Sales: San Beda College of Law

San Beda College of Law
113
MEMORY AID IN CIVIL LAW
SALES
SALE 5. Commutative; In some cases,
A nominate contract whereby one of aleatory (emptio spei);
the contracting parties obligates 6. Onerous.
himself to transfer the ownership of
and to deliver a determinate thing * Aleatory contract: one of the parties or
and the other to pay therefor a price both reciprocally bind themselves to give
certain in money or its equivalent. or to do something in consideration of
what the other shall give or do upon the
NOTES: Delivery and payment in a happening of an event which is
contract of sale are so interrelated and uncertain, or which is to occur at an
intertwined with each other that without indeterminate time. (Ex: Sale of
delivery of the goods there is no sweepstakes ticket)
corresponding obligation to pay. The
two complement each other. It is clear Contract to sell
that the two elements cannot be exclusive right and privilege to
dissociated, for the contract of purchase purchase an object.
and sale is essentially a bilateral a bilateral contract whereby the
contract, as it gives rise to reciprocal prospective seller, while expressly
obligations. (Pio Barretto Sons, Inc. vs. reserving the ownership of the
Compania Maritima, 62 SCRA 167). subject property despite delivery
Neither is the delivery of the thing thereof to the prospective buyer
bought nor the payment of the price binds himself to sell the said
necessary for the perfection of the property exclusively to the
contract of sale. Being consensual, prospective buyer upon fulfilment of
it is perfected by mere consent. the condition agreed upon, that is,
full payment of the purchase price.
Elements:
a. Essential elements those without NOTE: Absent a proviso in the contract
which, there can be no valid sale: that the title to the property is reserved
1. Consent or meeting of minds in the vendor until full payment of the
2. A Determinable subject matter purchase price or a stipulation giving the
3. Price certain in money or its vendor the right to unilaterally rescind
equivalent the contract the moment the vendee
b. Natural elements inherent in the fails to pay within the fixed period, the
contract, and which in the absence transaction is an absolute contract of
of any contrary provision, are sale and not a contract to sell. (Dignos
deemed to exist in the contract: vs. CA [1988])
1. Warranty against eviction * The contract of sale by itself is not a
2. Warranty against hidden defects mode of acquiring ownership. The
c. Accidental elements may be contact transfers no real rights; it
present or absent depending on the merely causes certain obligations to
stipulation of the parties (e.g.: arise.
conditions, interest, penalty, time
or place of payment, etc.) Contract of Contract to
Sale Sell
Characteristics: 1. Title passes to the 1. Ownership is
buyer upon delivery reserved in the
1. Principal
of the thing sold seller and is not to
2. Consensual; pass until full
3. Bilateral; payment of the
4. Nominate; purchase price
2. Non-payment of 2. Full payment is a
CIVIL LAW COMMITTEE
CHAIRPERSON: 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.
Rhodora
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease),
John Stephen
Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony
Purganan(LTD),
Ma. Ricasion Tugadi (Conflicts of Law)
114
the price is a positive suspensive 1. Constructive 1. Third person

negative resolutory condition, the /actual knowledge on buying the
condition and the failure of which is the part of the 2 nd property despite
remedy of the seller not a breach buyer of the defect in fulfilment of the
is to exact fulfilment casual or serious the sellers title suspensive
or to rescind the but simply renders him not a condition cannot
contract prevents the registrant in good be deemed a
obligation of the faith. Such second buyer in bad
vendor to convey buyer cannot defeat faith and
title from having the first buyers title. prospective
binding force Ratio: Fulfilment of buyer cannot
3. Vendor loses and 3. Title remains in the suspensive seek the relief of
cannot recover the vendor if the conditions affects the reconveyance of
ownership of the vendee does not sellers title to the property.
thing sold and comply with the property and previous Exception: If
delivered until the condition delivery of the There was no
contract of sale is precedent of property previous sale of
resolved and set making payment at automatically the property.
aside the time specified transfers
in the contract ownership/title to the
buyer.
Conditional Sale Contract to
Sell OBJECTS OF SALE
As to reservation of title to the subject Requisites:
property 1. THINGS:
In both cases the seller may reserve the a) determinate or determinable
title to the subject property until (Arts. 1458, 1460)
fulfillment of the suspensive condition i.e. b) lawful (Arts 1347, 1409 [1,4]
full payment of the price
c) should not be impossible (Art.
As to effect of fulfillment of suspensive 1348) e.g. must be within the
condition
commerce of man
1. Upon fulfillment of 1. Upon 2. RIGHTS must be transmissible
the suspensive fulfillment of the
Exceptions:
condition, the suspensive
contract of sale is condition, which -future inheritance
thereby perfected, is the full - service
such that if there had payment of the
been previous delivery purchase price, Emptio rei Emptio spei
of the subject ownership will speratae
property to the buyer, not 1. Sale of an expected 1. Sale of a mere
ownership thereto automatically thing hope or expectancy
automatically transfer to the that the thing will
transfers to the buyer although come to existence;
buyer by operation the property may Sale of the hope
of law without any have been itself
further act by the previously 2. Sale is subject to 2. Sale produces
seller. delivered to him. the condition that the effect even if the
The prospective thing will exist; if it thing does not
seller still has does not, there is no come into
to convey title contract existence, unless it
to the is a vain hope
prospective 3. The uncertainty is 3. The uncertainty
buyer by with regard to the is with regard to
entering into a quantity and quality of the existence of
contract of the thing and not the the thing
absolute sale. existence of the thing
4. Object is a future 4. Object is a
As to effect of sale of the subject thing present thing which
property to 3rd persons is the hope or
expectancy
CIVIL LAW COMMITTEE

Rhodora
John Stephen
Purganan(LTD),
115
NOTE: In case of doubt the presumption

is in favor of emptio rei speratae which Sale Agency to sell
is more in keeping with the commutative 1. Buyer receives 1. Agent receives
character of the contract the goods as owner the goods as goods
of the principal who
Goods which may be Object of Sale retains his
a. Existing goods goods owned or ownership over
possessed by the seller. them
b. Future goods goods to be 2. Buyer pays the 2. Agent delivers
manufactured, raised or acquired by price the price which in
turn he got from his
the seller after the perfection of the buyer
contract. 3. Buyer, as a 3. Agent can return
NOTES: general rule, cannot the goods in case he
A sale of future goods is valid only as return the object is unable to sell the
an executory contract to be fulfilled sold same to a third
by the acquisition and delivery of person
goods specified. 4. Seller warrants 4. Agent makes no
the thing sold warranty for which
While there can be sale of future he assumes personal
property, there can generally be no liability as long as
donation of future property (Article he acts within his
751 Civil Code) authority and in the
Future inheritance cannot be sold. name of the seller
5. Buyer can deal 5. Agent in dealing
A contract of sale or purchase of with the thing sold with the thing
goods to be delivered at a future as he pleases being received, must act
time, if entered into without the the owner and is bound
intention of having any goods pass according to the
from one party to another, but with instructions of the
an understanding that at the principal
appointed time, the purchaser is
merely to receive or pay the Contract for
Sale
difference between the contract and Piece of Work
the market prices, is illegal. Such 1. The thing 1. The thing
contract falls under the definition of transferred is one transferred is one
futures in which the parties not in existence and which would have
which never would existed and would
merely gamble on the rise or fall in
have existed but for have been the
prices and is declared null and void the order of the subject of sale to
by law. (Art. 2018, NCC) (Onapal party desiring to some other person,
Phil. Commodities, Inc. vs. CA acquire it even if the order
[1993]) had not been given
2. The services 2. The primary
Instances when the Civil Code dominate the objective of the
recognizes sale of things not contract even contract is a sale of
actually or already owned by the though there is a the manufactured
sale of goods item; it is a sale of
seller at the time of the sale:
involved goods even though
1. Sale of a thing having potential the item is
existence (Article 1461) manufactured by
2. Sale of future goods (Article 1462) labor furnished by
3. Contract for the delivery at a certain the seller and upon
price of an article which the vendor previous order of
in the ordinary course of the the customer
business manufactures or procures 3. Not within the 3. Within the
for the general market, whether the Statute of Frauds Statute of Frauds
same is on hand at the time or not
(Article 1467)
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
116
the part of the seller the debtor is the

is the price; on the extinguishment of
Rules to determine if the contract is part of the buyer is the debt; on the part
one of Sale or Piece of work: the acquisition of of the creditor, it is
the object the acquisition of
a. If ordered in the ordinary course of the object offered in
business sale lieu of the original
b. If manufactured specially for the credit
customer and upon his special order, 4. Greater freedom 4. Less Freedom in
and not for the market piece of in determining determining the
work the price price
SCHOOLS OF THOUGHT: 5. Buyer still has to 5. The payment is

a) Massachusetts rule: If pay the price received by the
debtor before
specifically done at the order of
the contract is
another, this is a contract for a perfected.
piece of work. (Philippine
application)
b) New York rule: If thing already PRICE
exists-SALE; if not-WORK The sum stipulated as the equivalent
c) English rule: If material is more of the thing sold and also every
valuable-SALE; if skill is more incident taken into consideration for
valuable-WORK the fixing of the price, put to the
debit of the vendee and agreed to by
BARTER him.
contract whereby one of the parties
binds himself to give one thing in Requisites:
consideration of the other's promise 1. Certainty or ascertainable at the
to give another thing. time of perfection
NOTE: The only point difference 2. Real, not fictitious
between contract of sale and barter is in 3. In some cases, must not be
the element which is present in sale but grossly inferior to the value of
not in barter, namely: price certain in the thing sold.
money or its equivalent 4. Paid in money or its equivalent
NOTE: If the consideration is partly in Certainty

money and partly in another thing, It is not necessary that the certainty
determine: of the price be actual or determined
a. The manifest intention of the at the time of the execution of the
parties contract. The price is certain in the
b. If the intent is not clear, apply following cases:
the following rules: 1. If the parties have fixed or
1. If the thing is more valuable agreed upon a definite amount;
than money barter NOTE: The fixing of the price can
2. If the money and the thing never be left to the discretion of one
are of equal value sale of the contracting parties. However
3. If the thing is less valuable if the price fixed by one of the
than money sale parties is accepted by the other, the
sale is perfected.
Sale Dation in Payment 2. If it be certain with reference to
1. No pre-existing 1. Pre-existing credit another thing certain
credit 3. If the determination of the price
2. Obligations are 2. Obligations are is left to the judgment of a
created extinguished specified person or persons even
3. Consideration on 3. Consideration of before such determination
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
117
4. In the cases provided under Art. GENERAL RULE: Mere inadequacy of

1472 NCC the price is not a sufficient ground for
the cancellation of the sale if property is
real.
Effect when the price is fixed by the

third person designated: EXCEPTIONS:
GENERAL RULE: Price fixed by a third a. Where the price is so low as to
person designated by the parties is be shocking to the moral
binding upon them. conscience, judicial sale of
EXCEPTIONS: personal property will be set
1. When the third person acts in aside
bad faith or by mistake b. In the event of a resale, a better
2. When the third person disregards price can be obtained
the specific instructions or the
procedure marked out by the NOTE: The validity of the sale is not
parties necessarily affected where the law gives
to the owner the right to redeem, upon
Effect when the price is not fixed by the theory that the lesser the price, the
the third person designated: easier it is for the owner to effect
1. If the third person refuses or redemption.
cannot fix the price, the
contract shall become Effect where price is simulated
ineffective, unless the parties 1. If it is shown to have been in reality
subsequently agree upon the a donation or some other act or
price contract
2. If the third person is prevented The sale is void but the act or
from fixing the price by the fault contract may be valid as a
of the seller or buyer, the party donation
not in fault may obtain redress 2. If not
against the party in fault The contract is void and inexistent
Effect of Gross Inadequacy of Price: Effect of Failure to determine price:

