SALES | Prof.
Jardeleza 1
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Chapter I: INTRODUCTION
DEFINITION OF SALE
Art. 1458: By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and
the other to pay therefor a price certain in money or
its equivalent.
A contract of sale may be absolute or conditional.
NOTES:
- Contract of Sale  a contract where one of the
parties obligates himself to transfer the ownership
of, and to deliver a determinate thing, and the other
to pay therefor a price certain in money or its
equivalent.
- Essence: Transfer of ownership
NATURE OF THE OBLIGATIONS
- Real obligations  aka obligations “to give”
o Can be the proper subject of actions for
specific performance
- Two sets of obligations:
o Seller has two obligations, to:
 Transfer the ownership, and
 Deliver the possession, of the
subject matter
 *Note, however, that warranty is
an added obligation of the seller
o Buyer has an obligation to:
 Pay the price
ESSENTIAL REQUISITES OF A CONTRACT OF SALE
1. Consent: meeting of the minds to transfer
ownership in exchange for the price; must be
manifested and given instantaneously (cannot be a
secret or simply told to a 3rd party)
2. Subject Matter: determinate or determinable
3. Price: must be paid in money or its equivalent
NOTES:
- When all three elements are present, there being a
meeting of the minds, then a perfected contract of
sale arises
- When an essential element is lacking = no
perfected contract of sale
- When all three elements are present, but there is
defect or illegality constituting any of such
elements, the resulting contract is either voidable
when the defect constitutes a vitiation of consent,
or void as mandated under Art. 1409
Dizon v. CA (1999)
F: Respondent Overland Express Lines, Inc. entered into a
contract of lease with option to buy with petitioners, who
are co-owners of a parcel of land. During the one-year term
of the lease, respondent failed to exercise the option to buy,
but paid the stipulated amount to Alice Dizon (one of the co-
owners) a month after the term of the contract, still hoping
to buy the land from the petitioners.
H: There was no perfected contract of sale. The consent of
all the co-owners was lacking, as it was only Alice Dizon
who consented to the transaction. Respondent should have
exerted efforts in order to ascertain the extent of Alice
Dizon’s authority, since there was no proof that all the co-
owners consented to the act of Alice Dizon nor authorized
her to act on their behalf.
STAGES OF CONTRACT OF SALE
1. Negotiation
- The period from the time the prospective
contracting parties indicate their interests in
the contract to the time the contract is
perfected
- Offer and acceptance
- Preparatory stage
2. Perfection
- Takes place upon the concurrence of the
essential elements of the sale which are the
meeting of the minds of the parties as to the
object of the contract and upon the price
- Agreement or meeting of offer and acceptance
3. Consummation
- Begins when the parties perform their
respective undertaking under the contract of
sale, culminating in the extinguishment thereof
- Actual or constructive delivery, and payment
of price
CHARACTERISTICS OF CONTRACT OF SALE
1. Nominate and Principal
- NOMINATE  it has been given a particular
name by law
o Its nature and consequences are governed
by a set of rules in the Civil Code
- PRINCIPAL  it can stand on its own, and does
not depend on another contract for its validity
or excistence (vs. accessory or preparatory
contracts)
o Parties enter into a contract of sale to
achieve within its essence the objectives
of the transaction, and simply not in
preparation for another contract
2. Consensual

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Art. 1475: The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
NOTES:
- CONSENSUAL  It is perfected by mere consent, at
the moment there is a meeting of the minds upon
the thing which is the object of the contract and
upon the price (vs. solemn and real contracts);
agreement of the parties to buy and to sell
o Once there is a meeting of the minds as to
the price, the sale is valid, despite the
manner of its actual payment, or even
when there has been breach thereof
o If the real price is not stated in the
contract, then the sale is valid but subject
to reformation; if there is no meeting of
the minds as to the price, because the
price stipulated is simulated, then the
contract is void
o The actual delivery of the subject matter
or payment of the price agreed upon are
not necessary components to establish the
existence of a valid sale, and their non-
performance do not also invalidate or
render “void” a sale that has began to exist
as a valid contract at perfection
o Non-performance merely becomes the
legal basis for the remedies of either
specific performance or rescission, with
damages in either case
o Binding effect of a deed of sale: principle
that the obligations arising therefrom
have the force of law between the parties
and they are expected to abide in good
faith by their respective contractual
commitments
3. Bilateral and Reciprocal
Art. 1169: Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of
their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so
declare; or
(2) When from the nature and the circumstances of
the obligation it appears that the designation of the
time when the thing is to be delivered or the service is
to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the
obligor has rendered it beyond his power to perform.
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In reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his
obligation, delay by the other begins.
Art. 1191: The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment
of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the
Mortgage Law.
NOTES:
- BILATERAL AND RECIPROCAL  imposes
obligations on both parties (vs. unilateral
contracts)
o Whereby the obligation or promise of
each party is the cause or consideration
for the obligation or promise of the other
- Reciprocal obligations = those which arise from the
same cause, and in which each party is a debtor
and a creditor of the other, such that the obligation
of one is dependent upon the obligation of the
other
o To be performed simultaneously such that
the performance of one is conditioned
upon the simultaneous fulfillment of the
other
- Legal effects and consequences of sale being a
bilateral contract composed of reciprocal
obligations:
1. The power to rescind is implied,
and such power need not be
stipulated in the contract in order
for the innocent party to invoke
the remedy;
2. Neither party incurs in delay if
the other party does not comply,
or is not ready to comply in a
proper manner, with what is
incumbent upon him; and
3. From the moment one of the
parties fulfills his obligation, the
default by the other begins,
without the need of prior
demand

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- General requisite: that it be mutually obligatory,
i.e., there should be a concurrence of the promise of
the vendor to sell a determinate thing and the
promise of the vendee to receive and pay for the
property so delivered and transferred
4. Onerous
- Imposes a valuable consideration as a
prestation, which ideally is a price certain in
money or its equivalent (vs. gratuitous
contracts)
5. Commutative
Art. 1355: Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence.
Art. 1470: Gross inadequacy of price does not affect a
contract of sale, except as it may indicate a defect in
the consent, or that the parties really intended a
donation or some other act or contract.
NOTES:
- Reason: a thing of value is exchanged for equal
value, i.e., ideally the value of the subject matter is
equivalent to the price paid
- No requirement that the price be equal to the exact
value of the subject matter; it is sufficient that the
seller believes that what was received was of the
commutative value of what he gave
- Inadequacy of price  Does not affect ordinary
sale
o Not a sufficient ground for the
cancellation of a voluntary contract of sale
otherwise free from invalidating effects
o May show vice in consent – can be
grounds for annulment, but such
annulment is not for inadequacy of price,
but for vitiation in consent
SALE IS TITLE AND NOT MODE
- TITLE  constitutes the legal basis by which to
affect dominion or ownership
- MODE  the legal means by which dominion or
ownership is created, transferred, or destroyed
- It is delivery or tradition that is the mode to transfer
ownership and possession to the buyer
- Sale is merely title that creates the obligation on the
part of the seller to transfer ownership and deliver
possession, but on its own, sale is not a mode that
transfers ownership
- Even if a sale is perfected by mere consent,
ownership of the thing sold is acquired only upon
its delivery to the buyer
SALE DISTINGUISHED FROM OTHER CONTRACTS
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1. Donation
Art. 725: Donation is an act of liberality whereby a
person disposes gratuitously of a thing or right in
favor of another, who accepts it.
Art. 1471: If the price is simulated, the sale is void,
but the act may be shown to have been in reality a
donation, or some other act or contract.
SALE DONATION
Onerous contract Gratuitous contract
Perfected by mere consent Requires consent and must
comply with the formalities
mandated by law for its
validity
The property sold is replaced Requires that there be a
by the equivalent monetary diminution of the estate of
consideration; there is no one party (donor) and the
diminution of the seller’s enrichment of the other
estate party’s estate (donee)
NOTES:
- Even when the donor imposes upon the donee a
burden, but which is less than the value of the thing
given, there is still a donation
- When the value of the burden placed upon the
donee is more than the value of the thing given, it
becomes an “onerous” donation, as either a barter
or sale, which are both governed by the Law on
Sales; consequently, the perfection and
enforceability of the contract happen upon consent
2. Barter
Art. 1468: If the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characterized by the manifest
intention of the parties. If such intention does not
clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration
exceeds the amount of the money or its equivalent;
otherwise, it is a sale.
Art. 1638: By the contract of barter or exchange one
of the parties binds himself to give one thing in
consideration of the other's promise to give another
thing.
Art. 1641: As to all matters not specifically provided
for in this Title, barter shall be governed by the
provisions of the preceding Title relating to sales.
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SALE BARTER
Art. 1714: If the contractor agrees to produce the
One of the parties binds One of the parties binds work from material furnished by him, he shall deliver
himself to deliver a thing in himself to give one thing in the thing produced to the employer and transfer
consideration of the other’s consideration of the other’s dominion over the thing. This contract shall be
undertaking to pay the price promise to give another governed by the following articles as well as by the
in money or its equivalent thing pertinent provisions on warranty of title and against
hidden defects and the payment of price in a contract
of sale.
NOTES:
- Rules to determine whether contract is sale or Art. 1715: The contract shall execute the work in
barter: such a manner that it has the qualities agreed upon
1. Manifest intention of the parties: and has no defects which destroy or lessen its value
 Even if the acquisition of a thing is paid for or fitness for its ordinary or stipulated use. Should
by another object of greater value than the the work be not of such quality, the employer may
money component, it may still be a sale require that the contractor remove the defect or
and not a barter, when such was the execute another work. If the contract fails or refuses
intention of the parties to comply with this obligation, the employer may
2. When intention does not appear and have the defect removed or another work executed,
consideration consists partly in money and at the contractor's cost.
partly in another thing:
 BARTER  where the value of the thing
given as part of the consideration exceeds SALE CONTRACT FOR A PIECE
the amount of money given or its OF WORK
equivalent
 SALE  where the value of the thing given Essence = sale of an object Essence = sale of service
as part of the consideration equals or is
less than the amount of money given Essence is the object, Essence is the service,
irrespective of the party knowledge, or even
Fule v. CA (1998) giving or executing it reputation of the person
F: Fule owned a parcel of land, which he offered to be who executes or
exchanged for a pair of diamond earrings owned by Dr. manufactures the object
Cruz. After the barter was completed, Fule alleged that the
earrings were counterfeit and demanded that the contract Constitutes of real Subject matter is the service
between him and Dr. Cruz be rescinded. obligations; proper subject to be rendered (obligation to
H: A contract of sale is perfected by mere consent, upon the of an action for specific do); does not allow an action
meeting of the minds of the parties regarding the object of performance for specific performance in
the contract and its price—this was present in this case. The case the contractor refuses
ownership of the land and the earrings had been passed to to comply with his
Dr. Cruz and Fule, respectively, upon the constructive obligation; employer is given
delivery thereof. There was no evidence supporting the the remedy as stated in Art.
allegation of Fule that Dr. Cruz is guilty of fraud, hence the 1715
contract shall remain in force and Fule may not recover the
parcel of land from Dr. Cruz.
NOTES:
- CONTRACT FOR A PIECE OF WORK  the
3. Contract for Piece of Work contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price
Art. 1467: A contract for the delivery at a certain or compensation; the contractor may either
price of an article which the vendor in the ordinary employ only his labor or skill, or also furnish the
course of his business manufactures or procures for materials
the general market, whether the same is on hand at o Must look to the nature of the work = If
the time or not, is a contract of sale, but if the goods the company accepts a job that requires
are to be manufactured specially for the customer the use of extraordinary skills or
and upon his special order, and not for the general additional equipment, or involves services
market, it is a contract for a piece of work. not generally performed by it
o Massachusetts Rule  whether the thing
transferred is one not in existence and
Art. 1713: By the contract for a piece of work the which never would have existed but for
contractor binds himself to execute a piece of work the order of the party desiring to acquire
for the employer, in consideration of a certain price it, or a thing which would have existed
or compensation. The contractor may either employ and been the subject of sale to some other
only his labor or skill, or also furnish the material.
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person, even if the order had not been underlying fiduciary

given relationship
o Contractor  a person who, in pursuit of
the independent business, undertakes to The buyer himself pays for The agent is not obliged to
do a specific job or piece of work for other the price of the object, pay the price, and is merely
persons, using his own means and which constitutes his main obliged to deliver the price
methods, without submitting himself to obligation which he may receive from
control as to the petty details the buyer
- TWO TESTS FOR DISTINCTION:
o Manufacturing in the ordinary course of The buyer, after delivery, The agent does not become
business = contract of sale becomes the owner of the the owner of the thing
o Manufacturing upon special orders of subject matter subject of the agency, even if
customers and not for the general market the object is delivered to him
= contract for a piece of work
The seller warrants The agent who effects the
Celestino v. Collector (1956) sale assumes no personal
Oriental Sash Factory was considered a seller of sashes, liability as long as he acts
windows, and doors as it habitually makes them for sale to within his authority and in
the general public. The fact that windows and doors were the name of the principal;
manufactured only when customers placed their orders however, the agent can
does not alter the nature of the establishment. If it accepts a voluntarily bind himself to
job that requires the use of extraordinary or additional the warranties of the seller
equipment, or involves services not generally performed by
it, it thereby contracts for a piece of work, filling orders Because of the underlying
within the meaning of Art. 1467. fiduciary relationship
between the agent and the
Commissioner v. Engineering Equipment (1975) principal, the agent is
Engineering entered into a contract for a piece of work. The disqualified from receiving
aircon units installed in a central type of AC system would any personal profit from the
not have existed but for the order of the party desiring to transaction covered by the
acquire it; and if it existed without the special order of the agency, and any profit
company’s customer, these AC units were not intended for received should pertain to
sale to the general public. the principal

4. Agency to Buy or Sell

Art. 1466: In construing a contract containing
provisions characteristic of both the contract of sale
and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered.
Art. 1868: By the contract of agency a person binds
himself to render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
SALE AGENCY
Essence = transfer of title or Essence = delivery to the
agreement to transfer it for agent of the goods not as the
the price paid or promised agent’s property but of the
principal who remains the
owner and has the right to
control the sales by the
agent, fix the price and
terms, demand and receive
the proceeds of the sales less
the agent’s commission
Not unilaterally revocable Revocable even in the
presence of an irrevocability
clause, because it covers an
NOTES:
- CONTRACT OF AGENCY  a person binds himself
to render some service or to do something in
representation or on behalf of the principal, with
the consent or authority of the latter
Quiroga v. Parsons (1918)
F: Plaintiff Quiroga granted to defendant Parsons the right
to sell as an “agent” the “Quiroga beds” in Visayas. Parsons
was obliged under the contract to pay for the beds within a
specified period after delivery even when not yet sold, at a
discount of 25% as commission for the sales. Quiroga
sought the rescission of the agreement, claiming that
Parsons violated some of the conditions in their contract,
invoking the essential revocability of agency as his legal
basis to rescind the agreement.
H: Quiroga may not unilaterally rescind the contract,
because the contract that existed between himself and
Parsons was one of sale, and not of agency. The controlling
condition present in the contract that defined it to be a
contract of sale was that there was the obligation on the
part of the plaintiff to supply the beds, and, on the part of
the defendant, to pay the price therefor.
Puyat v. Arco (1941)
F: Arco Amusement company had engaged the services of
Gonzalo Puyat and Sons to purchase from the Starr Piano
Company based in the US specified sound reproducing

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equipment. When Arco found out that Puyat had quoted to
Arco not the net price but the list price, and that Puyat had
received a discount from Starr, it sought to recover the
same, arguing that being only its agent, any benefit or profit
received by Puyat from the transaction must inure to Arco,
as the principal.
H: Theirs was a contract of sale, and not of agency. Although
Puyat was entitled to receive commission, the same did not
necessarily make it an agent of Arco, as the provision is only
an additional price which Arco bound itself to pay. Such
stipulation was not incompatible with the contract of sale.
Not every concealment is fraud; the fact that Puyat tweaked
the prices of the equipment a bit is neither illegal nor
fraudulent, such increase only refers to the profit that Puyat
may recover from the business it is engaged in.
5. Dacion en Pago
Art. 1245: Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law of sales.
NOTES:
- DACION EN PAGO  one whereby property is
alienated to the creditor in full satisfaction of a
debt in money; presupposes a pre-existing debt
and extinguishes the debt
o Constitutes the delivery and transmission
of a thing by the debtor to the creditor as
an accepted equivalent of the performance
of the obligation
o A special mode of payment – whereby the
debtor offers another thing to the debtor
who accepts it as equivalent of payment of
an outstanding debt
Dao Heng Bank v. Sps. Laigo (2008)
F: Spouses Laigo obtained a loan from Dao Heng Bank and
as security, three real estate mortgages were executed.
When the Laigos failed to pay on time, they verbally agreed
to cede one of the mortgaged properties to Dao Heng Bank
by way of dacion en pago. Dao Heng later issued a letter
stating the outstanding obligation of the Laigos, and when
the Laigos took no action, their remaining mortgaged
properties were foreclosed.
H: There is no showing that the dacion en pago has been
accepted by both parties. Since there is no consent, there is
no dacion en pago. The titles to the properties were
delivered as a security for the loan, hence the foreclosure
was valid as it was the proper remedy in this case. The
power to decide whether or not to foreclose the mortgage is
the sole prerogative of the mortgagee (Dao Heng).
6. Lease
Art. 1484: In a contract of sale of personal property the
price of which is payable in installments, the vendor
may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the
vendee fail to pay;
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(2) Cancel the sale, should the vendee's failure to pay
cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendee's failure to
pay cover two or more installments. In this case, he
shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement
to the contrary shall be void.
Art. 1485: The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
NOTES:
- CONTRACT OF LEASE  the lessor binds himself to
give to another (the lessee) the enjoyment or use of
a thing for a price certain, and for a period which
may be definite or indefinite
o A conditional sale may be made in the
form of a “lease with an option to buy” as a
device to circumvent the provisions of the
Recto Law governing the sale of personal
property on installments
CONTRACT OF SALE/CONTRACT TO SELL
- CONTRACT TO SELL  a situation wherein the
seller promised to execute a deed of absolute sale
upon completing payment of the price
o Ownership is retained by the seller until
payment of the price in full
o Such payment is a positive suspensive
condition, failure of which is not a breach
but an event that prevents the obligation
of the vendor to convey title
o Seller has the right to extrajudicially
terminate the operation of the contract,
refuse conveyance and retain the sums or
installments already received, where such
rights are expressly provided for
Luzon Brokerage v. Maritime Building (1972)
F: Myers and Maritime entered into a contract of conditional
sale (contract to sell). Myers reserved the right to cancel the
contract in case of Maritime’s failure to pay installments.
Maritime failed to pay, hence, Myers cancelled the contract.
H: Contract to sell, not of sale. When payment was not made,
contract of sale was not perfected. The distinction between
contracts of sale and contract to sell with reserved title has
been recognized by this Court in repeated decisions
upholding the power of promisors under contracts to sell in
case of failure of the other party to complete payment, to
extrajudicially terminate the operation of the contract, refuse
conveyance and retain the sums or installments
already received, where such rights are expressly provided
for, as in this case.
Dignos v. CA (1988)
F: Dignos sold their land to Jabil payable in 2 installments,
with assumption of indebtedness. Jabil paid and it was

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acknowledged by the spouses in a deed. Later, Dignos
spouses also sold the same land to Cabigas, a deed of
absolute sale was executed.
H: The property belongs to Jabil since when Dignos sold the
land to Cabigas, they could not validly do so since they no
longer were the owners. Difference between contract to sell
and contract of sale: sell – reserves ownership subject to
fulfillment of condition, i.e. full payment, and ownership
does not pass to the buyer despite delivery of the thing until
said condition is fulfilled; sale – does not reserve ownership
over the thing sold and ownership is transferred
immediately upon actual or constructive delivery of the
thing.
Chapter II: PARTIES TO A CONTRACT OF SALE
CAPACITY OF PARTIES
Art. 1489: All persons who are authorized in this Code
to obligate themselves, may enter into a contract of
sale, saving the modifications contained in the
following articles.
Where necessaries are those sold and delivered to a
minor or other person without capacity to act, he must
pay a reasonable price therefor. Necessaries are those
referred to in article 290.
Art. 1490: The husband and the wife cannot sell
property to each other, except:
(1) When a separation of property was agreed upon in
the marriage settlements; or
(2) When there has been a judicial separation of
property under article 191.
Art. 1491: The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or
persons who may be under his guardianship;
(2) Agents, the property whose administration or sale
may have been intrusted to them, unless the consent
of the principal has been given;
(3) Executors and administrators, the property of the
estate under administration;
(4) Public officers and employees, the property of the
State or of any subdivision thereof, or of any
government-owned or controlled corporation, or
institution, the administration of which has been
intrusted to them; this provision shall apply to judges
and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of
justice, the property and rights in litigation or levied
SALES | Prof. Jardeleza 7
upon an execution before the court within whose
jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring
by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of
any litigation in which they may take part by virtue of
their profession;
(6) Any others specially disqualified by law.
Art. 1492: The prohibitions in the two preceding
articles are applicable to sales in legal redemption,
compromises and renunciations.
NOTES:
- GENERAL RULE = any person who has the
“capacity to act,” or the “power to do acts with legal
effects,” i.e., the power to obligate himself, may
enter into a contract of sale, whether as a seller or
as a buyer
- Natural persons = age of majority is 18 years, upon
which age they have the capacity to act
- Juridical persons = a juridical personality separate
and distinct from that of its members is expressly
recognized by law, with full “juridical capacity” to
obligate themselves and enter into valid contracts
ABSOLUTE INCAPACITY
Art. 1327: The following cannot give consent to a
contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who
do not know how to write.
Art. 1397: The action for the annulment of contracts
may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who are
capable cannot allege the incapacity of those with
whom they contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their action
upon these flaws of the contract.
Art. 1399: When the defect of the contract consists in
the incapacity of one of the parties, the incapacitated
person is not obliged to make any restitution except
insofar as he has been benefited by the thing or price
received by him.
NOTES:
- Minors, insane and demented persons, and deaf-
mutes who do not know how to write = have no
legal capacity to contract
o Contracts entered into by them are
voidable, subject to annulment or
ratification

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Necessaries
Art. 1489: All persons who are authorized in this Code
to obligate themselves, may enter into a contract of
sale, saving the modifications contained in the following
articles.
Where necessaries are those sold and delivered to a
minor or other person without capacity to act, he must
pay a reasonable price therefor. Necessaries are those
referred to in article 290.
Art. 290: Support is everything that is indispensable
for sustenance, dwelling, clothing and medical
attendance, according to the social position of the
family.
Support also includes the education of the person
entitled to be supported until he completes his
education or training for some profession, trade or
vocation, even beyond the age of majority.
NOTES:
- NECESSARIES  everything indispensable for
sustenance, dwelling, clothing, medical attendance,
education, and transportation, in keeping with the
financial capacity of the family… [and education]
include[s] his schooling or training for some
profession, trade, or vocation, even beyond the age
of majority. Transportation shall include expenses
in going to and from school, or to and from place of
work.”
- Two requisites for the sale of necessaries to minors
be valid:
o Perfection of the sale
o Delivery of the subject necessaries
RELATIVE INCAPACITY: Married Persons
1. Contracts with Third Parties
Art. 73: The original of the affidavit required in the last
preceding article, together with a copy of the marriage
contract, shall be sent by the person solemnizing the
marriage to the local civil registrar of the municipality
where it was performed within the period of thirty
days, after the performance of the marriage. The local
civil registrar shall, however, before filing the papers,
require the payment into the municipal treasury of the
legal fees required in article 65.
Art. 96: The existing laws which punish acts or
omissions concerning the marriage license,
solemnization of marriage, authority to solemnize
marriages, and other acts or omissions relative to the
SALES | Prof. Jardeleza 8
celebration of marriage shall remain and continue to be
in force.
NOTES:
- A spouse may, without the consent of the other
spouse, enter into sale transactions in the regular
or normal pursuit of his or her profession,
vocation, or trade
- The administration of the community property or
the conjugal property shall belong to both spouses
jointly; in case of disagreement, the husband’s
decision shall prevail, without prejudice to the
wife’s capacity to seek remedy from the courts
within a 5-year period
- The disposition or encumbrance of community
property or conjugal property shall be void without
authority of the court or the written consent of the
other spouse.
o In such a case, the transaction shall be
construed as a continuing offer on the part
of the consenting spouse and the third
person, and may be perfected as a binding
contract upon the acceptance by the other
spouse or authorization by the court
before the offer is withdrawn by either or
both offerors
2. Between Spouses
Art. 133: Every donation between the spouses during
the marriage shall be void. This prohibition does not
apply when the donation takes effect after the death of
the donor.
Neither does this prohibition apply to moderate gifts
which the spouses may give each other on the occasion
of any family rejoicing.
Art. 1490: The husband and the wife cannot sell
property to each other, except:
(1) When a separation of property was agreed upon in
the marriage settlements; or
(2) When there has been a judicial separation of
property under article 191.
Art. 1492: The prohibitions in the two preceding
articles are applicable to sales in legal redemption,
compromises and renunciations.
NOTES:
- RATIONALE FOR PROHIBITION:
o To prevent a spouse from defrauding his
creditors by transferring his properties to
the other spouse
o To avoid a situation where the dominant
spouse would unduly take advantage of

