOT voidable under the Statute ofFrauds, such contract is valid BUTrescissible under Article 1380 to1381(3) of the New Civil Code(Guzman Bocaling & Co. vs.Bonnavie; Riviera Filipina, Inc vs. CAet.al. GR No. 117355, April 5, 2002).

The basis of the right of first refusalmust be the current offer to sell ofthe seller or offer to purchase of anyprospective buyer. Only after theoptionee fails to exercise its right offirst priority under the same termsand within the period contemplated

could the owner validly offer to sellthe property to a third person,again, under the same terms asoffered to the optionee (ParanaqueKings Enterprises, Inc. vs. CA GR No.111538, February 26, 1997)

The lessees right of first option tobuy the leased property in case of itssale is but a part of the bigger rightto lease the said property from thelessor. The option was given to thelessee because she was the lessee of



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the subject property. It was acomponent of the consideration ofthe lease. The option was by nomeans an independent right which

can be exercised by the lessee. Ifthe lessee is barred by the contractfrom assigning her right to lease thesubject property to any other party,the lessee is similarly barred toassign her first option to buy theleased property to another.(Bangayan et.al vs. CA and Lim GRNo.123581, August 29, 1997)

Earnest money or ARRAS issomething of value to show that thebuyer was really in earnest, and given to

the seller to bind the bargain. It isconsidered as:

a) part of the purchase priceb) proof of perfection of the

contract*It shall be deducted from the totalprice.

Earnest money Option money1. Title passes tothe buyer upondelivery of thething sold

1. Ownership isreserved to theseller and is not topass until full

payment2. In case ofnon-payment, anaction for specificperformance orfor rescission canbe filed by theinjured party

2. In case ofnon-payment, therecan be action forspecific performance

3. Part of thepurchase price

3. Money given as adistinctconsideration for anoption contract

4. When given,the buyer is bound

to pay the balance

4. The would-bebuyer is not required

to buy5. Given whenthere is already asale

5. Applies to a salenot yet perfected

RULES ON RISK OF LOSS ANDDETERIORATION:a. The thing sold is lost before

perfection: Seller bears the loss.b. The thing sold is lost at the time of

perfection: Contract is void orinexistent.

c. The thing sold is lost afterperfection, but before delivery:

GENERAL RULE: Who bears the risk

of loss is governed by thestipulations in the contract

In the absence of anystipulation:

First view:Buyerbears the loss as an exceptionto the rule of res perit domino.

EXCEPTIONS:1. when object sold consists of

fungible goods for a price fixedaccording to weight, number ormeasure

2. seller is guilty of fraud,

negligence, default or violationof contractual terms

3. object sold is generic(Civil Code of the Philippines, Paras)NOTE: This view conforms withManresas view. Buyer would havebeen the one to profit from the thinghad it not been lost or destroyed.

Contrary view:Where the ownership is transferredby delivery, as in our code, theapplication of the axiom res peritdomino, imposes the risk of lossupon the vendor; hence, if the thingis lost by fortuitous event beforedelivery, the vendor suffers the lossand cannot recover the price fromthe vendee (Commentaries and

Jurisprudence on the Civil Code ofthe Philippines, Tolentino)

d. The thing is lost after delivery:Buyer bears the loss.

Question: If one does not comply, theother need not pay?

Answer: True. But this only applies whenthe seller is able to deliver but does not.

EFFECT OF LOSS AT THE TIME OF SALE:a. Thing entirely lost at the time of

perfection: Contract is void andinexistent

b. Thing only partially lost: Vendeemay elect between withdrawingfrom the contract or demanding the



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remaining part, paying itsproportionate price

Sale by description

A sale where a seller sells things asbeing of a certain kind, buyer merelyrelying on the sellersrepresentations or descriptions.

There is warranty that the thing soldcorresponds to the representationsor descriptions.

Sale by sample

A sale where a small quantity of acommodity is exhibited by the selleras a fair specimen of the bulk, which

is not present and as to which thereis no opportunity to inspect orexamine.NOTE: The mere exhibition of thesample does not necessarily make ita sale by sample. This exhibitionmust have been the sole basis orinducement of the sale.

There is warranty that the bulk ofthe commodity will correspond inkind, quality, and character with thesample exhibited.

NOTE: In a sale by sample and bydescription, there is a two-foldwarranty.

RIGHTS OF BUYER:1) Return the thing and recover themoney paid, or2) Retain the thing and sue for thebreach of warranty.

PURCHASE BY MINORS: Contract isgenerally voidable but in case ofnecessaries, where necessaries are soldand delivered to a minor or other personwithout capacity to act, he must pay areasonable price therefore. Necessariesare those in Art. 290.

FORMALITIES OF CONTRACT OF SALEGENERAL RULE: Sale is a consensualcontract and is perfected by mereconsent.EXCEPTIONS: In order to beenforceable by action, the followingmust be in writing:

1. Sale of personal property at aprice not less than P500

2. Sale of real property or aninterest therein

3. Sale of property not to beperformed within a year fromthe date thereof

4. Applicable statute requiresthat the contract of sale be in acertain form

NOTE: Statute of Frauds is applicableonly to executory contracts and not tocontracts which are totally or partiallyperformed.

CAPACITY TO BUY OR SELLGENERAL RULE: All persons who canbind themselves also have legal capacityto buy and sell.EXCEPTIONS:

1. Absolute incapacity (minors,demented persons, imbeciles,deaf and dumb, prodigals, civilinterdictees) - party cannot bindthemselves in any case.

2. Relative incapacity incapacityexists only with reference tocertain persons or a certain classof property

Relative IncapacityA. Husband and wife (Art. 1490):Generally, a sale by one spouse toanother is void.