1. Voluntary sales 1. Where contract executory
GENERAL RULE: Mere inadequacy of The contract is inefficacious
the price does not affect validity of the 2. Where the thing has been delivered
sale. to and appropriated by the buyer
A valuable consideration, however The buyer must pay a reasonable
small or nominal, if given or price therefore
stipulated in good faith is, in the
absence of fraud, sufficient. Reasonable price generally the market
(Rodriguez vs. CA, 207 SCRA 553) price at the time and place fixed by the
Future inheritance cannot be sold. contract or by law for the delivery of the
goods
EXCEPTIONS:
a. Where low price indicates vice of PERFECTION OF SALE
consent, sale may be annulled; GENERAL RULE: It is perfected at the
or contract is presumed to be an moment there is meeting of the minds
equitable mortgage upon a determinate thing (object), and a
b. Where the price is so low as to certain price (consideration), even if
be shocking to conscience, neither is delivered. A choice between
sale may be set aside. rescission and fulfilment, with damages
in either case)
2. Involuntary or Forced sales
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
118
NOTE: Sale is a consensual contract; Nonpayment only creates a right

Hence, delivery and payment are not to demand payment or to rescind
essential for its perfection the contract, or to criminal
EXCEPTION: When the sale is subject prosecution in the case of
to a suspensive condition by virtue of bouncing checks. (EDCA
law or stipulation. Publishing and Distributing
* The terms and conditions of payment Corp. vs. Santos, 184 SCRA 614)
are merely accidental, not essential
elements of the contract of sale except EXCEPTIONS:
where the partied themselves stipulate 1. Contrary stipulation or Pactum
that in addition to the subject-matter reservati dominii (contractual
and the price, they are essential or reservation of title) a stipulation,
material to the contract. usually in sales by installment,
whereby, despite delivery of the
Requirements for perfection property sold, ownership remains
a. When parties are face to face with the seller until full payment of
When an offer is accepted without the price is made.
conditions or qualifications 2. Contract to sell
NOTES: 3. Contract of insurance a perfected
A conditional acceptance is a contract of sale, even without
counter-offer delivery, vests in the vendee an
when negotiated thru phone it is equitable title, an existing interest
as if it is negotiated face to face over the goods sufficient to be the
b. When contract is thru subject of insurance
correspondence or thru telegram
When the offeror receives or has RULES GOVERNING AUCTION SALES
knowledge of the acceptance by the 1. Sales of separate lots by auction are
offeree separate contracts of sale.
NOTE: If the buyer has already 2. Sale is perfected by the fall of the
accepted but the seller does not hammer
know yet of the acceptance, the 3. Seller has the right to bid in the
seller may still withdraw auction, provided:
c. When a sale is subject to a a) such right was reserved
suspensive condition b) notice was given that the sale was
From the moment the condition is subject to a right to bid on behalf of the
seller
fulfilled
c) right is not prohibited by law or by
stipulation
TRANSFER OF OWNERSHIP
4. Advertisements for bidders are simply
GENERAL RULE: While a contract of
invitations to make proposals, and the
sale is consensual, ownership of the advertiser is not bound to accept the
thing sold is acquired only upon its highest or lowest bidder, unless the
delivery, actual or constructive, to the contrary appears.
buyer. (Daus vs. Sps. De Leon, 16 June
2003) EFFECT OF PROMISE TREATED UNDER
This is true even if the purchase ART. 1479 Civil Code:
has been made on credit. 1. Accepted unilateral promise to sell
Payment of the purchase price is or buy
not essential to the transfer of Only one makes the promise, this
ownership, as long as the promise is accepted by the other.
property sold has been Example: A promises to sell to B, B
delivered. (Sampaguita Pictures, accepts the promise, but does not in
Inc vs. Jalwindor Manufacturers, turn promise to buy.
Inc. 93 SCRA 420)
CIVIL LAW COMMITTEE

Rhodora
John Stephen
Purganan(LTD),
119
does not bind the promissor even if supported by a consideration, the

accepted and may be withdrawn moment it was accepted, a perfected
anytime. contract of sale resulted, applying Art.
NOTE: Pending notice of its withdrawal, 1324 of the NCC. In view of the ruling of
the accepted promise partakes the the Supreme Court, the only importance
nature of an offer to sell which if of the consideration for an option is that
accepted, results in a perfected contract the option cannot be withdrawn by the
of sale (Sanchez vs. Rigos 45 SCRA3 68). grantor after acceptance.
In other words, if the acceptance is * In an option to buy, the party who has
made before withdrawal, it constitutes a an option may validly and effectively
binding contract of sale although the exercise his right by merely notifying the
option is given without consideration. owner of the formers decision to buy
if the promise is supported by a and expressing his readiness to pay the
stipulated price.
consideration distinct and separate
from the price (option money), its
Right of First Refusal
acceptance will give rise to a
perfected contract. It is a right of first priority all things
and conditions being equal; there
2. Bilateral promise to buy and sell should be identity of the terms and
One party accepts the others conditions to be offered to the
optionee and all other prospective
promise to buy and the latter, the
buyers, with optionee to enjoy the
formers promise to sell a
right of first priority. A deed of sale
determinate thing for a price certain
executed in favor of a third party
it is reciprocally demandable who cannot be deemed a purchaser
It requires no consideration distinct in good faith, and which is in
from the selling price violation of the of the right of first
NOTE: this is as good as a perfected refusal granted to the optionee is
sale. No title of dominion is NOT voidable under the Statute of
transferred as yet, the parties being Frauds, such contract is valid BUT
given only the right to demand rescissible under Article 1380 to
fulfillment or damages. 1381(3) of the New Civil Code
(Guzman Bocaling & Co. vs.
Policitation Bonnavie; Riviera Filipina, Inc vs. CA
An unaccepted unilateral promise to et.al. GR No. 117355, April 5, 2002).
buy or sell. Even if accepted by the The basis of the right of first refusal
other party, it does not bind the must be the current offer to sell of
promissor and maybe withdrawn the seller or offer to purchase of any
anytime. This is a mere offer, and prospective buyer. Only after the
has not yet been converted into a optionee fails to exercise its right of
contract. first priority under the same terms
and within the period contemplated
Option contract could the owner validly offer to sell
A contract granting a privilege in one the property to a third person,
person, for which he has paid a again, under the same terms as
consideration, which gives him the offered to the optionee (Paranaque
right to buy certain merchandise, at Kings Enterprises, Inc. vs. CA GR No.
anytime within the agreed period, at 111538, February 26, 1997)
a fixed price. The lessees right of first option to
An option without consideration is buy the leased property in case of its
void and the effect is the same as if sale is but a part of the bigger right
there was no option to lease the said property from the
* However, in Sanchez vs. Rigos (1972), lessor. The option was given to the
even though the option was not lessee because she was the lessee of
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
120
the subject property. It was a c. The thing sold is lost after

component of the consideration of perfection, but before delivery:
the lease. The option was by no
means an independent right which GENERAL RULE: Who bears the risk
can be exercised by the lessee. If of loss is governed by the
the lessee is barred by the contract stipulations in the contract
from assigning her right to lease the In the absence of any
subject property to any other party, stipulation:
the lessee is similarly barred to First view:
assign her first option to buy the Buyer bears the loss as an exception
leased property to another. to the rule of res perit domino.
(Bangayan et.al vs. CA and Lim GR EXCEPTIONS:
No.123581, August 29, 1997) 1. when object sold consists of
fungible goods for a price fixed
Earnest money or ARRAS is according to weight, number or
something of value to show that the measure
buyer was really in earnest, and given to 2. seller is guilty of fraud,
the seller to bind the bargain. It is negligence, default or violation
considered as: of contractual terms
a) part of the purchase price 3. object sold is generic
b) proof of perfection of the (Civil Code of the Philippines, Paras)
contract NOTE: This view conforms with
*It shall be deducted from the total Manresas view. Buyer would have
price. been the one to profit from the thing
had it not been lost or destroyed.
Earnest money Option money
1. Title passes to 1. Ownership is Contrary view:
the buyer upon reserved to the Where the ownership is transferred
delivery of the seller and is not to by delivery, as in our code, the
thing sold pass until full application of the axiom res perit
payment domino, imposes the risk of loss
2. In case of 2. In case of
upon the vendor; hence, if the thing
non-payment, an non-payment, there
action for specific can be action for is lost by fortuitous event before
performance or specific performance delivery, the vendor suffers the loss
for rescission can and cannot recover the price from
be filed by the the vendee (Commentaries and
injured party Jurisprudence on the Civil Code of
3. Part of the 3. Money given as a the Philippines, Tolentino)
purchase price distinct
consideration for an d. The thing is lost after delivery:
option contract Buyer bears the loss.
4. When given, 4. The would-be
the buyer is bound buyer is not required Question: If one does not comply, the
to pay the balance to buy
other need not pay?
5. Given when 5. Applies to a sale
there is already a not yet perfected Answer: True. But this only applies when
sale the seller is able to deliver but does not.
RULES ON RISK OF LOSS AND EFFECT OF LOSS AT THE TIME OF SALE:

DETERIORATION: a. Thing entirely lost at the time of
a. The thing sold is lost before perfection: Contract is void and
perfection: Seller bears the loss. inexistent
b. The thing sold is lost at the time of b. Thing only partially lost: Vendee
perfection: Contract is void or may elect between withdrawing
inexistent. from the contract or demanding the
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
121
remaining part, paying its 1. Sale of personal property at a

proportionate price price not less than P500
2. Sale of real property or an
Sale by description interest therein
A sale where a seller sells things as 3. Sale of property not to be
being of a certain kind, buyer merely performed within a year from
relying on the sellers the date thereof
representations or descriptions. 4. Applicable statute requires
There is warranty that the thing sold that the contract of sale be in a
certain form
corresponds to the representations
NOTE: Statute of Frauds is applicable
or descriptions.
only to executory contracts and not to
contracts which are totally or partially
Sale by sample
performed.
A sale where a small quantity of a
commodity is exhibited by the seller
as a fair specimen of the bulk, which
is not present and as to which there CAPACITY TO BUY OR SELL
is no opportunity to inspect or GENERAL RULE: All persons who can
examine. bind themselves also have legal capacity
NOTE: The mere exhibition of the to buy and sell.
sample does not necessarily make it EXCEPTIONS:
a sale by sample. This exhibition 1. Absolute incapacity (minors,
must have been the sole basis or demented persons, imbeciles,
inducement of the sale. deaf and dumb, prodigals, civil
There is warranty that the bulk of interdictees) - party cannot bind
the commodity will correspond in themselves in any case.
kind, quality, and character with the 2. Relative incapacity incapacity
sample exhibited. exists only with reference to
certain persons or a certain class
NOTE: In a sale by sample and by of property
description, there is a two-fold warranty.
Relative Incapacity
RIGHTS OF BUYER: A. Husband and wife (Art. 1490):
1) Return the thing and recover the Generally, a sale by one spouse to
money paid, or another is void.
2) Retain the thing and sue for the The husband and wife cannot sell
breach of warranty. property to each other except:
1. When a separation of property
PURCHASE BY MINORS: Contract is was agreed upon by the spouses
generally voidable but in case of 2. When there has been a judicial
necessaries, where necessaries are sold separation of property under
and delivered to a minor or other person Article 134 and 135 of the Family
without capacity to act, he must pay a Code
reasonable price therefore. Necessaries
are those in Art. 290. B. Incapacity by reason of relation to
property (Art. 1491)
FORMALITIES OF CONTRACT OF SALE
The following persons cannot acquire
GENERAL RULE: Sale is a consensual
property by purchase, even at a
contract and is perfected by mere
public auction, either in person or
consent.
through the mediation of another:
EXCEPTIONS: In order to be
(GAEP-JO)
enforceable by action, the following
1. the guardian, with respect to the
must be in writing:
property of his ward;
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
122
2. agents, with respect to the Furthermore, the said sale was