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the weaker spouse, thereby effectively
defrauding the latter
o To avoid an indirect violation of the
prohibition against donations between
spouses under Art. 133
- PERSONS WHO MAY QUESTION THE VALIDITY OF
THE SALE BETWEEN SPOUSES:
o Heirs of either spouse
o Prior creditors
o The State, when it comes to the payment
of proper taxes due on the transactions
Medina v. Collector (1961)
F: Deficiency sales taxes were sought to be collected against
the sales of lumber products by the wife to the public,
although when the husband previously sold the lumber
products to the wife (at a lower price), he had already paid
the sales taxes thereon. The spouses alleged that the sales
between them were valid since they were governed by the
complete separation of property regime pursuant to a pre-
nuptial agreement executed between them.
H: Aside from the fact that the records of the alleged pre-
nuptial agreement were non-existent, the Court determined
that at the time of their marriage, the spouses had no
properties to have warranted them to execute a pre-nuptial
agreement for complete separation of property. The sales
between them were void and non-existent in violation of
Art. 1490, and thus the sales by the wife to the public are
not exempt from the sales tax.
3. Applicability to Common-Law Spouses
Art. 133: Every donation between the spouses during
the marriage shall be void. This prohibition does not
apply when the donation takes effect after the death of
the donor.
Neither does this prohibition apply to moderate gifts
which the spouses may give each other on the
occasion of any family rejoicing.
NOTES:
- The Court has held that “so long as marriage
remains the cornerstone of our family law, reason
and morality alike demand that the disabilities
attached to marriage should likewise attach to
common law relationships
- Reason for application: common law spouses
cannot be in a better position than those who
legally contract marriage
Matabuena v. Cervantes (1971)
F: The sister of the deceased common-law husband sought
to annul the previous donation by the deceased during his
lifetime to his then common law spouse, although the two
subsequently married thereafter.
H: The donation was void as the prohibition applies to
common-law spouses as well.
Cruz v. CA (1997)
F: Cruz executed a deed of absolute sale over a parcel of
land to her common-law spouse, Suzara, without any
monetary consideration. Suzara registered the land under
SALES | Prof. Jardeleza 9
his name and used it as collateral for a bank loan. Cruz filed
a complaint, alleging that her sale in favor of Suzara was null
and void for lack of consideration and for being contrary to
law and public policy. Suzara had sold the land to a third
party.
H: Even if common law spouses are prohibited from selling
each other property, Cruz can no longer seek reconveyance
of the property to her because it has already been acquired
by a third party in good faith and for value from Suzara, who
was the holder of the title over the land.
SPECIAL DISQUALIFICATIONS
Art. 1491: The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
(1) The guardian, the property of the person or
persons who may be under his guardianship;
(2) Agents, the property whose administration or sale
may have been intrusted to them, unless the consent
of the principal has been given;
(3) Executors and administrators, the property of the
estate under administration;
(4) Public officers and employees, the property of the
State or of any subdivision thereof, or of any
government-owned or controlled corporation, or
institution, the administration of which has been
intrusted to them; this provision shall apply to judges
and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and
employees connected with the administration of
justice, the property and rights in litigation or levied
upon an execution before the court within whose
jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring
by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of
any litigation in which they may take part by virtue of
their profession;
(6) Any others specially disqualified by law.
Art. 1492: The prohibitions in the two preceding
articles are applicable to sales in legal redemption,
compromises and renunciations.
1. Guardians, Agents, and Administrators
- Contracts entered into by these people may be
“ratified” by a new contract (the private wrong
to the ward, principal, or estate can be
condoned and the State shall not stand in the
way); the contracts entered into by the others
(lawyers, judges, etc.) cannot be cured even by
subsequent contract (because what is involved
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is a public wrong, i.e., a damage to public
service, etc.)
- GUARDIANSHIP  a trust of the highest order
o The trustee cannot be allowed to have
any inducement to neglect his ward’s
interest
- AGENCY: exception  the contract of sale will
not be deemed void if the consent of the
principal has been given
o Broker not included in the prohibition
= he is a mere middleman between
the seller and the buyer and does not
act in behalf of either of them
Philippine Trust Co. v. Roldan (1956)
F: When his father died, Mariano inherited 17 parcels of
land from him. His stepmom Roldan, was appointed his
guardian through guardianship proceedings. Roldan sold
the land to her brother-in-law Ramos allegedly to invest the
money in a house in Manila. The next day, Ramos executed
in favor of Roldan a deed of conveyance covering the same
17 parcels.
H: Roldan purchased her ward’s property through her
brother-in-law. She planned to get them for herself, evident
from the amount of time that lapsed between the two sales.
Only ONE DAY had passed from the time the guardianship
court judicially confirmed the sale. From both legal and
equitable standpoints, the sales cannot be sustained. The
sales from Mariano, by Roldan, to Ramos, and then from
Ramos to Mariano, are void for violation of Art. 1459.
prestige necessary to carry out their functions by
freeing them from all suspicion which, although
unfounded, tends to discredit the institution by
putting into question the honor of these people
Macariola v. Asuncion (1982)
F: Judge Asuncion purchased a property from Dr. Galapon,
who acquired the said property from the parties in a
partition case previously handled by Judge Asuncion.
H: The prohibition in the NCC on acquisition of properties
by judges covers only acquisitions taking place during the
pendency of the litigation involving those properties. The
case handled by Judge Asuncion had long been final. He
didn’t buy the lot directly from the plaintiffs either.
However, his acts invited suspicion of impropriety &
distrust thus he was reminded to be discreet in his
private/business affairs.
Chapter III: SUBJECT MATTER
REQUISITES OF A VALID SUBJECT MATTER
Art. 1459: The thing must be licit and the vendor must
have a right to transfer the ownership thereof at the
time it is delivered.
Art. 1460: A thing is determinate when it is particularly
designated or physical segregated from all others of the
same class.

The requisite that a thing be determinate is satisfied if

2. Lawyers
at the time the contract is entered into, the thing is
capable of being made determinate without the
- Prohibition is intended to curtail any undue
necessity of a new or further agreement between the
influence of the lawyer on his client on account of
parties.
their confidential association
- Violation of the prohibition is tantamount to a
Art. 1461: Things having a potential existence may be
breach of professional ethics
the object of the contract of sale.
Rubias v. Batiller (1973)
The efficacy of the sale of a mere hope or expectancy is
F: Francisco Militante claimed ownership over land to which
deemed subject to the condition that the thing will
he filed an application for registration of title. The
come into existence.
application was opposed by the Director of Lands. Pending
litigation, Militante sold the land to Domingo Rubias, his
The sale of a vain hope or expectancy is void.
son-in-law and a lawyer by profession. Rubias declared the
land for taxation purposes under various tax declarations
Art. 1462: The goods which form the subject of a
and land taxes.
contract of sale may be either existing goods, owned or
H: Aside from acquiring nothing from Francisco Militante,
possessed by the seller, or goods to be manufactured,
his application for registration was denied by the land
raised, or acquired by the seller after the perfection of
registration court, as affirmed with finality by the CA.
the contract of sale, in this Title called "future goods."
Assuming in arguendo that Militante had anything to sell,
the deed of sale executed in 1956 by him in favor of plaintiff
There may be a contract of sale of goods, whose
at a time when plaintiff was concededly his counsel of
acquisition by the seller depends upon a contingency
record in the land registration case involving the very land
which may or may not happen.
in dispute was void. The purchase by a lawyer of the
property in litigation from his client is categorically
Art. 1463: The sole owner of a thing may sell an
prohibited by Article 1491, paragraph (5) of the Civil Code.
undivided interest therein.
3. Judges
Art. 1464: In the case of fungible goods, there may be a
sale of an undivided share of a specific mass, though the
- Prohibition is intended to (1) remove any occasion
seller purports to sell and the buyer to buy a definite
for fraud, and (2) to surround them with the

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number, weight or measure of the goods in the mass,
and though the number, weight or measure of the
goods in the mass, and though the number, weight or
measure of the goods in the mass is undetermined. By
such a sale the buyer becomes owner in common of
such a share of the mass as the number, weight or
measure bought bears to the number, weight or
measure of the mass. If the mass contains less than the
number, weight or measure bought, the buyer becomes
the owner of the whole mass and the seller is bound to
make good the deficiency from goods of the same kind
and quality, unless a contrary intent appears.
Art. 1465: Things subject to a resolutory condition may
be the object of the contract of sale.
NOTES:
- Requisites that ought to be present in the subject
matter at the time of perfection of the contract:
o It must be licit
o It must be determinate or at least
determinable
o It must be existing, having potential
existence, a future thing, or even
contingent or subject to a resolutory
condition, i.e., it must be a possible thing
1. Must be licit
Art. 1347: All things which are not outside the
commerce of men, including future things, may be the
object of a contract. All rights which are not
intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance
except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be
the object of a contract.
Art. 1459: The thing must be licit and the vendor must
have a right to transfer the ownership thereof at the time
it is delivered.
Art. 1575: The sale of animals suffering from contagious
diseases shall be void.
A contract of sale of animals shall also be void if the use
or service for which they are acquired has been stated in
the contract, and they are found to be unfit therefor.
Art. 1409: The following contracts are inexistent and
void from the beginning:
(1) Those whose cause, object or purpose is contrary to
law, morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
SALES | Prof. Jardeleza 11
(3) Those whose cause or object did not exist at the time
of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to
the principal object of the contract cannot be
ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right
to set up the defense of illegality be waived.
NOTES:
- LICIT  not outside the commerce of men
o If subject matter is illicit = contract of sale
is void
o Illicit objects: e.g., narcotics, lands
belonging to the patrimony of the State,
wild animals, rare wild plants, gunpowder
and explosives, firearms and
ammunitions, etc.
Martinez v. CA (1974)
F: A parcel of land, ownership of which changed hands until
it landed to spouses Martinez, was being contested by the
municipality as a river and thus form part of public domain.
The dispute was referred to the Committee of Rivers and
Streams, which conducted an investigation. The report
submitted stated that Parcel No. 2 was not a public river but
a private fishpond owned by the spouses. The municipal
officials of Lubao refused to recognize the Subcommittee’s
decision.
H: Parcel No. 2 is a river of the public domain as evidenced
by its technical description which states that it is bounded
on all sides by rivers. Said parcel is a branch of the main
river that has been covered with water since time
immemorial and thus part of the public domain. It is
incapable of private appropriation or acquisition by
prescription. The spouses’ title does not include the river.
Simple possession of a certificate of title under the Torrens
system does not necessarily make the possessor a true
owner of all the property described therein. The
incontestable and indefeasible character of a Torrens
certificate of title does not operate when the land covered is
not capable of registration.
2. Must be determinate or determinable
Art. 1460: A thing is determinate when it is
particularly designated or physical segregated from all
others of the same class.
The requisite that a thing be determinate is satisfied if
at the time the contract is entered into, the thing is
capable of being made determinate without the

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necessity of a new or further agreement between the
parties.
NOTES:
- Even if the subject matter of the sale was generic
(determinable), the performance of the seller’s
obligation would require necessarily its physical
segregation or particular designation, making the
subject matter determinate at the point of
performance
- DETERMINATE  aka SPECIFIC, when it is
particularly designated or physically segregated
from all others of the same class
o When the subject matter of a sale is
determinate, the basis upon which to
enforce seller’s obligation to deliver, as
well as the basis upon which to
demonstrate breach, are certain and
unequivocable
o The defense of force majeure is applicable
to legally relieve the seller from the
consequences of failure to deliver the
subject matter of the sale
- DETERMINABLE  a generic object, i.e., it has
neither been physically segregated nor particularly
designated at the point of perfection from the rest
of its kind
o Requisites:
 (1) If at perfection of the sale, the
subject matter is capable of being
determinate, aka the “capacity to
segregate” test; and
 (2) without the necessity of a
new or further agreement
between the parties, aka the “no
further agreement” test
Melliza v. City of Iloilo (1968)
F: Melliza sold under a deed several tracts of land to the
then Municipality of Iloilo, including lots 1214-C and 1214-
D. The instrument of sale did not mention lot 1214-B,
although it was contiguous to the other two lots, but
stipulated that the area being sold shall include the area
“needed for the construction of the city hall site, avenues
and parks according to the Arellano plan.” The Arellano plan
had long been in existence before the execution of the deed.
H: The requirement that a sale must have for its object a
determinate thing is fulfilled as long as, at the time the
contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or
further agreement between the parties. The requirement
was deemed fulfilled under the contract of sale because it
specifically referred to such other portions of the lots
required by the “Arellano plan” which had long been in
existence and it specifically provided for the land areas
needed for the city hall site. Therefore, at the time of the
perfection of the contract, the exact area of the land needed,
which was the subject matter of the sale, could be
determined by simply referring to the Arellano plan,
without the parties needing to draw-up a new contract, nor
even to clarify matters or explain their intentions.
SALES | Prof. Jardeleza 12
Atilano v. Atilano (1969)
F: Eulogio Atilano II brought parcel of land from his brother
Eulogio Atilano I. Heirs of E. Atilano II claim that upon
resurvey of the subject land, it was discovered that the land
sold to them designated as Lot No. 535-E was in fact Lot No.
535-A which was the one presently occupied by heirs of
Atilano I. So, Atilano II bought 535-E but is now occupying
535-A (1,808 square-meter) and Atilano II retained 535-A
but is now occupying 535-E (2,612 square meters). Atilano
II of course wants to get the other bigger parcel.
H: When one sells or buys real property - a piece of land, for
example - one sells or buys the property as he sees it, in its
actual setting and by its physical metes and bounds, and not
by the mere lot number assigned to it in the certificate of
title. The real issue here is not adverse possession, but the
real intention of the parties to that sale. The object of sale,
as intended and understood by the parties, was that specific
portion where the vendee was then already residing, where
he reconstructed his house where his heirs continued to
reside, namely, lot No. 535-A; and that its designation as lot
No. 535-E in the deed of sale was a simple mistake in the
drafting of the document.
3. Must be existing, future, or contingent
Art. 1347: All things which are not outside the
commerce of men, including future things, may be the
object of a contract. All rights which are not
intransmissible may also be the object of contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be
the object of a contract.
Art. 1348: Impossible things or services cannot be the
object of contracts.
Art. 1462: The goods which form the subject of a
contract of sale may be either existing goods, owned or
possessed by the seller, or goods to be manufactured,
raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen.
NOTES:
- POSSIBLE THING  it has the capacity, not
certainty, of coming into existence if subject to a
suspensive condition; or it already exists but may
or may not cease to exist if it is subject to a
resolutory condition
- Things having a potential existence may be the
object of a contract of sale
- Rationale for requisite = to ensure demandability
and enforceability of the underlying obligation of
the seller to deliver

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- Absence of this requisite = contract of sale is void
Emption rei speratae
Art. 1461: Things having a potential existence may be
the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void.
Art. 1347: All things which are not outside the
commerce of men, including future things, may be the
object of a contract. All rights which are not
intransmissible may also be the object of contracts.
No contract may be entered into upon future
inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be
the object of a contract.
NOTES:
- SALE EMPTIO REI SPERATAE  a sale subject to
the condition that the thing will come into
existence
o Strictly a contract covering future things, and
subject to a suspensive condition that the
subject matter will come into existence
o If the subject matter does not come into
existence, the contract is deemed extinguished
as soon as the time expires or if it has become
indubitable that the event will not take place
Pichel v. Alonzo (1981)
F: Alonzo was awarded a parcel of land by the Government
as homestead, of course with prohibition from
encumbrance. Alonzo sold to Pichel through a “deed of sale”
all the fruits of the coconut trees which may be harvested in
the land for the period 15 September 1968 to 1 January
1976, in consideration of P4,200. Alonzo filed an action for
the annulment of a “Deed of Sale” because the contract
actually is, for all legal intents and purposes, a contract of
lease of the land itself; an encumbrance prohibited under
RA 477.
H: The document in question expresses a valid contract of
sale. It has the essential elements of a contract of sale as
defined under Article 1485 of the New Civil Code. The
subject matter of the contract of sale in question are the
fruits of the coconut trees on the land during the years from
September 15, 1968 up to January 1, 1976, which subject
matter is a determinate thing. Under Article 1461 of the
New Civil Code, things having a potential existence may be
the object of the contract of sale. Pending crops which have
potential existence may be the subject matter of the sale.
Emptio spei
SALES | Prof. Jardeleza 13
Art. 1461: Things having a potential existence may be
the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void.
NOTES:
- SALE EMPTIO SPEI  A sale of hope or expectancy
o Uncertainty is with regard to the existence of
the thing
o Contract deals with a present thing—hope or
expectancy
o Sale produces its effect even though the thing
itself does not come into existence
Subject to resolutory condition
Art. 1465: Things subject to a resolutory condition may
be the object of the contract of sale.
NOTES:
- Things subject to a resolutory condition may be the
object of a contract of sale
- When the resolutory condition is fulfilled, the
parties shall return to each other what they have
received
4. Quantity of subject matter not essential for
perfection
Art. 1349: The object of every contract must be
determinate as to its kind. The fact that the quantity is
not determinate shall not be an obstacle to the
existence of the contract, provided it is possible to
determine the same, without the need of a new contract
between the parties.
NOTES:
- Law provides only that thing must be determinate
as to its kind, and not necessarily as to its quantity
PARTICULAR KINDS
1. Generic things
Art. 1246: When the obligation consists in the delivery
of an indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the
debtor deliver a thing of inferior quality. The purpose of
the obligation and other circumstances shall be taken
into consideration.
Art. 1409 (6): The following contracts are inexistent
and void from the beginning:

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(6) Those where the intention of the parties relative to
the principal object of the contract cannot be ascertained
NOTES:
- When the obligation consists in the delivery of an
indeterminate or generic thing, the creditor may
not demand a thing of superior quality. Neither can
the debtor deliver a thing of inferior quality
Yu Tek v. Gonzales (1915)
F: A written contract was executed between Basilio
Gonzalez and Yu Tek & Co for Gonzalez to provide Yu Tek
with 600 piculs of sugar of the first and the second grade
according to the result of the polarization within three
months for a consideration of P3000. Yu Tek paid Gonzalez
P3000 but the latter was not able to deliver the sugar
because of the almost total failure of his crop. The contract
of sale being valid, the loss of the thing must be borne by the
buyer.
H: A contract of sale is not perfected until the parties have
agreed upon the price and the thing sold. There is a
perfected sale with regard to the thing being sold when it
had already been physically segregated from all other
articles. In the case at bar, what was designated was the
generic name “sugar.” There was no appropriation of any
particular lot of sugar. Thus, the contract between Gonzalez
and Yu Tek was merely an executory agreement; a promise
of sale and not a sale. As there was no perfected sale, it is
clear that articles 1452, 1096 and 1182 are not applicable.
2. Future goods
Art. 1461: Things having a potential existence may be
the object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void.
NOTES:
- THING OF POTENTIAL EXISTENCE  A thing,
though not yet actually in existence, is reasonably
certain to come into existence as the natural
increment or usual incident of something already
in existence, and then belonging to the vendor, and
the title will vest in the buyer the moment the thing
comes into existence
- It is not part of the requisite of a valid subject
matter, at the time of the perfection of the contract,
that the seller is the owner of the thing sold as long
as he has the right to transfer ownership thereof at
the time the subject matter is delivered
3. Sale of undivided interest or share
Art. 1463: The sole owner of a thing may sell an
undivided interest therein.
SALES | Prof. Jardeleza 14
Art. 1464: In the case of fungible goods, there may be a
sale of an undivided share of a specific mass, though the
seller purports to sell and the buyer to buy a definite
number, weight or measure of the goods in the mass,
and though the number, weight or measure of the
goods in the mass, and though the number, weight or
measure of the goods in the mass is undetermined. By
such a sale the buyer becomes owner in common of
such a share of the mass as the number, weight or
measure bought bears to the number, weight or
measure of the mass. If the mass contains less than the
number, weight or measure bought, the buyer becomes
the owner of the whole mass and the seller is bound to
make good the deficiency from goods of the same kind
and quality, unless a contrary intent appears.
NOTES:
- GENERAL RULE: Proportional co-ownership over
the mass
- If mass contains less than the number, weight, or
measure bought = buyer becomes the owner of the
whole mass and the seller must make good the
deficiency which must be of the same kind and
quality unless a contrary intent appears
4. Sale of things in litigation
Art. 1381 (4): The following contracts are rescissible:
(4) Those which refer to things under litigation if they
have been entered into by the defendant without the
knowledge and approval of the litigants or of
competent judicial authority
Art. 1358 (2): The following must appear in a public
document:
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal partnership
of gains
NOTES:
- GENERAL RULE: Sales of things under litigation by
the defendant without the knowledge and approval
of the litigants or of the court are rescissible
- EXCEPTION: When the thing is in the possession of
a third person who did not act in bad faith

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Chapter IV: OBLIGATION OF THE SELLER TO
TRANSFER OWNERSHIP
SALE BY A PERSON NOT THE OWNER AT TIME OF
DELIVERY
Art. 1462: The goods which form the subject of a
contract of sale may be either existing goods, owned or
possessed by the seller, or goods to be manufactured,
raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency
which may or may not happen.
Art. 1505: Subject to the provisions of this Title, where
goods are sold by a person who is not the owner
thereof, and who does not sell them under authority or
with the consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or
any other provision of law enabling the apparent owner
of goods to dispose of them as if he were the true owner
thereof;
(2) The validity of any contract of sale under statutory
power of sale or under the order of a court of
competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and
special laws.
Art. 1459: The thing must be licit and the vendor must
have a right to transfer the ownership thereof at the
time it is delivered.
NOTES:
- GENERAL PRINCIPLE: No one can transfer a better
title than what he has over the property sold
o Only the owner of the goods or one authorized
by the owner to sell can transfer title thereto
to the buyer
o Owner of a lost movable or of which he has
been unlawfully deprived may recover it even
from a purchaser in good faith
EXCEPTIONS: When ownership transfers by non-
owner
1. Estoppel
SALES | Prof. Jardeleza 15
Art. 1434: When a person who is not the owner of a
thing sells or alienates and delivers it, and later the
seller or grantor acquires title thereto, such title passes
by operation of law to the buyer or grantee.
NOTES:
- If a person who is not the owner sells the thing, and
he should subsequently acquire ownership thereof,
his conveyance is deemed valid, and his title passes
by operation of law to his buyer (estoppel by deed)
Hernaez v. Hernaez (1915)
F: Domingo Hernaez’s parents died. He sold his interests to
the undivided estate of both parents to his son, Vicente.
Notwithstanding that fact, and in connivance with Vicente,
he executed a document of sale all his interest to his father’s
estate and 1/18 of his mother’s to Alejandro Montelibano.
He also executed a document of sale, on the same day, to
Jose Montelibano Uy-Cana, selling 4/18 of his interest in his
mother’s estate. Jose Montelibano Uy-Cana then sold his
interest to Alejandro. After that, Vicente sold his interest to
his uncle Rosendo.
H: Vicente is estopped from asserting his title as against
either Montelibano or Uy-Cana, even though he had actually
purchased all of his father’s interest. Where the true owner
of property, for however short a time, holds out another, or,
with knowledge of his own right, allows another to appear
as the owner of or as having full power of disposition over
the property, the same being in the latter’s actual
possession, and innocent third parties are thus led into
dealing with such apparent owner, they will be protected.
Siy Cong Bien v. HSBC (1932)
F: Ranft was given quedans as document of his title to bales
of hemp he had purchased. However, without paying for the
hemp yet, he offered the quedans as security for his
preexisting debts to HSBC. He died without paying Siy for
the hemp. Siy wanted to get the quedans from HSBC as these
were not yet paid for.
H: Siy is estopped from denying that the bank had a valid
title to the quedans for the reason that Siy itself had
voluntarily clothed Ranft with all the attributes of
ownership. The bank, without knowing of the arrangement
between the parties, relied upon the apparent ownership in
good faith.
Jalbuena v. Lizarraga (1915)
F: Salvador Lizarraga, as judgment creditor, caused the
sheriff to levy upon an old sugar-mill as the property of
Ildefonso Doronila, the judgment debtor and husband of
Jalbuena. At the time of the levy Doronila stated to the
sheriff that the mill belonged to him.
H: Jalbuena is estopped. Where the true owner of property,
for however short a time, holds out another, or, with
knowledge of his own right, allows another to appear, as the
owner of or as having full power of disposition over the
property, the same being in the latter's actual possession,
and innocent third parties are thus led into dealing with
some [such] apparent owner, they will be protected.
2. Recording Laws; Torrens System – PD 1529

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- Laws relating to goods which would enable the
registered owner to dispose of them as if he were
the true owner; these laws do not exist in the
Philippines
- Lands registered under the Land Registration Act =
the innocent purchaser who takes the land from
the registered owner acquires a better title than his
vendor
3. Statutory Sale – Order of Courts
- A sale by the sheriff or by any other public officer
authorized by law, of goods under execution or
subject of foreclosure, is valid even if the owner did
not authorize or consent to the sale
4. Sale in Merchant’s Store, Market, or Fair
- An innocent purchaser acquires a better title than
his vendor if he buys the goods from a merchant’s
store, market, or fair
- PURPOSE: To protect innocent purchasers who buy
at merchants’ stores, markets, or fairs, in order to
facilitate commercial sales in movables and to give
stability to business transactions
Sun Bros. v. Velasco (1958)
F: Sun Bros delivered to Francisco Lopez an Admiral
refrigerator. Lopez paid only the down payment of P500.
Lopez sold the ref to Velasco. The following day, Velasco
sold the ref to Co Kang Chiu, after displaying the ref at his
store. Co Kang Chiu paid P985 in cash. The ref was delivered
to Co Kang Chiu. Sun Bros filed a complaint for replevin.
H: This is a case of an imperfect or void title ripening into a
valid one, as a result of some intervening causes. The policy
of the law from which we do not feel justified to deviate, has
always been that where the rights & interests of a vendor
comes into clash with that of an innocent buyer for value,
the latter must be protected. Ruling this way would
facilitate commercials on movable & give stability to
business transactions. This rule is necessary in a country
such as ours where free enterprise prevails, for buyers can’t
be reasonably expected to look behind the title of every
article when he buys at a store. The doctrine of caveat
emptor is now rarely applied, and if it is mentioned it is
more of an exception than the general rule.
Masiclat v. Centeno (1956)
F: Centeno (defendant) was the owner of 15 sacks of rice,
which were for sale at her store near the public market of
Angeles. A stranger approached her and offered to purchase
the rice. Centeno agreed to sell the 15 sacks for P26.00 each,
which the stranger promised to pay as soon as he would
receive the price of his adobe stones (which were being
then unloaded from a truck parked at the opposite side of
the street). Relying on this promise, Centeno ordered the
rice loaded in the aforementioned truck, of which Masiclat
(plaintiff) was the caretaker, on the expectation that as soon
as the adobe stones would be paid, the stranger would pay
her the price of the rice. While the rice was being loaded,
Centeno was keeping an eye on it, waiting for the stranger
to come and pay her. When the stones were completely
unloaded, the stranger could nowhere be found. Thereupon,
SALES | Prof. Jardeleza 16
Centeno decided to unload the rice from the truck, but
Masiclat objected on the ground that he has bought it at
P26.00 per sack from a person whom he did not know.
H: Ownership of the rice has not been transferred to
Masiclat. The evidence does not clearly show the identity of
the person who tried to buy the rice, and neither does it
show that the same person was the one who sold the same
to Masiclat. But even supposing that said stranger sold the
rice to Masiclat, the latter acquired no title thereto because
Centeno had not lost ownership and legal possession
thereof. Ownership is not considered transmitted until the
property is actually delivered and the purchaser has taken
possession and paid the price agreed upon. The sale was not
consummated because although Centeno allowed the rice to
be loaded in the truck, she did not intend to transfer its
ownership until she was paid the stipulated price. This is
evident from the fact that she continually watched her rice
and demanded its unloading as soon as the stranger was
missing.
SALE BY A PERSON HAVING A VOIDABLE TITLE
Art. 1506: Where the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of
the sale, the buyer acquires a good title to the goods,
provided he buys them in good faith, for value, and
without notice of the seller's defect of title.
Art. 559: The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who
has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of
the same.
If the possessor of a movable lost or which the owner has
been unlawfully deprived, has acquired it in good faith at
a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
NOTES:
o Where the seller has a voidable title to the goods
but his title has not been avoided at the time of the
sale, he can transfer a valid title to an innocent
purchaser for value
o So long as the goods are still in the possession of
the first buyer, they may still be recovered by the
vendor in an action for annulment
o Once title is transferred to an innocent purchaser
for value before the contract is annulled, the
purchaser acquires a valid title
Tagatac v. Jimenez (1957)
F: Tagatac was induced by fraud (pretending he had lots of
money) to sell and deliver his car to Feist for which she was
given a post-dated check. The check was dishonored and the
car was subsequently sold from one person to another until
it was displayed in a car exchange where it was discovered
by the plaintiff. She brought an action to recover the car.
H: According to Art. 559 CC, although possession of movable
property acquired in good faith is equivalent to a title, one