The husband and wife cannot sellproperty to each other except:1. When a separation of property

was agreed upon by the spouses2. When there has been a judicial

separation of property under

Article 134 and 135 of the FamilyCode

B. Incapacity by reason of relation toproperty (Art. 1491)

The following persons cannot acquireproperty by purchase, even at apublic auction, either in person orthrough the mediation of another:(GAEP-JO)1. the guardian, with respect to the

property of his ward;



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2. agents, with respect to theproperty whose administration orsale may have been entrusted tothem, unless the consent of the

principal has been given;3. executor or administrator, with

respect to the property of theestate under administration;

4. public officers and employees,with respect to the properties ofthe government, its politicalsubdivisions, or GOCCs, that areentrusted to them;

5. judges, justices, prosecutingattorneys, clerks of courts, etc.,with respect to the property incustogia legis; and

6. any other person speciallydisqualified by law.Examples of persons especiallydisqualified by law:a. Aliens who are disqualified topurchase agricultural landsb. An unpaid seller having a rightof lien or having stopped thegoods in transitu, who isprohibited from buying the goodseither directly or indirectly inthe resale of the same, at public

or private sale which he maymakec. The officer holding theexecution, or his deputy.NOTE: While those disqualifiedunder Arts. 1490 and 1491 maynot become lessees (Art. 1646),still aliens may become lesseeseven if they cannot buy lands.

Effect of violation:a) With respect to nos. 1 to 3: the

sale is VOIDABLE.Reason: only private rights,which are subject to ratificationare violatedNOTE: In the case of Lao vs.Genato, 137 SCRA 77, theSupreme Court found that thesale by the administrator ofcertain properties of the estatein order to settle the existingobligations of the estate wasmade to the administrators son

for a grossly low price.

Furthermore, the said sale wasnot submitted to the probatecourt for approval as mandatedby the order authorizing the

administrator to sell. The salewas indubitably illegal, irregularand fictitious, and the courtsapproval of the assailedcompromise agreement violatedArticle 1491 and cannot work toratify a fictitious contract whichis non-existent and void fromthe very beginning

b) With respect to nos. 4 to 6: thesale is NULL AND VOID.Reason: violation of publicpolicy cannot be subject to

ratification

OBLIGATIONS OF THE VENDOR: (WPD-TT)1. Transfer ownership (cannot be

waived)2. Deliver the thing sold (cannot be

waived)3. Warrant against eviction and against

hidden defects (can be waived ormodified since warranty is not anessential element of the contractof sale)

4. Take care of the thing, pendingdelivery, with proper diligence(Article 1163)

5. Pay for the expenses of the deed ofsale, unless there is stipulation tothe contrary

DELIVERY

Is a mode of acquiring ownership, asa consequence of certain contractssuch as sale, by virtue of which,actually or constructively, the object

is placed in the control andpossession of the vendee.

Delivery of the thing togetherwith the payment of the price,marks the consummation of thecontract of sale(PNB vs. Ling, 69Phil. 611)

In all forms of delivery, it isnecessary that the act ofdelivery be coupled with theintention of delivering thething.



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The act without the intention isinsufficient. (Norkis Distributor,Inc. vs. CA, 195 SCRA 694)

Kinds:1. Actual or real placing the thing

under the control and possession ofthe buyer.

2. Legal or constructive delivery isrepresented by other signs or actsindicative thereofa. delivery by the execution of a

public instrument.NOTE: Gives rise only to a primafacie presumption of delivery whichis destroyed when actual delivery isnot effected because of a legal

impediment (Ten Forty Realty vs.Cruz, 10 Sept. 2003)b. traditio symbolica - to effect

delivery, the parties make use ofa token or symbol to representthe thing delivered

c. traditio longa manu sellerpointing out to the buyer thethings which are transferred,which at the time must be insight.

d. traditio brevi manu buyersimply continues in possession ofthe thing but under title ofownership.

e. traditio constitutumpossessorium seller continuesin possession but under adifferent title other thanownership.

3. Quasi-tradition delivery of rights,credits or incorporeal property,made by:a. placing titles of ownership in the

hands of buyer

b. allowing buyer to make use ofrights4. Tradition by operation of law

Constructive delivery requires threethings before ownership may betransferred:1. The seller must have control over

the thing2. The buyer must be put under control3. There must be the intention to

deliver the thing for purposes ofownership

When is the vendor not bound todeliver the thing sold:1. If the vendee has not paid him the

price2. If no period for payment has beenfixed in the contract

3. Even if a period for payment hasbeen fixed in the contract, if thevendee has lost the right to makeuse of the same.

Sale or return

Property is sold, but the buyer, whobecomes the owner of the propertyon delivery, has the option to returnthe same to the seller instead of

paying the price.

NOTES:

It is a kind of sale with a conditionsubsequent.

The buyer must comply with theexpress or implied conditionsattached to the return privilege;otherwise, the sale becomesabsolute.

Buyer, being the owner, bears the

risk of loss

Sale on trial, approval, or satisfaction

A contract in the nature of an optionto purchase if the goods prove to besatisfactory, the approval of thebuyer being a condition precedent.

Rules:1. title remains in the seller2. risk of loss remains with seller

except when the buyer is at fault or

has agreed to bear the loss3. buyer must give goods a trial, except

where it is evident that it cannotperform the work

4. period within which buyer mustsignify his acceptance runs onlywhen all the parts essential for theoperation of the object have beendelivered.

5. if it is stipulated that a third personmust satisfy approval or satisfaction,the provision is valid, but the third



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person must be in good faith. Ifrefusal to accept is not justified,seller may still sue.

6. Generally, the sale and delivery to a

buyer who is an expert on the objectpurchased is not a sale on approval,trial, or satisfaction.