property whose administration or not submitted to the probate
sale may have been entrusted to court for approval as mandated
them, unless the consent of the by the order authorizing the
principal has been given; administrator to sell. The sale
3. executor or administrator, with was indubitably illegal, irregular
respect to the property of the and fictitious, and the courts
estate under administration; approval of the assailed
4. public officers and employees, compromise agreement violated
with respect to the properties of Article 1491 and cannot work to
the government, its political ratify a fictitious contract which
subdivisions, or GOCCs, that are is non-existent and void from
entrusted to them; the very beginning
5. judges, justices, prosecuting b) With respect to nos. 4 to 6: the
attorneys, clerks of courts, etc., sale is NULL AND VOID.
with respect to the property in Reason: violation of public
custogia legis; and policy cannot be subject to
ratification
6. any other person specially
disqualified by law. OBLIGATIONS OF THE VENDOR: (WPD-
Examples of persons especially TT)
disqualified by law: 1. Transfer ownership (cannot be
a. Aliens who are disqualified to waived)
purchase agricultural lands 2. Deliver the thing sold (cannot be
b. An unpaid seller having a right waived)
of lien or having stopped the 3. Warrant against eviction and against
goods in transitu, who is hidden defects (can be waived or
prohibited from buying the goods modified since warranty is not an
either directly or indirectly in essential element of the contract
the resale of the same, at public of sale)
or private sale which he may 4. Take care of the thing, pending
make delivery, with proper diligence
c. The officer holding the (Article 1163)
execution, or his deputy. 5. Pay for the expenses of the deed of
NOTE: While those disqualified sale, unless there is stipulation to
under Arts. 1490 and 1491 may the contrary
not become lessees (Art. 1646),
still aliens may become lessees DELIVERY
even if they cannot buy lands. Is a mode of acquiring ownership, as
a consequence of certain contracts
Effect of violation: such as sale, by virtue of which,
a) With respect to nos. 1 to 3: the actually or constructively, the object
sale is VOIDABLE. is placed in the control and
Reason: only private rights, possession of the vendee.
which are subject to ratification
are violated Delivery of the thing together
NOTE: In the case of Lao vs.
with the payment of the price,
Genato, 137 SCRA 77, the
marks the consummation of the
Supreme Court found that the
contract of sale(PNB vs. Ling, 69
sale by the administrator of
Phil. 611)
certain properties of the estate
in order to settle the existing In all forms of delivery, it is
obligations of the estate was necessary that the act of
made to the administrators son delivery be coupled with the
for a grossly low price. intention of delivering the thing.
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The act without the intention is

insufficient. (Norkis Distributor, When is the vendor not bound to
Inc. vs. CA, 195 SCRA 694) deliver the thing sold:
1. If the vendee has not paid him the
Kinds: price
1. Actual or real placing the thing 2. If no period for payment has been
under the control and possession of fixed in the contract
the buyer. 3. Even if a period for payment has
2. Legal or constructive delivery is been fixed in the contract, if the
represented by other signs or acts vendee has lost the right to make
indicative thereof use of the same.
a. delivery by the execution of a
public instrument. Sale or return
NOTE: Gives rise only to a prima Property is sold, but the buyer, who
facie presumption of delivery which becomes the owner of the property
is destroyed when actual delivery is on delivery, has the option to return
not effected because of a legal the same to the seller instead of
impediment (Ten Forty Realty vs. paying the price.
Cruz, 10 Sept. 2003)
b. traditio symbolica - to effect
delivery, the parties make use of NOTES:
a token or symbol to represent It is a kind of sale with a condition
the thing delivered subsequent.
c. traditio longa manu seller The buyer must comply with the
pointing out to the buyer the
express or implied conditions
things which are transferred,
attached to the return privilege;
which at the time must be in
otherwise, the sale becomes
sight.
absolute.
d. traditio brevi manu buyer
simply continues in possession of Buyer, being the owner, bears the
the thing but under title of risk of loss
ownership.
e. traditio constitutum Sale on trial, approval, or satisfaction
possessorium seller continues A contract in the nature of an option
in possession but under a to purchase if the goods prove to be
different title other than satisfactory, the approval of the
ownership. buyer being a condition precedent.
3. Quasi-tradition delivery of rights,
credits or incorporeal property, Rules:
made by: 1. title remains in the seller
a. placing titles of ownership in the 2. risk of loss remains with seller
hands of buyer except when the buyer is at fault or
b. allowing buyer to make use of has agreed to bear the loss
rights 3. buyer must give goods a trial, except
4. Tradition by operation of law where it is evident that it cannot
perform the work
Constructive delivery requires three 4. period within which buyer must
things before ownership may be signify his acceptance runs only
transferred: when all the parts essential for the
1. The seller must have control over operation of the object have been
the thing delivered.
2. The buyer must be put under control 5. if it is stipulated that a third person
3. There must be the intention to must satisfy approval or satisfaction,
deliver the thing for purposes of the provision is valid, but the third
ownership
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person must be in good faith. If the maxim Nemo dat quid non habet
refusal to accept is not justified, (You cannot give what you do not
seller may still sue. have).
6. Generally, the sale and delivery to a EXCEPTIONS: (SMERVS)
buyer who is an expert on the object 1. Owner is estopped or precluded
purchased is not a sale on approval, by his conduct
trial, or satisfaction. 2. When sale is made by the
registered owner or apparent
Sale or return Sale on Trial owner in accordance with
1. Subject to a 1. Subject to a recording or registration laws
resolutory condition suspensive condition 3. Sales sanctioned by judicial or
2. Depends entirely 2. Depends on the statutory authority
on the will of the character or quality of
buyer the goods
4. Purchases in a merchant's store,
3. Ownership 3. Ownership remains
fairs or markets
passes to the buyer in the seller until buyer 5. When a person who is not the
on delivery and signifies his approval or owner sells and delivers a thing,
subsequent return acceptance to the subsequently acquires title
reverts ownership seller
in the seller
thereto (Art. 1434)
6. When the seller has a voidable
4. Risk of loss or 4. Risk of loss remains title which has not been avoided
injury rests upon with the seller at the time of the sale (Art.
the buyer
1506)
Instances where Seller is still the * Unlawful deprivation is no longer
Owner despite Delivery: limited to a criminal act. There is
1. Sale on trial, approval or satisfaction Unlawful Deprivation where there is no
2. Contrary intention appears by the valid transmission of ownership.
term of the contract;
3. Implied reservation of ownership Place of delivery of goods
(Article 1503) 1. Where there is an agreement, place
a. If under the bill of lading, the of delivery is that agreed upon
goods are deliverable to seller or 2. Where there is no agreement, place
agent or their order; of delivery determined by usage of
b. If the bill of lading, although trade
stating that the goods are to be 3. Where there is no agreement and no
delivered to the buyer or his prevalent usage, place of delivery is
agent, is kept by the seller or his the sellers place
agent; 4. In any other case, place of delivery
a. When the buyer, although the is the sellers residence
goods are deliverable to order of 5. In case of specific goods, which to
buyer, and although the bill of the knowledge of the parties at the
lading is given to him, does not time the contract was made were in
honor the bill of exchange sent some other place, that place is the
along with it. place of delivery, in the absence of
agreement or usage of trade to the
Transfer of ownership where goods sold contrary
delivered to carrier
General Rule: Delivery to the carrier is Time of delivery of goods
deemed to be delivery to the buyer 1. Stipulated time
Exception: Where the right of 2. In the absence thereof, within a
possession or ownership of specific goods reasonable time
sold is reserved
NEGOTIABLE DOCUMENT OF TITLE
SALE OF GOODS BY A NON-OWNER (NDT)
GENERAL RULE: Buyer acquires no title
even if in good faith and for value under
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A document of title in which it is NOTE; Mere transferee does not acquire

stated that the goods referred to directly the obligation of the bailee (in
therein will be delivered to the Art. 1513). To acquire it, he must notify
bearer, or to the order of any person the bailee.
named in such document.
May be negotiated by delivery or WHO CAN DEFEAT RIGHTS OF
TRANSFEREE:
indorsement.
1. Creditor of transferor
2. Transferor
The document is negotiable if:
3. Subsequent purchaser
1. The goods are deliverable to the
bearer; or
RULES WHEN QUANTITY IS LESS THAN
2. If the goods are deliverable to the
AGREED UPON:
order of a certain person
1. Buyer may reject; or
2. Buyer may accept what has been
Persons who may negotiate NDT:
delivered, at the contract rate
1. The owner; or
2. Any person to whom the possession
RULES WHEN QUANTITY IS MORE THAN
or custody thereof has been
AGREED UPON:
entrusted by the owner, if by the
1. Buyer may reject all; or
terms of the document the bailee
2. Buyer may accept the goods
issuing the document undertakes to
agreed upon and reject the rest;
deliver the goods to the order of the
or
person to whom the possession or
3. Buyer may accept all and must
custody of the document has been
pay for them at the contract
entrusted or if at the time of such
rate
entrusting the document in such
NOTE: Acceptance, even if not express
form that it may be negotiated by
may be implied when the buyer
delivery.
exercises acts of ownership over the
excess goods.
* If the holder of a negotiable document
of title (deliverable to bearer) entrusts
RULES WHEN GOODS MIXED WITH
the document to a friend for deposit,
GOODS OF DIFFERENT DESCRIPTION:
but the friend betrays the trust and
negotiates the document by delivering it Buyer may accept the goods which
to another who is in good faith, the said are in accordance with the contract
owner cannot impugn the validity of the and reject the rest
negotiation. As between two innocent
persons, he who made the loss possible NOTE: If the subject matter is
shall bear the loss, without prejudice to indivisible, in case of delivery of larger
his right to recover from the wrongdoer. quantity of goods or of mixed goods, the
buyer may reject the whole of the goods
RIGHTS OF PERSON TO WHOM
DOCUMENT HAS BEEN NEGOTIATED: DELIVERY TO THE CARRIER
1) The title of the person negotiating the GENERAL RULE: Where the seller is
document, over the goods covered by authorized or required to send the goods
the document; to the buyer, delivery to the carrier is
2) The title of the person (depositor or delivery to the buyer.
owner) to whose order by the terms of EXCEPTIONS:
the document the goods were to be 1. When a contrary intention
delivered, over such goods; appears
3) The direct obligation of the bailee to 2. Implied reservation of ownership
hold possession of the goods for him, as under pars. 1,2,3 of Art. 1503
if the bailee had contracted to him
directly Kinds of Delivery to the Carrier
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a. C.I.F. (cost, insurance, freight) c. If the vendee would not have

signify that the price fixed bought the immovable had
covers not only the costs of the he known of its smaller area
goods, but the expense of the of inferior quality
freight and the insurance to be irrespective of the extent of
paid by the seller lack of area or quality
b. F.O.B. (free on board) goods
are to be delivered free of Sale for a Lump Sum (A Cuerpo Cierto)
expense to the buyer to the Vendor is obligated to deliver all the
point where they are F.O.B. The land included within the boundaries,
point of F.O.B., either at the regardless of whether the real area
point of shipment or the point of should be greater or smaller
destination, determines when Ordinarily, there can be no rescission
the ownership passes. or reduction or increase whether the
NOTE: the terms C.I.F. and F.O.B. area be greater or lesser, unless
merely make rules of presumption there is gross mistake.
c. C.O.D. (collect on delivery) the NOTE: The Civil Code presumes that the
carrier acts for the seller in purchaser had in mind a particular piece
collecting the purchase price, of land and that he ascertained its area
which the buyer must pay to and quality before the contract of sale
obtain possession of the goods. was perfected. If he did not do so, or if
having done so he made no objection
SELLERS DUTY AFTER DELIVERY TO and consented to the transaction, he can
CARRIER blame no one but himself (Teran vs.
1. To enter on behalf of buyer into such Villanueva Viuda de Riosa 56 Phil 677).
contract reasonable under the What is important is the delivery
circumstances of all the land included in the
2. To give notice to buyer regarding boundaries.
necessity of insuring the goods
DOUBLE SALE (Art. 1544)
PAYMENT OF THE PURCHASE PRICE Requisites: VOCS
GENERAL RULE: The seller is not bound 1. two or more transactions must
to deliver the thing sold unless the constitute valid sales;
purchase price has been paid.
2. they must pertain exactly to the
EXCEPTION: The seller is bound to
same object or subject matter;
deliver even if the price has not been
3. they must be bought from the same
paid, if a period of payment has been
or immediate seller; AND
fixed.
4. two or more buyers who are at odds
over the rightful ownership of the
Sale of Real Property by Unit
subject matter must represent
Entire area stated in the contract conflicting interests.
must be delivered
When entire area could not be Rules of preference:
delivered, vendee may: 1. Personal Property
1. Enforce the contract with the a. first possessor in good faith
corresponding decrease in price 2. Real Property
2. Rescind the sale: a. first registrant in good faith
a. If the lack in area is at least b. first possessor in good faith
1/10 than that stated or c. person with oldest title in good
stipulated faith
b. If the deficiency in quality
specified in the contract NOTES:
exceeds 1/10 of the price
agreed upon
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Purchaser in Good Faith one who b. proceed with the contract ,