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who has lost any movable or has been unlawfully deprived
thereof, may nevertheless recover it from the person in
possession of it. There was a valid transmission of
ownership from Tagatac to Feist by virtue of the sale and
delivery of the car to the swindler. The fraud and deceit
practiced on her earmarked the sale as a voidable contract.
As long as no action was taken for annulment, the contract
remained binding. As the car was again sold to another, the
title acquired by the subsequent purchaser was an
indefeasible one, even as against the original owner.
De Garcia v. CA (1971)
F: A diamond ring was stolen from Guevara’s house. While
she was talking to Garcia, an owner of a restaurant, she
recognized the ring on the latter’s finger and asked how she
acquired the same. Garcia averred that she bought it from
her comadre. It was ascertained the ring was indeed
Guevarra’s but despite written demands, Garcia refused to
return the ring.
H: The possession of movable property acquired in good
faith is equivalent to a title. Nevertheless, one who has lost
any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same. If the
possessor of a movable lost of which the owner has been
unlawfully deprived, has acquired it in good faith at a public
sale, the owner cannot obtain its return without
reimbursing the price paid therefor. The title of the
possessor is not that of ownership, but is merely a
presumptive title sufficient to serve as a basis of acquisitive
prescription.
EDCA Publishing v. Santos (1990)
F: An impostor (alias Jose Cruz) buys books from EDCA
through telephone. EDCA delivers the books, is paid through
personal check, and issues a sales invoice. Impostor sells
books to Santos who buys in good faith. The check to EDCA
bounces, EDCA discovers the fraud of the impostor, and
seeks to recover ownership of the books from Santos.
H: Ownership shall pass from the vendor to the vendee
upon the actual or constructive delivery of the thing sold
even if the purchase price has not yet been paid. There was
a perfected contract of sale. De La Pena acquired ownership
over the books which he could then validly transfer to the
Leonor Santos. First sentence of Art 559 CC: “the possession
of movable property acquired in good faith is equivalent to a
title.” Santos acquired possession of the movables (the
books) in good faith, thus she has title to them as owner.
Aznar v. Yapdiangco (1965)
F: To get purchase price for car, Marella said they had to go
to his sister’s house to borrow money. Marella also
requested the registration papers and copy of deed from
Irineo, Santos’ son, on the pretext that he would show it to
his lawyer. Irineo handed the documents to Marella. They
alighted while an unidentified companion of De Dios stayed
behind in the car. Once inside the house, Irineo was asked to
wait in the sala while De Dios went inside a room. De Dios
did not come out of the room. The car was also not there
outside anymore. He inquired from a woman he saw for L.
De Dios and he was told that no such name lived or was
even known there.
H: Article 559 of the Civil Code applies in this case, for under
it, the rule is to the effect that if the owner has lost a thing,
SALES | Prof. Jardeleza 17
or if he has been unlawfully deprived of it, he has a right to
recover it, not only from the finder, thief or robber, but also
from third persons who may have acquired it in good faith
from such finder, thief or robber. It establishes two
exceptions to the general rule of irrevindicability, to wit,
when the owner (1) has lost the thing, or (2) has been
unlawfully deprived thereof. In these cases, the possessor
cannot retain the thing as against the owner, who may
recover it without paying any indemnity, except when the
possessor acquired it in a public sale.
Chapter V: PRICE
MEANING OF PRICE
Art. 1469: In order that the price may be considered
certain, it shall be sufficient that it be so with reference
to another thing certain, or that the determination
thereof be left to the judgment of a special person or
persons.
Should such person or persons be unable or unwilling to
fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
Where such third person or persons are prevented from
fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies
against the party in fault as are allowed the seller or the
buyer, as the case may be.
Art. 1470: Gross inadequacy of price does not affect a
contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or
some other act or contract.
Art. 1471: If the price is simulated, the sale is void, but
the act may be shown to have been in reality a donation,
or some other act or contract.
Art. 1472: The price of securities, grain, liquids, and
other things shall also be considered certain, when the
price fixed is that which the thing sold would have on a
definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on
such day, or in such exchange or market, provided said
amount be certain.
Art. 1473: The fixing of the price can never be left to the
discretion of one of the contracting parties. However, if
the price fixed by one of the parties is accepted by the
other, the sale is perfected.
Art. 1474: Where the price cannot be determined in
accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the
thing or any part thereof has been delivered to and

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appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question of
fact dependent on the circumstances of each particular
case.
NOTES:
- Price is the sum stipulated as the (1) equivalent of
the thing sold, and also (2) every incident taken
into consideration for the fixing of the price put to
the debit of the buyer and agreed to by him
- The seller cannot unilaterally increase the
purchase price previously agreed upon with the
buyer, even when the need to adjust the price of
sale is due to increased construction costs
REQUISITES FOR A VALID PRICE
1. Must be real
Art. 1471: If the price is simulated, the sale is void, but
the act may be shown to have been in reality a
donation, or some other act or contract.
NOTES:
- The price is real when, at the perfection of the
contract of sale, there is a legal intention to pay and
to receive payment.
a. When price simulated
- The price is simulated when there is no legal
intention to pay and to receive payment.
b. Effects when price simulated
- Void. Unless the contract of sale is shown to be
in reality a donation or some other act or
contract.
c. False consideration
Art. 1353: The statement of a false cause in contracts
shall render them void, if it should not be proved that
they were founded upon another cause which is true
and lawful.
Art. 1354: Although the cause is not stated in the
contract, it is presumed that it exists and is lawful,
unless the debtor proves the contrary.
Art. 1355: Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue
influence.
NOTES:
- There is a false consideration when the price
stipulated in the contract is not the actual price
paid or delivered. If the price is false, the contract
of sale is still valid; provided that there is there is
SALES | Prof. Jardeleza 18
still a price paid or there is another cause is true
and lawful. In this instance, the contract is subject
to reformation.
- A contract with a false consideration is different
from a contract without consideration. A contract
without consideration has no stipulated price at all.
A consideration being an essential requisite of a
contract of sale, a contract without consideration is
void. Its inexistence is permanent, incurable, and
not subject to prescription.
Mapalo v. Mapalo (1966)
F: Illiterate farmer spouses intended to donate half of their
lot but were deceived into signing a deed of sale over the
entire lot for 500 pesos. No payment of the price
whatsoever was tendered.
H: Contract of sale is void for having no consideration. The
contract had no consideration in that the price which
appeared as paid in the deed has never in fact been paid by
the buyer. A contract without consideration is to be
distinguished from one with a false consideration where
there is a real consideration but the same is not the one
stated in the document.
Ong v. Ong (1985)
F: Seller executed a deed selling her part of the land to the
buyer for “1 peso and other valuable considerations”. Seller
eventually wants to revoke the sale since 1 peso is not a
valid consideration to sustain the sale.
H: The consideration of: “1 peso and other valuable
considerations” is a valid consideration to support the
contract of sale. The consideration is not just 1 peso, but
also other valuable considerations. The presumption that all
contracts have a consideration cannot be overcome by mere
allegations and assertions that there is a lack of
consideration.
Bagnas v. CA (1989)
F: Seller sold a land assessed to be worth 10.5k for 1 peso to
the buyer. Buyer uses the contract of sale as a claim to have
a better right on the land over the seller’s heirs.
H: The apparent gross inadequacy and enormous
disproportion between the stipulated price of the sale (1
peso) and the value of the estate (at least 10.5k)
demonstrates a false and fictitious consideration. The sale is
void because there is no other true and lawful cause.
Morales v. CA (1960)
F: Seller sold the land to buyer1 for 1 peso using a second
duplicate title because the original duplicate title was lost. It
appears that the original duplicate wasn’t really lost and
seller used the original duplicate to sell the land to buyer2.
Buyer2 claims preference over the double sale arguing that
he is a purchaser in good faith and for value, and that the
sale to buyer1 with a 1 peso consideration is dubious.
H: Assuming that said consideration of P1.00 is suspicious,
this circumstance, alone, does not necessarily justify that
buyer1 was not a purchaser in good faith and for value. The
seller’s liberality may be a sufficient cause for a valid
contract. Although fraud or bad faith may render the
contract voidable, it is binding until annulled.

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d. Non-payment of price
- There is a valid contract of sale even if there is no
actual payment of the price. A contract of sale is a
consensual contract, and becomes binding and
valid upon the meeting of the minds on the price.
Payment of the price goes into the consummation
of the contract of sale, not in the perfection. (Taken
from Villanueva which I think is inconsistent with
the Mapalo doctrine.)
- If the minds of the parties never meet as to the
price, because the price stipulated is known by
both parties as simulated, the contract is
undoubtedly void. On the other hand, if the minds
of the parties have met as to the price, the contract
of sale is valid, irrespective o the manner of
payment agreed upon.
- With respect to the price, a contract of sale is valid
if the price is fixed but is later on remitted or
condoned. The price in this case is not fictitious.
The failure to pay the price does not cancel a sale
for lack of consideration, because when the
contract was perfected there was a price or
consideration agreed on.
2. Must be in money or its equivalent
Art. 1458: By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and
to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Art. 1468: If the consideration of the contract consists
partly in money, and partly in another thing, the
transaction shall be characterized by the manifest
intention of the parties. If such intention does not
clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration
exceeds the amount of the money or its equivalent;
otherwise, it is a sale.
NOTES:
- The price is considered certain if it is “in money or
its equivalent” – its equivalent meaning some
representative of money like a check, draft, or
letters of credit. Services and prestations are not
the equivalent of money, thus they do not
constitute a valid price.
- Dacion en pago – property given to the creditor in
satisfaction of a debt in money, is regarded as a
sale with the price paid in advance and is governed
by the law on sales.
- The consideration for a valid contract of sale can be
the price and other additional considerations. For
a contract of sale to be valid, it must have the price
SALES | Prof. Jardeleza 19
as part of its consideration even if it has other
considerations.
Republic v. Phil. Resources (1958)
F: Buyer bought goods from the Bureau of Prisons but only a
small portion of the price was paid. To pay for the balance,
buyer had materials from his company delivered to the
Bureau of Prisons. The government contests this type of
payment arguing that price is always paid in terms of money
and that payment in kind is no payment at all.
H: The buyer may pay a price in price certain or its
equivalent. Payment of the price need not be in money.
Whether the goods delivered to the Bureau of Prisons is
sufficient payment is for the court to decide.
3. Must be certain or ascertainable at time of
perfection
Art. 1469: In order that the price may be considered
certain, it shall be sufficient that it be so with reference
to another thing certain, or that the determination
thereof be left to the judgment of a special person or
persons.
Should such person or persons be unable or unwilling to
fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
Where such third person or persons are prevented from
fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies
against the party in fault as are allowed the seller or the
buyer, as the case may be.
NOTES:
- The price is considered certain when the price
agreed upon is that which the thing sold would
have on a definite day or in a particular exchange
or market or could be determined with reference
to another thing certain.
Toyota Shaw v. CA (1995)
F: Buyer intended to purchase a vehicle. The agreement
with the seller only indicated the submission of necessary
documents, a down payment, and the date and time of
pickup of the vehicle. Buyer paid the down payment but
when he came to pick up the vehicle, seller informed him
that it was sold to another person.
H: The agreement between the buyer and seller did not
represent a perfected contract of sale because nothing was
mentioned about the full purchase price and the manner the
installments were to be paid. A definite agreement on the
manner of payment of the price is an essential element in
the formation of a binding contract of sale; a disagreement
on the manner of payment is tantamount to a failure to
agree on the price.
4. The manner of payment must be agreed upon

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- The manner and terms of payment of the price is
an integral part of the price because of the time
value of money. For example, a seller may impose a
comparatively lower price if payment is to be made
for a shorter period of time. Conversely, the seller
may impose a higher price if payment is to be made
over a longer period of time.
Velasco v. CA (1973)
F: Buyer intends to purchase land. The agreement with the
seller requires that he pay a down payment and monthly
installments. Buyer paid part of the down payment but
when he was about to pay the other part of the down
payment, seller refused to accept it and refused to execute
the deed of sale.
H: The agreement did not represent a perfected contract of
sale. The fact that the buyer gave part of the down payment
cannot be considered proof of the perfection of the contract
as the manner of payment of the installments were not
agreed on.
HOW PRICE IS DETERMINED
1. By third person
Art. 1469: In order that the price may be considered
certain, it shall be sufficient that it be so with reference
to another thing certain, or that the determination
thereof be left to the judgment of a special person or
persons.
Should such person or persons be unable or unwilling to
fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
Where such third person or persons are prevented from
fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies
against the party in fault as are allowed the seller or the
buyer, as the case may be.
NOTES:
- A designation of the price by a third person makes
the price certain or ascertainable as to give rise to a
valid contract of sale. There is a perfected and
existing contract (e.g., contract to sell) even before
a third person fixes the price. It can be validly
stipulated that the price will be left to the judgment
of third persons. In this case, the fixing of a price by
a third person becomes a suspensive condition.
- If the third person fixes the price in bad faith or by
mistake (there is a price but fixed in bad faith or by
mistake), the buyer and seller can seek court
remedy to fix the price.
- But if the third person is unable or unwilling to fix
the price (no price at all), the buyer and seller do
not have a cause of action to seek from the court
the fixing of the price because:
SALES | Prof. Jardeleza 20
1. When the third person does not fix the price
the suspensive condition of fixing the price has
not happened, hence there is no contract
which the court can fix.
2. Since the contract has no price or is without
consideration, there is no enforceable contract
between the buyer and seller Courts cannot
create contracts between the parties. In this
case, the law declares that the contract of sale
is inefficacious.
- Although third persons may fix the price, they may
not determine the subject matter of the sale. The
obligation to pay the price is a fungible obligation.
Any money can be used to pay the price and it
cannot be extinguished by fortuitous event. On the
other hand, the obligation to deliver the subject
matter can only be complied with when the thing is
either physically segregated or particularly
designated.
3. By the courts
Art. 1469, supra
NOTES:
- If the third person fixes the price in bad faith or by
mistake, the buyer and seller can seek court
remedy to fix the price.
4. By reference to a definite day
Art. 1472: The price of securities, grain, liquids, and
other things shall also be considered certain, when the
price fixed is that which the thing sold would have on a
definite day, or in a particular exchange or market, or
when an amount is fixed above or below the price on
such day, or in such exchange or market, provided said
amount be certain.
NOTES:
- The price can be determined with reference to
value of the thing on a particular date in the future
taking into consideration inflation rate, exchange
rate, or other factors in the market so long as the
amount is certain.
5. By reference to another thing certain
- The price can be determined with reference to
another thing certain such as: certain invoices in
clearly identified by the contract, or stipulated
formulas.
INADEQUACY OF PRICE
Art. 1355: Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract,

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unless there has been fraud, mistake or undue
influence.
Art. 1470: Gross inadequacy of price does not affect a
contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation
or some other act or contract.
NOTES:
- Gross inadequacy of price does not affect a contract
of sale except:
1. The inadequacy may indicate a defect in
consent.
2. Contract may be invalidated if there is fraud,
mistake, or undue influence.
- There is no requirement that the price given is
exactly the value of the subject matter delivered.
- Inadequacy of price may be a ground for setting
aside a judicial sale because it is not it is not the
result of negotiations and bargaining. The courts
may protect the supposed seller from a bad bargain
that is not his own doing. For judicial sale be set
aside on this ground, the inadequacy must be
shocking to the conscience of man. Also, it must be
shown that in the event of a resale, a better price
can be obtained.
- However, a judicial sale will not be set aside when
there is a right of redemption, since the more
inadequate the winning bid at public sale, the more
easily it is for the owner to redeem the property.
- Inadequacy of price is a ground for rescission of
conventional sale in case of the following
rescissible contracts:
1. Those entered into by guardians whenever the
ward they represent suffers lesion by more
than ¼ of the value of the object of sale
2. Those agreed upon in representation of
absentees, if the absentee suffers lesion by
more than ¼ of the value of the object of sale
- When there is a right to repurchase, the
inadequacy of price should not be material because
(1) the judgment debtor may reacquire the
property or (2) sell his right to repurchase and
thus recover the loss he claims to have suffered by
reason of the price obtained in the auction sale.
- Gross inadequacy of price in a conventional sale
with a right to repurchase raises a presumption of
equitable mortage (Art. 1602). The proper remedy
of the seller is not to rescind the contract, but to
have it reformed or declared a mortgage contract,
and to pay off the indebtedness which is secured.
The remedy of the buyer would be to foreclose on
the equitable mortgage.
WHEN NO PRICE AGREED
Art. 1474: Where the price cannot be determined in
accordance with the preceding articles, or in any other
manner, the contract is inefficacious. However, if the
SALES | Prof. Jardeleza 21
thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question of
fact dependent on the circumstances of each particular
case.
NOTES:
- The contract is inefficacious if the buyer or seller
cannot agree on the price or if the third person
designated to fix it is unwilling or unable to do so.
EARNEST MONEY V. OPTION MONEY
Art. 1482: Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract.
NOTES:
- Earnest money is part of the purchase price while
option money is given as a distinct consideration
for the option contract
- Earnest money is given only where there is already
a sale, option money applies to a sale not yet
perfected
- When earnest money is given, the buyer is bound
to pay the balance while the in option money, he is
not required to buy, but he may forfeit it depending
on the terms of the option.
- Even when the contract is subject to a suspensive
condition, the acceptance of earnest money shows
that the sale is conditionally consummated or
partly executed subject to the fulfillment of the
condition.
Limson v. CA (2001)
F: Buyer offered to purchase a mortgaged land by giving 20k
“earnest money”. Seller granted him a 10-day option to buy
the land. After the lapse of the option, buyer found out that
the seller sold the land to another person.
H: There is no perfected contract of sale. The 20k “earnest
money” was in reality option money which was
consideration for the 10-day period to buy the land. There
was no perfected contract of sale when the money was
given. Seller did not agree to sell the land, but only agreed to
give the buyer the privilege to buy it within a 10-day period.
Since there was no unconditional acceptance within the
period, seller was no longer bound to keep the privilege to
the buyer.
San Miguel Properties v. Huang (2000)
F: Buyer offered to purchase land by giving 1M earnest
deposit for a 30-day exclusive option to buy the land. Buyer
and seller failed to agree on the terms and conditions of the
sale as well as the manner of payment within the option
period. Seller returned the 1M earnest deposit. Buyer
demands enforcement of the sale claiming that the 1M is
earnest money evidencing the perfection of the contract of
sale.

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H: There is no perfected contract of sale because the buyer
and seller failed to get past the negotiation stage of agreeing
on terms and conditions of the sale. What the buyer had was
only an option to buy the land. The 1M cannot be considered
as earnest money because when it was given there was no
perfected sale yet; hence it cannot form part of the purchase
price. The 1M was consideration for the option and a
guarantee that the buyer will not back out. It is not the
giving of earnest money, but the proof of the concurrence of
all the essential elements of the contract of sale which
establishes the existence of a perfected sale.
Chapter VI: FORMATION OF CONTRACT OF SALE
PREPARATORY
Art. 1479: A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
1. Offer
Art. 1475: The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
NOTES:
- The contract of sale is perfected at the moment
when there is a meeting of the minds upon the
object and price. This happens when the offer to
sell of the seller is certain and the acceptance of the
offer by the buyer is absolute. The offer of the seller
must be certain as to the subject matter, the price,
and manner of payment. The acceptance by the
buyer must be absolute and unconditional. A
qualified acceptance (i.e., acceptance with
reservations) is a counter-offer and is not binding
unless accepted by the other party.
a. Forms of offer
Art. 1319: Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to
SALES | Prof. Jardeleza 22
have been entered into in the place where the offer was
made.
Art. 1325: Unless it appears otherwise, business
advertisements of things for sale are not definite offers,
but mere invitations to make an offer.
Art. 1326: Advertisements for bidders are simply
invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the
contrary appears.
Zayco v. Serra (1923)
F: Seller offered to sell property to the buyer for a total price
of 1M. Seller also offered that it case the 1M could not be
paid in cash, the balance has to be paid in 3 years. Buyer
wrote a letter to seller accepting the offer and tendering
100,000 pesos as initial payment. Seller refused to proceed
with the sale and cancelled the offer.
H: There is no perfected contract of sale. The offer did not
state the amount of payments made in installments. Buyer’s
tendering of the 100,000 pesos as initial payment
constituted a proposal of a payment scheme that wasn’t
included in the seller’s original offer. Hence, this proposal of
a payment scheme constituted a counter-offer which
requires acceptance by the seller. In order for an acceptance
to convert an offer to sell into a perfected contract, it must
be plain and unconditional. It must not have any new
proposition. Where the offer does not state the amount of
payments to be made in installments, the offer is not certain.
b. Forms of acceptance
Art. 1319, supra
NOTES:
- An acceptance made by letter or telegram only
binds the person making the offer if such person
has knowledge of the acceptance. Therefore, even if
an acceptance has been mailed to the person
making the offer, the acceptance may still be
withdrawn anytime before the person making the
offer has knowledge of the acceptance.
- Even when the offer is certain the acceptance is
absolute, there is no perfected contract of sale if it
is subject to a suspensive condition. Perfection
takes place from the moment the condition is
complied with.
c. Vices vitiating consent
Art. 1330: A contract where consent is given through
mistake, violence, intimidation, undue influence, or
fraud is voidable.
Art. 1338: There is fraud when, through insidious
words or machinations of one of the contracting
parties, the other is induced to enter into a contract
which, without them, he would not have agreed to.

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Art. 1331: In order that mistake may invalidate
consent, it should refer to the substance of the thing
which is the object of the contract, or to those
conditions which have principally moved one or both
parties to enter into the contract.
Mistake as to the identity or qualifications of one of
the parties will vitiate consent only when such identity
or qualifications have been the principal cause of the
contract.
A simple mistake of account shall give rise to its
correction.
NOTES:
- Vice in consent renders the contract voidable, not
void.
- Failure to disclose facts when there is a duty to
reveal them constitutes fraud. Insidious
machinations signify a deceitful scheme or plot
with an evil design or with fraudulent purpose.
2. Option Contract
Art. 1479: A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
Art. 1324: When the offerer has allowed the offeree a
certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
NOTES:
- An option is a preparatory contract in which one
party grants to the other, for a fixed period and
under specified conditions, the power to decide,
whether or not to enter into a principal contract. It
binds the party who has given the option, not to
enter into the principal contract with any other
person during the period designated, and, within
that period, to enter into such contract with the
one to whom the option was granted, if the latter
should decide to use the option.
- An option contract grants a right, not an obligation,
to the buyer. The obligation it imposes is on the
seller or offeror of the option not to withdraw the
offer for a stipulated period.
- It is an onerous contract because it must be
supported by a separate consideration for it to
be valid. It is consensual in that it requires a
SALES | Prof. Jardeleza 23
meeting of the minds between the buyer and
seller.
De la Cavada v. Diaz (1918)
F: Buyer has an option to purchase seller's lot of about 100
hectares as soon as it is registered. After execution of the
option contract, seller proceeded to register a part of the
hacienda. Seller made a counter-offer to sell only a part of
the hacienda. Buyer refused on the ground that under the
contract he can buy the whole hacienda. According to seller,
the contract included 100 hectares more or less and by
offering a portion of the hacienda, he complied with the
terms of the contract.
H: The contract between the parties is not an option
contract but an absolute promise to sell. The seller
promised to convey the land in question to the buyer as
soon as the same could be registered. The buyer stood ready
to comply with his part of the contract. The seller, however,
refused to comply with his promise. All of the conditions of
the contract on the part of the seller had been concluded,
except delivering the deeds of transfer.
Carcellar v. CA (1999)
F: Buyer has a lease contract with option to buy. Before
expiration of the lease, seller notified buyer if he wanted to
exercise the option to buy. Also before expiration of the
lease, buyer asked for an extension claiming that he doesn’t
have enough funds yet to buy the property and that he
already introduced improvements on the property. Seller
denied the extension after the period of lease has expired.
Thereafter, buyer signified his intent to exercise the option.
Seller denies alleging that the period has already expired.
H: Buyer should be allowed to exercise the option to buy,
despite asking for an extension. Buyer’s letter asking for an
extension of the lease so he could exercise the option
signifies a notice to the seller that he indeed intends to
exercise the option. This interpretation is consistent with
the primary intention of the parties in entering into the
contract in the first place.
a. Meaning of Consideration
- An option contract must be supported by a
separate consideration distinct from the price of
the contract of sale. The consideration in an option
contract may be anything of value, compared to the
consideration of the contract of sale where it has be
in money or its equivalent.
- The burden of proof to show that the option
contract has a separate consideration is the party
alleging its existence. The presumption of the
existence of a consideration in every contract (Art.
1354) cannot be relied on because it is expressly
stipulated that option contracts require a separate
consideration (Art. 1479).
Villamor v. CA (1991)
F: Buyer spouses bought half of a piece of land at 70 pesos
per square meter. An option contract was made for the sale
of the other half of the land stating that the only reason
buyers bought the first half of the land was because seller
will also sell them the other half of the land for the same
price. When the buyers sought to exercise the option, seller