Sale or return Sale on Trial1. Subject to aresolutory condition

1. Subject to asuspensive condition

2. Depends entirelyon the will of thebuyer

2. Depends on thecharacter or quality ofthe goods

3. Ownershippasses to the buyeron delivery andsubsequent return

reverts ownershipin the seller

3. Ownership remainsin the seller until buyersignifies his approval oracceptance to the

seller

4. Risk of loss orinjury rests uponthe buyer

4. Risk of loss remainswith the seller

Instances where Seller is still theOwner despite Delivery:1. Sale on trial, approval or satisfaction2. Contrary intention appears by the

term of the contract;3. Implied reservation of ownership

(Article 1503)a. If under the bill of lading, the

goods are deliverable to seller oragent or their order;

b. If the bill of lading, althoughstating that the goods are to bedelivered to the buyer or hisagent, is kept by the seller or hisagent;

a. When the buyer, although thegoods are deliverable to order ofbuyer, and although the bill oflading is given to him, does nothonor the bill of exchange sentalong with it.

Transfer of ownership where goodssold delivered to carrierGeneral Rule: Delivery to the carrier isdeemed to be delivery to the buyerException: Where the right ofpossession or ownership of specific goodssold is reserved

SALE OF GOODS BY A NON-OWNERGENERAL RULE: Buyer acquires no titleeven if in good faith and for value under

the maxim Nemo dat quid non habet(You cannot give what you do nothave).EXCEPTIONS: (SMERVS)

1. Owner is estopped or precludedby his conduct

2. When sale is made by theregistered owner or apparentowner in accordance withrecording or registration laws

3. Sales sanctioned by judicial orstatutory authority

4. Purchases in a merchant's store,fairs or markets

5. When a person who is not theowner sells and delivers a thing,subsequently acquires title

thereto (Art. 1434)6. When the seller has a voidable

title which has not been avoidedat the time of the sale (Art.1506)

* Unlawful deprivation is no longerlimited to a criminal act. There isUnlawful Deprivation where there is novalid transmission of ownership.

Place of delivery of goods1. Where there is an agreement, place

of delivery is that agreed upon2. Where there is no agreement, place

of delivery determined by usage oftrade

3. Where there is no agreement and noprevalent usage, place of delivery isthe sellers place

4. In any other case, place of deliveryis the sellers residence

5. In case of specific goods, which tothe knowledge of the parties at thetime the contract was made were insome other place, that place is theplace of delivery, in the absence ofagreement or usage of trade to thecontrary

Time of delivery of goods1. Stipulated time2. In the absence thereof, within a

reasonable time

NEGOTIABLE DOCUMENT OF TITLE(NDT)



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A document of title in which it isstated that the goods referred totherein will be delivered to thebearer, or to the order of any person

named in such document. May be negotiated by delivery or

indorsement.

The document is negotiable if:1. The goods are deliverable to the

bearer; or2. If the goods are deliverable to the

order of a certain person

Persons who may negotiate NDT:1. The owner; or2. Any person to whom the possession

or custody thereof has beenentrusted by the owner, if by theterms of the document the baileeissuing the document undertakes todeliver the goods to the order of theperson to whom the possession orcustody of the document has beenentrusted or if at the time of suchentrusting the document in suchform that it may be negotiated bydelivery.

* If the holder of a negotiable documentof title (deliverable to bearer) entruststhe document to a friend for deposit,but the friend betrays the trust andnegotiates the document by delivering itto another who is in good faith, the saidowner cannot impugn the validity of thenegotiation. As between two innocentpersons, he who made the loss possibleshall bear the loss, without prejudice tohis right to recover from the wrongdoer.

RIGHTS OF PERSON TO WHOM

DOCUMENT HAS BEEN NEGOTIATED:1) The title of the person negotiating thedocument, over the goods covered bythe document;2) The title of the person (depositor orowner) to whose order by the terms ofthe document the goods were to bedelivered, over such goods;3) The direct obligation of the bailee tohold possession of the goods for him, asif the bailee had contracted to himdirectly

NOTE; Mere transferee does not acquiredirectly the obligation of the bailee (inArt. 1513). To acquire it, he must notifythe bailee.

WHO CAN DEFEAT RIGHTS OFTRANSFEREE:

1. Creditor of transferor2. Transferor3. Subsequent purchaser

RULES WHEN QUANTITY IS LESS THANAGREED UPON:

1. Buyer may reject; or2. Buyer may accept what has been

delivered, at the contract rate

RULES WHEN QUANTITY IS MORE THANAGREED UPON:

1. Buyer may reject all; or2. Buyer may accept the goods

agreed upon and reject the rest;or

3. Buyer may accept all and mustpay for them at the contractrate

NOTE: Acceptance, even if not expressmay be implied when the buyerexercises acts of ownership over theexcess goods.

RULES WHEN GOODS MIXED WITHGOODS OF DIFFERENT DESCRIPTION:

Buyer may accept the goods whichare in accordance with the contractand reject the rest

NOTE: If the subject matter isindivisible, in case of delivery of largerquantity of goods or of mixed goods, thebuyer may reject the whole of the goods

DELIVERY TO THE CARRIERGENERAL RULE: Where the seller isauthorized or required to send the goodsto the buyer, delivery to the carrier isdelivery to the buyer.EXCEPTIONS:

1. When a contrary intentionappears

2. Implied reservation of ownershipunder pars. 1,2,3 of Art. 1503

Kinds of Delivery to the Carrier



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a. C.I.F. (cost, insurance, freight) signify that the price fixedcovers not only the costs of thegoods, but the expense of the

freight and the insurance to bepaid by the sellerb. F.O.B. (free on board) goods

are to be delivered free ofexpense to the buyer to thepoint where they are F.O.B. Thepoint of F.O.B., either at thepoint of shipment or the point ofdestination, determines whenthe ownership passes.

NOTE: the terms C.I.F. and F.O.B.merely make rules of presumptionc. C.O.D. (collect on delivery) the

carrier acts for the seller incollecting the purchase price,which the buyer must pay toobtain possession of the goods.