buys the property of another without waiving the performance of
notice that some other person has a the condition.
right to or interest in such property 2. If the condition is in the nature
and pays a full and fair price for the of a promise that it should
same at the time of such purchase or happen, the non-performance of
before he has notice of the claim or such condition may be treated
interest of some other person in the by the other party as breach of
property (Veloso vs. CA). warranty.
Registration requires actual
NOTE: A distinction must be made
recording; if the property was never
between a condition imposed on the
really registered as when the
perfection of a contract and a condition
registrar forgot to do so although he
imposed merely on the performance of
has been handed the document,
an obligation. The failure to comply with
there is no registration.
the first condition would prevent the
Possession is either actual or juridical relation itself from coming into
constructive since the law made no existence, while failure to comply with
distinction (Sanchez vs. Ramos 40 the second merely gives the option
Phil614) either to refuse or proceed with the sale
Possession in Art.1544 includes not or to waive the condition.
only material but also symbolic
possession (Ten Forty Realty vs. The mere fact that the second
Cruz, 10 Sept. 2003.) contract of sale was perfected in
Title means title because of sale, good faith is not sufficient if, before
and not any other title or mode of title passes, the second vendee
acquiring property (Lichauco vs. acquires knowledge of the first
Berenguer 39 Phil 642) transaction. The good faith or
Hernandez vs. Katigbak Rule: When innocence of the posterior vendee
the property sold on execution is needs to continue until his contract
registered under Torrens, ripens into ownership by tradition or
registration is the operative act that registration. (Palanca vs. Dir. Of
gives validity to the transfer or Lands, 46 PHIL 149)
creates a lien on the land, and a
purchaser on execution sale is not
required to go behind the registry to EFFECT IF BUYER HAS ALREADY SOLD
determine the conditions of the THE GOODS:
property. Exception: Where the General Rule: The unpaid sellers right to
purchaser had knowledge, prior to or lien or stoppage in transitu remains even
at the time of the levy, of such if buyer has sold the goods.
previous lien or encumbrance, his Except:
knowledge is equivalent to 1) When the seller has given consent
registration. thereto, or
2) When the buyer is a purchaser in good
CONDITION faith for value of a negotiable document
Effect of Non-fulfillment of Condition of title.
1. If the obligation of either party
is subject to any condition and WARRANTY
such condition is not fulfilled, a statement or representation made
such party may either: by the seller of goods,
a. refuse to proceed with the contemporaneously and as a part of
contract the contract of sale, having
reference to the character, quality,
or title of the goods, and by which
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he promises or undertakes to insure be disturbed in his legal and

that certain facts are or shall be as peaceful possession thereof.
he then represents.
Elements:
Kinds: 1. vendee is deprived, in whole or
1. EXPRESS any affirmation of fact or in part, of the thing purchased;
any promise by the seller relating to 2. the deprivation is by virtue of a
the thing if the natural tendency of final judgment;
such affirmation or promise is to 3. the judgment is based on a prior
induce the buyer to purchase the right to the sale or an act
same and if the buyer purchases the imputable to the vendor;
thing relying thereon 4. the vendor was summoned in the
suit for eviction at the instance
NOTE: A mere expression of opinion, no of the vendee; AND
matter how positively asserted, does not 5. no waiver of warranty by the
import a warranty unless the seller is an vendee.
expert and his opinion was relied upon
by the buyer. Vendor's liability shall consist of:
1. Total eviction: (VICED)
2. IMPLIED - that which the law a. Value of the thing at the time of
derives by implication or inference eviction;
from the nature of the transaction or b. Income or fruits if he has been
the relative situation or ordered to deliver them to the
circumstances of the parties, party who won the suit;
irrespective of any intention of the c. Costs of the suit;
seller to create it. d. Expenses of the contract; AND
a. Warranty against eviction e. Damages and interests if the sale
b. Warranty against hidden defects was in bad faith.
c. Warranty as to Fitness and
Merchantability 2. Partial eviction:
NOTE: An implied warranty is a natural, a. to enforce vendors liability
not an essential element of a contract, for eviction (VICED); OR
and is deemed incorporated in the b. to demand rescission of
contract of sale. It may however, be contract.
waived or modified by express
stipulation. (De Leon) Question: Why is rescission not a remedy
There is no implied warranty as to the in case of total eviction?
condition, adaptation, fitness or Answer: Rescission contemplates that
suitability or the quality of an article the one demanding it is able to return
sold as a second-hand article. But such whatever he has received under the
articles might be sold under such contract. Since the vendee can no longer
circumstances as to raise an implied restore the subject-matter of the sale to
warranty. the vendor, rescission cannot be carried
* A certification issued by a vendor that a out.
second-hand machine was in A-1
condition is an express warranty binding * The suit for the breach can be directed
on the vendor. (Moles vs. IAC [1989]) only against the immediate seller, not
sellers of the seller unless such sellers
A. Warranty against eviction had promised to warrant in favor of later
Warranty in which the seller buyers or unless the immediate seller
guarantees that he has the right to has expressly assigned to the buyer his
sell the thing sold and to transfer own right to sue his own seller.
ownership to the buyer who shall not NOTE: The disturbance referred to in
the case of eviction is a disturbance in
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law which requires that a person go to Warranty in which the seller

the courts of justice claiming the thing guarantees that the thing sold is free
sold, or part thereof and invoking from any hidden faults or defects or
reasons. Mere trespass in fact does not any charge or encumbrance not
give rise to the application of the declared or known to the buyer.
doctrine of eviction.
Elements: (SHENPW)
Vendors liability is waivable but any 1. defect must be Serious or
stipulation exempting the vendor important;
from the obligation to answer for 2. it must be Hidden;
eviction shall be void if he acted in 3. it must Exist at the time of the
bad faith. sale;
Kinds of Waiver: 4. vendee must give Notice of the
a. Consciente voluntarily defect to the vendor within a
made by the vendee without reasonable time;
the knowledge and 5. action for rescission or reduction
assumption of the risks of of price must be brought within
eviction the proper Period (within 6 mos.
NOTE: vendor shall pay only the from delivery of the thing or 40
value which the thing sold had at days from date of delivery in
the time of eviction case of animals); and
b. Intencionada made by the 6. no Waiver of the warranty.
vendee with knowledge of
the risks of eviction and Remedies of the Vendee:
assumption of its a. Accion redhibitoria (rescission)
consequences b. Accion quanti minoris (reduction
EFFECT: vendor not liable of the price)
NOTE: Every waiver is presumed to be NOTES:
consciente. To consider it intencionada, Hidden faults or defects pertain only
it must be accompanied by some
to those that make the object unfit
circumstance which reveals the
for the use for which it was intended
vendors knowledge of the risks of
at the time of the sale.
eviction and his intention to submit to
such consequences. This warranty in Sales is applicable
in Lease (Yap vs. Tiaoqui 13Phil433)
WHERE IMMOVABLE SOLD ENCUMBERED Effect of loss of thing on account of
WITH NON-APPARENT BURDEN hidden defects:
1. Right of vendee 1. If vendor was aware of hidden
a) recission, or defects, he shall bear the loss and
b) indemnity vendee shall have the right to
recover: (PED)
2. When right cannot be exercised: a. the price paid
a) if the burden or servitude is b. expenses of the contract
apparent c. damages
b) if the non-apparent burden or 2. If vendor was not aware, he shall be
servitude is registered obliged to return: (PIE)
c) if vendee had knowledge of the a. price paid
encumbrance, whether it is registered b. interest thereon
or not c. expenses of the contract if paid
3. When action must be brought by the vendee
- within ONE YEAR from the
execution of the deed of sale Effect if the cause of loss was not the
hidden defect
B. Warranty against hidden defects
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If the thing sold had any hidden Instances where implied warranties are
fault at the time of the sale, and inapplicable:
should thereafter be lost by a (1) 1. As is and where is sale - vendor
fortuitous event OR (2) through the makes no warranty as to the quality
fault of the vendee: or workable condition of the goods,
the vendee may demand of the and that the vendee takes them in
vendor the price which he paid the condition in which they are
less the value of the thing at the found and from the place where they
time of its loss. are located.
NOTE: the difference between the 2. Sale of second-hand articles
price paid and the value of the thing 3. Sale by virtue of authority in fact or
at the time of its loss represents the law
damage suffered by the vendee and
the amount which the vendor Caveat Venditor (Let the seller
enriched himself at the expense of beware): the vendor is liable to the
the vendee vendee for any hidden faults or defects
in the thing sold, even though he was
If the vendor acted in bad faith:
not aware thereof.
vendor shall pay damages to the
vendee Caveat Emptor (Let the buyer
beware): requires the purchaser to be
C. Implied Warranties of Quality aware of the supposed title of the
Warranty of Fitness vendor and one who buys without
Warranty in which the seller checking the vendors title takes all the
guarantees that the thing sold is risks and losses consequent to such
reasonably fit for the known failure.
particular purpose for which it was
acquired by the buyer RULES IN CASE OF SALE OF ANIMALS
1. When two or more animals have been
GENERAL RULE: There is no implied sold at the same time and the
warranty as to the quality or fitness for redhibitory defect is in one, or some of
any particular purpose of goods under a them but not in all, the general rule is
contract of sale that the redhibition will not affect the
EXCEPTIONS: others without it. It is immaterial
1. Where the buyer, expressly or by whether the price has been fixed for a
implication manifests to the lump sum for all the animals or for a
seller the particular purpose for separate price for each.
which the goods are required 2. No warranty against hidden defects
2. Where the buyer relies upon the of animals sold at fairs or at public
sellers skill or judgment auctions, or of livestock sold as
condemned. This is based on the
Warranty of Merchantability assumption that the defects must have
Warranty in which the seller been clearly known to the buyer.
guarantees, where the goods were 3. Sale of animals shall be void when:
bought by description, that they are a) animals sold are suffering from
reasonably fit for the general contagious disease
purpose for which they are sold b) if the use or service for which
they are acquired has been stated in the
It requires identity between what is contract, and they are found to be unfit
described in the contract AND what therefor
is tendered, in the sense that the 4. Limitation of the action: 40 days
latter is of such quality to have some from the date of their delivery to the
value vendee
5. Vendor shall be liable if the animal
should die within 3 days after its
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purchase if the disease which caused the Pertinent Rules:

death existed at the time of the contract 1. The vendor is not required to deliver
the thing sold until the price is paid
OBLIGATIONS OF THE VENDEE: nor the vendee to pay the price
A. Principal Obligations: before the thing is delivered in the
1. To accept delivery absence of an agreement to the
2. To pay the price of the thing sold in contrary (Article 1524).
legal tender unless another mode 2. If stipulated, the vendee is bound to
has been agreed upon accept delivery and to pay the price
NOTE: A grace period granted the at the time and place designated;
vendee in case of failure to pay the 3. If there is no stipulation as to the
amount/s due is a right not an time and place of payment and
obligation. The grace period must not delivery, the vendee is bound to pay
be likened to an obligation, the non- at the time and place of delivery
payment of which, under Article 1169 of 4. In the absence of stipulation as to
the Civil Code, would still generally the place of delivery, it shall be
require judicial or extra-judicial demand made wherever the thing might be
before default can be said to arise at the moment the contract was
(Bricktown Devt Corp vs. Amor Tierra perfected (Article 1251)
Devt Corp. 57SCRA437) 5. If only the time for delivery has been
fixed in the contract, the vendee is
B. Other Obligations required to pay even before the
1. To take care of the goods without thing is delivered to him; if only the
the obligation to return, where the time for payment has been fixed,
goods are delivered to the buyer and the vendee is entitled to delivery
he rightfully refuses to accept even before the price is paid by him
(Article 1524)
NOTES:
The buyer in such a case is in the Ways of accepting goods:
position of a bailee who has had 1. Express acceptance
goods thrust upon him without 2. Implied acceptance
his assent. He has the obligation a. When buyer does an act which
to take reasonable care of the only an owner can do,
goods but nothing more can be b. Failure to return goods after
demanded of him. reasonable lapse of time
The goods in the buyers
possession under these NOTES:
circumstances are at the sellers The retention of goods is strong
risk evidence that the buyer has
2. To be liable as a depositary if he accepted ownership of the goods.
voluntarily constituted himself as
such
Delivery and acceptance are two
3. To pay interest for the period separate and distinct acts of
between delivery of the thing and different parties
the payment of the price in the Delivery is an act of the vendor
following cases: and one of the vendors
a. Should it have been stipulated obligations; vendee has nothing
b. Should the thing sold and to do with the act of delivery by
delivered produce fruits or the vendor
income Acceptance is an obligation of
c. Should he be in default, from the vendee; acceptance cannot
the time of judicial or extra- be regarded as a condition to
judicial demand for the payment complete delivery;
of the price seller must comply with the
obligation to deliver although
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there is no acceptance yet by 1. if the vendor gives security for the