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contested that the option is void for a lack of a separate
consideration.
H: Consideration is the “why” of contracts; the reason which
moves the parties to enter into the contract. The option had
a valid consideration which was the seller agreeing to sell
the first half of the land at 70 pesos (which was greatly
higher than the market price). Although the option is valid,
it did not provide a definite time to exercise the option.
Since actions upon a written contract must be brought
within 10 years, and the option was sought to be exercised
17 years from the time of the execution of the contract, the
right of action has prescribed.
Soriano v. Bautista (1962)
F: Seller mortgaged land for 1,800 with a stipulation that the
mortgagee can purchase the land for 3,900 which option can
be exercised in two years. Mortgagee/ buyer decides to
purchase the land. Seller refuses and claims that as
mortgagors they cannot be deprived of their right to redeem
the land.
H: While a mortgage contains the customary stipulation
concerning redemption, the contract has an express
provision granting the mortgagee an option to purchase. An
option to buy attached to a real estate mortgage was
deemed to be a valid stipulation. The mortgagor’s promise
to sell is supported by the same consideration as that of the
mortgage itself, which is distinct from that which would
support the sale, an additional amount having been agreed
upon to make up the entire price of 3,900 should the option
be exercised.
b. An option to buy is not a contract of purchase
and sale
- Just like a contract of sale, an option contract is
onerous because it must have a separate
consideration to be valid. It is consensual since the
meeting of the minds on the object and price gives
rise to the option contract, even when the
consideration has not yet been paid.
- As opposed to a contract of sale, an option contract
is not covered by the Statute of Frauds. It can be
proved by parole evidence.
Adelfa Properties v. CA (1995)
F: Seller sold 1/2 of the land to the buyer. Buyer expressed
interest in buying the other half of the property. An
exclusive option to purchase was executed. Before the buyer
could make full payment, it received a complaint for the
annulment of the sale from the heirs of the seller. Buyer
suspended payment pending the resolution of the conflicts
in the seller’s camp. Seller sold the land to another person
claiming that the exclusive option to purchase was strictly
an option and seller’s suspension of payment constituted a
counter-offer.
H: The exclusive option to purchase was actually a contract
to sell binding on both parties where the only condition left
to transfer the title is full payment of the price. This is not an
SALES | Prof. Jardeleza 24
option contract or a continuing offer on the part of the seller
that does not impose a binding obligation. There is a
concurrence of the seller’s intention to sell the other half of
the property and acceptance by the buyer, with only the
condition of full payment before title is transferred from
seller to buyer.
c. Without consideration void as option but valid
as offer
- If the option contract is not supported by a
separate consideration distinct from the price, it is
void as an option but valid as an offer. Acceptance
of the offer, before the offer is withdrawn, gives
rise to a perfected contract of sale and binds the
buyer and seller (Arts. 1479 par. 1, and 1324). This
constitutes a mutual promise to buy and sell. Note
that acceptance of the offer has to be
communicated to the seller/ offeror.
Sanchez v. Rigos (1972)
F: Seller executed an option contract, without a
consideration, in favor of the buyer over a parcel of land.
Seller refused to accept buyer’s several attempts to pay the
consideration. Buyer consigned the amount in court and
files an action against the seller. Buyer alleges that the
option committed the seller to sell and buyer to buy.
H: The contract between buyer and seller is an option
contract without a supporting separate consideration. If the
option is given without a consideration, it is a mere offer of
a contract of sale, which is not binding until accepted. In
other words, since there may be no valid contract without a
cause or consideration, the promisor is not bound by his
promise and may, accordingly, withdraw it. Pending notice
of its withdrawal, his accepted promise partakes, however,
of the nature of an offer to sell, which, if accepted, results in
a perfected contract of sale.
d. Proper exercise of option
- When an option contract does not contain a period
when the option can be exercised, it cannot be
presumed that it can be exercised indefinitely.
Actions in a written contract must be brought
within ten years, else the option will prescribe (Art.
1144).
Nietes v. CA (1972)
F: Buyer and seller entered into a contract of lease with
option to buy. Seller seeks to rescind the contract. Buyer
refuses and deposited checks to cover balance of the
purchase price. Buyer subsequently withdrew the checks
after clearing.
H: Buyer exercised the option validly within the period
stipulated. The buyer may exercise the option by advising
the seller of his decision to buy and expressing his readiness
to pay the price, provided that the price is available and
actually delivered to the seller upon execution and delivery
of the deed of sale. Notice of the acceptance of the option
contract by the buyer need not be simultaneous with actual
payment of the price, so long as price is delivered to the
seller upon performance of his part of the agreement.

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e. There must be acceptance of option
Vasquez v. CA (1991)
F: Seller sold land to buyer. Along with the deed of sale,
seller made a separate document giving them the right to
repurchase. Buyer contends that they cannot be compelled
to resell the lot to sellers because the right to repurchase,
which can be either an option to buy or a promise to resell
on their part, was not supported by a consideration distinct
from the price.
H: An option contract not supported by a separate condition
can only have legal effect if the option has been accepted
and the acceptance is communicated to the seller.
Annotation of the option to repurchase at the back of the
title cannot be considered as an acceptance of the option.
The annotation only served as a notice of the existence of
the unilateral promise of the buyers to resell the land to the
sellers. Seller's ineffectual acceptance of the option
validated the buyer's refusal to resell which can be
considered as a withdrawal of the option.
3. Right of First Refusal
- An option contract would require certainty on both
the object and the consideration of the contract. In
a right of first refusal, the object may be certain but
the consideration is uncertain since it would
depend on the seller’s eventual intention to enter
into a binding juridical relation with another
person.
- The right belongs to a class of juridical relations
not governed by contracts (since the cause is
indefinite or uncertain), but by provisions of the
Civil Code on human conduct. A breach on the right
of first refusal cannot justify an issuance of a writ
of execution or an action for specific performance.
At most, it would justify recovery of damages
under Art. 19 of the Civil Code.
Equitorial Realty v. Mayfair (1996)
F: Lessee is granted a right of first refusal in the lease
contract. Lessor informed lessee that a third person was
willing to buy the property for 1.2M. Lessor offered to sell
the property to the lessee for 6-7M. Lessee eventually
expressed interest to buying the property but lessor
abandoned the negotiations. Lessee found out that the
lessor sold the property to a third person for 11.3M. Lessee
asks for rescission of the sale and specific performance that
the property be sold to it. Lessor argues that the option to
purchase invoked by lessee is void for lack of consideration.
H: What the lessee has is not an option contract but a right
of first refusal. The requirement that an option contract
must have a separate consideration is inapplicable. An
option is a contract granting a privilege to buy or sell within
an agreed time and at a determined price. It is a separate
and distinct contract from that which the parties may enter
into upon the consummation of the option. It must be
SALES | Prof. Jardeleza 25
supported by consideration. The right of first refusal is an
integral part of (not separate from) the contracts of lease.
The consideration is built into the reciprocal obligations of
the parties.
Parañaque Kings v. CA (1994)
F: Lesee-corporation has a right of first refusal obtained
from its predecessor over parcels of land. Lessor offered to
sell the land to lessee for 15M. Lessee counter-offered to
buy for 5M. Lessor sold the properties to another person for
9M. Lessor argues that she complied with respecting
lessee’s right of first refusal by offering the sale to it first
before it proceeded to offer another person.
H: There is a breach of lessee’s right of first refusal. If the
lessees cannot buy at the price quoted by the lessor, the
lessor cannot sell it to another person for a lower price and
under more favorable conditions without offering the
lowered price and said favorable conditions to the lessee.
There should be identity of terms and conditions to be
offered to the lessee and all other prospective buyers. The
basis of the right of first refusal must be the current offer to
sell of the seller or offer to purchase of any prospective
buyer. Only after the buyer fails to exercise its right of first
priority under the same terms and within the period
contemplated, could the owner validly offer to sell the
property to a third person, again, under the same terms as
offered to the buyer.
Ang Yu v. CA (1994)
F: Seller offered to sell the premises the buyers are leasing
to the buyers, and gave them first priority over other
buyers. Seller sold the properties to a corporation breaching
the right of first refusal of the buyers. Lower court ordered a
writ of execution conveying the deed of sale to buyers for
the price offered to the corporation.
H: A breach of the right of first refusal cannot justify a writ
of execution or an action for specific performance absent
the element of consensuality in contracts. Proper remedy in
a breach of right of first refusal is an action for damages.
Rosencor v. Inquing (2001)
F: Lessees were given a right of first refusal by the lessor
over the leased properties. Lessor died. Lessor’s heirs
initially recognized the right of first refusal of the lessees
but then eventually sold the leased properties to another
person. Lessees ask for the rescission of the contract of sale
between the lessor’s heirs and the new owner.
H: Rescission is a remedy granted to secure reparations for
damages caused to them by a contract, by means of the
restoration of things to their condition at the moment prior
to the celebration of said contract. The new owner did not
know lessees’ right of first refusal; thus, it did not act in bad
faith in buying the property. Being a buyer in good faith and
for value, and being in lawful possession of the property,
bars restoration of things to their condition at the moment
prior to the perfection of the contract.
4. Mutual Promise to Buy and Sell
Art. 1479: A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable.

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An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
NOTES:
- A promise to sell a determinate thing coupled with
a correlative promise to buy at a specified price is
binding (Art. 1479). In a mutual promise to buy
and sell the title does not pass to the buyer. The
buyer and seller are merely given the right to
demand fulfillment of the contract or damages for
breach of contract.
- Compliance can be exacted from an unconditional
mutual promise to buy and sell as long as the object
is determinate and the price is fixed (Ang Yu vs CA,
1994).
De la Cavada v. Diaz (1918), supra
PERFECTION
Art. 1475: The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
Art. 1319: Consent is manifested by the meeting of
the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer
was made.
Art. 1325: Unless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to make an offer.
Art. 1326: Advertisements for bidders are simply
invitations to make proposals, and the advertiser is
not bound to accept the highest or lowest bidder,
unless the contrary appears.
NOTES:
- Until the contract is perfected, it cannot serve as a
binding juridical relation.
1. When deviation allowed
Villonco v. Bormaheco (1975)
F: Seller, representing his corporation, made an offer to sell
land to the buyer subject to certain conditions – 100,00
SALES | Prof. Jardeleza 26
pesos down payment and seller’s acquisition of a certain
separate land. Buyer gave a counter-offer with the 100,000
peso check. Seller encashed the check and gave his reply
indicating some amendments to the counter-offer After
acquiring the certain separate land, seller refused to
proceed with the sale arguing that his reply constituted a
standing counter-offer which the buyer did not accept.
H: There is a perfected contract of sale. The reply by the
seller was equivalent to an absolute acceptance since the
deviations or amendments contained in the response were
not material at all. They are mere clarifications of what the
parties previously agreed upon. The seller’s change in a
phrase of the offer to purchase, which change does not
essentially change the terms of the offer, does not amount to
a rejection of the offer and a tender of a counter-offer.
2. Sale by Auction
Art. 1476: In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots,
each lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in
other customary manner. Until such announcement is
made, any bidder may retract his bid; and the
auctioneer may withdraw the goods from the sale
unless the auction has been announced to be without
reserve.
(3) A right to bid may be reserved expressly by or on
behalf of the seller, unless otherwise provided by law or
by stipulation.
(4) Where notice has not been given that a sale by
auction is subject to a right to bid on behalf of the seller,
it shall not be lawful for the seller to bid himself or to
employ or induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or induce any
person to bid at such sale on behalf of the seller or
knowingly to take any bid from the seller or any person
employed by him. Any sale contravening this rule may
be treated as fraudulent by the buyer.
Art. 1403: The following contracts are unenforceable,
unless they are ratified:
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred
pesos, unless the buyer accept and receive part of such
goods and chattels, or the evidences, or some of them,
of such things in action or pay at the time some part of
the purchase money; but when a sale is made by
auction and entry is made by the auctioneer in his sales
book, at the time of the sale, of the amount and kind of
property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is
made, it is a sufficient memorandum.
Art. 1326, supra

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NOTES:
- A sale by auction is perfected only when the
auctioneer announces its perfection by the fall of
the hammer. Until such announcement is made,
any bidder may retract his bid and the auctioneer
may withdraw the goods from the sale, unless the
auction has been announced to be
- The owner of the property sold at an auction may
provide the terms under which the auction will
proceed. The terms are binding upon all bidders
whether they are aware of it or not
3. Perfection
Art. 1475, supra
National Grains Authority v. IAC (1989)
F: NFA buys rice from qualified farmers. Seller passed the
qualifications set and was given a maximum quota of 2,649
cavans of rice to sell to the NFA. Seller sold 630 cavans of
rice, but NFA held his payment in abeyance due to alleged
irregularities in his qualifications. NFA argues that the rice
was merely offered and since it has not signified its
acceptance, it cannot be compelled to pay for it.
H: There is a perfected contract of sale. There is perfection
when there is consent upon the subject matter and the
price, even if neither is delivered. The acceptance referred
to which determines consent is the acceptance of the offer
and not of the goods delivered. When NFA accepted the
seller’s offer to sell palay grains by noting a quota of 2,640
cavans, there was already a meeting of the minds between
the parties. The fact that the exact number of cavans of
palay to be delivered has not been determined does not
affect the perfection of the contract.
Peoples Homesite and Housing v. CA (1984)
F: Buyers were conditionally granted a sale of a house by a
housing entity, provided they either pay the price of the lot
or make a 20% deposit. Buyers did neither. Buyers did not
also make a manifestation that they were interested in the
offer. The housing entity withdrew the grant and offered it
to other persons, who complied with the above mentioned
requirements. Buyers asked for a reconsideration of the
offer made to them.
H: There is no perfected contract of sale to bind the housing
entity to deliver to them the house. The sale of the house
was conditional. Buyers did not comply with the set
conditions. In conditional obligations, the acquisition of
rights, as well as the extinguishment or loss of those already
required, shall depend upon the happening of the event
which constitutes the condition.
4. Place of Perfection
Art. 1319: Consent is manifested by the meeting of
the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
SALES | Prof. Jardeleza 27
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer
was made.
NOTES:
- The place of perfection of the contract of sale is
where there is a meeting of the offer and the
acceptance upon the object and the consideration.
- In case of acceptance through a letter or telegram,
it is presumed that the contract was entered into
the place where the offer was made
5. Expenses of Execution and Registration
Art. 1487: The expenses for the execution and
registration of the sale shall be borne by the vendor,
unless there is a stipulation to the contrary.
Art. 1521: Unless otherwise agreed, the expenses of
and incidental to putting the goods into a deliverable
state must be borne by the seller.
FORMALITIES OF THE CONTRACT
1. Form not important
Art. 1483: Subject to the provisions of the Statute of
Frauds and of any other applicable statute, a contract of
sale may be made in writing, or by word of mouth, or
partly in writing and partly by word of mouth, or may
be inferred from the conduct of the parties.
Art. 1356: Contracts shall be obligatory, in whatever
form they may have been entered into, provided all the
essential requisites for their validity are present.
However, when the law requires that a contract be in
some form in order that it may be valid or enforceable,
or that a contract be proved in a certain way, that
requirement is absolute and indispensable. In such
cases, the right of the parties stated in the following
article cannot be exercised. (1278a)
Art. 1357: If the law requires a document or other
special form, as in the acts and contracts enumerated in
the following article, the contracting parties may
compel each other to observe that form, once the
contract has been perfected. This right may be
exercised simultaneously with the action upon the
contract. (1279a)
Art. 1358: The following must appear in a public
document:
(1) Acts and contracts which have for their object the
creation, transmission, modification or extinguishment
of real rights over immovable property; sales of real

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property or of an interest therein a governed by
Articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal partnership
of gains;
(3) The power to administer property, or any other
power which has for its object an act appearing or
which should appear in a public document, or should
prejudice a third person;
(4) The cession of actions or rights proceeding from an
act appearing in a public document.
All other contracts where the amount involved exceeds
five hundred pesos must appear in writing, even a
private one. But sales of goods, chattels or things in
action are governed by Articles, 1403, No. 2 and 1405.
NOTES:
- General rule: No form required for the validity of
the contract of sale
Dalion v. CA (1990)
F: Buyer sought to recover ownership of the land bought by
him through a private document. Seller denied the fact of
sale and alleged that the document is fictitious and his
signature in the document of sale was forged.
H: A contract of sale is a consensual contract, which is
perfected by mere consent. No particular form is required
for its validity. The provision of Art. 1358 on the necessity of
a public document is only for convenience, not for validity
or enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a
public instrument. The seller was not able to present clear
and convincing evidence to show that the buyer had
committed forgery.
Secuya v. Vda de Selma (2000)
F: A parcel of land was subject of two sales. Buyer1, the
present possessor of the land alleging to have acquired the
property first, evidences his sale from a private document
which was allegedly lost. Buyer2 evidences his sale from a
public document
H: A sale of a piece of land in a private instrument is binding
between the parties. However, it cannot be considered
binding on third persons, if it is not embodied in a public
instrument and recorded in the Registry of Property.
2. Exceptions: When form important
A. Form important for enforceability
a. Statute of Frauds
Art. 1403: The following contracts are unenforceable,
unless they are ratified:
(1) Those entered into in the name of another person
by one who has been given no authority or legal
representation, or who has acted beyond his powers;
SALES | Prof. Jardeleza 28
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence
of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage,
other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five
hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or
some of them, of such things in action or pay at the time
some part of the purchase money; but when a sale is
made by auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
(e) An agreement of the leasing for a longer period than
one year, or for the sale of real property or of an
interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving
consent to a contract.
Art. 1405: Contracts infringing the Statute of Frauds,
referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefit under
them.
NOTES:
- The Statute of Frauds bars the enforceability of
certain transactions unless it observes a certain
form (in writing and subscribed and sworn to by
the party charged or his agent). The purpose of
having the Statute of Frauds is to prevent perjury
in the enforcement of obligations depending for
their evidence upon the unassisted memory of the
witness (Shoemaker vs. La Tondena, 1939).
- The following sales contracts have to observe the
proper form to be enforceable:
(1) Sale which is not to be performed within a year
from its perfection

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(2) Sale of goods, chattels, or things at a price more
than 500 pesos
(3) Sale of real property or an interest therein
- The Statute of Frauds applies only to executory
contracts, not to contracts either totally or partially
performed.
- The following instances take the contract of sale
out of the barring effect of the Statute of Frauds:
(1) When there is a note or memorandum in
writing evidencing the sale, and it is subscribed by
the party charged or his agent
(2) When there has been partial consummation of
the contract of sale (e.g., partial performance by the
buyer such as possession of a portion of the land,
relinquishment of claim to the land, building or
improvements on the land, tender of payment)
(3) When there has been a failure to object to the
presentation of evidence as to the existence of a
contract without being in writing and which is
covered by the Statute of Frauds
- For a note or memorandum to be sufficient, it must
contain all the essential terms of the contract of
sale: object, price, manner of payment.
Paredes v. Espino (1968)
F: Buyer bought a lot in another province that was closed
through letter and telegram. Upon meeting with the buyer,
the seller refused to execute the deed of sale and claims that
buyer’s claim is unenforceable under the Statute of Frauds.
H: A written note or memorandum embodying the
essentials of the contract and signed by the party charged or
his agent suffices to make the verbal agreement enforceable,
taking it out of the operation of the Statute of Frauds. The
letter where the deal was closed constitutes an adequate
memorandum. The letter included the location where the
property is situated, the TCT number, the size, and the
purchase price.
Baretto v. Manila (1924)
F: Buyer company wanted to buy a house to gain right of
way. Seller, owner of the house, executed and delivered a
deed of sale of the house to the company agent. Seller, on
several attempts, failed to collect the purchase price. Buyer
company returns the deed to him until arrangements for the
payments can be made. Seller files an action to claim the
purchase price from the buyer arguing that his claim is
enforceable even if it is not in writing because there is
already partial performance (delivery of the deed).
H: Buyer’s claim is barred by the Statute of Frauds. Delivery
of the deed with no intention to part with the title does not
take the case out of the Statute of Frauds. There was no
intention to part with the title as evidenced by non-payment
of the purchase price and the fact that the deed was
returned and retained by the seller.
Inigo v. Estate of Maloto
F: Pursuant to a verbal agreement, buyer bought a house
and lot. Buyer did not press seller for the title of the
property. Buyer took possession of the property and
introduced improvements. Buyer sought the lawyer of the
SALES | Prof. Jardeleza 29
seller to fix the deed of sale but the latter was unavailable.
Seller died and the title to the property passed on to his
heirs. Lower court rules that buyer’s claim of ownership is
unenforceable under the Statute of Frauds since it is a sale
of real property not in writing.
H: Buyer’s suit is not barred by the Statute of Frauds
because there is already a consummated contract. The
Statute of Frauds bars only executor contracts. It matters
not that neither the receipt for the consideration nor the
sale itself was in writing. Because “oral evidence of the
alleged consummated sale of the land” is not forbidden by
the Statute of Frauds and may not be excluded in court.
B. Form important for validity
a. Sale of realty through an agent
Art. 1874: When a sale of a piece of land or any interest
therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.
NOTES:
- The authority or power to sell a piece of land or
any interest therein must be in writing; otherwise
the sale of the agent is void even if the sale itself is
in writing.
City Lite v. CA (2000)
F: Seller corporation offered property for sale to the general
public. To facilitate the offers, it utilized an agent. The agent
made offers to the buyer corporation and terms and
conditions of the sale were set. Seller corporation refused to
proceed with the sale. Buyer corporation demanded
compliance with the sale.
H: Agent had no authority to sell land. The written
memorandum issued by the seller corporation requesting
the agent’s assistance in finding buyers for the property
meant that the agent was only to assist them in looking for
buyers and referring to them possible prospects. The final
evaluation, appraisal and acceptance of the transaction
could be made only by seller corporation. The agent was
only a contact person with no authority to conclude a sale of
the property and whose only job was to bring the parties
together for a possible transaction.
b. Sale of large cattle
Art. 1581: The form of sale of large cattle shall be
governed by special laws.
Sec. 529: Registration necessary to validity of transfer.
No transfer shall be valid unless the same is registered
and a certificate of transfer obtained as herein
provided, but the large cattle under two years of age
may be registered and branded gratis for the purpose of
effecting a valid transfer, if the registration and transfer
are made at the same time.

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NOTES:
- The sale of large cattle must be in writing,
otherwise it is void. No sale of large cattle shall be
valid unless the sale is registered with the
municipal treasurer who shall issue a certificate of
transfer.
c. Electronic Commerce Act – RA 8792
Section 7. Legal Recognition of Electronic documents
Electronic documents shall have the legal effect, validity or
enforceability as any other document or legal writing, and-
(a) Where the law requires a document to be in writing,
that requirement is met by an electronic document if the
said electronic document maintains its integrity and
reliability and can be authenticated so as to be usable for
subsequent reference, in that–
i. The electronic document has remained complete and
unaltered, apart from the addition of any endorsement
and any authorized change, or any change which
arises in the normal course of communication, storage
and display; and
ii. The electronic document is reliable in the light of
the purpose for which it was generated and in the light
of all relevant circumstances.
(b) Paragraph (a) applies whether the requirement
therein is in the from of an obligation or whether the law
simply provides consequences for the document not
being presented or retained in its original from.
(c) Where the law requires that a document be presented
or retained in its original form, that requirement is met by
an electronic document if-
i. There exists a reliable assurance as to the integrity of
the document from the time when it was first
generated in its final from; and
ii. That document is capable of being displayed to the
person to whom it is to be presented: Provided, That
no provision of this Act shall apply to vary any and all
requirements of existing laws on formalities required
in the execution of documents for their validity.
For evidentiary purposes, an electronic document shall be
the functional equivalent of a written document under
existing laws.
This Act does not modify any statutory any statutory rule
relating to admissibility of electronic data massages or
electronic documents, except the rules relating to
authentication and best evidence.
Section 8. Legal Recognition of Electronic Signatures
An electronic signature on the electronic document shall be
equivalent to the signature of a person on a written
document if the signature is an electronic signature and
proved by showing that a prescribed procedure, not
alterable by the parties interested in the electronic
document, existed under which-
(a) A method is used to identify the party sought to be
bound and to indicate said party's access to the
electronic document necessary for his consent or
approval through the electronic signature;
(b) Said method is reliable and appropriate for the
purpose for which the electronic document was
SALES | Prof. Jardeleza 30
generated or communicated, in the light of all
circumstances, including any relevant agreement;
(c) It is necessary for the party sought to be bound, in
or order to proceed further with the transaction to have
executed or provided the electronic signature; and
(d) The other party is authorized and enable to verify
the electronic signature and to make the decision to
proceed with the transaction authenticated by the
same.
Section 11. Authentication of Electronic Data Messages and
Electronic Documents
Until the Supreme Court by appropriate rules shall have so
provided, electronic documents, electronic data messages
and electronic signatures, shall be authenticated by
demonstrating, substantiating and validating a claimed
identity of a user, device, or another entity is an information
or communication system, among other ways, as follows;
(a) The electronic signatures shall be authenticated by
proof than a letter , character, number or other symbol
in electronic form representing the persons named in
and attached to or logically associated with an
electronic data message, electronic document, or that
the appropriate methodology or security procedures,
when applicable, were employed or adopted by such
person, with the intention of authenticating or
approving in an electronic data message or electronic
document;
(b) The electronic data message or electronic
document shall be authenticated by proof that an
appropriate security procedure, when applicable was
adopted and employed for the purpose of verifying the
originator of an electronic data message or electronic
document, or detecting error or alteration in the
communication, content or storage of an electronic
document or electronic data message from a specific
point, which, using algorithms or codes, identifying
words or numbers, encryptions, answers back or
acknowledgement procedures, or similar security
devices.
The supreme court may adopt such other authentication
procedures, including the use of electronic notarization
systems as necessary and advisable, as well as the certificate
of authentication on printed or hard copies of the electronic
documents or electronic data messages by electronic
notaries, service providers and other duly recognized or
appointed certification authorities.
The person seeking to introduce an electronic data message
or electronic document in any legal proceeding has the
burden of proving its authenticity by evidence capable of
supporting a finding that the electronic data message or
electronic document is what the person claims it on be.
In the absence of evidence to the contrary, the integrity of
the information and communication system in which an
electronic data message or electronic document is recorded
or stored may be established in any legal proceeding –
a.) By evidence that at all material times the
information and communication system or other
similar device was operating in a manner that did not
affect the integrity of the electronic data message or
electronic document, and there are no other reasonable
grounds to doubt the integrity of the information and
communication system,

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b.) By showing that the electronic data message or
electronic document was recorded or stored by a party
to the proceedings who is adverse in interest to the
party using it; or
c.) By showing that the electronic data message or
electronic document was recorded or stored in the
usual and ordinary course of business by a person who
is not a party to the proceedings and who did not act
under the control of the party using the record.
NOTES:
- Electronic documents shall have the legal effect,
validity or enforceability as any other document or
legal writing, as long as:
(1) the electronic document maintains its integrity
and reliability, and
(2) is capable of being displayed to the person to
whom it is to be presented, containing the
electronic signature of the person sending it.
- Such documents may be authenticated by proof
that appropriate methodology and security
procedures have been adopted to ensure its
reliability and integrity.
Chapter VII: TRANSFER OF OWNERSHIP
MANNER OF TRANSFER
Article 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
Article 1496. The ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in any
of the ways specified in articles 1497 to 1501, or in any
other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.
NOTES:
In General: How Effected
- The ownership of the thing sold shall be transferred to the
buyer upon the actual or constructive delivery, or in any
manner signifying an agreement that possession is
transferred from the vendor to the vendee.
- Contract of sale: Right to transfer or acquire ownership
- Delivery: Method of acquiring ownership.
- Sale without delivery: Buyer has no rights over the
property except that of a creditor
- Private sale without delivery, with creditor attaching
the property: Creditor has better right over the buyer.
- Judicial Sale: Perfected contract which is not consummated
until delivery of the thing.
- Sale without delivery: Gives the purchaser no rights in said
property (except those of the creditor); Thus, where the sale
was evidenced in a private instrument and the thing
remained in the possession of the vendor when it was
SALES | Prof. Jardeleza 31
attached by his creditor, the latter has a better right over the
thing than the buyer.
Kuenzle v. Macke (1909)
Facts:
- Stanley & Krippendorf (S&K), being indebted to the
plaintiff, sold to the latter by an instrument in writing their
property. The said instrument was never recorded and was
a private document. Also the said property remained from
the time of sale forward in the exclusive possession and
control of said S&K.
- Defendant Desiderio, as sheriff, levied upon said property
by virtue of an execution issued upon a judgment secured
by the defendant, the firm Macke & Chandler (M&K), against
S&K. The plaintiff notified the sheriff that it was the owner
of the said property and forbade the sale under said
execution.
- The sheriff went ahead with the sale of said goods. M&K
was the purchaser of said property and the same were
delivered to it. The defendants allege that the property was
not the property of the plaintiff at the time of said levy and
sale, but was the property of S&K, who were in possession
of the same at the time of such levy.
Held / Doctrine:
- The ownership of personal property cannot be transferred
to the prejudice of third persons except by delivery of the
property itself.
- A sale without delivery gives the would-be purchaser no
rights in said property except those of a creditor.
- Where there is no express provision that the title shall not
pass until payment of the price, and the thing sold has been
delivered, title passes from the moment the thing sold is
placed in the possession and control of the buyer. In spite of
the reciprocal nature of a sale, it is not the prior payment of
price that determines the effects of delivery of the subject
matter.
WHEN DELIVERY DOES NOT TRANSFER TITLE
1. Sale on return
- In this case, instead of paying the price, ownership
passes on delivery, but he may revest ownership to the
seller by returning or tendering the goods within the time
fixed in the contract (or a reasonable time).
- Sale or return: Title passes on delivery with the option to
return the goods to the seller.
- Non-exercise of the privilege of return makes the sale
absolute.
- Conditional sale: Payment of the price is a suspensive
condition before legal title is passed.
- Sale on credit with right to return: Buyer remains liable for
the price though it becomes impossible without his fault to
return the goods.
- In a case, sale providing that the buyer would be permitted
to return them unless they measured up to the description
was a sale with option to return, and not a sale on approval,
and title passed to the buyer on delivery to the carrier.