SELLERS DUTY AFTER DELIVERY TOCARRIER1. To enter on behalf of buyer into suchcontract reasonable under thecircumstances2. To give notice to buyer regardingnecessity of insuring the goods

PAYMENT OF THE PURCHASE PRICEGENERAL RULE: The seller is not boundto deliver the thing sold unless thepurchase price has been paid.EXCEPTION: The seller is bound todeliver even if the price has not beenpaid, if a period of payment has beenfixed.

Sale of Real Property by Unit

Entire area stated in the contractmust be delivered

When entire area could not bedelivered, vendee may:1. Enforce the contract with the

corresponding decrease in price2. Rescind the sale:

a. If the lack in area is at least1/10 than that stated orstipulated

b. If the deficiency in qualityspecified in the contractexceeds 1/10 of the priceagreed upon

c. If the vendee would not havebought the immovable hadhe known of its smaller areaof inferior quality

irrespective of the extent oflack of area or quality

Sale for a Lump Sum (A Cuerpo Cierto)

Vendor is obligated to deliver all theland included within the boundaries,regardless of whether the real areashould be greater or smaller

Ordinarily, there can be no rescissionor reduction or increase whether thearea be greater or lesser, unlessthere is gross mistake.

NOTE:The Civil Code presumes that the

purchaser had in mind a particular pieceof land and that he ascertained its areaand quality before the contract of salewas perfected. If he did not do so, or ifhaving done so he made no objectionand consented to the transaction, he canblame no one but himself (Teran vs.Villanueva Viuda de Riosa 56 Phil 677).

What is important is the deliveryof all the land included in theboundaries.

DOUBLE SALE (Art. 1544) Requisites: VOCStwo or more transactions must constitute

valid sales;they must pertain exactly to the same

object or subject matter;they must be bought from the same or

immediate seller; ANDtwo or more buyers who are at odds over

the rightful ownership of the subjectmatter must represent conflictinginterests.

Rules of preference:1. Personal Property

a. first possessor in good faith2. Real Property

a. first registrant in good faithb. first possessor in good faithc. person with oldest title in good

faith

NOTES:

Purchaser in Good Faith one whobuys the property of another without



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notice that some other person has aright to or interest in such propertyand pays a full and fair price for thesame at the time of such purchase or

before he has notice of the claim orinterest of some other person in theproperty (Veloso vs. CA).

Registration requires actualrecording; if the property was neverreally registered as when theregistrar forgot to do so although hehas been handed the document,there is no registration.

Possession is either actual orconstructive since the law made nodistinction (Sanchez vs. Ramos 40Phil614)

Possession in Art.1544 includes notonly material but also symbolicpossession (Ten Forty Realty vs.Cruz, 10 Sept. 2003.)

Title means title because of sale,and not any other title or mode ofacquiring property (Lichauco vs.Berenguer 39 Phil 642)

Hernandez vs. Katigbak Rule: Whenthe property sold on execution isregistered under Torrens,registration is the operative act thatgives validity to the transfer orcreates a lien on the land, and apurchaser on execution sale is notrequired to go behind the registry todetermine the conditions of theproperty. Exception: Where thepurchaser had knowledge, prior to orat the time of the levy, of suchprevious lien or encumbrance, hisknowledge is equivalent toregistration.

CONDITION Effect of Non-fulfillment of Condition1. If the obligation of either party

is subject to any condition andsuch condition is not fulfilled,such party may either:a. refuse to proceed with the

contractb. proceed with the contract ,

waiving the performance ofthe condition.

2. If the condition is in the natureof a promise that it shouldhappen, the non-performance ofsuch condition may be treated

by the other party as breach ofwarranty.

NOTE: A distinction must be madebetween a condition imposed on theperfection of a contract and a conditionimposed merely on the performance ofan obligation. The failure to comply withthe first condition would prevent thejuridical relation itself from coming intoexistence, while failure to comply withthe second merely gives the optioneither to refuse or proceed with the sale

or to waive the condition.

The mere fact that the secondcontract of sale was perfected ingood faith is not sufficient if, beforetitle passes, the second vendeeacquires knowledge of the firsttransaction. The good faith orinnocence of the posterior vendeeneeds to continue until his contractripens into ownership by tradition orregistration. (Palanca vs. Dir. OfLands, 46 PHIL 149)

EFFECT IF BUYER HAS ALREADY SOLDTHE GOODS:General Rule: The unpaid sellers rightto lien or stoppage in transitu remainseven if buyer has sold the goods.Except:1) When the seller has given consentthereto, or2) When the buyer is a purchaser in goodfaith for value of a negotiable document

of title.

WARRANTY

a statement or representation madeby the seller of goods,contemporaneously and as a part ofthe contract of sale, havingreference to the character, quality,or title of the goods, and by whichhe promises or undertakes to insurethat certain facts are or shall be ashe then represents.



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Kinds:1. EXPRESS any affirmation of fact or

any promise by the seller relating to

the thing if the natural tendency ofsuch affirmation or promise is toinduce the buyer to purchase thesame and if the buyer purchases thething relying thereon

NOTE: A mere expression of opinion, nomatter how positively asserted, does notimport a warranty unless the seller is anexpert and his opinion was relied uponby the buyer.