the buyer return of the price in a proper case
Acceptance by the buyer may 2. if it has been stipulated that
precede actual delivery; there may notwithstanding any such
be actual receipt without contingency, the vendee must make
acceptance and there may be payment (see Article 1548 par.3)
acceptance without receipt 3. if the vendor has caused the
Unless otherwise agreed upon, disturbance or danger to cease
4. if the disturbance is a mere act of
acceptance of the goods by the
trespass
buyer does not discharge the seller
5. if the vendee has fully paid the price
from liability for damages or other
legal remedy like for breach of any
REMEDIES FOR BREACH OF CONTRACT
promise or warranty
A. Remedies of the seller
1. Action for payment of the price (Art.
When vendee may suspend payment of
1595)
the price:
2. Action for damages for non-
1. If he is disturbed in the possession or
acceptance of the goods (Art. 1596)
ownership of the thing bought
3. Action for rescission (Art. 1597)
2. If he has well-grounded fear that his
B. Remedies of the buyer
possession or ownership would be
1. Action for specific performance (Art.
disturbed by a vindicatory action or
1598)
foreclosure of mortgage
2. Action for rescission or damages for
breach of warranty (Art 1599)
NOTES:
If the thing sold is in the possession A. REMEDIES OF THE SELLER FOR
of the vendee and the price is BREACH OF CONTRACT
already in the hands of the vendor, IN CASE OF MOVABLES
the sale is a consummated contract 1. Ordinary Remedies
and Article 1590 is no longer a. Movables in General Failure of
applicable. Article 1590, the vendee to appear to receive
presupposes that the price or any delivery or, having appeared,
part thereof has not yet been paid failure to tender the price at the
and the contract is not yet same time, unless, a longer
consummated. period for its payment has been
Under Article 1590, the vendee has stipulated
no cause of action for rescission action to rescind the sale
before final judgement, otherwise (Art. 1593)
the vendor might become a victim of b. Sale of Goods
machinations between the vendee action for the price (Art.
and the third person
1595)
Disturbance must be in possession
action for damages (Art.
and ownership of the thing acquired
1596)
If the disturbance is caused by the 2. Unpaid Seller
existence of non-apparent servitude, Types:
the remedy of the buyer is
a. The seller of the goods who has
rescission, not suspension of
not been paid or to whom the
payment.
price has not been tendered
b. The seller of the goods, in case a
When vendee cannot suspend payment bill of exchange or other
of the price even if there is negotiable instrument has been
disturbance in the possession or received as conditional payment,
ownership of the thing sold: AND the condition on which it
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was received has been broken by payments of price or rents must

reason of the dishonor of the be returned
instrument, insolvency of the EXCEPTIONS: a stipulation that
buyer or otherwise. the installments or rents paid
Remedies: shall not be returned to the
1. Possessory lien over the goods vendee or lessee shall be valid
2. Right of stoppage in transitu insofar as the same may not be
after he has parted with the unconscionable under the
possession of the goods and the circumstan-ces (Article 1486).
buyer becomes insolvent 3. Foreclosure of the chattel
3. Special Right of resale mortgage on the thing sold if
4. Special Right to rescind the sale vendee shall have failed to pay
5. Action for the price two or more installments. In this
6. Action for damages case, there shall be no further
action against the purchaser to
3. Article 1484 or Recto Law recover unpaid balance of the
Remedies of vendor in sale of price.
personal property by installments
Requisites: NOTES:
1. Contract of sale Further recovery barred only from
2. Personal property the time of actual sale at public auction
3. Payable in installments conducted pursuant to foreclosure
4. In the case of the second and (Macondray vs. Tan.)
third remedies, that there has Other chattels given as security
been a failure to pay two or cannot be foreclosed if they are not
more installments subject of the installment sale (Ridad
NOTE: Apply likewise to contracts vs. Filipinas investment and Finance
purporting to be leases of personal Corp. GR 39806, Jan. 28, 1983)
property with option to buy If the vendor assigns his right to a
Art. 1484 does not apply to a sale: financing company, the latter may be
1. Payable on straight terms (partly regarded as a collecting agency of the
in cash and partly in one term) vendor and cannot therefore recover any
2. Of Real property deficiency from the vendee (Zayas vs.
Remedies: Luneta Motors Co.)
1. Specific performance upon When the vendor assigns his credit to
vendees failure to pay another person, the latter is likewise
NOTE: Does not bar full recovery for bound by the same law. Accordingly,
judgment secured may be executed when the assignee forecloses on the
on all personal and real properties of mortgage, there can be no further
the buyer which are not exempt recovery of the deficiency and the
from execution (Palma v. CA.) vendor-mortgagee is deemed to have
2. Rescission of the sale if vendee renounced any right thereto (Borbon II
shall have failed to pay two or vs. Servicewide Specialist, Inc.
more installments 258SCRA658)
NOTES: NOTE: However, Article 1484(3) does
Nature of the remedy which NOT bar one to whom the vendor has
requires mutual restitution bars assigned on with a recourse basis his
further action on the purchase credit against the vendee from
price (Nonato vs. IAC.) recovering from the vendor the
GENERAL RULE: cancellation assigned credit in full although the
vendor may have no right of recovery
of sale requires mutual
against the vendee for the deficiency
restitution, that is all partial
(Filipinas Invest. & Finance Corp. vs.
Vitug, Jr. 28SCRA658)
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year of installment payments

NOTE: Remedies are alternative and made
exclusive NOTE: This right shall be
exercised by the buyer ONLY
IN CASE OF IMMOVABLES once in every 5 years of the life
1. Ordinary Remedies of the contract AND its
a. In case of anticipatory breach extensions.
rescission (Article 1591) 2. Actual cancellation can only take
place after 30 days from receipt
b. Failure to pay the purchase price
by the buyer of the notice of

cancellation OR demand for
rescission upon judicial or rescission by a notarial act AND
notarial demand for upon full payment of the cash
rescission (Article 1592) surrender value to the buyer
the vendee may pay, even (Olympia Housing vs. Panasiatic,
after the expiration of the 16 January 2003.)
period, as long as no demand NOTE: The seller shall refund to
for rescission has been made the buyer the cash surrender
upon him value of the payments on the
NOTE: Article 1592 does not property equivalent to 50% of
apply to: the total payments made. After
1) Sale on instalment of real five (5) years of installments,
estate there shall be an additional 5%
2) Contract to sell every year but not to exceed 90%
3) Conditional sale of the total payments made
4) Cases covered by RA 6552: 3. The buyer shall have the right to
Realty Installment buyer sell his rights or assign the same
protection act to another person OR to
reinstate the contract by
2. R.A. No. 6552 or Maceda Law updating the account during the
An Act to Provide Protection to grace period and before actual
buyers of Real Estate on Installment cancellation of the contract
Payments 4. The buyer shall have the right to
Law governing sale or financing of pay in advance any installment
real estate on installment payments or the full unpaid balance of the
Requisites: purchase price any time without
interest and to have such full
1. transactions or contracts
payment of the purchase price
involving the sale OR financing
annotated in the certificate of
of real estate on installment
title covering the property.
payments, including residential
condominium apartments; and
B. If Buyer has paid less than 2
2. buyer defaults in payment of
years of installments
succeeding installments.
1. The seller shall give the buyer a
grace period of NOT less than 60
Rights of the buyer: days from the date the
A. If Buyer has paid at least two installment became due. If the
(2) years of installments buyer fails to pay the
1. The buyer must pay, without installments due at the
additional interest, the unpaid expiration of the grace period,
installments due within the total the seller may cancel the
grace period earned by him. contract after 30 days from
There shall be one (1) month receipt by the buyer of the
grace period for every one (1) notice of cancellation or the
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demand for rescission of a. actually take possession of

contract by a notarial act. the goods sold OR
2. Same No. 3 and 4 paragraph A b. give notice of his claim to
above the carrier or other person in
possession
NOTE: Down payments, deposits or 5. Seller must surrender the
options on the contract shall be included negotiable document of title, if
in the computation of the total number any, issued by the carrier or
of installment payments made bailee
6. Seller must bear the expenses of
Remedies of Unpaid Seller delivery of the goods after the
I. Possessory Lien exercise of the right
When may be exercised:
1. Where the goods have been sold GOODS ARE CONSIDERED IN TRANSITU:
without any stipulation as to 1. after delivery to a carrier or other
credit bailee and before the buyer or his agent
2. When the goods have been sold takes delivery of them; and
on credit, but the term of credit 2. If the goods are rejected by the
has expired buyer, and the carrier or other bailee
3. Where the buyer becomes continues in possession of them
insolvent
When lost: GOODS ARE NO LONGER CONSIDERED IN
TRANSITU:
1. Delivery of the goods to a carrier
1. after delivery to the buyer or his
or bailee for the purpose of
agent in that behalf;
transmission to the buyer
2. if the buyer or his agent obtains
without reserving ownership or
possession of the goods at a point before
right of possession
the destination originally fixed;
2. When the buyer lawfully obtains
3. if the carrier or the bailee
possession of the goods
acknowledges to hold the goods on
3. By waiver of the lien
behalf of the buyer; and
NOTE: Possessory lien is lost after the
4. if the carrier or bailee wrongfully
seller loses possession but his lien as an
refuses to deliver the goods to the buyer
unpaid seller remains; hence he is still
an unpaid creditor with respect to the
price of specific goods sold. His Effects of the exercise of the right
preference can only be defeated by the 1. The goods are no longer in transit.
governments claim to the specific tax on 2. The contract of carriage ends;
the goods themselves (Arts. 2247 and instead the carrier now becomes a
2241). mere bailee, and will be liable as
NOTE: The bringing of an action to such.
recover the purchase price is not one of 3. The carrier should not deliver
the ways of losing the possessory lien. anymore to the buyer or the latters
An unpaid seller does not lose his lien by agent; otherwise he will clearly be
reason that he has obtained a money liable for damages.
judgement or decree for the price of 4. The carrier must redeliver to, or
goods (Art. 1529, last paragraph). according to the directions of the
seller.
II. Stoppage of goods in transitu
WAYS OF EXERCISING THE RIGHT TO
Requisites: STOP:
1. Seller must be unpaid 1. By taking actual possession of the
2. Buyer must be insolvent goods
3. Goods must be in transit 2. By giving notice of his claim to the
4. Seller must either: carrier or bailee
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III. Special Right of Resale pay for the thing sold (Art. 1596
May be exercised only when the par.1)
unpaid seller has either a right of 2. In an executory contract, where
lien OR has stopped the goods in the ownership in the goods has
transitu AND under ANY of the not passed, and the seller cannot
following conditions: maintain an action to recover
1. Where the goods are perishable the price (Art 1595)
in nature 3. If the goods are not yet
2. Where the right to resell is identified at the time of the
expressly reserved in case the contract or subsequently
buyer should make a default B. REMEDIES OF THE BUYER FOR
3. Where the buyer delays in the BREACH OF CONTRACT
payment of the price for an
unreasonable time 1. Action for specific performance
(Art. 1598)
IV. Rescission Where the seller has broken the
Types: contract to deliver specific or
ascertained goods
1. Special Right to Rescind Under
The judgment or decree may be
Art. 1534 If the seller has
either the right of lien OR a right unconditional, or upon such terms
to stop the goods in transitu AND and conditions as to damages,
under either of 2 situations: payment of the price and otherwise
a. Where the right to rescind as the court may deem just
on default has been
expressly reserved 2. Remedies of buyer for breach of
b. Where the buyer has been in warranty by seller (Art. 1599):
default for an unreasonable 1. Recoupment accept the goods and
time set up the sellers breach to reduce
2. Under Art. 1597 (technical or extinguish the price
rescission) 2. Accept the goods and maintain an
action for damages for breach of
V. Action for the price warranty
3. Refuse to accept the goods and
When may be exercised: maintain an action for damages for
1. Where the ownership has passed breach of warranty
to the buyer AND he wrongfully 4. Rescind the contract by returning or
neglects OR refuses to pay for offering the return of the goods, and
the price recover the price of any part thereof
2. Where the price is payable on a NOTE: These are alternative remedies.
day certain AND he wrongfully
neglects OR refuses to pay for When rescission by buyer not allowed:
the price, irrespective of the 1. if the buyer accepted the goods
delivery or transfer of title knowing of the breach of warranty
3. Where the goods cannot readily without protest
be resold for a reasonable price 2. if he fails to notify the seller within a
AND the buyer wrongfully refuses reasonable time of his election to
to accept them even before the rescind
ownership of the goods has 3. if he fails to return or offer to return
passed, if Article 1596 is the goods in substantially as good
inapplicable. condition as they were in at the time of
the transfer of ownership to him
VI. Action for damages
When may be exercised: EXTINGUISHMENT OF SALE
1. In case of wrongful neglect or 1. Same causes as in all other
refusal by the buyer to accept or obligations
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2. Conventional Redemption * When can there be presumption as to