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2. Sale on approval, trial or satisfaction
Article 1502. When goods are delivered to the buyer "on
sale or return" to give the buyer an option to return the
goods instead of paying the price, the ownership passes to
the buyer on delivery, but he may revest the ownership in
the seller by returning or tendering the goods within the
time fixed in the contract, or, if no time has been fixed,
within a reasonable time.
When goods are delivered to the buyer on approval or on
trial or on satisfaction, or other similar terms, the
ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to the
seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has
been fixed, on the expiration of a reasonable time. What is a
reasonable time is a question of fact.
NOTES:
- When goods are delivered to the buyer subject to his
approval or “on trial,” or on “satisfaction,” or other similar
terms, ownership passes to the buyer only when he
signifies his approval or acceptance to the seller or
does any other act adopting the transaction or when he
retains the goods without giving notice of rejection on the
expiration of the time fixed for the return of the goods, or on
the expiration of a reasonable time, if no period has been
fixed.
- Goods sent to the buyer on the “hope that the latter would
find them satisfactory and order that type of goods” is a sale
on approval.
- In a case, trial period begun when the machinery was set
up, not at the time it was delivered, if the machinery
requires set up prior to its use.
3. Express Reservation
Article 1478. The parties may stipulate that ownership in
the thing shall not pass to the purchaser until he has fully
paid the price.
Luzon Brokerage v. Maritime Blg. (1972)
Facts:
- The defendant Myers Building Co., Inc., owner of three
parcels of land in the City of Manila, together with the
improvements thereon, entered into a contract entitled
"Deed of Conditional Sale" in favor of Maritime Building Co.,
Inc., whereby the former sold the same to the latter for
P1,000,000.00, Philippine currency.
> P50,000.00 of this price was paid upon the
execution of the said contract
> The parties agreed that the balance of P950,000.00
was to be paid in monthly installments at the rate of
SALES | Prof. Jardeleza 32
P10,000.00 with interest of 5% per annum until the
same was fully paid.
- They agreed that in case of failure on the part of the
vendee to pay any of the installments due and payable, the
contract shall be annulled at the option of the vendor and all
payments already made by vendee shall be forfeited and the
vendor shall have right to re-enter the property and take
possession thereof.
- Maritime Building Co., Inc. failed to pay the monthly
installments corresponding to the months of March, April
and May, 1961.
- Myers Building Co., Inc. wrote the Maritime Building Co.,
Inc. a letter advising it of the cancellation of the Deed of
Conditional Sale entered into between them.
Held / Doctrine:
- Under the circumstances, the action of Maritime in
suspending payments to Myers Corporation was a breach of
contract tainted with fraud or malice (dolo) or a “conscious
and intentional design to evade the normal fulfillment of
existing obligations.” Maritime having acted in bad faith, it
was not entitled to ask the court to give it further time to
make payment and thereby erase the default or breach that
it had deliberately incurred.
- In contracts to sell, where ownership is retained by the
seller and is not to pass until the full payment of the price,
such payment, as the SC said, is a positive suspensive
condition, the failure of which is not a breach, casual or
serious, but simply an event that prevented the obligation of
the vendor to convey title from acquiring binding force, in
accordance with Article 1117 of the Old Civil Code. To argue
that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where
non-payment is a resolutory condition, which is not the
case.
4. Implied Reservation
Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership in the goods until
certain conditions have been fulfilled. The right of
possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to
a carrier or other bailee for the purpose of transmission to
the buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of
the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill
of lading, the ownership would have passed to the buyer on
shipment of the goods, the seller's property in the goods
shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the
contract.
Where goods are shipped, and by the bill of lading the goods
are deliverable to order of the buyer or of his agent, but
possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession
of the goods as against the buyer.

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Where the seller of goods draws on the buyer for the price
and transmits the bill of exchange and bill of lading together
to the buyer to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill of lading if he
does not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in good faith, for value, the bill
of lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the facts
making the transfer wrongful.
5. When sale not valid
- When sale is not valid, there is no transfer of
ownership.
6. When seller is not the owner
- The seller need not have the title to the goods at the time
of perfection of the contract. However, he must have the
title at the time of delivery.
- Art. 1505: Subject to the provisions of this Title, where
goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with the
consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods
is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or
any other provision of law enabling the apparent owner
of goods to dispose of them as if he were the true owner
thereof;
(2) The validity of any contract of sale under statutory
power of sale or under the order of a court of
competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and
special laws.
- Art. 559: The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof
may recover it from the person in possession of the same.
If the possessor of a movable lost or which the owner has
been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
- General Rule: In a sale by the non-owner, the buyer
acquires no better title to the goods than the seller had (he
merely steps into the shoes of the seller)
- Exceptions (when the true owner cannot recover the
thing):
SALES | Prof. Jardeleza 33
(1) Estoppel or when the owner is precluded, by his
own conduct, from denying the seller’s authority to sell
(apply Art. 1438 by analogy)
> Art. 1438: One who has allowed another to assume
apparent ownership of personal property for the
purpose of making any transfer of it, cannot, if he
received the sum for which a pledge has been
constituted, set up his own title to defeat the pledge of
the property, made by the other to a pledgee who
received the same in good faith and for value.
(2) PD 1529 (Recording Laws; Torrens Title)
> Even when the sale is void, the general rule that the
direct result of a previous void contract cannot be valid
is inapplicable when it will directly contravene the
Torrens system of registration. The Court cannot
disregard such rights and order the cancellation of the
certificate, since the effect of such outright cancellation
will be to impair public confidence in the certificate of
title.
(3) Statutory power of sale or under the order of a
court of competent jurisdiction
(4) Sale in merchant’s store, or in fairs, or markets
(Arts. 85 – 86, Code of Commerce)
> To allow recovery would retard commerce.
Executory Sales
- Parties may stipulate that ownership in the thing shall not
pass to the buyer until he has fully paid the price.
- Seller may reserve the right of possession or ownership of
the goods despite its delivery.
- If buyer failed to comply with the conditions, seller may
recover the possession or extrajudicially terminate the
operation of the contract, refuse conveyance, and retain
sums already received, where such rights are expressly
provided for in the contract.
- Creditor of the buyer cannot attach goods if the seller has
reserved ownership until full payment of the purchase
price.
KINDS OF DELIVERY
1. Real delivery
Article 1497. The thing sold shall be understood as
delivered, when it is placed in the control and possession of
the vendee.
NOTES:
- Delivery: When thing sold is placed in the control and
possession of the buyer, absent stipulation that title
passes only upon full payment of the purchase price.
- Effects of delivery: Conveyance of ownership, without
prejudice to the buyer to claim the purchase price.
- Insolvency does not automatically give as cause of action
for a replevin suit, nor the right to rescind the
contract (following nonpayment of the purchase price).
- In a case, where the goods were ready for delivery at the
time and place agreed upon, the mere fact that the buyer, by

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reason of the improper equipment of the vessel, was unable
to take the goods aboard the vessel, cannot relieve the
latter for responsibility under the contract.
Bean v. Cadwallader (1908)
Facts:
- George Case entered into 2 contracts with Cadwallader
Company, whereby Case would sell and deliver timber to
Cadwallader. Under the contracts, the logs were to be
delivered alongside Cadwallader’s vessel at Basilan.
Pursuant to both contracts, Case did deliver the timber to
the port of Basilan but Cadwallader did not accept and pay
for the same.
- Cadwallader alleged that Case made misrepresentations
regarding the harbor located in Basilan; that Case
represented such harbor to be safe and easily practicable
for a vessel to come alongside the land, whereas, in fact, it
was unsafe and impossible for Cadwallader to enter the
harbor with boats to load the logs.
Held / Doctrine:
- Actual manual delivery of an article sold is not essential to
the passing of the title thereto, unless made so by the terms
of the contract or by an understanding of the parties. The
parties to the contract may agree when and on what
conditions the property in the subject of the contract was
passed to the prospective owner.
- It is a rule well established that a mere contract for the sale
of goods, where nothing remains to be done by the seller
before making delivery, transfers the right of property,
although the price has not been paid, nor the thing sold
actually delivered to the purchaser.
- In an action for goods sold and delivered, if the plaintiff
proves delivery at the place agreed and that there remained
nothing further for him to do, he need not show actual
acceptance by the defendant. The mere fact that the
defendant, by reason of the improper equipment of the
vessel, was unable to take said logs aboard such vessel,
cannot relieve the latter from responsibility under the
contract.
Ocejo v. International Bank (1918)
Facts:
- Chong executed and delivered to the defendant a
promissory note payable one month from the said date. He
also had deposited with the bank, as security for the said
note, 5,000 piculs of sugar. The bank did not take possession
of the sugar and Chong continued to retain the sugar in his
possession and control. It was also noted that the alleged
pledge was not recorded in a public document. The money
represented by the promissory does not appear to have
been delivered.
- Plaintiffs, on the other hand, entered into a contract with
Chong for the sale of a lot of sugar. In compliance with the
agreement, 5,000 piculs of sugar were delivered to Chong’s
warehouse. The plaintiffs presented for collection its
account but Chong refused to make payment.
- On the day the sugar was delivered by plaintiffs, a bank
representative discovered that the sugar deposited with
them was only 1,800 piculs. The representative, together
with a lawyer from the bank took possession of plaintiff’s
delivered sugar.
SALES | Prof. Jardeleza 34
- Ocejo tried to recover possession of the sugar but the Bank
which then had possession refused to deliver the same to
Ocejo.
Held / Doctrine:
- Tradition is a true mode of acquiring ownership “which
effects the passage of title and the birth of the right in rem.
Therefore, the delivery of the thing… signifies that title has
passed from the seller to the buyer.”
- Delivery produces its natural effects in law, the principal
and most important of which being the conveyance of
ownership, without prejudice to the right of the seller to
claim payment of the price. Normally therefore, as a
consequence of a valid sale, the delivery of the subject
matter ipso jure transfers its ownership to the buyer.
- De la Rama vs. Sanchez: The fact that the price of the
property has not yet been paid in full is not, nor can it be, an
obstacle to the acquisition of the ownership thereof by the
plaintiff, because as such a condition was not stipulated in
the contract, the latter immediately produced its natural
effects in law, the principal and most important of which
being the conveyance of the ownership by means of the
delivery of the thing old to the purchaser, without prejudice,
of the course, to the right of the vendor to claim payment of
any sum still due.
- Gonzalez vs. Rojas: “…ownership of things is not
transferred by contract merely but by delivery. Contracts
only constitute titles or rights to the transfer or acquisition
of ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of
acquiring it being different in our law.”
Cebu Winland Dev. Corp. v. Ong Siao Hua (2009)
Facts:
- Plaintiff is the owner and developer of a condominium
project in Cebu city. Defendant is buyer of 2 condo units and
4 parking spaces.
- During construction of the condominium, plaintiff offered
to sell the condo units to defendants at a 3% discounted
price provided 30% of the price is paid as down payment
and the balance is paid in 24 monthly installments.
- Defendant accepted the offer. Condo unit is represented to
be 155 sq. meters with a price of 22,378/ sq. meter. There
was no written document that evidenced the sale.
- Possession of the units was turned over to defendant.
Upon full payment, plaintiff sent defendant deeds of sale
over the units for him to sign. Defendant found out from the
deeds that the floor area is only 127 sq. meters and upon a
commissioned survey over the units, it was found out to be
110 sq. meters. Defendant demanded a refund since he
received a smaller unit that what he intended to buy.
Complaint filed on 7 August 1998.
- Plaintiff claims that defendant’s action has prescribed
pursuant to Art. 1543 (6 months upon from date of
delivery), alleging that delivery was made on 10 October
1996 (Complaint made on 7 August 1998). Defendant
argues that the prescription period has not even begun
because delivery was not yet made.
Held / Doctrine:
- Art. 1497 – Real and actual delivery through transfer of
control and possession
- Art. 1498 – Symbolic delivery effected through an
execution of a public document

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- Art. 1498 does not say that the execution of the public
document provides a conclusive presumption of the
delivery of possession. It says that execution is equivalent to
delivery which means that the presumption of delivery can
be rebutted by clear and convincing evidence. Thus, the
presumptive delivery by execution of a public instrument
can be negated by the failure of the buyer to take actual
possession of the land sold. (In this case, there is no delivery
because only possession, and not ownership, was
transferred. Since there is no delivery, the prescription
period has not begun.)
2. Constructive delivery
NOTES:
Delivery by Public Instrument
- When sale is made through a public instrument, execution
thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if from the deed, the contrary
does not appear or cannot be clearly inferred.
- The public document can be used to prove ownership of
the thing.
- In a case, Notary Public’s failure to deliver the deed to the
buyer, pursuant to seller’s instruction, cannot defeat the
absolute and conditional character of the conveyance.
- Execution of deed of sale of a homestead is the reckoning
point for the redemption period under the Public Land Law
and not on the date the price is fully paid, absent
any stipulation that ownership will not vest to the buyer
until full payment of the purchase price.
- This manner of delivery is common to personal as well as
real property.
Not Equivalent to Delivery
- General rule: He who purchases by means of a public
instrument, is presumed to be a possessor in fact (admits
proof to the contrary).
- If the intent of the parties shows that delivery is not (or
cannot be) intended, as shown:
> When a certain date is fixed for the buyer to take
possession of the object;
> In sale by installment; if it is stipulated that
the possession transfers upon the payment of the last
installment;
> If the right to use and enjoy the property is reserved
to the seller until gathering the pending crops;
> If the seller has no control over the thing sold, and
hence its material delivery could not have been made.
- A person who does not have actual possession of the thing
sold cannot transfer constructive possession by the
execution and delivery of a public instrument.
- Control over the thing must be transferred, and not merely
ownership or right of possession.
- If there is no impediment to prevent the thing
sold from passing possession by the sole will of the seller,
execution of a public instrument is sufficient.
- If, however, the buyers cannot possess or enjoy the thing
as it is opposed by another, there is no delivery.
> If there is stipulation in the contract of sale that
“vendors would continue in possession for four
months”;
> If possession shall not be delivered until the
expiration of an existing lease over the property;
SALES | Prof. Jardeleza 35
> If the buyer shall not be entitled to take possession until
payment of the first installment of the price.
a. Symbolic Delivery
Article 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot
clearly be inferred.
With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or depository
where it is stored or kept.
NOTES:
Aviles v. Arcega (1922)
Facts:
- First Sale (sp Alcantara & Capulong -> Aviles)
> The house (erected on a leasehold land of the
Nagtahan estate) in dispute in this case was sold by the
spouses Venancio Alcantara and Vicenta Capulong to
the plaintiff Generosa Aviles, as evidenced by a
document acknowledged before Jose Galang Serano
(notary public)
>> Stipulation: During four months, the vendors
would continue in possession of the house, the
expenses for repairs, land and other tax to be for
their account, as well as the payment of the rent for
the lot on which it is erected.
>> The plaintiff Generosa Aviles never took
possession of the said property.
- Second Sale (sp Alcantara & Capulong -> sp de Leon &
Arcega)
> In a document and acknowledged on the following
day before Ariston Rivera (notary public), the same
property was sold by the same spouses Venancio
Alcantara and Vicente Capulong to the spouses
Fortunato de Leon and Segunda Arcega, who took
possession of the property
Held / Doctrine:
- Article 1462 Civil Code: If the sale should be made by
means of a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the subject-
matter of the contract unless the contrary appears or may
be clearly inferred from such instrument.
> When there is symbolic delivery: (1) when the sale is
made in a public document and (2) nothing appears
therein to the contrary either expressly or impliedly.
> Delivery of the thing as is supposed to be made by the
execution of the document, as provided in Article 1462,
although in that case it must be considered to take place
partly by operation of law.
- No such symbolic delivery can exist when there is a
stipulation to the contrary
> At the time of the execution of the deed in favor of the
plaintiff (first purchaser) there was no symbolic
delivery because there was an express stipulation to the
contrary.
> It cannot be said that after the lapse of the four
months following, during which the vendors were to

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continue in possession of the house, according to the
stipulation, any symbolic delivery subsisted.
> Nothing can subsist that did not exist before.
> It cannot be said that symbolic delivery
spontaneously took place after the lapse of the four
months stipulated, for there is no law providing that it
should take place after the execution of the document
where there is a stipulation to the contrary.
>> The law does not say that such a symbolic
delivery is suspended when at the execution of the
document a stipulation to the contrary is made.
>> What the law simply says is that no such
symbolic tradition can take place, — can exist —
when there is a stipulation to the contrary.
- Neither can it be said that the house must be presumed to
have been delivered to the first purchaser after the lapse of
the four months aforesaid, for such a presumption is
overthrown by the fact stipulated by the parties that this
first purchaser never took possession of the house.
Phil. Suburban v. Auditor General (1975)
Facts:
- The PHHC took possession of its purchased unoccupied
property in Bulacan and used it as a resettlement area for
squatters and flood victims from Manila and suburbs. It
subsequently purchased the entire area where the original
property bought was part of.
- Petitioner and PHHC entered into a contract embodied in a
public instrument entitled "Deed of Absolute Sale" but said
document was not registered in the Office of the Register of
Deeds until March 14, 1961.
- April 12, 1961, the Provincial Treasurer of Bulacan
requested the PHHC to withhold the amount of P30,099.79
(realty tax due on the subject property for the year 1961)
from the purchase price to be paid by PHHC. Petitioner,
through the PHHC, paid under protest the abovementioned
amount to the Provincial Treasurer of Bulacan.
- June 13, 1961, petitioner requested a refund of the amount
so paid. Petitioner claimed that it ceased to be the owner of
the land in question upon the execution of the Deed of
Absolute Sale on December 29, 1960. The said request was
denied.
Held / Doctrine:
- Under the civil law, delivery (tradition) as a mode of
transmission of ownership maybe actual (real tradition) or
constructive (constructive tradition). When the sale of real
property is made in a public instrument, the execution
thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or
cannot clearly be inferred. There is symbolic delivery of the
property subject of the sale by the execution of the public
instrument, unless from the express terms of the
instrument, or by clear inference therefrom, this was not the
intention of the parties.
Sarmiento v. Lesaca (1960)
Facts:
- Plaintiff bought from defendant two parcels of land for
P5,000. A deed of sale was executed in a public document.
After the sale, plaintiff tried to take actual and physical
possession of the lands but was prevented from doing so by
a certain Martin Deloso, who claims to be the owner thereof.
Plaintiff wrote the defendant asking the latter to change the
SALES | Prof. Jardeleza 36
lands sold with another of the same kind and class or to
return the purchase price together with the expenses she
incurred in the execution of the sale. Defendant did not
agree to either proposition, so plaintiff filed the present
petition.
Held / Doctrine:
- The vendor intended to place the vendee in actual
possession of the lands immediately as can be inferred from
the stipulation that the vendee “takes actual possession
thereof … with full rights to dispose, enjoy and make use
thereof in such manner and form as would be most
advantageous to herself” in the contract. The possession
referred to in the contract evidently refers to actual
possession and not merely symbolical inferable from the
mere execution of the document.
- As provided in Article 1462, the thing sold shall be deemed
delivered when the vendee is placed in the control and
possession thereof, which situation does not here obtain
because from the execution of the sale up to the present the
vendee was never able to take possession of the lands due
to the insistent refusal of Martin Deloso to surrender them
claiming ownership thereof. And although it is postulated in
the same article that the execution of a public document is
equivalent to delivery, this legal fiction only holds true
when there is no impediment that may prevent the passing
of the property from the hands of the vendor into those of
the vendee.
- The Code imposes upon the vendor the obligation to
deliver the thing sold. The thing is considered to be
delivered when it is placed “in the hands and possession of
the vendee.” (Civ. Code, art. 1462.) It is true that the same
article declares that the execution of a public instrument is
equivalent to the delivery of the thing which is the object of
the contract, but in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the
vendor shall have such control over the thing sold that, at
the moment of the sale, its material delivery could have
been made. It is not enough to confer upon the purchaser
the ownership and right of possession. The thing sold must
be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy
of the purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or
through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will,
then fiction yields to reality – the delivery has not been
effected.
Florendo v. Foz (1991)
Facts:
- Foz executed a contract, ratified before a notary, wherein
he sold, ceded, and conveyed to Florendo his house and
camarin, together with the lots on which they are erected,
for P6,000. Of this price, Foz had already received P2,000,
which is indicated in the contract and Florendo will pay the
remaining P4,000 when Foz goes to Vigan “during this or
the next month.”
- When Foz went to Vigan, Florendo paid the remaining
P4000, but payment was refused by Foz. Florendo instead
deposited the P4000 with the Municipal Treasurer as

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payment. Foz contended that the true price was P10,000,
and that he was made to believe that the price indicated in
the contract was P10,000 and not P6000. He alleged that the
contract was just read out to him.
Held / Doctrine:
- The instrument of contract is valid and effective. From the
validity and force of the contract is derived the obligation on
the part of the vendor to deliver the thing sold.
- Art. 1466 Civil Code states that the vendor shall not be
bound to deliver the thing sold, if the vendee should not
have paid the price, or if a period for the payment has not
been fixed in the contract. If in, the contract a period has
been fixed for the payment, the vendor must deliver the
thing sold.
> This provision contains a rule and an exception:
>> Rule: The thing shall not be delivered, unless the
price be paid.
>> Exception: The thing must be delivered, though
the price be not first paid, if a time for such
payment has been fixed in the contract.
> In the contract in question, a period was fixed for the
payment, thus making the contract fall under the
exception.
- It is the material delivery of the property sold which Foz
must make in compliance with the contract, inasmuch as the
formal delivery de jure was made, according to paragraph 2,
Article 1462 of the Civil Code: “When the sale should be
made by means of a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if in said instrument the
contrary does not appear or may be clearly inferred.”
- As the contrary does not appear nor is to be inferred from
the contract, its execution was really a formal or symbolical
delivery of the property sold and authorized Florendo to use
the title of ownership as proof that he was thenceforth the
owner of the property.
Masallo v. Cesar (1918)
Facts:
- While defendant was in possession of the land, one Matea
Crispino executed a deed of sale over the land to the
plaintiff. Crispino was not in possession of the land when
she sold it to plaintiff. After being sold the land, plaintiff and
his laborers went to plow it. Defendant then approached
them and insisted her right of ownership over the land.
Defendant took a bolo and cut the rope traces by which
plaintiff’s carabao was attached to the plow. Plaintiff
withdrew from the land and filed an action for ejectment
against the defendant.
Held / Doctrine:
- Plaintiff’s action can only succeed upon proof of prior
possession in himself or someone to whose rights he has
succeeded. Defendant was shown to have had prior peaceful
possession of the land for an indefinite time. Although
plaintiff bought the land with a deed of sale from Matea
Crispino, mere execution and delivery of the deed did not
constitute a delivery of possession because Matea Crispino
admits that she did not have possession of the land when
she executed the deed of sale to the plaintiff.
Asset Privatization Trust v. T.J. Enterprises 587 SCRA 481
(2009)
Facts:
SALES | Prof. Jardeleza 37
- Petitioner had acquired from the DBP assets consisting of
machinery and refrigeration equipment which were then
stored at Golden City compound, Pasay City.
- The compound was then leased to and in the physical
possession of Creative Lines, Inc. These assets were sold on
an as-is-where-is basis.
- November 7, 1990: Petitioner and respondent entered into
an absolute deed of sale over certain machinery and
refrigeration equipment identified as Lots Nos. 2, 3 and 5.
> Respondent paid the full amount of P84,000.00
(evidenced by petitioner’s receipt).
> After two (2) days, respondent demanded the
delivery of the machinery it had purchased.
- Sometime in March 1991: Petitioner issued a gate pass.
> Respondent was able to pull out from the compound
the properties designated as Lots Nos. 3 and 5.
> However, during the hauling of Lot No. 2 consisting of
sixteen (16) items, only nine (9) items were pulled out
by respondent.
> Creative Lines’ employees prevented respondent
from hauling the remaining machinery and equipment.
Held / Doctrine:
- No constructive delivery
- Delivery
> The ownership of a thing sold shall be transferred to
the vendee upon the actual or constructive delivery
thereof.
> The thing sold shall be understood as delivered when
it is placed in the control and possession of the vendee.
> As a general rule, when the sale is made through a
public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the
object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred.
> And with regard to movable property, its delivery
may also be made by the delivery of the keys of the
place or depository where it is stored or kept.
- Execution of public instrument
> In order for the execution of a public instrument to
effect tradition, the purchaser must be placed in control
of the thing sold.
> However, the execution of a public instrument only
gives rise to a prima facie presumption of delivery.
>> Such presumption is destroyed when the
delivery is not effected because of a legal
impediment.
>> It is necessary that the vendor shall have control
over the thing sold that, at the moment of sale, its
material delivery could have been made.
>> Thus, a person who does not have actual
possession of the thing sold cannot transfer
constructive possession by the execution and
delivery of a public instrument.
- Presumption of constructive delivery is not applicable
> The presumption of constructive delivery is not applicable
as it has to yield to the reality that the purchaser was not
placed in possession and control of the property.
b. Tradition Longa Manu
Article 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to the