2. IMPLIED - that which the lawderives by implication or inferencefrom the nature of the transaction orthe relative situation orcircumstances of the parties,irrespective of any intention of theseller to create it.a. Warranty against evictionb. Warranty against hidden defectsc. Warranty as to Fitness and

MerchantabilityNOTE: An implied warranty is a natural,not an essential element of a contract,

and is deemed incorporated in thecontract of sale. It may however, bewaived or modified by expressstipulation. (De Leon)There is no implied warranty as to thecondition, adaptation, fitness orsuitability or the quality of an articlesold as a second-hand article. But sucharticles might be sold under suchcircumstances as to raise an impliedwarranty.* A certification issued by a vendor thata second-hand machine was in A-1

condition is an express warranty bindingon the vendor. (Moles vs. IAC [1989])

A. Warranty against eviction

Warranty in which the sellerguarantees that he has the right tosell the thing sold and to transferownership to the buyer who shall notbe disturbed in his legal andpeaceful possession thereof.

Elements:

1. vendee is deprived, in whole orin part, of the thing purchased;

2. the deprivation is by virtue of afinal judgment;

3. the judgment is based on a priorright to the sale or an actimputable to the vendor;

4. the vendor was summoned in thesuit for eviction at the instanceof the vendee; AND

5. no waiver of warranty by thevendee.

Vendor's liability shall consist of:1. Total eviction: (VICED)a. Value of the thing at the time of

eviction;

b. Income or fruits if he has beenordered to deliver them to theparty who won the suit;

c. Costs of the suit;d. Expenses of the contract; ANDe. Damages and interests if the sale

was in bad faith.

2. Partial eviction:a. to enforce vendors liability

for eviction (VICED); ORb. to demand rescission of

contract.

Question: Why is rescission not a remedyin case of total eviction?Answer: Rescission contemplates thatthe one demanding it is able to returnwhatever he has received under thecontract. Since the vendee can no longerrestore the subject-matter of the sale tothe vendor, rescission cannot be carriedout.

* The suit for the breach can be directed

only against the immediate seller, notsellers of the seller unless such sellershad promised to warrant in favor of laterbuyers or unless the immediate sellerhas expressly assigned to the buyer hisown right to sue his own seller.NOTE: The disturbance referred to inthe case of eviction is a disturbance inlaw which requires that a person go tothe courts of justice claiming the thingsold, or part thereof and invokingreasons. Mere trespass in fact does not



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give rise to the application of thedoctrine of eviction.

Vendors liability is waivable but any

stipulation exempting the vendorfrom the obligation to answer foreviction shall be void if he acted inbad faith. Kinds of Waiver:

a. Consciente voluntarilymade by the vendee withoutthe knowledge andassumption of the risks ofeviction

NOTE: vendor shall pay only thevalue which the thing sold had atthe time of evictionb. Intencionada made by the

vendee with knowledge ofthe risks of eviction andassumption of itsconsequences

EFFECT: vendor not liableNOTE: Every waiver is presumed to beconsciente. To consider it intencionada,it must be accompanied by somecircumstance which reveals thevendors knowledge of the risks ofeviction and his intention to submit tosuch consequences.

WHERE IMMOVABLE SOLD ENCUMBEREDWITH NON-APPARENT BURDEN1. Right of vendee

a) recission, orb) indemnity

2. When right cannot be exercised:a) if the burden or servitude is

apparentb) if the non-apparent burden or

servitude is registered

c) if vendee had knowledge of theencumbrance, whether it is registeredor not3. When action must be brought

- within ONE YEAR from theexecution of the deed of sale

B. Warranty against hidden defects

Warranty in which the sellerguarantees that the thing sold is freefrom any hidden faults or defects or

any charge or encumbrance notdeclared or known to the buyer.

Elements: (SHENPW)

1. defect must be Serious orimportant;

2. it must be Hidden;3. it must Exist at the time of the

sale;4. vendee must give Notice of the

defect to the vendor within areasonable time;

5. action for rescission or reductionof price must be brought withinthe proper Period (within 6 mos.from delivery of the thing or 40days from date of delivery in

case of animals); and6. no Waiver of the warranty.

Remedies of the Vendee:a. Accionredhibitoria (rescission)b. Accion quanti minoris (reduction

of the price)NOTES:

Hidden faults or defects pertain onlyto those that make the object unfitfor the use for which it was intendedat the time of the sale.

This warranty in Sales is applicablein Lease (Yap vs. Tiaoqui 13Phil433)

Effect of loss of thing on account ofhidden defects:1. If vendor was aware of hidden

defects, he shall bear the loss andvendee shall have the right torecover: (PED)a. the price paidb. expenses of the contractc. damages

2. If vendor was not aware, he shall beobliged to return: (PIE)a. price paidb. interest thereonc. expenses of the contract if paid

by the vendee

Effect if the cause of loss was not thehidden defect

If the thing sold had any hiddenfault at the time of the sale, andshould thereafter be lost by a (1)



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fortuitous event OR (2) through thefault of the vendee: the vendee may demand of the

vendor the price which he paid

less the value of the thing at thetime of its loss.

NOTE: the difference between theprice paid and the value of the thingat the time of its loss represents thedamage suffered by the vendee andthe amount which the vendorenriched himself at the expense ofthe vendee

If the vendor acted in bad faith:

vendor shall pay damages to thevendee

C. Implied Warranties of QualityWarranty of Fitness

Warranty in which the sellerguarantees that the thing sold isreasonably fit for the knownparticular purpose for which it wasacquired by the buyer

GENERAL RULE: There is no impliedwarranty as to the quality or fitness forany particular purpose of goods under acontract of sale

EXCEPTIONS:1. Where the buyer, expressly or by

implication manifests to theseller the particular purpose forwhich the goods are required

2. Where the buyer relies upon thesellers skill or judgment

Warranty of Merchantability

Warranty in which the sellerguarantees, where the goods werebought by description, that they arereasonably fit for the generalpurpose for which they are sold

It requires identity between what isdescribed in the contract AND whatis tendered, in the sense that thelatter is of such quality to have somevalue

Instances where implied warranties areinapplicable:1. As is and where is sale - vendor

makes no warranty as to the quality

or workable condition of the goods,and that the vendee takes them inthe condition in which they arefound and from the place where they

are located.2. Sale of second-hand articles3. Sale by virtue of authority in fact or

law

Caveat Venditor (Let the sellerbeware): the vendor is liable to thevendee for any hidden faults or defectsin the thing sold, even though he wasnot aware thereof.