3. Legal Redemption Equitable Mortgage?
1) Parties must have entered into a
CONVENTIONAL REDEMPTION contract denominated as a contract of
The right which the vendor reserves sale
to himself, to reacquire the property 2) The intention of the parties was to
sold provided he returns to the secure an existing debt by way of
vendee: mortgage
b. the price of the sale; NOTE: In the cases referred to in Arts.
c. expenses of the contract; 1602 and 1604, the apparent vendor may
d. any other legitimate payments ask for the reformation of the
made therefore and; instrument.
e. the necessary and useful Remedy of Reformation: To correct the
expenses made on the thing instrument so as to make it express the
sold; and true intent of the parties.
f. fulfills other stipulations which
may have been agreed upon. Redemption Period
a. if there is an agreement: period
agreed upon cannot exceed 10 years
A sale with conventional redemption is b. if no agreement as to the period: 4
deemed to be an equitable mortgage years from the date of the contract
in any of the following cases: c. the vendor who fails to repurchase
(IPERTOD) the property within the period
1. Unusually Inadequate purchase agreed upon may, however, exercise
price; the right to repurchase within 30
2. Possession by the vendor remains, as days FROM the time final judgment
lessee or otherwise; was rendered in a civil action on the
3. Extension of redemption period after basis that the contract was a true
expiration; sale with right of repurchase
4. Retention by the vendee of part of This refers to cases involving a
the purchase price; transaction where one of the
5. Vendor binds himself to pay the parties contests or denies that
Taxes of the thing sold; the true agreement is one of sale
6. Any Other case where the parties with right to repurchase; not to
really intended that the transaction cases where the transaction is
should secure the payment of a debt conclusively a pacto de retro
or the performance of any sale. Example: Where a buyer a
obligation; or retro honestly believed that he
7. When there is Doubt as to whether entered merely into an Equitable
contract is contract of sale with Mortgage, not a pacto de retro
right of repurchase or an equitable transaction, and because of such
mortgage. belief he had not redeemed
within the proper period.
Equitable Mortgage NOTE: Tender of payment is
One which lacks the proper sufficient to compel redemption, but
is not in itself a payment that
formalities, form of words, or other
relieves the vendor from his liability
requisites prescribed by law for a
to pay the redemption price (Paez
mortgage, but shows the intention of
vs. Magno.)
the parties to make the property
subject of the contract as security
for a debt and contains nothing LEGAL REDEMPTION
impossible or contrary to law The right to be subrogated, upon the
(Cachola vs. CA 208SCRA496) same terms and conditions
stipulated in the contract, in the
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place of one who acquires a thing by 5. Sale of adjacent small urban

(1) purchase or (2) dation in lands bought merely for
payment, or (3) by any other speculation (Article 1622)
transaction whereby ownership is B. Under special laws:
transferred by onerous title. 1. An equity of redemption in cases
May be effected against movables or of judicial foreclosures
immovables. 2. A right of redemption in cases of
It must be exercised within thirty extra-judicial foreclosures
3. Redemption of homesteads
(30) days from the notice in writing
4. Redemption in tax sales
by the vendor.\
5. Redemption by an agricultural
tenant of land sold by the
landowner
NOTE: Written notice under Article 1623
is mandatory for the right of redemption
to commence (PSC vs. Sps. Valencia 19
ASSIGNMENT OF CREDIT
August 2003.)
a contract by which the owner of a
BASIS OF LEGAL REDEMPTION: Not on credit transfers to another his rights
any proprietary right, which after the and actions against a third person in
sale of the property on execution, leaves consideration of a price certain in
the judgment debtor and vests in the money or its equivalent
purchaser, but on a bare statutory
privilege to be exercised only by the NOTE: Transfer of rights by assignment
persons named in the statute. takes place by the perfection of the
contract of assignment without the
Tender of payment is not necessary; necessity of delivering the document
evidencing the credit.
offer to redeem is enough.
this rule does not apply to
negotiable documents and
PRE-EMPTION REDEMPTION documents of title which are
1. arises before 1. arises after sale governed by special laws.
sale
2. no rescission 2. there can be
because no sale as rescission of the Effects of Assignment:
yet exists original sale 1. transfers the right to collect the full
3. the action is 3. action is directed value of the credit, even if he paid a
directed against against the buyer price less than such value
the prospective 2. transfers all the accessory rights
seller 3. debtor can set up against the
assignee all the defenses he could
Instances of legal redemption: have set up against the assignor
A. Under the Civil Code (legal
redemption): Effect of payment by the debtor after
1. Sale of a co-owner of his share assignment of credit
to a stranger (Article 1620) 1. Before Notice of the assignment
2. When a credit or other Payment to the original creditor
incorporeal right in litigation is
is valid and debtor shall be
sold (Article 1634)
released from his obligation
3. Sale of an heir of his hereditary
2. After Notice
rights to a stranger (Article
1088) Payment to the original creditor
4. Sale of adjacent rural lands not is not valid as against the
exceeding one hectare (Article assignee
1621) He can be made to pay again by
the assignee
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GENERAL RULE: Debtor has the right of

Warranties of the assignor of credit: legal redemption in sale of credit or
a. He warrants the existence of the incorporeal rights in litigation
credit EXCEPTIONS:
b. He warrants the legality of the a. Sale to a co-heir or co-owner
credit at the perfection of the b. Sale to a co-owner
contract c. Sale to the possessor of property
NOTE: There is no warranty as to the in question
solvency of the debtor unless it is
expressly stipulated OR unless the
insolvency was already existing and of BARTER
public knowledge at the time of the
assignment BARTER
contract whereby one of the parties
NOTE: The seller of an inheritance binds himself to give one thing in
warrants only the fact of his heirship but consideration of the other's promise
not the objects which make up his to give another thing (Article 1638)
inheritance.
NOTE: Barter is similar to a sale with
Liabilities of the assignor of credit for the only difference that instead of
violation of his warranties paying a price in money, another thing is
1. Assignor in good faith given in lieu of the purchase price
Liability is limited only to the
price received and to the PERFECTION and CONSUMMATION
expenses of the contract, and Perfected from the moment there is
any other legitimate payments a meeting of minds upon the things
by reason of the assignment promised by each party in
2. Assignor in bad faith consideration of the other
Liable not only for the payment
of the price and all the expenses Consummated from the time of
but also for damages mutual delivery by the contracting
parties of the things promised
Legal Redemption in Sale or Credit or
other incorporeal right in litigation NOTES:
Requisites: Where the giver of the thing
1. There must be a sale or assignment bartered is not the lawful owner
of credit thereof, the aggrieved party cannot
2. There must be a pending litigation at be compelled to deliver the thing
the time of the assignment which he has promised and is also
3. The debtor must pay the assignee: entitled to damages.
a. price paid by him
b. judicial cost incurred by him;
Where a party is evicted of the thing
AND exchanged, the injured party is given
c. interest on the price from the the option, either to recover the
date of payment property he has given in exchange
with damages or only claim an
4. The right must be exercised by the indemnity for damages.
debtor within 30 days from the date As to matters not provided for by the
the assignee demands (judicially or provisions on barter, the provisions
extra-judicially) payment from him on sales will apply suppletorily
SALE OF CREDIT OR OTHER BULK SALES LAW (Act No. 3952)

INCORPOREAL RIGHTS IN LITIGATION When Sale or Transfer in Bulk:
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Any sale, transfer, mortgage, or Effects of False Statements in the

assignment: Schedule of Creditors:
1. Of a stock of goods, wares, 1. Without knowledge of buyer
merchandise, provisions, or If the statement is fair upon its
materials otherwise than in the face and the buyer has no
ordinary course of trade and the knowledge of its incorrectness
regular prosecution of business; or and nothing to put him on
2. Of all or substantially all, of the inquiry about it, he will be
business or trade; or protected in its purchase
3. Of all or substantially all, of the The remedy of the creditor is not
fixtures and equipment used in the against the goods but to
business of the vendor, mortgagor, prosecute the seller criminally
transferor or assignor (section 2) 2. With knowledge or imputed
knowledge of buyer
When sale or transfer in bulk not The vendee accepts it at his
covered by Bulk Sales Law: peril
1. If the sale or transfer is in the The sale is valid only as between
ordinary course of trade and the the vendor and the vendee but
regular prosecution of business of void against the creditors
the vendor;
2. If it is made by one who produces 3. With names of certain creditors
and delivers a written waiver of the without notice are omitted from
provisions of the Bulk Sales Act from the list
his creditors The sale is void as to such
3. If it is made by an executor, creditors, whether the omission
administrator, receiver, assignee in was fraudulent or not,
insolvency, or public officer, acting 4. With respect to an innocent
under judicial process (Section 8); purchaser for a value from the
and original purchaser
4. If it refers to properties exempt An innocent purchaser for value
from attachment or execution (Rules from the original purchaser is
of Court, Rule 39, Section 12) protected
However if the circumstances
Protection Accorded to Creditors by
are such as to bind the
Bulk Sales Law:
subsequent purchaser with
1. It requires the vendor, mortgagor,
constructive notice that the sale
transferor or assignor to deliver to
to the vendor (original
the vendee, mortgagee, or to his or
purchaser) was fraudulent, the
its agent or representative a sworn
property will be liable in his
written statement of names and
hands to creditors of the original
addresses of all creditors to whom
vendor
said vendor, etc. may have been
Effect of violation of law on Transfer:
indebted together with the amount
1. As between the parties
due or to be due (Section 3)
The Bulk Sales Law does not in
2. It requires the vendor, mortgagor,
any way affect the validity of
transferor or assignor, at least 10
the transfer as between the
days before the sale, transfer,
intermediate parties thereto
mortgage, assignment to make a full
A sale not in compliance with the
detailed inventory showing the
quantity and the cost of price of Bulk Sales Law is valid against all
goods, and to notify every creditor persons other than the creditors.
of the price terms and conditions of 2. As against creditors
the sale, etc. (Section 5) A purchaser in violation of the
law acquires no right in the
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property purchased as against 2. Sales by a farmer or agriculturalist