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delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot
clearly be inferred.
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale, or if the
latter already had it in his possession for any other reason.
Article 1513. A person to whom a negotiable document of
title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser
in good faith for value and also such title to the goods as the
person to whose order the goods were to be delivered by
the terms of the document had or had ability to convey to a
purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document
to hold possession of the goods for him according to the
terms of the document as fully as if such bailee had
contracted directly with him.
Article 1514. A person to whom a document of title has
been transferred, but not negotiated, acquires thereby, as
against the transferor, the title to the goods, subject to the
terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires
the right to notify the bailee who issued the document of the
transfer thereof, and thereby to acquire the direct obligation
of such bailee to hold possession of the goods for him
according to the terms of the document.
Prior to the notification to such bailee by the transferor or
transferee of a non-negotiable document of title, the title of
the transferee to the goods and the right to acquire the
obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the
transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transferor of
a subsequent sale of the goods by the transferor.
NOTES:
- Roman Law: tradition longa manu takes place when the
thing is placed in the sight of the purchaser so that he can
take possession of it at pleasure.
- Civil Code: Delivery of movable property may be made:
> By the delivery of the keys of the place or depository
where it is stored or kept;
SALES | Prof. Jardeleza 38
> By mere consent or agreement if the thing
sold cannot be transferred to the possession of the
vendee at the time of the sale.
- In a case, where quedans were issued to the buyer for
goods sold located at the warehouse of the seller “placed at
the disposal of the buyer,” to be delivered three or four
months later, delivery was effected upon the execution of
the quedans. Seller merely became a depositary of the good
sold.
- In a contract for the salvage of surplus property, the
employer assigned all its rights and title to all surplus
property salvaged by the contractor at the price of P90 per
long ton, payment to be made monthly, on the basis of
recovery reports of sunken surplus property salvaged
during the preceding month, court held that it was a case of
tradition longa manu and ownership passed as soon the
property was salvaged.
Board of Liquidator v. Floro 110 Phil 482 (1960)
Facts:
- Melecio Malabanan entered into an agreement with the
Board for the salvage of surplus properties sunk in
territorial waters off the provinces of Mindoro, La Union,
and Batangas. Malabanan submitted a recovery report,
which stated that he had recovered a total of 13,107 pieces
of steel mattings
- Four months prior, Malabanan had entered into an
agreement with respondent Exequiel Floro where they
agreed that Floro would advance to Malabanan certain sums
of money as repayment of secured quantities of steel
mattings which Malabanan would consign to Floro. Floro
was, authorized to sell whatever steel mattings were in his
possession under said contract, in amount sufficient to
satisfy the advances.
- Malabanan was not able to repay Floro's advances. Floro in
turn, sold 11,047 pieces of steel mattings to Eulalio Legaspi.
- Malabanan filed in the CFI Manila a petition for voluntary
insolvency, in which the Board and Floro were listed as
creditors. Also included therein were the 11,167 pieces of
steel mattings.
- The Board, claiming to be the owner of the listed steel
matting, filed a petition to exclude them from the inventory.
Floro opposed the Board's petition and claimed that the
steel matting listed had become the property of Eulalio
Legaspi by virtue of a deed of sale in his favor, executed by
Floro pursuant to the latter's contract with Malabanan.
Held / Doctrine:
- There is nothing in the said contract which may be deemed
a reservation of title, or from which it may clearly be
inferred that delivery was not intended.
- While there was no physical tradition, there was one by
agreement (traditio longa manu) in conformity with Art.
1499 of the Civil Code: “The delivery of movable property
may likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time of
the sale.”

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c. Tradition Brevi Manu
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale, or if the
latter already had it in his possession for any other reason.
NOTES:
- Delivery of movable property takes place when the vendee
had the thing already in his possession before the sale took
place, not as owner but as lessee, borrower, or as a
depositary.
Abuan v. Garcia 14 SCRA 759 (1965)
Facts:
- The land in contention was originally acquired by
Laureano Abuan and was passed after his death to his legal
heirs, the plaintiffs. The latter sold the land to defendants,
evidenced by a Deed of Absolute Sale. Later, plaintiffs filed
an action to recover the land, claiming that the deed of
absolute sale had been executed through fraud, without
consideration. However, the parties managed to reach an
amicable settlement and instead entered into an
“Agreement.” Under the “Agreement,” defendants promised
to pay the balance on or before April 30, 1955. Claiming that
full payment had been effected only in May 1955, plaintiffs
instituted the present action for legal redemption (March
1960).
- Defendants moved to dismiss, on the ground that plaintiffs’
right of action was already barred, because the five-year
redemption period had expired. Plaintiffs, on the other
hand, argue that the five-year period should be counted
from May 1955, when full payment was effected.
Held / Doctrine:
- It began to run on Aug. 7, 1953, when the Deed of Absolute
Sale was executed. Plaintiffs’ right of action has therefore
prescribed.
- The law speaks of "five years from date of conveyance."
Conveyance means transfer of ownership; it means the date
when the title to the land is transferred from one person to
another. The five-year period should, therefore, be reckoned
with from the date that defendants acquired ownership of
the land.
- Under Art. 1498, when the sale is made through a public
instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot be
clearly inferred.
- The deed of sale was executed on August 7, 1953, which
was "superseded" by the Agreement of February 28, 1955,
as to the terms and conditions of payment of the purchase
price. The latter agreement did not operate to revest the
ownership of the land in the plaintiffs.
d. Tradition Constitutom Possessorium
Article 1500. There may also be tradition constitutum
possessorium.
NOTES:
SALES | Prof. Jardeleza 39
- Seller remains in possession of the property sold by virtue
of a lease agreement with the buyer.
- Buyer acquired ownership through constitutum
possessorium, and, as a lessor, become the legal possessor.
- Seller: Possesses the property in the name and
representation of the buyer.
- If the seller sells the property, second buyer cannot
acquire the land as he bought it from a mere tenant.
- If a saloon was sold in a private instrument, and the seller
was appointed as manager of the business by the buyer, the
buyer acquired ownership of the property by
tradition constitutum possessorium.
Bautista v. Sioson 39 Phil 615 (1919)
Facts:
- On Sept 4, 1912, the defendant Francisco Sioson and his
wife Lorenza through a notarial instrument, sold to the
plaintiff Rosalio Bautista a camarin or warehouse under the
right of repurchase. It was stipulated that if w/in 2 years
from the date of the contract the vendors or their successors
in interest should not repurchase said properties, such sale
should become absolute and the ownership in the
properties sold should be consolidated.
- On the same date, Bautista, through a notarial instrument,
leased the properties sold to him to the vendors (Sioson).
- On August 5, 1914, Sioson executed before a notary a
document by w/c he sold under right of repurchase to the
defendant Raymundo de la Cruz, the same camarin. And that
if within the period of 6 months Sioson should not make the
redemption stipulated, said sale should become absolute.
- The two said alienations were both set forth in notarial
instruments, and not recorded in the registry of property
- Bautista claims that Sioson has not repurchased the
camarin from him nor paid the price of the lease. At the time
of the complaint, de la Cruz was in possession of the
camarin
Held / Doctrine:
- Francisco Sioson, who sold to Cruz, occupied it as a mere
tenant and not as owner, and, consequently, was unable to
transmit to the purchaser any property right whatever nor
lawful possession under title of owner.
- Where the vendor on the same date on which the deed of
sale is executed by means of a constitutum possessorium
agreement converts himself into a tenant or lessee of the
property that he sold, and continues in possession thereof
as such tenant, the purchaser who acquired the property
through delivery or symbolic tradition with all the
consequent effects of a deed of conveyance is deemed to be
in possession thereof by the express will of the contracting
parties, and, therefore, it must be recognized that through
such constitutum possessorium agreement, the purchaser
who by that covenant became the lessor is in lawful
possession of the leased property, and that the vendor by
the same covenant, converted himself into the lessee and is
in material possession of the leased property in the name
and representation of the purchaser, its lawful owner.
- It logically follows that the second purchaser who acquired
the property from the lessee or tenant and who through the
acts of the latter entered into the material possession of the
property by virtue of the second sale could not have
acquired any right of ownership therein, inasmuch as he
received the property not from its lawful owner, but from a
mere tenant or lessee who had no right whatever to dispose

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of it; therefore, the second purchaser's possession is merely
precarious and was taken after the first purchaser had
exercised his right of possession, and the possession of the
second purchaser cannot prevail over that previously
obtained by the first purchaser.
e. Delivery to a Common Carrier
Article 1523. Where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to the
buyer, delivery of the goods to a carrier, whether named by
the buyer or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the buyer,
except in the cases provided for in article 1503, first, second
and third paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer
as may be reasonable, having regard to the nature of the
goods and the other circumstances of the case. If the seller
omit so to do, and the goods are lost or damaged in course
of transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent by the seller
to the buyer under circumstances in which the seller knows
or ought to know that it is usual to insure, the seller must
give such notice to the buyer as may enable him to insure
them during their transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk during such transit.
NOTES:
- Where the seller is authorized or required under the
contract to transmit the goods to the buyer through a
common carrier, delivery of the goods to the carrier is
considered delivery to the buyer, and hence, title passed
to the buyer at the point of shipment, unless by the form
of the bill of lading, the seller reserved title, with intent
to remain the owner for all purposes, and not merely for
the sole purpose of securing payment, or unless the
contrary intent appears in the contract of sale, as where
the seller is required to deliver the goods to the buyer at
the point of destination.
- This rule is in accordance with that of the Uniform sales
Act in order to determine the intent of the parties as to
the time the title to the goods is to pass to the buyer.
- Specific goods, deliverable: Title passes to the buyer at
the time the contract was entered into.
- Specific goods, seller does things to make the
thing deliverable: Title passes to the buyer upon making
the thing deliverable.
- Goods sold by description, determinable at the time of
the contract, and delivered to a common carrier to
transmit to the buyer: Seller is presumed to have
unconditionally set aside the goods for the buyer. Title
passes to the buyer at the point of shipment, unless the
contract requires the seller to deliver the goods to the
buyer at a particular place, or where ownership was
reserved by the seller, as shown by the form of the bill of
lading.
SALES | Prof. Jardeleza 40
- If an F.O.B delivery to the carrier is authorized by the
buyer, delivery to the carrier is tantamount to delivery to
the buyer, even he will have possession of the goods
until the seller has paid, as the bill of lading with
the draft for the price was forwarded to the seller’s
agent. Court stated that the Uniform Sales Act
contemplates that the seller may, at his option, reserve
the jus dispodendi and the risk of loss follows
the beneficial interest in accordance with the intent of
the parties, and not the legal title held merely as security
for the payment of the price.
Terms “F.O.B.,” “C.I.F.,” “F.A.S.”
- General rule: Delivery by the seller to the common
carrier transfers title to the buyer.
- Payment of freight: Determinative of intent of the
parties as to the place of delivery.
- Buyer pays freight: Buyer owns goods at the point of
shipment.
- Seller pays freight: Seller has to transport the
goods to the ultimate destination before title passes to
the buyer.
- F.O.B.: Free on board. Seller bears transportation cost
up to the F.O.B. point.
- C.I.F.: Cost, Insurance and Freight. Price quoted
includes the price of the goods, insurance and freight
charges on the goods up to the place of destination.
- F.A.S.: Free alongside. Seller bears the transportation
expenses until he delivers the goods to a vessel at a
named port.
- These are merely used to fix the price and not the place
of delivery to the buyer, as it is not uncommon to impose
duties to the seller beyond the FOB point if the price for
such service was paid.
- Best indication of the intent of the parties as to the
place of delivery of the goods: Manner and place of
payment of price agreed upon by the parties.
- Price payable upon proof of shipment: buyer accepts
delivery at the point of shipment.
- Price payable upon arrival at the point of destination:
destination is the place of delivery to the buyer.
“FOB Sales”
(“Free on board” means that the seller bears expenses of
transportation up to the f.o.b. point.)
Behn Meyer v. Yangco 38 Phil 602 (1918)
Facts:
- A memorandum of agreement was executed between
Behn, Meyer & Co. and Yangco.
- The contract provided for the following:
> 80 drums Caustic Soda 76% Carabao brand al precio
de Dollar Gold Nine and 75/100 per 100-lbs.
> c.i.f. Manila, pagadero against delivery of documents.
> Time of delivery: “Embarque: March 1916.”
>> The merchandise was shipped from New York
on the Steamship Chinese Prince on April 12, 1916.
- The payment would be effected upon delivery of the
documents.
- The steamship was detained by British authorities at
Penang and part of the cargo, including 71 drums of caustic
soda, was removed.

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- Defendant refused to accept delivery of the remaining nine
drums of soda on the ground that the goods were in bad
order.
- Defendant also refused the optional offer of the plaintiff of
waiting for the remainder of the shipment until its arrival or
of accepting the substitution of 71 drums of caustic soda of
similar grade from plaintiff’s stock.
Held / Doctrine:
- Determination of the place of delivery always resolves
itself into a question of fact. If the contract is silent as to the
person or mode by which the goods are to be sent, delivery
by the vendor to a common carrier, in the usual and
ordinary course of business, transfers the property to the
vendee.
- The letters “c.i.f.” in British contracts stand for costs,
insurance and freight. They signify that the price fixed
covers not only the cost of the goods but the expense of
freight and insurance to be paid by the seller.
- The letters “F.O.B.” stand for the words “Free on Board.” It
means that the seller shall bear all expenses until the goods
are delivered where they are to be “F.O.B.”
- Both terms make rules of presumption. The word “Manila”
in conjunction with the letters “c.i.f” must mean that the
contract price, covering costs, insurance, and freight
signifies delivery was to be made in Manila.
“CIF Sales”
(“Cost, insurance, freight” signifies that the price quoted
includes the costs of the goods, insurance, and freight
charges on the goods up to the place of destination)
General Food v. Nacoco 100 Phil 637 (1956)
Facts:
- NACOCO sold to GFC 1,000 long tons of copra, at USD163
per ton of 2,000 pounds.
- NACOCO shipped 1,054.6278 short tons of copra to GFC on
board the S. S. “Mindoro.”
- The weighing of the cargo was done by the Luzon
Brokerage Co. On the strength of the net weigh thus found,
NACOCO prepared and remitted to GFC the corresponding
bills of lading and other documents, and withdrew from the
latter’s letter of credit 95% of the invoice value of the
shipment, or a total of USD136,686.95.
- Upon arrival in New York, the net cargo was reweighed by
GFC and was found to weigh only 898.792 short tons.
> Deducting from the value of the shortage the sum of
USD8,092.02 received by GFC from the insurer for
58.25 long tons lost or destroyed even before the copra
was loaded on board the vessel, GFC demanded from
NACOCO the refund of the remaining amount.
Held / Doctrine:
- Under an ordinary C.I.F. agreement, delivery to the buyer
is complete upon delivery of the goods to the carrier and
tender of the shipping and other documents required by the
contract and the insurance policy taken in the buyer’s
behalf.
- Parties may, by express stipulation or impliedly (by
making the buyer’s obligation depend on arrival and
inspection of the goods), modify a C.I.F. contract and throw
the risk upon the seller until arrival in the port of
destination.
- Warner, Barnes & Co. vs. Warner Sugar R. Co.: The
reasonable construction given by the Court to this contract
SALES | Prof. Jardeleza 41
was that “though the seller was required to deliver the
goods at a customary wharf in New York, and the price
could not be finally determined until the goods were landed,
yet the property in the goods and the risk of loss was
intended to pass when the full shipping documents were
presented, including an insurance policy. If the goods were
totally lost, then by the express terms of the contract the
buyers were to pay the full amount of invoice and if the
goods were partially lost, then it is fairly inferable that,
while payment was to be made according to landed weights,
the seller should not be deprived of the right to show that
these landed weights were diminished by loss or damage
due to the risk of the voyage. Any other construction of the
contract would require the seller to provide insurance for
the buyer for a loss which falls not on the buyer, but on the
seller.”
- While the risk of loss was apparently placed on GFC after
delivery of the cargo to the carrier, it was nevertheless
agreed that the payment of the price was to be according to
the “net landed weight”.
> NACOCO had the burden of proof to show that the
shortage in weight upon arrival in New York was due to
risks of the voyage and not the natural drying up of the
copra while in transit, or to reasonable allowances for
errors in the weighing of the gross cargo and the empty
bags in Manila.
“FAS”
(“Free alongside” means that the seller bears the expenses
of transportation until he delivers the goods alongside a
vessel at a named post.)
Effect of form of bill of lading
Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership in the goods until
certain conditions have been fulfilled. The right of
possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to
a carrier or other bailee for the purpose of transmission to
the buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of
the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill
of lading, the ownership would have passed to the buyer on
shipment of the goods, the seller's property in the goods
shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the
contract.
Where goods are shipped, and by the bill of lading the goods
are deliverable to order of the buyer or of his agent, but
possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession
of the goods as against the buyer.

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Where the seller of goods draws on the buyer for the price
and transmits the bill of exchange and bill of lading together
to the buyer to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill of lading if he
does not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in good faith, for value, the bill
of lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the facts
making the transfer wrongful.
NOTES:
- The seller may, by the form of the bill of lading:
> Consign the goods to himself or to his agent and thus
prevent title from passing to the buyer until the latter
pays the price (Seller is presumed to have reserved
ownership over the goods, despite delivery to the
common carrier.)
> Consign the goods to the order of the buyer or the
latter’s agent, but by retaining the negotiable bill of
lading, he thereby prevents the buyer from obtaining
the goods from the carrier until the price is paid (Seller
is presumed to have retained merely possession over
the goods; title passed to the buyer at the point
of shipment).
- When the seller forwards the bill of lading together with
the draft drawn on the buyer for the price, the presumed
intention of the seller is not to part with ownership over the
goods until the draft is honored by the buyer.
- The form in which the bill of lading is taken as indicative of
title to the goods is not conclusive and is thus rebuttable.
- In a case, where the contract provided that
notwithstanding the fact that the goods are shipped to the
seller’s order, the goods are at the risk of the buyer from
and after delivery to the carrier, the consignment of
the goods to the order of the seller shows that the title
reserved by the seller was only for the purpose of security,
and the beneficial interest in the goods passed to the buyer
at the point of shipment.
- In a case, although the goods were shipped and consigned
to the buyer under a straight bill of lading, but the
circumstances show that the parties were aware of the
pending strike, and the sale was dependent on the ability of
the mill to ship the goods, the terms “cash on receipt of the
merchandise at the destination point” in the contract
indicate their intention that the title was not to pass to the
buyer until the latter received the goods at the destination
point.
- In a case, where the contract involved a sale of goods to be
shipped from Hamburg, cif New York, and the terms of the
contract state: “ Payment-net cash against shipping
documents payable upon arrival of the steamer; No
SALES | Prof. Jardeleza 42
arrival, no sale; Insurance – for the account of the seller,”
the court held that there was not a mere postponement of
the time of payment of the price but an agreement
that if the steamer did not arrive, no payments were to be
made, thus showing that the risk of the voyage was on the
seller, and that title was not transferred to the
buyer upon delivery to the carrier, the terms cif referring
only to the price.
DOUBLE SALES
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
NOTES:
- If the same thing should have been sold by the owner to
different buyers, the question as to who of the latter
acquired ownership depends on the nature of the thing sold.
- Prior the Spanish Code: Preference is given to the
purchaser who first took possession of the thing sold,
even it involved an immovable.
- Spanish Civil Code: Distinguished between movables
and immovables to harmonize the Code with the Spanish
Mortgage Law of 1889.
- Movables: Delivery transfers ownership to an innocent
buyer.
- Immovables: Registration of the deed of sale in the registry
of property is necessary to prejudice other buyers of the
property.
- Spanish Mortgage Law: Required registration of
titles and instruments affecting real property to prejudice
third persons.
- Act No. 496 (1912): Registration of the title is the
operative act to convey and affect the land.
- Act No. 2387 (1918): Instruments affecting unregistered
lands should be recorded without prejudice to a third party
with a better right.
- Rationale: Recording does not come after
investigation to determine validity or efficacy of the
instrument, and hence it may prejudice those who
subsequently acquire interest therein.
- Unregistered lands have no titles, and hence, owners claim
ownership through payment of taxes, and continuous,
adverse and public possession for 30 years or more.
(understood as they acquired the lands through
prescription)
- PD 892 (1976): Abrogated Spanish Mortgage Law and
stated that Owner of lands having Spanish titles are
required to file application for registration under the
Torrens System within six (6) months; Spanish titles will no

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longer be evidence of ownership, and they will be
considered unregistered land; transactions affecting
them shall be recorded under Act 3344, now Sec. 113, PD
1529.
1. General Rule – Prior tempore, prior jure
NOTES:
- General Rule: FIRST IN TIME, PRIORITY IN RIGHT
(PRIMUS TEMPORE, POTIOR JURE)
- Application of the general rule: When not all requisites
embodied in Art. 1544 concur.
Carbonell v. CA 69 SCRA 99 (1976)
Facts:
- Respondent Poncio was the owner of the subject parcel of
land, mortgaged in favor of the Republic Savings Bank. Both
petitioners Carbonell and respondent Infante offered to buy
the said lot from Poncio.
- Petitioner Carbonell and respondent Poncio came into
agreement that petitioner is to buy said lot on the condition
that from the purchase price would come the money to be
paid to the bank.
- Petitioner and respondent, in the presence of a witness,
made and executed a document in the Batanes dialect, a
contract for half lot which petitioner bought from Poncio.
- A formal deed of sale was prepared but Carbonell was told
by Poncio that he could not proceed any more with the sale
because he had already given the lot to respondent Infante.
- Respondent Poncio executed the formal deed of sale in
favor of respondent Infante who paid P1,500 to Republic
Savings Bank for the mortgage indebtedness; and so, the
mortgage on the lot was eventually discharged.
- The deed of sale in favor of respondent Infante was
registered but on the Transfer Certificate of Title that was
issued to her, there was the annotation of the adverse claim
of petitioner Carbonell.
Held / Doctrine:
- The Court cited Art.1544, New Civil Code:
xxx (2) Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
(3) Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
> It is essential that the buyer of realty must act in good
faith in registering his deed of sale to merit the
protection of the second paragraph of said Article 1544.
> The second paragraph directs that ownership of
immovable property should be recognized in favor of
one “who in good faith first recorded” his right.
> The third paragraph says that if there is inscription, as in
the case at bar, prior registration in good faith is a pre-
condition to superior title.
2. Requisites for Double Sale
Requisites for Double Sale
- Exactly same subject matter
- Exactly same immediate seller
- Buyers represent conflicting interest
SALES | Prof. Jardeleza 43
- Both sales are valid
According to Art. 1544 of the Civil Code:
- Movable
> The owner is the one who is first to possess in good
faith.
- Immovable
> First to register in good faith
> No inscription, first to possess in good faith
> No inscription and no possession in good faith
(Person who presents oldest title in good faith)
Cheng v. Genato 300 SCRA 722 (1998)
Facts:
- Genato is the owner of two parcels of land in Bulacan. He
entered into a contract to sell with the Da Jose spouses,
which was executed in a public instrument and annotated at
the back of the two certificates of title. The spouses failed to
pay the full purchase price indicated in the contract, so they
asked for an extension of 30 days. Pending the effectivity of
the said extension period, and without due notice to the
spouses, Genato executed an Affidavit to Annul the Contract
to Sell.
- Subsequently, Cheng expressed interest over the parcels of
land. Genato showed Cheng copies of his TCT’s and the
annotations at the back containing his contract to sell with
the Da Jose spouses. Despite this, Cheng issued a check for
P50,000 upon the guaranty that the previous contract with
the Da Jose spouses will be annulled.
- The spouses chanced upon Genato and it was only then
that they discovered the affidavit to annul their contract.
They were shocked and protested against the rescission of
the contract. After reminding Genato that the 30-day
extension period was still in effect, and that they were
willing and able to pay the purchase price, Genato decided
to continue the contract he had with them. This agreement
was formalized in a conforme letter.
- Cheng demanded that Genato execute a deed of sale in his
favor, on the ground that the check he gave was partial
payment to the agreed purchase price and considered as
earnest money, which Genato accepted. Thus, the contract
was already perfected.
- The Da Jose spouses, on the other hand, assert that they
have a superior right to the property as first buyers. They
allege that the unilateral cancellation of the contract to sell
was null and void. They also cite Cheng’s bad faith as a
buyer being duly informed of the contract to sell between
Genato and the spouses.
Held / Doctrine:
- Art. 1544 is inapplicable since the contract to sell
contemplates neither a transfer of ownership nor a sales
transaction. The provision connotes that following concur:
1) The two (or more) sales transactions in the issue
must pertain to exactly the same subject matter, and
must be valid sales transactions;
2) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests; and
3) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought
from the very same seller.
- Nevertheless, the governing principle in Art. 1544 should
apply in this case. Jurisprudence teaches us that the