Caveat Emptor (Let the buyerbeware): requires the purchaser to be

aware of the supposed title of thevendor and one who buys withoutchecking the vendors title takes all therisks and losses consequent to suchfailure.

RULES IN CASE OF SALE OF ANIMALS1. When two or more animals have beensold at the same time and theredhibitory defect is in one, or some ofthem but not in all, the general rule isthat the redhibition will not affect theothers without it. It is immaterial

whether the price has been fixed for alump sum for all the animals or for aseparate price for each.2. No warranty against hidden defectsof animals sold at fairs or at publicauctions, or of livestock sold ascondemned. This is based on theassumption that the defects must havebeen clearly known to the buyer.3. Sale of animals shall be void when: a) animals sold are suffering fromcontagious disease b) if the use or service for whichthey are acquired has been stated in thecontract, and they are found to be unfittherefor4. Limitation of the action: 40 daysfrom the date of their delivery to thevendee5. Vendor shall be liable if the animalshould die within 3 days after itspurchase if the disease which caused thedeath existed at the time of the contract

OBLIGATIONS OF THE VENDEE:



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A. Principal Obligations:1. To accept delivery2. To pay the price of the thing sold in

legal tender unless another mode

has been agreed uponNOTE: A grace period granted thevendee in case of failure to pay theamount/s due is a right not anobligation. The grace period must notbe likened to an obligation, the non-payment of which, under Article 1169 ofthe Civil Code, would still generallyrequire judicial or extra-judicial demandbefore default can be said to arise(Bricktown Devt Corp vs. Amor TierraDevt Corp. 57SCRA437)

B. Other Obligations1. To take care of the goods without

the obligation to return, where thegoods are delivered to the buyer andhe rightfully refuses to accept

NOTES: The buyer in such a case is in the

position of a bailee who has hadgoods thrust upon him withouthis assent. He has the obligationto take reasonable care of thegoods but nothing more can be

demanded of him. The goods in the buyers

possession under thesecircumstances are at the sellersrisk

2. To be liable as a depositary if hevoluntarily constituted himself assuch

3. To pay interest for the periodbetween delivery of the thing andthe payment of the price in thefollowing cases:a. Should it have been stipulatedb. Should the thing sold and

delivered produce fruits orincome

c. Should he be in default, fromthe time of judicial or extra-judicial demand for the paymentof the price

Pertinent Rules:1. The vendor is not required to deliver

the thing sold until the price is paidnor the vendee to pay the price

before the thing is delivered in theabsence of an agreement to thecontrary (Article 1524).

2. If stipulated, the vendee is bound to

accept delivery and to pay the priceat the time and place designated;3. If there is no stipulation as to the

time and place of payment anddelivery, the vendee is bound to payat the time and place of delivery

4. In the absence of stipulation as tothe place of delivery, it shall bemade wherever the thing might beat the moment the contract wasperfected (Article 1251)

5. If only the time for delivery has beenfixed in the contract, the vendee is

required to pay even before thething is delivered to him; if only thetime for payment has been fixed,the vendee is entitled to deliveryeven before the price is paid by him(Article 1524)

Ways of accepting goods:1. Express acceptance2. Implied acceptance

a. When buyer does an act whichonly an owner can do,

b. Failure to return goods after

reasonable lapse of time

NOTES:

The retention of goods is strongevidence that the buyer hasaccepted ownership of the goods.

Delivery and acceptance are twoseparate and distinct acts ofdifferent parties Delivery is an act of the vendor

and one of the vendorsobligations; vendee has nothing

to do with the act of delivery bythe vendor

Acceptance is an obligation ofthe vendee; acceptance cannotbe regarded as a condition tocomplete delivery;

seller must comply with theobligation to deliver althoughthere is no acceptance yet bythe buyer

Acceptance by the buyer mayprecede actual delivery; there may



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be actual receipt withoutacceptance and there may beacceptance without receipt

Unless otherwise agreed upon,

acceptance of the goods by thebuyer does not discharge the sellerfrom liability for damages or otherlegal remedy like for breach of anypromise or warranty

When vendee may suspend payment ofthe price:1. If he is disturbed in the possession or

ownership of the thing bought2. If he has well-grounded fear that his

possession or ownership would bedisturbed by a vindicatory action or

foreclosure of mortgage

NOTES:

If the thing sold is in the possessionof the vendee and the price isalready in the hands of the vendor,the sale is a consummated contractand Article 1590 is no longerapplicable. Article 1590,presupposes that the price or anypart thereof has not yet been paidand the contract is not yet

consummated. Under Article 1590, the vendee has

no cause of action for rescissionbefore final judgement, otherwisethe vendor might become a victim ofmachinations between the vendeeand the third person

Disturbance must be in possessionand ownership of the thing acquired

If the disturbance is caused by theexistence of non-apparent servitude,the remedy of the buyer is

rescission, not suspension ofpayment.

When vendee cannot suspend paymentof the price even if there isdisturbance in the possession orownership of the thing sold:1. if the vendor gives security for the

return of the price in a proper case2. if it has been stipulated that

notwithstanding any such

contingency, the vendee must makepayment (see Article 1548 par.3)

3. if the vendor has caused thedisturbance or danger to cease

4. if the disturbance is a mere act oftrespass5. if the vendee has fully paid the price

REMEDIES FOR BREACH OF CONTRACTA. Remedies of the seller1. Action for payment of the price (Art.

1595)2. Action for damages for non-

acceptance of the goods (Art. 1596)3. Action for rescission (Art. 1597)B. Remedies of the buyer1. Action for specific performance (Art.