the creditors of the seller selling the products of his farm
His status is that of a trustee or 3. Sales in restaurant operations by a
receiver for the benefit of the hotel owner or inn-keeper
creditors of the seller; as such, irrespective of the amount of
he is responsible for the capital; provided that the restaurant
disposition of the property is incidental to the hotel business;
and
Remedies Available to creditors: 4. Sales which are limited only to
The proper remedy is one against products manufactured, processed or
the goods to subject them to the assembled by a manufacturer
payment of the debt, such as through a single outlet, irrespective
execution, attachment, of capitalization
garnishment, or by a proceeding in
equity High-End or Luxury Goods
An ordinary action against the Goods which are not necessary for
purchaser to obtain money life maintenance and whose demand
judgement will not lie, unless the is generated in large part by the
purchaser has sold or otherwise higher income groups
disposed of, or dealt with the Shall include but not limited to:
property, so as to become personally jewelry, branded or designer
liable to creditors for value of it. clothing and footwear, wearing
Acts Punished by Bulk Sales Law: apparel, leisure and sporting goods,
1. Knowingly or wilfully making or electronics and other personal
delivering a statement required by effects
the Act which does not include the NOTE: A natural-born citizen of the
names of all the creditors of the Philippines who has lost his citizenship
vendor, etc. with the correct amount but who resides in the Philippines shall
due or to become due or which be granted the same rights as Filipino
contains any false or untrue citizens
statement; and
2. Transferring title to any stock of Foreign Equity Participation:
goods, wares, merchandise,
Foreign-owned partnerships,
provisions or materials sold in bulk
without consideration or for nominal associations and corporations formed
consideration (Section 7) and organized under the laws of the
Philippines may, upon registration
RETAIL TRADE LIBERALIZATION ACT with SEC and DTI, or in case of
(RA 8762) Foreign-owned single proprietorship
with the DTI, engage or invest in
Retail Trade retail trade business, subject to the
following categories:
Any act occupation or calling of 1. Category A:
habitually selling direct to the
Paid-up capital of the equivalent
general public merchandise,
commodities or goods for in Philippine Peso of: <
consumption, but the restrictions of $2,500,000 US Dollars
this law shall not apply to the Reserved exclusively for Filipino
following: citizens and corporations wholly
1. Sales by manufacturer, processor, owned by citizens
laborer, or worker, to the general 2. Category B:
public the products manufactured, Minimum paid-up capital of the
processed produced by him if his equivalent in Philippine Peso of
capital does not exceed P100,000; $2,500,000 US Dollars, but
<$7,500,000
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May be wholly owned by the allowable foreign participation as

foreigners except for the first herein provided
two years after the effectivity of
this Act wherein foreign NOTE: All retail Trade enterprises under
participation shall be limited to categories B and C in which foreign
not > 60% of total equity. ownership exceeds 80% of equity shall
3. Category C: offer a minimum of 30% of their equity
Paid-up capital of the equivalent to the public through any stock
exchange in the Philippines within 8
in Philippine Peso of:
years from the start of the operations
$7,500,000 US Dollars or more
May be wholly owned by Qualification of Foreign Retailers
foreigners 1. Minimum of $200,000,000 US Dollars
NOTE: In no case shall the net worth in its parent corporation
investments for establishing a for Categories B and C and
store in Categories B and C be $50,000,000 net worth in its parent
less than the equivalent in corporation for Categories D
Philippine Peso of: US $830,000 2. 5 retailing branches or franchises in
4. Category D: operation anywhere around the
Enterprises specializing in high- world unless such retailer has at
end or luxury products with paid- least 1 store capitalized at a
up capital of the equivalent in minimum of $25,000,000 US Dollars
Philippine Peso of: $250,000 US 3. 5-year track record in retailing; and
Dollars per store 4. Only nationals from, or juridical
May be wholly owned by entities formed or incorporated in
foreigners Countries which allow to engage in
retail trade in the Philippines
NOTES:
Foreign investor shall be required to PD 957 (SUBDIVISION AND
maintain in the Philippines the FULL CONDOMINIUM BUYERS PROTECTIVE
amount of the prescribed minimum DECREE
capital, UNLESS the foreign investor
has notified the SEC and the DTI of Registration of Projects
its intention to repatriate its capital The registered owner of a parcel of
and cease operations in the
land who wishes to convert the same
Philippines
into a subdivision project shall
Failure to maintain the full amount submit his subdivision plan to the
of the prescribed minimum capital HOUSING AND LAND-USE
prior to notification of the SEC and REGULATORY BOARD, which shall act
the DTI shall subject the foreign upon and approve the same, upon a
investors to penalties or restrictions finding that the plan complies with
on any future trading the Subdivision Standards' and
activities/business in the Philippines Regulations enforceable at the time
the plan is submitted. The same
NOTE: Foreign Investors Acquiring procedure shall be followed in the
Shares of Stock of existing retail stores case of a plan for a condominium
whether or not publicly listed whose net project except that, in addition, said
worth is in excess of the Peso equivalent Authority shall act upon and approve
of US $2,500,000 may purchase only up the plan with respect to the building
to the maximum of 60% of the equity or buildings included in the
thereof within the first 2 years, and condominium project in accordance
thereafter, they may acquire the with the National Building Code
remaining percentage consistent with (R.A. No. 6541).
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
143
The subdivision plan, as so approved, Grounds for Revocation of registration

shall then be submitted to the certificate and license to sell of owners
Director of Lands for approval in or dealers
accordance with the procedure 1. Is insolvent; or
prescribed in Section 44 of the Land 2. Has violated any of the provisions of
Registration Act (Act No. 496, as this Decree or any applicable rule or
amended by R.A. No. 440): Provided, regulation of the Authority, or any
that it case of complex subdivision undertaking of his/its performance
plans, court approval shall no longer bond; or
be required. The condominium plan 3. Has been or is engaged or is about to
as likewise so approved, shall be engage in fraudulent transactions; or
submitted to the Register of Deeds 4. Has made any misrepresentation in
of the province or city in which the any prospectus, brochure, circular or
property lies and the same shall be other literature about the
acted upon subject to the conditions subdivision project or condominium
and in accordance with the project that has been distributed to
procedure prescribed in Section 4 of prospective buyers; or
the Condominium Act (R.A. No. 5. Is of bad business repute; or
4726). 6. Does not conduct his business in
accordance with law or sound
National Housing authority (now business principles.
Housing and Land Use Regulatory
Board) has the exclusive jurisdiction
to regulate the real estate trade and
LEASE
business.
LEASE
License to sell consensual, bilateral, onerous, and
Such owner or dealer to whom has commutative contract by virtue of
been issued a registration certificate which one person binds himself to
shall not, however, be authorized to grant temporarily the use of the
sell any subdivision lot or thing or to render some service to
condominium unit in the registered another who undertakes to pay some
project unless he shall have first rent.
obtained a license to sell the project Kinds of Leases (From the view point
within two weeks from the of the subject matter
registration of such project. 1. Lease of things
2. Lease of service
Exempt transactions 3. Lease of work
A license to sell and performance
bond shall not be required in any of NOTE: Since lease is consensual and is
the following transactions: not imposed by law, only the lessor has
1. Sale of a subdivision lot resulting the right to fix the rents. However, the
from the partition of land among co- increasing of the rent is not an absolute
owners and co-heirs. right on the part of the lessor.
2. Sale or transfer of a subdivision lot
by the original purchaser thereof and Characteristics or Requisites for Lease
any subsequent sale of the same lot. of Things
3. Sale of a subdivision lot or a 1. Consensual
condominium unit by or for the 2. Principal
account of a mortgagee in the 3. Nominate
ordinary course of business when 4. Purpose is to allow enjoyment or
necessary to liquidate a bona fide use of a thing (the person to
debt. enjoy is the lessee; the person
allowing the enjoyment by
another is the lessor
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
144
5. Subject matter must be within 1. only use or 1. ownership is

the commerce of man enjoyment is transferred
6. Purpose to which the thing will transferred
be devoted should not be 2. transfer is 2. transfer is
immoral temporary permanent
7. Onerous (there must rent or 3. lessor need not 3. seller must be
be the owner the owner at the
price certain) time the property
8. Period is Temporary (not is delivered
perpetual, hence, the longest 4. the price of the 4. usually, the
period is 99 years) object, selling price is
9. Period is either definite or distinguished from mentioned
indefinite the rent, is usually
If no term is fixed, we not mentioned
should apply Art.1682 (for rural
leases) and Art. 1687 (for urban Lease of Lease of Services
leases) Things
If the term is fixed but 1. object of 1. object is some
contract is a work or service
indefinite, the court will fix the thing
term under the law of 2. lessor has to 2. lessor has to
obligations and contracts deliver the thing perform some work
10. Lessor need not be the owner leased or service
3. in case of 3. in case of
NOTE: A usufructuary may thus breach, there breach, no action
lease the premises in favor of a can be an action for specific
stranger, such lease to end at the for specific performance
time that the usufruct itself ends performance
Rent Lease of Contract for a

The compensation either in Services Piece of Work
(locatio (locatio operas)
money, provisions, chattels, or
operatum)
labor, received by the lessor 1. the important
from the lessee. 1. the
important object object is the work
is the labor done
NOTES: performed by the
lessor
When a student boards and lodges in 2. the result is 2. the result is
a dormitory, there is no contract of generally not generally
lease. The contract is not important, important;
designated specifically in the Civil hence the generally, the price
Code. It is an innominate contract. laborer is is not payable until
It is however, believed that the entitled to be the work is
contract can be denominated as the paid even if completed, and said
there is price cannot be
contract of board and lodging.
destruction of lawfully demanded
There is a contract of lease when the work through if the work is
the use and enjoyment of a safety fortuitous event destroyed before it
deposit box in a bank is given for a is finished and
price certain. This is certainly not a accepted
contract of deposit.
A lease of personal property with
option to buy (at a nominal amount)
Lease of Agency
at the end of the lease can be Services
considered a sale.
LEASE SALES
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
145
It is based on It is based on Persons referred to in Art. 1491 are

employment representation disqualified because of fiduciary
the lessor of agent represents his relationships
services does principal and enters
not represent his into juridical acts.
SUBLEASE
employer nor
does he execute A separate and distinct contract of
juridical acts. lease wherein the original lessee
Principal Preparatory becomes a sublessor to a sublessee.
contract contract Allowed unless expressly prohibited.
The sublessee is subsidiarily liable
Rule for Lease of Consumable Goods for any rent due. The lessor has an
GENERAL RULE: Consumable goods accion directa against the sublessee
cannot be the subject matter of a for unpaid rentals and improper use
contract of lease of things. of the object.
Why? To use or enjoy hem, they will have
to be consumed. This cannot be done by
a lease since ownership over them is not SUBLEASE ASSIGNMENT OF
transferred to him by the contract of LEASE
1. there are two 1. there is only one
lease.
leases and two juridical
EXCEPTIONS: distinct juridical relationship, that of
a. If they are merely exhibited relationships the lessor and the
b. If they are accessory to an although assignee, who is
industrial establishment immediately converted into a
connected and lessee
RECORDING OF LEASE OF PERSONAL related to each
PROPERTY other
GENERAL RULE: Lease of real property 2. the 2. the personality of
personality of the lessee
is personal right the lessee does disappears
EXCEPTIONS: Lease partakes of the not disappear
nature of real right if: 3.the lessee does 3. the lessee
a. Lease of real property is more not transmit transmits absolutely
than 1 year absolutely his his rights to the
b. Lease of real property is rights and assignee
registered regardless of duration obligations to the
sublessee
NOTE: Lease of personal property 4. the sublessee, 4. the assignee has
generally, does a direct action
cannot be registered. To be binding
not have any against the lessor
against third persons, the parties must direct action
execute a public instrument. against the lessor
* Lease may be made orally, but if the

RIGHTS OF LESSOR IF SUBLEASE
lease of Real Property is for more
PROHIBITED BUT ENTERED INTO BY
than 1 year, it must be in writing
LESSEE:
under the Statue of Frauds.
1) Rescission and damages, or
2) Damages only (Contract will be
Persons Disqualified to be Lessees
allowed to remain in force)
Because Disqualified to Buy
3) Ejectment
1. A husband and a wife cannot lease to
each other their separate properties Instances when sublessee is liable to
except: the lessor:
a. if separation of property was a. All acts which refer to the use
agreed upon and preservation of the thing
b. if there has been judicial leased in the manner stipulated
separation of property
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
146
between the lessor and the

lessee NOTE: Suspend- for the intervening
b. The sublessee is subsidiarily period, the lessee does not have to pay
liable to the lessor for any rent the rent.
due from the lessee.
NOTE: The sublessee shall not be EFFECTIVITY OF THE SUSPENSION:
responsible beyond the amount of rent The right begins:
due from him. a) In the case of repairs, from the time
he made the demand for said repairs,
Accion Directa: direct action which the and the demand went unheeded.
lessor may bring against a sublessee who b) In the case of eviction, from the time
misuses the subleased property. the final judgment for eviction becomes
effective.
OBLIGATIONS OF THE LESSOR (DnM)
a. Delivery of the object (cannot Alternative remedies of Aggrieved
be waived) party (Lessor/Lessee) in case of Non-
b. Making of necessary repairs fulfillment of duties:
c. Maintenance in peaceful and 1. Rescission and damages
adequate possession 2. Damages only, allowing the contract
to remain in force Specific
OBLIGATIONS OF THE LESSEE (R2EN2U) Performance
a. to pay rent NOTE: Damages Recoverable in
b. to use thing leased as a diligent ejectment cases are the rents or the fair
father of a family, devoting it to rental value of the premises. The
the use stipulated following cannot be successfully
c. to pay expenses for the deed of claimed:
lease 1. Profits plaintiff could have
d. to notify the lessor of usurpation earned were it not for the
or untoward acts possible entry or unlawful
e. to notify the lessor of need for detainer
repairs 2. Material injury to the premises
f. to return the property leased 3. Actual, moral, or exemplary
upon termination of the lease damages
Effect of Destruction of the Thing Immediate termination of lease under