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governing principle is PRIMUS TEMPORE, PORTIOR JURE
(first in time, stronger in right). Not only was the contract
between Genato and the spouses first in time; it was also
registered long before Cheng’s intrusion as a second buyer.
- Under Art. 1544, for the second buyer to displace the first
buyer:
1) The second buyer must show that he acted in good
faith from the time of acquisition until title is
transferred to him; and
2) The second buyer must show continuing good faith and
innocence or lack of knowledge of the first sale until his
contract ripens into full ownership.
3. Who is purchaser in good faith
Must Be In Good Faith
- Purchaser in good faith
> One who buys property without notice that another
person has a right or interest in such property
> One who has paid price before notice that another has
claim or interest
- lis pendens: notice that subject matter is in litigation
- adverse claim: notice that somebody is claiming better
right
- Possessor in good faith: One who is not aware that there
exists in his title or mode of acquisition any flaw
which invalidates it. Mistake upon a doubtful or difficult
question of law may be the basis of good faith.
- Good faith is always presumed, and the burden of proving
bad faith is on the person alleging it.
- Possession acquired in good faith does not lose this
character except in the case and from the moment facts
exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully.
- Leung Yee v. F.L. Strong Machinery: One who purchase real
estate with knowledge of a defect or lack of title in his
vendor cannot claim good faith as well as one who has
knowledge of facts which should have put him upon
such inquiry or investigation as might be necessary to
acquaint him with the defects in the title of his vendor… His
mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of
existence of a defect in the vendor’s title, will not make him
an innocent purchaser for value if afterwards develop that
tile was in fact defective and it appears that he had such
notice of the defect as would have led to its discovery had he
acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation.
- Good faith consists in an honest intention to abstain from
taking any unconscientious advantage of another.
- The good faith of the second buyer must continue
until his contract ripens into ownership by tradition or
recording.
- Lands registered under the Torrens system:
> Buyer buys from registered owner: Buyer may rely
only on the certificate of title issued in the name of the
buyer; he is not required to trace its origin to prior
certificates of title.
> Buyer buys not from registered owner: He is
expected to examine all factual circumstances
necessary to determine flaws in the title or the
seller’s capacity to sell the land.
SALES | Prof. Jardeleza 44
> Buyer buys from one whose right is annotated in the
certificate of title: He is not an innocent purchaser if it
turns out that the seller is not the sole owner of the
land.
Agricultural and Home Extension v. CA 213 SCRA 536 (1992)
Facts:
- Spouses Diaz sold to Gundran a 19-hectare parcel of land
in Las Piñas, Rizal, and the owner’s duplicate copy of the
title was turned over to the latter. However, Gundran did
not register the Deed of Absolute Sale because he was
advised in the Office of the Register of Deeds of Pasig of the
existence of notices of lis pendens on the title.
- Gundran and petitioner Agricultural and Home
Development Group, entered into a Joint Venture
Agreement for the improvement and subdivision of the land.
This agreement was likewise not annotated on the title.
- Four years later, the spouses Diaz again entered into
another contract of sale of the same property with
respondent Cabautan.
- By virtue of an order of the CFI of Rizal, a new copy of the
certificate of title over the land was issued to the Diaz
spouses, who had alleged the loss of their copy. On the same
day, the notices of lis pendens annotated on the original
certificate of title were cancelled and the Deed of Sale in
favor of Cabautan was registered. A new TCT was thereupon
issued in his name.
Held / Doctrine:
- “Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.”
- PURCHASER IN GOOD FAITH  one who buys the
property of another without notice that some other person
has a right to or interest in such property and pays a full and
fair price for the same at the time of such purchase or before
he has notice of the claim or interest of some other person
in the property.
- While it is true that notices of lis pendens in favor of other
persons were earlier inscribed on the title, these did not
have the effect of establishing a lien or encumbrance on the
property affected. Their only purpose was to give notice to
third persons and to the whole world that any interest they
may acquire in the property pending litigation would be
subject to the result of the suit.
- Justice Paras: “…no one can sell what he does not own, but
this is merely the general rule. Is Art. 1544 then an
exception to the general rule? In a sense, yes, by reason of
public convenience; in still another sense, it really reiterates
the general rule that insofar as innocent third persons are
concerned, the registered owner (in case of real property) is
still the owner, with power of disposition.”

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4. Priority of registration over possession
Possession
- Both actual or constructive
Registration
- Any entry made in the books in the registry, including both
registration in its ordinary and strict sense, and
cancellation, annotation, and even marginal notes. It is the
entry made in the registry which records solemnly and
permanently the right of ownership and other real rights.
- If #1: registered under Torrens system
> Art. 1544 applies
- If #2: not registered under the Torrens system
> Art. 1544 does not apply
> Under Act No. 3344, registration of documents
affecting unregistered land is without prejudice to a
third party with a better right.‖ The mere registration
of a sale in one’s favor does not give him any right over
the land if the vendor was not anymore the owner of
the land, having previously sold the same to
somebody else, even if the earlier sale was
unrecorded.
- If sale for 1 occurs when land is not yet registered &
sale 2 is done when land is already registered: apply
FIRST IN TIME, PRIORITY IN RIGHT
- Registration by the first buyer under Act 3344 can have
the effect of constructive notice to the second buyer that can
defeat his right as such buyer.
5. Sale of Movables
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
Article 1497. The thing sold shall be understood as
delivered, when it is placed in the control and possession of
the vendee.
Article 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if
from the deed the contrary does not appear or cannot
clearly be inferred.
With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or depository
where it is stored or kept.
SALES | Prof. Jardeleza 45
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of the sale, or if the
latter already had it in his possession for any other reason.
Article 1500. There may also be tradition constitutum
possessorium.
Article 1501. With respect to incorporeal property, the
provisions of the first paragraph of article 1498 shall
govern. In any other case wherein said provisions are not
applicable, the placing of the titles of ownership in the
possession of the vendee or the use by the vendee of his
rights, with the vendor's consent, shall be understood as a
delivery.
NOTES:
Rule Governing Sale of Movables
- NCC: Same as Spanish Civil Code
- If the same thing should have been sold to different
vendees, the ownership shall be transferred to a person
who may have first taken possession thereof in good faith.
- Delivery may be made in different forms provided in Arts.
1497 to 1501, NCC.
- If there are two sales, both buyers are in good faith, but the
other has obtained delivery through tradition constitutum
possessorium, he shall be deemed the owner of the
movable.
Rivera v. Ong 37 Phil 355 (1917)
Facts:
- Plaintiff purchased steam boilers and chimneys from the
house of Lichauco, which was offering for sale such
materials. The goods remained at the store because plaintiff
did not take possession immediately. Almost a month after,
defendant bought machinery and junk from the store which
he immediately took possession of. When plaintiff came to
claim his goods, it was found out that many of the auxiliary
parts of his order was with the defendant by virtue of
defendant’s purchase of machinery and junk.
Held / Doctrine:
- Defendant was a purchaser in good faith and acquired
possession of the subject matter first, hence having a better
title than the plaintiff who has never had possession at all.
- Where two different agents of the same owner
successively negotiated sales to two different buyers, the
buyer having acquired possession first must be declared the
true owner.
- Also, plaintiff failed to prove his own title to the subject
matter. The defendant had, in his favor, the fact that he was
a purchaser in good faith and had acquired lawful
possession. There is a presumption arising from such
possession that he was the owner.
6. Sale of Immovables
Article 1544. Par. 2. Should it be immovable property, the
ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
NOTES:

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Rule Governing Sale of Immovables (General Rule)
- If the thing sold should be immovable property, the
ownership shall belong to the person acquiring it, who, in
good faith, first recorded it in the Registry of Property.
- When an unregistered land is sold to two buyers, the latter
filing an adverse claim in the Registry of Property, the latter
acquires ownership of the property as the recording of
adverse claim has given him preference over the property.
Carbonell v. CA 69 SCRA 99 (1976)
Facts:
- Respondent Poncio was the owner of the subject parcel of
land, mortgaged in favor of the Republic Savings Bank. Both
petitioners Carbonell and respondent Infante offered to buy
the said lot from Poncio.
- Petitioner Carbonell and respondent Poncio came into
agreement that petitioner is to buy said lot on the condition
that from the purchase price would come the money to be
paid to the bank.
- Petitioner and respondent, in the presence of a witness,
made and executed a document in the Batanes dialect, a
contract for half lot which petitioner bought from Poncio.
- A formal deed of sale was prepared but Carbonell was told
by Poncio that he could not proceed any more with the sale
because he had already given the lot to respondent Infante.
- Respondent Poncio executed the formal deed of sale in
favor of respondent Infante who paid P1,500 to Republic
Savings Bank for the mortgage indebtedness; and so, the
mortgage on the lot was eventually discharged.
- The deed of sale in favor of respondent Infante was
registered but on the Transfer Certificate of Title that was
issued to her, there was the annotation of the adverse claim
of petitioner Carbonell.
Held / Doctrine:
- The Court cited Art.1544, New Civil Code:
(2) Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
(3) Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
> It is essential that the buyer of realty must act in good
faith in registering his deed of sale to merit the
protection of the second paragraph of said Article 1544.
> The second paragraph directs that ownership of
immovable property should be recognized in favor of
one “who in good faith first recorded” his right.
> The third paragraph says that if there is inscription,
as in the case at bar, prior registration in good faith is a
pre-condition to superior title.
7. Sale by virtue of execution and attachment
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
SALES | Prof. Jardeleza 46
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
NOTES:
Sales by Virtue of Execution and Attachment
- General rule in Art. 1544, NCC is not applicable to
execution sales because purchaser acquires the rights,
titles or interests of the judgment debtor over the
property at the time of levy, since he has the duty to
determine the rights of the judgment debtor before bidding.
- Spanish Law of Civil Procedure and Spanish Mortgage Law:
attaching creditors are not “third persons” and hence
attachment or execution cannot prejudice prior
unrecorded sales made by the judgment creditor, and
is preferred only over claims contracted subsequent to its
recording.
- This does not apply to lands registered under Act 496,
since registration of instrument shall be the operative act to
convey and affect the land, hence unrecorded sales cannot
prejudice execution sales, if no third-party claim was
presented before the execution sale took place.
- A bona fide purchaser of a registered land at an execution
sale acquires a good title as against a prior
transferee of an unrecorded transfer.
Carumba v. CA 31 SCRA 558 (1970)
Facts:
- Spouses Amado Canuto (petitioner’s brother-in-law) &
Nemesia Ibasco, by virtue of a "Deed of Sale of Unregistered
Land with Covenants of Warranty" sold a parcel of land to
the spouses petitioner Amado Carumba and Benita Canuto,
for the sum of P350.00. Said deed of sale was never
registered in the Office of the Register of Deeds of
Camarines Sur, and the Notary, Mr. Vicente Malaya, was not
then an authorized notary public in the place.
- Two years later, a complaint for a sum or money was filed
by Santiago Balbuena against vendor spouses Amado
Canuto & Nemesia Ibasco. The lower court rendered a
decision in favor of Balbuena.
- Ex-officio Sheriff, Imperial, issued a "Definite Deed of Sale”
of the subject property in favor of Balbuena. The subject
property was then declared for taxation purposes in the
name of Santiago Balbuena.
Held / Doctrine:
- While under Art. 1544 registration in good faith prevails
over possession in the event of a double sale by the vendor
of the same piece of land to different vendees, said article is
of no application to the case at bar, even if Balbuena, the
later vendee, was ignorant of the prior sale made by his
judgment debtor in favor of petitioner Carumba – because
the purchaser of unregistered land at a sheriff's execution
sale only steps into the shoes of the judgment debtor, and
merely acquires the latter's interest in the property sold as
of the time the property was levied upon. As Sec. 35 of Rule
39 of the Revised ROC, par. 2 provides:

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“Upon the execution and delivery of said (final) deed the
purchaser, redemptioner, or his assignee shall be
substituted to and acquire all the right, title, interest, and
claim of the judgment debtor to the property as of the time
of the levy, except as against the judgment debtor in
possession, in which case the substitution shall be effective
as of the time of the deed.”
- When the levy was made by the Sheriff, the spouses Canuto
no longer had dominical interest nor any real right over the
land that could pass to the purchaser at the execution sale.
Hence, the latter must yield the land to petitioner Carumba.
8. Meaning of “Better Right”
- A person having a “better right” would be one who
had previously acquired ownership thereof
through the modes of acquiring ownership under
the Civil Code: tradition as a result of sale,
donation, succession and prescription.
Hanopol v. Pilapil 7 SCRA 452 (1963)
Facts:
- Hanopol claims ownership of the land by virtue of a series
of purchases effected in 1938 by means of private
instruments, executed by the former owners. In a previous
civil case, Hanopol filed a complaint against the same
vendors who re-took possession through fraud, threat, and
intimidation. The decision declared him the exclusive owner
of the land in question.
- On the other hand, Pilapil asserts title to the property on
the strength of a duly notarized deed of sale executed in his
favor by the same owners in 1945. This was registered in
the Register of Deeds in Leyte under the provisions of Act
No. 3344.
Held / Doctrine:
- The "better right" referred to in Act No. 3344 is much more
than the mere prior deed of sale in favor of the first vendee.
In the case of Lichauco v. Berrenguer, it was the prescriptive
right that had supervened. Or, as also suggested in that case,
other facts and circumstances exist which, in addition to his
deed of sale, the first vendee can be said to have better right
than the second purchaser. In the case at bar, there appears
to be no clear evidence of Hanopol's possession of the land
in controversy.
9. Unregistered land
PD 1529 (Property Registration Decree)
Section 113. Recording of instruments relating to
unregistered lands.
No deed, conveyance, mortgage, lease, or other voluntary
instrument affecting land not registered under the Torrens
system shall be valid, except as between the parties thereto,
unless such instrument shall have been recorded in the
manner herein prescribed in the office of the Register of
Deeds for the province or city where the land lies.
(a) The Register of Deeds for each province or city shall
keep a Primary Entry Book
and a Registration Book. The Primary Entry Book shall
contain, among other particulars, the entry number, the
names of the parties, the nature of the document, the date,
hour and minute it was presented and received. The
SALES | Prof. Jardeleza 47
recording of the deed and other instruments relating to
unregistered lands shall be effected by any of annotation on
the space provided therefor in the Registration Book, after
the same shall have been entered in the Primary Entry
Book.
(b) If, on the face of the instrument, it appears that it is
sufficient in law, the Register of Deeds shall forthwith
record the instrument in the manner provided herein. In
case the Register of Deeds refuses its administration to
record, said official shall advise the party in interest in
writing of the ground or grounds for his refusal, and the
latter may appeal the matter to the Commissioner of Land
Registration in accordance with the provisions of Section
117 of this Decree. It shall be understood that any recording
made under this section shall be without prejudice to a third
party with a better right.
(c) After recording on the Record Book, the Register of
Deeds shall endorse among other things, upon the original
of the recorded instruments, the file number and the date as
well as the hour and minute when the document was
received for recording as shown in the Primary Entry Book.
NOTES:
- Art. 1544, NCC can apply to registered lands.
- Instruments affecting unregistered lands are required
to be registered in the Registry of Property to prejudice
third persons, “without prejudice to a third party with a
better right.”
- Mere registration of sale in one’s favor does not give him
any right over the land, if the vendor is not owner of the
land, or had already parted with his ownership before such
sale, in favor of a third party who had previously taken
possession of the land, even though the prior sale was
unrecorded.
- “Better right”: Acquired ownership through the modes
provided in the Civil Code (tradition as a result of sale,
donation, succession whether testate or intestate, or
prescription).
- Recorded conveyance may be used to determine
subsequent conveyance or encumbrances, but previous
conveyances must be investigated independent of the
recorded conveyance.
- Jovellanos v. Dimalanta: Prior possessor was
declared to be preferred against a prior recorder of the
adverse claim in the cadastral proceedings.
- Lichauco v. Berenguer: A better unrecorded right which
prevails over a recorded sale is one which was gained
independently of the sale, as title by prescription.
Dagupan v. Macam 14 SCRA 179 (1965)
Facts:
- Sammy Maron and his seven siblings owned a parcel of
unregistered land. While their application for registration of
said land under Act No. 496 was pending, they executed two
deeds of sale conveying the property to appellee Macam
who took possession and made substantial improvements
therein. A month later, certificate of registration of the land
was issued in the name of the Maron's, free from all liens
and encumbrances.

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- By virtue of a civil case of final judgment in favor of the
Municipal Court of Manila against Sammy Maron, levy was
made upon whatever interest he had in the property in
question, and thereafter said interest was sold at public
auction to the judgment creditor. The corresponding notice
of levy, certificate of sale and the Sheriff's certificate of final
sale in favor of the Manila Trading and Supply Co. —
because nobody exercised the right of redemptions — were
duly registered. The latter sold all its rights and title to the
property to appellant, Dagupan Trading.
- Actions were filed arguing as to who had the better right
over the property.
Held / Doctrine:
- Where for a considerable time prior to the levy on
execution interest of the owner of the land levied upon had
already been conveyed to another who took possession
thereof and introduced improvements thereon, the said levy
is void. The prior sale, although, unregistered, cannot be
defeated by subsequent execution sale and registration of or
issuance of Title over the land.
- In this case, what should determine the issue are the
provisions of the last paragraph of Section 35, Rule 39 of the
Rules of Court, to the effect that upon the execution and
delivery of the final certificate of sale in favor of the
purchaser of land sold in an execution sale, such purchaser
"shall be substituted to and acquire all the right, title,
interest and claim of the judgment debtor to the property as
of the time of the levy."
- At the time of the levy, Sammy Maron had no more interest
and claim over the said land in question because for a
considerable time prior to the levy, his interest had already
been conveyed to appellee Macam, fully and retrievably. So,
subsequent levy made on the property to satisfy the
judgment against Sammy Maron in favor of the Manila
Trading Company was void and of no effect
10. When one sale is forgery
Espiritu v. Valerio 9 SCRA 761 (1963)
Facts:
- Defendant filed an action to quiet title against plaintiffs
alleging that he is the owner of the parcel of land in question
having acquired it from the former owner, Pelagia Vegilia, as
evidenced by a deed of sale.
- Plaintiffs claim that they are the lawful owners of the land
having acquired it by inheritance from their deceased
husband and father, that the deceased acquired the land
from one Mariano Vegilia who bought it from Pelagia Vegilia
(same person who sold the land to defendant).
Held / Doctrine:
- Assuming both allegations of the parties are valid,
plaintiff's contention that they have a better right would
seem to be valid pursuant to Art. 1544 of the Civil Code and
that it was not disputed that the deed of sale in favor of
them was registered first.
- But since the deeds of sale presented by plaintiff are found
to be falsified, they have no legal right to claim the disputed
property (refer to case as to how they are exactly falsified).
11. First in possession in good faith
NOTES:
SALES | Prof. Jardeleza 48
- If neither vendee registered the sale in his favor or
registration was done in bad faith, the vendee who was first
in possession in good faith acquired ownership of the land.
- Civil Law Rule: Tradition is required to transfer ownership
to the buyer.
- If the first sale is evidenced in a public
instrument, it is tantamount to delivery unless the contrary
appears.
- If the land sold is already in the possession of the buyer,
the delivery is by virtue of constitutum possessorium.
- If there are two sales in good faith, the second buyer taking
possession of the property, the second buyer acquired
ownership of the land.
- If there are two sales, the first buyer tolerating the
possession of the seller, but the seller subsequently sold the
property to the second buyer who was place in possession
and first registered the property (the first buyer registered
it an hour later), the first buyer’s right prevails as the
registration was done in bad faith, and that the first sale
was executed in a public instrument signifying its
delivery.
Quimson v. Rosete 87 Phil 159 (1950)
Facts:
- The disputed parcel of land (a farm) originally belonged to
Dionisio Quimson (deceased).
- Dionisio Quimson executed a deed of conveyance over the
said property to his daughter Tomasa Quimson but
continued in his possession and enjoyment of the land.
- The said land was sold to spouses Magno Agustin and
Paulina Manzano with an agreement to repurchase within
six years.
- The same land was sold to Francisco Rosete also with
pacto de retro within five years thereafter having verified
its repurchase of spouses Agustin and Manzano, with money
furnished to him by Rosete, executing in the end the deed.
- Since then and even after the death of Dionisio Quimson, it
was Rosete who was in peaceful and quiet possession and
enjoyment of the property.
Held / Doctrine:
- Pertinent Provisions: Articles 1462 and 1473 of the Civil
Code
> ART. 1462. The thing sold shall be deemed delivered,
when it is placed in the control and possession of the
vendee.
When the sale is made by means of a public instrument,
the execution thereof shall be equivalent to the delivery
of the thing which is the object of the contract, if from
the said instrument the contrary does not appear or
may not be clearly inferred.
> ART. 1473. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof
in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who first recorded it
in the registry.
- Should there be no inscription, the ownership shall belong
to the person who in good faith was first in the possession;
and, in the absence of this, to the person who represents the
oldest title, provided there is good faith.

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- Buencamino vs. Viceo: “Upon a sale of real estate the
execution of a notarial document of sale is a sufficient
delivery of the property sold.”
- Florendo vs. Foz: “When the sale is made by means of a
public instrument, the execution thereof is tantamount to
conveyance of the subject matter, unless the contrary
clearly follows or be deduced from such instrument itself,
and in the absence of this condition such execution by the
vendor is per se a formal or symbolical conveyance of the
property sold, that is, the vendor in the instrument itself
authorizes the purchaser to use the title of ownership as
proof that latter is thenceforth the owner of the property.”
- Sanchez vs. Ramon: There appeared that one Fernandez
sold a piece of land to Marcelino Gomez and Narcisa
Sanchez under pacto de retro in a public instrument. The
purchasers neither recorded the deed in the registry of
property nor ever took material possession of the land.
Later, Fernandez sold the same property by means of a
private document to Ramos who immediately entered upon
the possession of it. It was held that, according to article
1473 of the Civil Code, Gomez and Sanchez were the first in
possession and consequently, that the sale in their favor was
superior.
- The execution of the public instrument is equivalent to the
delivery of the realty sold (Art. 1462 Civil Code) and its
possession by the vendee (Art. 438 Civil Code).
> Under these conditions the sale is considered
consummated and completely transfers to the vendee
all of the thing. The vendee by virtue of this sale has
acquired everything and nothing, absolutely nothing, is
left to the vendor.
> As the obligation of even delivering it, if he continues
taking material possession of it, is simply on account of
the vendee's tolerance and, in this sense, his possession
is vendor's possession.
> And if the latter should have to ask him for the
delivery of this material possession it would not be by
virtue of the sale, because this has been already
consummated and has produced all its effects, but by
virtue of the vendee's ownership, in the same were not
the vendor.
> This means that after the sale of the realty by means
of a public instrument, the vendor, who resells it to
another, does not transmit anything to the second sale,
takes material possession of the thing, he does it as
mere detainer, and it would be unjust to protect this
detention against the rights to the thing lawfully
acquired by the first vendee.
- The Court is of the opinion that the possession mentioned
in Article 1473 of the Civil Code (for determining who has
better right when the same piece of land has been sold
several times by the vendor) includes not the material but
also the symbolic possession, which is acquired by the
execution of a public instrument.
Sanchez v. Ramos 40 Phil 614 (1919)
Facts:
- Ciriaco Fernandez sold land to the plaintiff-spouses
Marcelino Gomez and Narcisa Sanchez under pacto de retro
for the period of 1 year. This was executed in a public
instrument by Marcelino Gomez and Narcisa Sanchez never
took material possession of the land. The period for
repurchase elapsed without the vendor making use of it.
SALES | Prof. Jardeleza 49
- Ciriaco Fernandez again sold the same land, by means of a
private document, to Roque Ramos who immediately took
material possession thereof.
Held / Doctrine:
- The Court cited Art. 1473:
If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should
be personal property.
Should it be real property, it shall belong to the purchaser
who first recorded it in the registry of deeds.
Should it not be recorded, the property shall belong to the
person who first took possession of it in good faith, or, in
default of possession, to the person who presents the oldest
title, provided there is good faith.
- Not one of the documents of sale in this case having been
recorded, preference must be decided in favor of the vendee
who first took possession.
- Because the law does not mention to which of these kinds
of possession Art. 1473 refers, it must be understood that it
refers to all of these kinds. The law has deliberately
intended to place the symbolic possession, which the
execution of the public document implies after the material
possession. But this argument would only be forceful if the
title, mentioned by Art. 1473, includes public instruments,
and this would only be true if public instruments are not
included in the idea of possession spoken of in said article.
- The court’s interpretation of Article 1473 is more in
consonance with the principles of justice. The execution of a
public instrument is equivalent to the delivery of the realty
sold (Art. 1462, Civil Code) and its possession by the vendee
(Art. 438). Under these conditions the sale is considered
consummated and completely transfers to the vendee all of
the vendor’s rights of ownership including his real right
over the thing.
- The possession mentioned in article 1473 (for determining
who has better right when the same piece of land has been
sold several times by the same vendor) includes not only
the material but also the symbolic possession, which is
acquired by the execution of a public instrument.
- STREET, J., dissenting: The possession referred to in article
1473 of the Civil Code is the actual, material and physical
possession of the thing sold; and in applying that provision
no account should ever be taken of the symbolic possession
which is supposed to be acquired by the purchaser, under
article 1463 of the Civil Code, when the sale is proved by a
public document.
12. Oldest title
Article 1544 Par. 3. Should there be no inscription, the
ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good
faith.
NOTES:
Oldest Title
- If neither of the vendees registered their deeds of sale nor
acquired possession of the land sold, the one who can