1598)2. Action for rescission or damages for

breach of warranty (Art 1599)

A. REMEDIES OF THE SELLER FORBREACH OF CONTRACT

IN CASE OF MOVABLES1. Ordinary Remedies

a. Movables in General Failure ofthe vendee to appear to receivedelivery or, having appeared,failure to tender the price at thesame time, unless, a longer

period for its payment has beenstipulated

action to rescind the sale(Art. 1593)

b. Sale of Goods

action for the price (Art.1595)

action for damages (Art.1596)

2. Unpaid Seller

Types:a. The seller of the goods who has

not been paid or to whom theprice has not been tendered

b. The seller of the goods, in case abill of exchange or othernegotiable instrument has beenreceived as conditional payment,AND the condition on which itwas received has been broken byreason of the dishonor of theinstrument, insolvency of thebuyer or otherwise.



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Remedies:1. Possessory lien over the goods2. Right of stoppage in transitu

after he has parted with the

possession of the goods and thebuyer becomes insolvent

3. Special Right of resale4. Special Right to rescind the sale5. Action for the price6. Action for damages

3. Article 1484 or Recto Law Remedies of vendor in sale of

personal property by installments

Requisites:1. Contract of sale2.

Personal property3. Payable in installments4. In the case of the second and

third remedies, that there hasbeen a failure to pay two ormore installments

NOTE: Apply likewise to contractspurporting to be leases of personalproperty with option to buy

Art. 1484 does not apply to a sale:1. Payable on straight terms (partly

in cash and partly in one term)2. Of Real property

Remedies:1. Specific performance upon

vendees failure to payNOTE: Does not bar full recovery forjudgment secured may be executedon all personal and real properties ofthe buyer which are not exemptfrom execution (Palma v. CA.)2. Rescission of the sale if vendee

shall have failed to pay two ormore installments

NOTES:

Nature of the remedy whichrequires mutual restitution barsfurther action on the purchaseprice (Nonato vs. IAC.)

GENERAL RULE: cancellationof sale requires mutualrestitution, that is all partialpayments of price or rents mustbe returnedEXCEPTIONS: a stipulation thatthe installments or rents paidshall not be returned to the

vendee or lessee shall be validinsofar as the same may not beunconscionable under thecircumstan-ces (Article 1486).

3. Foreclosure of the chattelmortgage on the thing sold ifvendee shall have failed to paytwo or more installments. In thiscase, there shall be no furtheraction against the purchaser torecover unpaid balance of theprice.

NOTES:

Further recovery barred only fromthe time of actual sale at public auctionconducted pursuant to foreclosure(Macondray vs. Tan.)

Other chattels given as securitycannot be foreclosed if they are notsubject of the installment sale (Ridadvs. Filipinas investment and FinanceCorp. GR 39806, Jan. 28, 1983)

If the vendor assigns his right to afinancing company, the latter may beregarded as a collecting agency of thevendor and cannot therefore recover anydeficiency from the vendee (Zayas vs.Luneta Motors Co.)

When the vendor assigns his credit toanother person, the latter is likewisebound by the same law. Accordingly,when the assignee forecloses on themortgage, there can be no furtherrecovery of the deficiency and thevendor-mortgagee is deemed to haverenounced any right thereto (Borbon IIvs. Servicewide Specialist, Inc.258SCRA658)NOTE: However, Article 1484(3) doesNOT bar one to whom the vendor hasassigned on with a recourse basis hiscredit against the vendee fromrecovering from the vendor theassigned credit in full although thevendor may have no right of recoveryagainst the vendee for the deficiency(Filipinas Invest. & Finance Corp. vs.Vitug, Jr. 28SCRA658)

NOTE: Remedies are alternative andexclusive



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IN CASE OF IMMOVABLES1. Ordinary Remedies

a. In case of anticipatory breach

rescission (Article 1591)

b. Failure to pay the purchase price

rescission upon judicial ornotarial demand forrescission (Article 1592)

the vendee may pay, evenafter the expiration of theperiod, as long as no demandfor rescission has been madeupon him

NOTE: Article 1592 does notapply to:

1) Sale on instalment of realestate

2) Contract to sell3) Conditional sale4) Cases covered by RA 6552:

Realty Installment buyerprotection act

2. R.A. No. 6552 or Maceda Law An Act to Provide Protection to

buyers of Real Estate on InstallmentPayments

Law governing sale or financing ofreal estate on installment payments

Requisites:1. transactions or contracts

involving the sale OR financingof real estate on installmentpayments, including residentialcondominium apartments; and

2. buyer defaults in payment ofsucceeding installments.

Rights of the buyer:A. If Buyer has paid at least two

(2) years of installments1. The buyer must pay, without

additional interest, the unpaidinstallments due within the totalgrace period earned by him.There shall be one (1) monthgrace period for every one (1)year of installment paymentsmadeNOTE: This right shall beexercised by the buyer ONLYonce in every 5 years of the life

of the contract AND itsextensions.

2. Actual cancellation can only takeplace after 30 days from receipt

by the buyer of the notice ofcancellation OR demand forrescission by a notarial act ANDupon full payment of the cashsurrender value to the buyer(Olympia Housing vs. Panasiatic,16 January 2003.)NOTE: The seller shall refund tothe buyer the cash surrendervalue of the payments on theproperty equivalent to 50% ofthe total payments made. Afterfive (5) years of installments,

there shall be an additional 5%every year but not to exceed 90%of the total payments made

3. The buyer shall have the right tosell his rights or assign the sameto another person OR toreinstate the contract byupdating the account during thegrace period and before actualcancellation of the contract

4. The buyer shall have the right topay in advance any installmentor the full unpaid balance of the

purchase price any time withoutinterest and to have such fullpayment of the purchase priceannotated in the certificate oftitle covering the property.