Leased: Art. 1660 applies:
1. Total destruction by a fortuitous
1. only to dwelling place or any other
event
building intended for human
Lease is extinguished habitation
2. even if at the time the contract was
perfected, the lessee knew of the
dangerous condition or waived the
right to rescind on account of this
2. Partial destruction condition
a. Proportional reduction of the Rules on Alteration of the Form of the
rent, or Lease
b. Rescission of the lease The Lessor can alter provided there
When lessee may suspend payment of is no impairment of the use to which
rent: the thing is devoted under the terms
1. lessor fails to undertake necessary of the lease
repairs Alteration can also be made by the
2. lessor fails to maintain the lessee in Lessee so long as the value of the
peaceful and adequate enjoyment of property is not substantially
the property leased impaired
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
147
Lease will be for the said period

Rules in case of Urgent Repairs and it ends on the day fixed
The lessee is obliged to tolerate the without need of a demand
work although it may be very
annoying to him and although during 2. If there is no fixed period
the same time he may be deprived A. For Rural Lands (Article 1680)
of a part of the premises it shall be for all time necessary
1. If repairs last for more than 40 days: for the gathering of fruits which
Lessee cannot act for reduction of the whole estate may yield in 1
rent or rescission year, or which it may yield once
2. If 40 days or more: lessee can ask B. For Urban Lands (Article 1687)
for proportionate reduction a. If rent is paid daily: lease is
NOTE: In either case, rescission may be from day to day
availed of if the main purpose is to b. If rent is paid weekly: lease is
provide a dwelling place and the from week to week
property becomes uninhabitable. c. If rent is paid monthly: lease is
from month to month
Effects if Lessor fails to make Urgent d. If rent is paid yearly: lease is
Repairs from year to year
1. Lessee may order repairs at the
lessors cost RULES ON EXTENSION OF THE LEASE
2. Lessee may sue for damages PERIOD:
3. Lessee may suspend the payment of 1) If a lease contract for a definite term
the rent allows lessee to extend the term, there
4. Lessee may ask for rescission, in is no necessity for lessee to notify lessor
case of substantial damage to him of his desire to so extend the term,
unless the contrary is stipulated.
TRESPASS IN LEASE: 2) May be extended as stipulation:
1. Trespass in fact (perturbacion de lessee can extend without lessors
mere hecho): consent but lessee must notify lessor.
physical enjoyment is reduced 3) May be extended for 6 years agreed
Lessor will not be held liable. upon by both parties as stipulation: This
2. Trespass in law (perturbacion de must be interpreted in favor of the
derecho): lessee. Hence, ordinarily the lessee at
A third person claims legal right the end of the original period may
either:
to enjoy the premises
a) leave the premises; or
Lessor will be held liable b) remain in possession
4) In co-ownership, assent of all is
NOTE: While the Japanese Occupation needed; otherwise, it is void or
was a fortuitous event, the lessor is still ineffective as against non-consenting co-
not excused from his obligation to owners.
warrant peaceful legal possession. Lease 5) Where according to the terms of the
is a contract that calls for prestations contract, the lease can be extended only
both reciprocal and repetitive; and the by the written consent of the parties
obligations of either party are not thereto, no right of extension can rise
discharged at any given moment, but without such written consent.
must be fulfilled all throughout the term
of the contract. (Villaruel vs. Manila Rule if Lessor Objects to the Lessees
Motor Co.) continued Possession:
Requisites:
Duration of Lease
1. Contract has expired
1. Lease made for a determinate
2. Lessee continued enjoying the thing
time or fixed Period
3. Lessor Objected to this enjoyment
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
148
If the three requisites are present,

the lessee shall be considered a Perpetual Lease
possessor in bad faith A lease contract providing that the
lessee can stay in the premises for as
IMPLIED NEW LEASE (Tacita long as he wants and for as long as
Reconducion) he can pay the rentals and its
lease which arises if at the end of increases.
the contract the lessee should This is not permissible; it is a purely
continue enjoying the thing leased potestative condition because it
for 15 days with the acquiescence of leaves the effectivity and enjoyment
the lessor, unless a notice to the of leasehold rights to the sole and
contrary had previously been given exclusive will of the lessee
by either party.
NOTE: In Jespajo Realty vs. CA, 27
Requisites: Sept. 2002, the SC upheld a lease
a. the term of the original contract contract, which provides that the lease
has expired contract shall continue for an indefinite
b. the lessor has not given the period provided that the lessee is up-to-
lessee a notice to vacate date in the payment of his monthly
c. the lessee continued enjoying rentals for the contract is one with a
the thing leased for at least 15 period subject to a resolutory condition.
days with the acquiescence of
the lessor PURCHASE OF THE LEASED PROPERTY
GENERAL RULE: Purchaser of thing
When there is no implied new leased can terminate lease.
EXCEPTIONS:
lease:
1. When before or after the a. lease is recorded in Registry of
expiration of the term, there is a Property
notice to vacate given by either b. there is stipulation in the
party. contract of sale that purchaser
2. When there is no definite fixed shall respect the lease
period in the original lease contract c. purchaser knows the existence of
as in the case of successive the lease
renewals. d. sale is fictitious
e. sale is made with right of
repurchase
Effects:
a. The period of the new lease is GROUNDS FOR EJECTMENT UNDER ART.
not that stated in the original 1673: (ELVU)
contract but the time in Articles 1. Expiration of the period agreed upon
1682 and 1687. or the period under Arts. 1682 and
b. Other terms of the original 1687;
contract are revived. 2. Lack of payment of the price
stipulated;
NOTE: Terms that are revived are only 3. Violation of any of the conditions
those which are germane to the agreed upon in the contract; and
enjoyment of possession, but not those 4. Unauthorized use or service by the
with respect to special agreements lessee of the thing leased.
which are by nature foreign to the right
of occupancy or enjoyment inherent in a
contract of lease such as an option to RENTAL REFORM ACT OF 2002
purchase the leased premises (Dizon vs. (R.A. No. 9161)
Magsaysay GR No. 23399, May 31,1974)
Effectivity: January 1, 2002.
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
149
Coverage: Except when the lease is for a

a. All residential units of NCR and other definite period, the provisions of Art.
highly urbanized cities, the total 1673(1) of the Civil Code (CC),
monthly rental for each of which insofar as they refer to residential
does not exceed P7,500; units, shall be suspended during the
b. All residential units in other areas effectivity of R.A. 9161, but other
the total monthly rental for each of provisions of the CC and the Rules of
which does not exceed P4,000 as of Court on lease contracts insofar as
1/1/02, without prejudice to pre- they are not in conflict with the
existing contracts. provisions of R.A. No. 9161 shall
apply.
Grounds for judicial ejectment: No increase in monthly rental by
SANORE more than 10% is allowed.
1. Assignment of lease or subleasing of
residential units including the TERMINATION OF THE LEASE
acceptance of boarders or If made for a determinate time, it
bedspacers without written consent ceases upon the day fixed without
of the owner or lessor; the need of a demand.
2. Arrears in payment of rent for a 1) By the expiration of the period
total of 3 months; 2) By the total loss of the thing
3. Legitimate needs of the owner or 3) By the resolution of the right of the
lessor to repossess for his own use or lessor
for the use of any immediate 4) By the will of the purchaser or
member of his family as a residential transferee of the thing
unit, provided: 5) By rescission due to non-performance
a. owner or immediate member not of the obligation of one of the parties
being owner of any other available
residential unit within the same city Special Provisions for Rural Lands
or municipality; Effect of loss due to fortuitous
b. lease for a definite period has
event:
expired;
1. Ordinary fortuitous event no
c. lessor has given lessee formal
reduction
notice 3 months in advance; and
2. Extraordinary fortuitous event
d. owner or lessor is prohibited
a. if more than of the fruits were
from leasing the residential unit or
lost, there shall be a reduction,
allowing its use by a third person for
unless there is a stipulation to
at least 1 year.
the contrary
4. Absolute ownership by the lessee of b. if or less, there shall be no
another dwelling unit in the same reduction
city or municipality which may be
lawfully used as his residence
Lease duration: If not fixed, it shall
provided lessee is with formal notice be for all time necessary for the
3 months in advance; gathering of fruits which the whole
estate may yield in 1 year, or which
5. Need of the lessor to make necessary it may yield once.
repairs in the leased premises which
is the subject of an existing order of
Special Provisions for Urban Lands
condemnation by appropriate
authorities concerned in order to Repairs for which urban lessor is
make said premises safe and liable:
habitable; and 1. special stipulation
2. if none, custom of the place
6. Expiration of period of the lease
3. in case of doubt, the repairs are
contract.
chargeable against him
NOTE:
CIVIL LAW COMMITTEE
Rhodora
John Stephen
Purganan(LTD),
150
Lease duration:
1. If there is a fixed period, lease will be
for said period.
2. If no fixed period, apply the following
rules:
a. If rent is paid daily: day to day
b. If rent is paid weekly: week to
week
c. If rent is paid monthly: month to
month
d. If rent is paid yearly: year to
year
CIVIL LAW COMMITTEE

Rhodora
John Stephen
Purganan(LTD),

Sales: San Beda College of Law

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MEMORY AID IN CIVIL LAW

MEMORY AID IN CIVIL LAW

the price is a positive suspensive 1. Constructive 1. Third person

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

NOTE: In case of doubt the presumption

MEMORY AID IN CIVIL LAW

the part of the seller the debtor is the

SCHOOLS OF THOUGHT: 5. Buyer still has to 5. The payment is

NOTE: If the consideration is partly in Certainty

MEMORY AID IN CIVIL LAW

4. In the cases provided under Art. GENERAL RULE: Mere inadequacy of

Effect when the price is fixed by the

Effect of Gross Inadequacy of Price: Effect of Failure to determine price:

MEMORY AID IN CIVIL LAW

NOTE: Sale is a consensual contract; Nonpayment only creates a right

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

does not bind the promissor even if supported by a consideration, the

MEMORY AID IN CIVIL LAW

the subject property. It was a c. The thing sold is lost after

RULES ON RISK OF LOSS AND EFFECT OF LOSS AT THE TIME OF SALE:

MEMORY AID IN CIVIL LAW

remaining part, paying its 1. Sale of personal property at a

MEMORY AID IN CIVIL LAW

2. agents, with respect to the Furthermore, the said sale was

MEMORY AID IN CIVIL LAW

The act without the intention is

MEMORY AID IN CIVIL LAW

MEMORY AID IN CIVIL LAW

A document of title in which it is NOTE; Mere transferee does not acquire

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

a. C.I.F. (cost, insurance, freight) c. If the vendee would not have

MEMORY AID IN CIVIL LAW

Purchaser in Good Faith one who b. proceed with the contract ,

MEMORY AID IN CIVIL LAW

he promises or undertakes to insure be disturbed in his legal and

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

law which requires that a person go to Warranty in which the seller

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

MEMORY AID IN CIVIL LAW

purchase if the disease which caused the Pertinent Rules:

MEMORY AID IN CIVIL LAW

there is no acceptance yet by 1. if the vendor gives security for the

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

was received has been broken by payments of price or rents must

MEMORY AID IN CIVIL LAW

year of installment payments

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

demand for rescission of a. actually take possession of

CIVIL LAW COMMITTEE

MEMORY AID IN CIVIL LAW

MEMORY AID IN CIVIL LAW

2. Conventional Redemption * When can there be presumption as to

MEMORY AID IN CIVIL LAW

place of one who acquires a thing by 5. Sale of adjacent small urban