B. If Buyer has paid less than 2years of installments

1. The seller shall give the buyer agrace period of NOT less than 60days from the date theinstallment became due. If thebuyer fails to pay theinstallments due at theexpiration of the grace period,the seller may cancel thecontract after 30 days fromreceipt by the buyer of thenotice of cancellation or thedemand for rescission ofcontract by a notarial act.

2. Same No. 3 and 4 paragraph Aabove



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NOTE: Down payments, deposits oroptions on the contract shall be includedin the computation of the total numberof installment payments made

Remedies of Unpaid SellerI. Possessory Lien

When may be exercised:1. Where the goods have been sold

without any stipulation as tocredit

2. When the goods have been soldon credit, but the term of credithas expired

3. Where the buyer becomesinsolvent

When lost:1. Delivery of the goods to a carrier

or bailee for the purpose oftransmission to the buyerwithout reserving ownership orright of possession

2. When the buyer lawfully obtainspossession of the goods

3. By waiver of the lienNOTE: Possessory lien is lost after theseller loses possession but his lien as anunpaid seller remains; hence he is stillan unpaid creditor with respect to the

price of specific goods sold. Hispreference can only be defeated by thegovernments claim to the specific tax onthe goods themselves (Arts. 2247 and2241).NOTE: The bringing of an action torecover the purchase price is not one ofthe ways of losing the possessory lien.An unpaid seller does not lose his lien byreason that he has obtained a moneyjudgement or decree for the price ofgoods (Art. 1529, last paragraph).

II. Stoppage of goods in transitu Requisites:

1. Seller must be unpaid2. Buyer must be insolvent3. Goods must be in transit4. Seller must either:

a. actually take possession ofthe goods sold OR

b. give notice of his claim tothe carrier or other person inpossession

5. Seller must surrender thenegotiable document of title, ifany, issued by the carrier orbailee

6. Seller must bear the expenses ofdelivery of the goods after theexercise of the right

GOODS ARE CONSIDERED IN TRANSITU:1. after delivery to a carrier or otherbailee and before the buyer or his agenttakes delivery of them; and2. If the goods are rejected by thebuyer, and the carrier or other baileecontinues in possession of them

GOODS ARE NO LONGER CONSIDERED IN

TRANSITU:1. after delivery to the buyer or hisagent in that behalf;2. if the buyer or his agent obtainspossession of the goods at a point beforethe destination originally fixed;3. if the carrier or the baileeacknowledges to hold the goods onbehalf of the buyer; and4. if the carrier or bailee wrongfullyrefuses to deliver the goods to the buyer

Effects of the exercise of the right1. The goods are no longer in transit.2. The contract of carriage ends;

instead the carrier now becomes amere bailee, and will be liable assuch.

3. The carrier should not deliveranymore to the buyer or the lattersagent; otherwise he will clearly beliable for damages.

4. The carrier must redeliver to, oraccording to the directions of theseller.

WAYS OF EXERCISING THE RIGHT TOSTOP:1. By taking actual possession of thegoods2. By giving notice of his claim to thecarrier or bailee

III. Special Right of Resale

May be exercised only when theunpaid seller has either a right oflien OR has stopped the goods in



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transitu AND under ANY of thefollowing conditions:1. Where the goods are perishable

in nature

2. Where the right to resell isexpressly reserved in case thebuyer should make a default

3. Where the buyer delays in thepayment of the price for anunreasonable time

IV. Rescission

Types:1. Special Right to Rescind Under

Art. 1534 If the seller haseither the right of lien OR a rightto stop the goods in transitu AND

under either of 2 situations:a. Where the right to rescind

on default has beenexpressly reserved

b. Where the buyer has been indefault for an unreasonabletime

2. Under Art. 1597 (technicalrescission)

V. Action for the price

When may be exercised:

1. Where the ownership has passedto the buyer AND he wrongfullyneglects OR refuses to pay forthe price

2. Where the price is payable on aday certain AND he wrongfullyneglects OR refuses to pay forthe price, irrespective of thedelivery or transfer of title

3. Where the goods cannot readilybe resold for a reasonable priceAND the buyer wrongfully refusesto accept them even before the

ownership of the goods haspassed, if Article 1596 isinapplicable.

VI. Action for damages

When may be exercised:1. In case of wrongful neglect or

refusal by the buyer to accept orpay for the thing sold (Art. 1596par.1)

2. In an executory contract, wherethe ownership in the goods has

not passed, and the seller cannotmaintain an action to recoverthe price (Art 1595)

3. If the goods are not yet

identified at the time of thecontract or subsequentlyB. REMEDIES OF THE BUYER FOR

BREACH OF CONTRACT

1. Action for specific performance(Art. 1598)

Where the seller has broken thecontract to deliver specific orascertained goods

The judgment or decree may beunconditional, or upon such termsand conditions as to damages,

payment of the price and otherwiseas the court may deem just

2. Remedies of buyer for breach ofwarranty by seller (Art. 1599):

1. Recoupment accept the goods andset up the sellers breach to reduceor extinguish the price

2. Accept the goods and maintain anaction for damages for breach ofwarranty

3. Refuse to accept the goods andmaintain an action for damages forbreach of warranty

4. Rescind the contract by returning oroffering the return of the goods, andrecover the price of any part thereof

NOTE: These are alternative remedies.

When rescission by buyer not allowed:1. if the buyer accepted the goodsknowing of the breach of warrantywithout protest2. if he fails to notify the seller within areasonable time of his election torescind3. if he fails to return or offer to returnthe goods in substantially as goodcondition as they were in at the time ofthe transfer of ownership to him

EXTINGUISHMENT OF SALE1. Same causes as in all other

obligations2. Conventional Redemption3. Legal Redemption

CONVENTIONAL REDEMPTION



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