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present the oldest title, provided there is good faith, has a
better right.
- Older title: any document showing acquisition of the land
in good faith, like a deed of sale or a receipt for the price.
- It does not include a public document as there is delivery
by means of a public instrument, unless the contrary can be
inferred.
Chapter VIII: RISK OF LOSS
GENERAL RULE
Article 1263. In an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not
extinguish the obligation.
Article 1189. When the conditions have been imposed with
the intention of suspending the efficacy of an obligation to
give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the
pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he
shall be obliged to pay damages; it is understood that the
thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in
either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.
NOTES:
- If at the time of the sale of a specific thing is perfected, the
thing had been entirely lost, the contract shall be ineffective.
As there is no object, there can be no valid contract.
- The loss, whether total or partial, must have occurred
before the contract was entered into, without the
knowledge of both parties.
- If the loss is merely partial, the law gives the vendee the
option of withdrawing from the contract or buying the
remainder of the proportionate price.
- If the thing has materially deteriorated in quality as to be
substantially changed in character, the vendee is given the
same option.
WHEN LOSS OCCURRED BEFORE PERFECTION
NOTES:
- When loss occurred before perfection, it is borne by
the seller.
SALES | Prof. Jardeleza 50
- This is because ownership is still with him
Roman v. Grimalt 6 Phil 96 (1906)
Facts:
- Roman, owner of the schooner (sail boat) Santa Marina,
and Grimalt, the purchaser, had been for several days
negotiating for the purchase of the said schooner. They
agreed upon the sale of the vessel for the sum of P1,500,
payable in 3 installments, provided the title papers to the
vessel were in proper form. Grimalt, however, was later
informed that the title to the vessel was in the name of a
certain Paulina Giron. Roman then promised to perfect his
title to the vessel but failed to do so.
- Consequently, due to a severe storm, the schooner sank in
the harbor of Manila Bay and could not be recovered.
Roman asserts that there was a perfected contract of sale
and demands from Grimalt the purchase price of the
schooner.
Held / Doctrine:
- If no contract of sale was actually executed by the parties
the loss of the vessel must be borne by its owner and not by
a party who only intended to purchase it and who was
unable to do so on account of failure on the part of the
owner to show proper title to the vessel and thus enable
them to draw up the contract of sale.
WHEN LOSS OCCURRED AT TIME OF PERFECTION
Article 1493. If at the time the contract of sale is perfected,
the thing which is the object of the contract has been
entirely lost, the contract shall be without any effect.
But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract
and demanding the remaining part, paying its price in
proportion to the total sum agreed upon.
Article 1494. Where the parties purport a sale of specific
goods, and the goods without the knowledge of the seller
have perished in part or have wholly or in a material part so
deteriorated in quality as to be substantially changed in
character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay
the agreed price for the goods in which the ownership will
pass, if the sale was divisible.
NOTES:
Loss Occurring at Time of Perfection of Contract
- Applicable if the risk of loss has not yet passed to the
buyer, and that parties did not know about the loss:
> Perfected contract; specific thing entirely lost:
Contract ineffective as there is no object.
> Perfected contract; specific thing partially lost or
materially deteriorated in quality (character changed):
Buyer has the option to withdraw from the contract or
buy the remainder at a proportionate price.
Norkis v. CA 193 SCRA 694 (1991)

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Facts:
- Private respondent Alberto Nepales bought from the
Norkis Bacolod branch a brand new Yamaha Wonderbike
motorcycle. The price of P7,500.00 was payable by means of
a Letter of Guaranty from the DBP, which Norkis agreed to
accept. Credit was extended to Nepales for the price of the
motorcycle payable by DBP upon release of his motorcycle
loan. As security for the loan, Nepales would execute a
chattel mortgage on the motorcycle in favor of DBP.
- Petitioner issued a sales invoice which Nepales signed in
conformity with the terms of the sale. In the meantime,
however, the motorcycle remained in Norkis’ possession.
- The motorcycle was delivered to a certain Julian Nepales,
allegedly the agent of Alberto Nepales. The motorcycle met
an accident at Binalbagan, Negros Occidental. An
investigation conducted by the DBP revealed that the unit
was being driven by a certain Zacarias Payba at the time of
the accident. The unit was a total wreck and was returned to
Norkis.
- DBP released the proceeds of private respondent’s
motorcycle loan to Norkis. Nepales paid the difference of
P328 and demanded the delivery of the motorcycle.
Held / Doctrine:
- The issuance of a sales invoice does not prove transfer of
ownership of the thing sold to the buyer. An invoice is
nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered
not a bill of sale. In all forms of delivery, it is necessary that
the act of delivery whether constructive or actual, be
coupled with the intention of delivering the thing. The act,
without the intention, is insufficient.
- Article 1496 of the Civil Code which provides that “in the
absence of an express assumption of risk by the buyer, the
things sold remain at seller’s risk until the ownership
thereof is transferred to the buyer,” is applicable to this
case, for there was neither an actual nor constructive
delivery of the thing sold, hence, the risk of loss should be
borne by the seller, Norkis, which was still the owner and
possessor of the motorcycle when it was wrecked. This is in
accordance with the well-known doctrine of res perit
domino.
WHEN LOSS OCCURRED AFTER PERFECTION BUT
BEFORE DELIVERY
Article 1164. The creditor has a right to the fruits of the
thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same
has been delivered to him.
Article 1262. An obligation which consists in the delivery of
a determinate thing shall be extinguished if it should be lost
or destroyed without the fault of the debtor, and before he
has incurred in delay.
NOTES:
Loss Occurring After Perfection But Before Delivery
- Rule Under the Old Civil Code
SALES | Prof. Jardeleza 51
> General Rule: Obligation to deliver a specific thing is
extinguished if the thing is lost or destroyed without
the fault of the seller and before he has been in default.
> Seller is in default or he has bound to deliver the same
thing to two or more different persons: He carries the
risk of loss until delivery is made.
> Goods indeterminate, or price dependent on weight,
number or measure: Loss shall not be imputed to the
buyer until the goods have been weighed, counted or
measured, unless the buyer is in default.
> Sale of specific objects: Buyer carries the risk of loss
despite delivery is absent.
> Roman Law: As soon as the contract was perfected,
the risk passed to the buyer. In order that the contract
may be deemed perfected, the sale must be
unconditional, and the object and the price exactly
ascertained. A generic thing cannot be object of a
contract of sale (hence the Spanish definition that the
thing must be determinate).
> Conditional sale/ indeterminate object/ price
dependent on the number, weight, measure of goods:
Buyer does not carry the risk of loss.
> Sale of lump sum: Buyer has to pay the price despite
the goods perished or deteriorated at the hands of the
seller.
> Yu Tek & Co v. Gonzales: Contract is perfected as to
the thing when it is physically segregated from all other
articles.
- Rule Under the New Civil Code
> Code Commission: Buyer does not bear the risk of loss
until delivery of the goods.
> Followed the common-law rule that the owner bears
the risk of loss, in the absence of stipulation to the
contrary
> Retained the Roman Law Rule requiring delivery,
either actual or constructive, to transfer ownership to
the buyer.
> “Determinate” thing included “determinable” things.
> Buyer does not bear the risk of loss until delivery of
fungible goods, unless he is in default.
> The extinguishment of the obligation to
delivery by virtue of fortuitous event also
extinguishes the obligation to pay the price.
> Art. 1189, NCC was applied to sales.
General Rule: Res perit domino (The owner bears the
loss)
Loss by fault of a party
Article 1480. Any injury to or benefit from the thing sold,
after the contract has been perfected, from the moment of
the perfection of the contract to the time of delivery, shall be
governed by articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made
independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according to
weight, number, or measure, the risk shall not be imputed to
the vendee until they have been weighed, counted, or

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measured and delivered, unless the latter has incurred in
delay.
Article 1504. Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to
the buyer, but when the ownership therein is transferred to
the buyer the goods are at the buyer's risk whether actual
delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's
risk from the time of such delivery;
(2) Where actual delivery has been delayed through the
fault of either the buyer or seller the goods are at the risk of
the party in fault.
Article 1538. In case of loss, deterioration or improvement
of the thing before its delivery, the rules in article 1189 shall
be observed, the vendor being considered the debtor.
Article 1636. In the preceding articles in this Title
governing the sale of goods, unless the context or subject
matter otherwise requires:
(1) "Document of title to goods" includes any bill of lading,
dock warrant, "quedan," or warehouse receipt or order for
the delivery of goods, or any other document used in the
ordinary course of business in the sale or transfer of goods,
as proof of the possession or control of the goods, or
authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or
by delivery, goods represented by such document.
"Goods" includes all chattels personal but not things in
action or money of legal tender in the Philippines. The term
includes growing fruits or crops.
"Order" relating to documents of title means an order by
indorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at
the time a contract of sale is made.
An antecedent or pre-existing claim, whether for money or
not, constitutes "value" where goods or documents of title
are taken either in satisfaction thereof or as security
therefor.
(2) A person is insolvent within the meaning of this Title
who either has ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they become
due, whether insolvency proceedings have been
commenced or not.
SALES | Prof. Jardeleza 52
(3) Goods are in a "deliverable state" within the meaning of
this Title when they are in such a state that the buyer would,
under the contract, be bound to take delivery of them.
Loss by fortuitous events
Art. 1480, supra
Article 1163. Every person obliged to give something is
also obliged to take care of it with the proper diligence of a
good father of a family, unless the law or the stipulation of
the parties requires another standard of care.
Article 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by
article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same
thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event
until he has effected the delivery.
Article 1504. Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to
the buyer, but when the ownership therein is transferred to
the buyer the goods are at the buyer's risk whether actual
delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's
risk from the time of such delivery;
(2) Where actual delivery has been delayed through the
fault of either the buyer or seller the goods are at the risk of
the party in fault.
Article 1538. In case of loss, deterioration or improvement
of the thing before its delivery, the rules in article 1189 shall
be observed, the vendor being considered the debtor.
Article 1189. When the conditions have been imposed with
the intention of suspending the efficacy of an obligation to
give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the
pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he
shall be obliged to pay damages; it is understood that the
thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;

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(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in
either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.
Fruits or improvements
Article 1537. The vendor is bound to deliver the thing sold
and its accessions and accessories in the condition in which
they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on
which the contract was perfected.
WHEN OWNERSHIP IS TRANSFERRED
Art. 1504, supra
NOTES:
When Ownership is Transferred
- NCC adopted the Uniform Sales act: The risk of loss of the
goods shall be borne by the owner, unless the contrary is
agreed upon.
- Ownership does not pass to the buyer, unless there is
actual or constructive delivery; hence, risk of loss shall be
borne by the buyer only after the goods have been delivered
to him or to his bailee.
- Risk of loss is borne by the seller if the
motorcycle, though registered in the name of the buyer for
the purpose of obtaining a bank loan, is in possession of the
seller.
- Delivery at the point of shipment to a common carrier:
Risk of loss of goods in transit borne by the buyer.
- Delivery at the point of destination: Risk of loss of goods in
transit borne by seller.
- Sales subject to approval or trial: Seller carries risk of loss
before approval.
- Sale in return: Buyer carries risk of loss until goods are
returned.
Stipulation to the Contrary
- Notwithstanding that title remained with the seller, it can
be validly agreed that the risk of loss shall be borne by the
seller.
Security Title
- Exception was aimed at conditional sales where the goods
were delivered to the buyer and used by him, but title was
retained by the seller, instead of accepting a mortgage on
the goods sold. Beneficial interest is in the buyer and the
risk should be on him.
- In a case, the title of the bank which paid the price of the
goods sold to the buyer under a letter of credit, is merely to
secure performance of the buyer’s obligation to pay; hence
the risk of loss should be borne by the buyer, as the
beneficial owner.
SALES | Prof. Jardeleza 53
Delay
- Delay in delivery makes the delaying party liable for the
loss or deterioration of the goods.
- Uniform Sales Act: Risk of loss is placed on the
party whose proximate cause of the loss.
- This was not adopted in the NCC, making the delaying
party liable for the loss even though the thing is lost without
his fault.
- Buyer’s unreasonable delay in inspecting the goods in FOB
sale subject to inspection at the point of loading makes him
liable for the subsequent loss of the goods.
- Buyer’s failure to furnish shipping orders following seller’s
delivery of the lumber to the place of delivery made him
liable for the price.
- Buyer’s failure to pay the purchase price despite delivery,
but non-acceptance of the thing sold makes the seller liable
for the loss of the goods if the goods were stored not for the
buyer but for himself as an owner.
Sun Bros. V. Perez 7 SCRA 977 (1963)
Facts:
- Defendant entered into a conditional sale agreement with
the plaintiff over an air conditioner. Defendant paid the
down payment and plaintiff installed the air con.
- The conditional sale agreement includes:
> “Title to said property shall vest in buyer only upon
full payment…”
> “The buyer shall keep said property in good condition
and properly protected against the elements… if said
property or any part thereof be lost, damaged, or
destroyed for any causes, he shall suffer such loss, or
repair such damage, it being distinctly understood and
agreed that said property remains at buyer’s risk after
delivery.”
- The air con burned several days later. Defendant did not
pay any of the subsequent monthly installments.
Held / Doctrine:
- It was expressly agreed in the contract that the buyer will
be liable for loss of the subject matter of the sale in any
event and for any cause. This includes fire and other
fortuitous events. The risk of loss was expressly stipulated
to be undertaken by the buyer, even if the title of the
property remained with the seller.
- Such stipulation is based on sound policy according to Am
Jur: “There are several basis for this rule. First is the
absolute and unconditional nature of the buyer's promise to
pay for the goods. The promise is nowise dependent upon
the transfer of the absolute title. Second is the fact that the
seller has fully performed his contract and has nothing
further to do except receive payment, and the buyer
received what he bargained for when he obtained the right
of possession and use of the goods and the right to acquire
title upon making full payment of the price. A third basis
advanced for the rule is the policy of providing an incentive
to care properly for the goods, they being exclusively under
the control and dominion of the buyer."
Lawyer’s Coop v. Tabora 13 SCRA 762 (1965)
Facts:
- Perfecto A. Tabora bought from the Lawyers Cooperative
Publishing Company:
 SALES | Prof. Jardeleza 54
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> One complete set of American Jurisprudence - There is nothing in the written contract which justifies an
consisting of 48 volumes with 1954 pocket parts inference that there was any thought in the mind of either of
> One set of American Jurisprudence, General Index, the parties that the vendor of the launch would himself
consisting of 4 volumes insure her against loss or damage during the long period
- The books were duly delivered and receipted for by allowed for the payment of the purchase price.
Tabora in his law office. - Oria, who had exclusive control of the operation of the
> Midnight of the same date, a big fire broke out in that vessel, sent her from Manila to Samar on the trip in the
locality which destroyed and burned all the buildings course of which she was shipwrecked, well knowing that
standing on one whole block including the law office she had not yet been insured: and that Song Fo had no
and library of Tabora. power to interfere, or to keep her in port pending their
- Tabora failed to pay the monthly installments agreed upon application for insurance. - Thus, under the terms of the
on the balance of the purchase price notwithstanding the deed of sale, Song Fo would not have had the right to detain
long time that had elapsed, the company demanded the vessel in a place of safety, against the wishes of Oria, had
payment of the installments due. the insurance agents definitely declined their insurance
Held / Doctrine: proposals.
- Article 1504 of the Civil Code in part provides: “(1) Where - The security for the payment of the purchase price of the
delivery of the goods has been made to the buyer or to a launch itself having disappeared as a result of an unforeseen
bailee for the buyer, in pursuance of the contract and the event (vis major), and no other security having been
ownership in the goods has been retained by the seller substituted therefor, the plaintiffs were clearly entitled to
merely to secure performance by the buyer of his recover judgment not only for the installments of the
obligations under the contract, the goods are at the buyer's indebtedness due under the terms of the contract at the
risk from the time of such delivery.” time when the instituted their action, but also for all
> While as a rule the loss of the object of the contract of installments which, but for the loss of the vessel had not
sale is borne by the owner or in case of force majeure matured at that time.
the one under obligation to deliver the object is exempt
from liability, the application of that rule does not here
obtain because the law on the contract entered into on
the matter argues against it.
> The seller agreed that the ownership of the books Chapter IX: Documents of Title
shall remain with it until the purchase price shall have
been fully paid, but such stipulation cannot make the Negotiable Document of Negotiable Instrument
seller liable in case of loss not only because such was Title
agreed merely to secure the performance by the buyer (To facilitate goods) - Operates as a substitute
of his obligation but in the very contract it was - Operates as proof of the for money
expressly agreed that the “loss or damage to the books possession or control of the
after delivery to the buyer shall be borne by the buyer.” goods, or
- The obligor agreed to assume any risk concerning the - Authorizing or purporting
goods from the time of their delivery, which is an exception to authorize the possessor
to the rule provided for in Article 1262 of the Civil Code. of the document to transfer
> The appellant cannot claim that since the books were or receive, either by
destroyed by fire without any fault on his part he indorsement or by delivery,
should be relieved from the resultant obligation under goods represented by such
the rule that an obligor should be held exempt from document.
liability when the loss occurs through a fortuitous - Governed by the Civil - Governed by the
event. Code, and in some cases, by Negotiable Instruments
> The said rule only holds true when the obligation the Warehouse Receipt Law Law
consists in the delivery of a determinate thing and there and Code of Commerce
is no stipulation holding him liable even in case of - The special indorsement - A bearer instrument is
fortuitous event. The obligation does not refer to a of a bearer instrument has always a bearer instrument
determinate thing, but is pecuniary in nature, and the the effect of converting the even if a special
obligor bound himself to assume the loss after the bearer instrument into an indorsement is made.
delivery of the goods to him. order instrument.
- If words such as “non-
Song Fo v. Oria 33 Phil 3 (1915) negotiable” or the like are
Facts: placed on the document,
- Song Fo & Co. sold a launch to Oria for P16,500, payable in such document may
quarterly installments of P1000, with 10% per annum nevertheless be negotiated
interest. The launch was delivered to Oria in Manila, but was by the holder.
shipwrecked and became a total loss while en route to
Oria's place of business in Samar. No part of the purchase
price has ever been paid. DEFINITION
Held / Doctrine:

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Article 1636. In the preceding articles in this Title
governing the sale of goods, unless the context or subject
matter otherwise requires:
(1) "Document of title to goods" includes any bill of lading,
dock warrant, "quedan," or warehouse receipt or order for
the delivery of goods, or any other document used in the
ordinary course of business in the sale or transfer of goods,
as proof of the possession or control of the goods, or
authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or
by delivery, goods represented by such document.
"Goods" includes all chattels personal but not things in
action or money of legal tender in the Philippines. The term
includes growing fruits or crops.
"Order" relating to documents of title means an order by
indorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at
the time a contract of sale is made.
An antecedent or pre-existing claim, whether for money or
not, constitutes "value" where goods or documents of title
are taken either in satisfaction thereof or as security
therefor.
(2) A person is insolvent within the meaning of this Title
who either has ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they become
due, whether insolvency proceedings have been
commenced or not.
(3) Goods are in a "deliverable state" within the meaning of
this Title when they are in such a state that the buyer would,
under the contract, be bound to take delivery of them.
PURPOSE OF DOCUMENTS OF TITLE
Siy Cong Bieng v. HSBC 56 Phil 598 (1932)
Facts:
- Otto Ranft pledged certain negotiable warehouse receipts
(quedans) to HSBC in order to secure the payment of his
preexisting debts to the latter.
- Otto Ranft bought bales of hemp (abaca) from plaintiff, and
the two parties agreed on the price therefor. On the same
day, the plaintiff sent the quedans and the invoice to Ranft
with the understanding that the payment would be made
against the same quedans. As in previous transactions of the
same kind between the bank and the plaintiff, the quedans
were paid one or two days after their delivery.
- On the evening that the quedans were delivered to HSBC,
Ranft died. Plaintiff immediately demanded the return of the
quedans, or the payment of the value, but was told that the
quedans had been sent to HSBC as soon as they were
received by Ranft.
Held / Doctrine:
- It must be noted that: (1) the quedans were negotiable in
form, (2) they were pledged by Ranft to HSBC to secure the
SALES | Prof. Jardeleza 55
payment of his preexisting debts to the said bank, and (3)
such of the quedans as were issued in the name of the
plaintiff were duly endorsed in blank by the plaintiff and by
Ranft.
- The bank had a perfect right to act as it did, and its action
is in accordance with certain provisions of the Warehouse
Receipts Act (Act No. 2137):
By Sec. 40 – The person who may negotiate the receipt is
either the “owner thereof,” or a “person to whom the
possession or custody of the receipt has been intrusted by
the owner” if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrusting
of the receipt, as stated, is more than the mere delivery of
the goods; it is a representation that the one to whom the
possession of the receipt has been so intrusted has the title
to the goods.
By Sec. 47 – The negotiation of the receipt to a purchaser for
value without notice is not impaired by the fact that it is a
breach of duty, or that the owner of the receipt was induced
“by fraud, mistake, or duress” to intrust the receipt to the
person who negotiated it.
By Sec. 41 – One to whom the negotiable receipt has been
duly negotiated acquires such title to the goods as the
person negotiating the receipt to him, or the depositor or
person to whose order the goods were deliverable by the
terms of the receipt, either had or “had ability to convey to a
purchaser in good faith for value.”
- Basically, if the owner of the goods permits another to
have the possession or custody of negotiable warehouse
receipts running to the order of the latter, or to the bearer, it
is a representation of title upon which bona fide purchasers
for value are entitled to rely.
- HSBC is not responsible for the loss suffered by the
plaintiff; the negotiable quedans were duly negotiated to the
bank and nothing on the record shows that HSBC is guilty of
fraud in the said transaction
NEGOTIABLE DOCUMENTS OF TITLE
1. How negotiated
Article 1508. A negotiable document of title may be
negotiated by delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
to deliver the goods to the order of a specified person, and
such person or a subsequent indorsee of the document has
indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the
goods are deliverable to bearer or where a negotiable
document of title has been indorsed in blank or to bearer,
any holder may indorse the same to himself or to any
specified person, and in such case the document shall
thereafter be negotiated only by the indorsement of such
indorsee.

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Article 1509. A negotiable document of title may be
negotiated by the indorsement of the person to whose order
the goods are by the terms of the document deliverable.
Such indorsement may be in blank, to bearer or to a
specified person. If indorsed to a specified person, it may be
again negotiated by the indorsement of such person in
blank, to bearer or to another specified person. Subsequent
negotiations may be made in like manner.
NOTES:
How Negotiated
- A negotiated bill of lading may be negotiated by delivery of
the document to another if by the terms thereof, the
goods are deliverable to bearer, or when the bill of lading
was endorsed in blank by the person to whose order the
goods were deliverable.
- If non-negotiable, it can be negotiated only by indorsement
of such person.
- US Custom: Common carriers stamp the words “not
negotiable” to the bill of lading even though it is negotiable.
> Rationale: In those states, the carrier incurs a penalty
if it delivers the goods without surrender of the bill of
lading, unless the bill of lading was marked “not
negotiable.”
- Philippines: The words should not change the legal
effect of negotiability as the concern of the Uniform Sales
Act is not the liability of the carrier but the rights of the
various holders of the bill.
2. Who can negotiate
Article 1512. A negotiable document of title may be
negotiated:
(1) By the owner thereof; or
(2) By any person to whom the possession or custody of the
document has been entrusted by the owner, if, by the terms
of the document the bailee issuing the document undertakes
to deliver the goods to the order of the person to whom the
possession or custody of the document has been entrusted,
or if at the time of such entrusting the document is in such
form that it may be negotiated by delivery.
NOTES:
Who May Negotiate It
- Only the owner of the document or one to whom
possession or custody of document has been entrusted
by the owner may negotiate it.
- This was in accordance with common law denying the full
effects of negotiability of bills of lading inasmuch as
they do not represent money but merely evidence of
performance of certain contractual duties.
- Owner should not be divested of his rights merely upon
loss of the documents.
- US: Adopted the analogy of negotiable bills of exchange to
its fullest extent, giving the purchaser for value without
notice, a valid title, even if he bought the negotiable
SALES | Prof. Jardeleza 56
document of title which was capable of negotiation by
delivery, from a thief or finder thereof.
- They recommended amending Art. 1518, CC (Then
Sec. 38, Uniform, Sales Act), to include “loss, theft,
accident or conversion” and Sec. 32 of the said Act.
- NCC: Adopted Sec. 38 but retained the original Sec. 32,
hence a conflict therein arises between Art. 1512 and Art.
1518, NCC.
3. Rights acquired by negotiation
Article 1505. Subject to the provisions of this Title, where
goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with the
consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods
is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any
other provision of law enabling the apparent owner of
goods to dispose of them as if he were the true owner
thereof;
(2) The validity of any contract of sale under statutory
power of sale or under the order of a court of competent
jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and
special laws.
NOTES:
Rights Acquired by Negotiation
- A document of title represents the right of the consignee in
the goods so that a person to whom a negotiable document
of title had been duly negotiated acquires not merely the
rights of the vendor but also whatever rights the original
consignee had over the goods.
- Hence, the buyer of the document of title may acquire a
better title than his vendor, an exception to the general rule
in Art. 1505.
- The indorsee also acquires the direct obligation of the
carrier as if he were the shipper and can sue the carrier
directly in his own name.
- The validity of a negotiation of a document of title to an
innocent purchaser for value is not affected by the fact that
there was a breach of duty on the part of the person to
whom such document was entrusted by the owner, or by
the fact that the owner of the document was deprived of it
by loss, theft, fraud, accident, mistake, duress or conversion.
- If the negotiable document was indorsed in blank
by the consignee and was stolen by one who sold and
delivered the document to an innocent purchaser for
value, latter acquires consignee’s title.
4. Effects of Negotiation
Article 1513. A person to whom a negotiable document of
title has been duly negotiated acquires thereby:

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(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser
in good faith for value and also such title to the goods as the
person to whose order the goods were to be delivered by
the terms of the document had or had ability to convey to a
purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document
to hold possession of the goods for him according to the
terms of the document as fully as if such bailee had
contracted directly with him.
5. Unauthorized Negotiation
Article 1518. The validity of the negotiation of a negotiable
document of title is not impaired by the fact that the
negotiation was a breach of duty on the part of the person
making the negotiation, or by the fact that the owner of the
document was deprived of the possession of the same by
loss, theft, fraud, accident, mistake, duress, or conversion, if
the person to whom the document was negotiated or a
person to whom the document was subsequently negotiated
paid value therefor in good faith without notice of the
breach of duty, or loss, theft, fraud, accident, mistake, duress
or conversion.
NON-NEGOTIABLE DOCUMENTS OF TITLE
1. How transferred or assigned
Article 1514. A person to whom a document of title has
been transferred, but not negotiated, acquires thereby, as
against the transferor, the title to the goods, subject to the
terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires
the right to notify the bailee who issued the document of the
transfer thereof, and thereby to acquire the direct obligation
of such bailee to hold possession of the goods for him
according to the terms of the document.
Prior to the notification to such bailee by the transferor or
transferee of a non-negotiable document of title, the title of
the transferee to the goods and the right to acquire the
obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the
transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transferor of
a subsequent sale of the goods by the transferor.
NOTES:
How Transferred
- As a non-negotiable bill of lading is not a symbol of
possession of the goods in the hands of the carrier, its
delivery cannot operate as a symbolic delivery of the goods
described as would pass title.
- Neither would the execution of a public deed of sale or
donation effect symbolic delivery.
- Only actual delivery of the goods by the carrier will effect
delivery.
SALES | Prof. Jardeleza 57
- Carrier will not deliver the goods to any holder of the
document or to whom such document of title may have been
endorsed by the consignee.
- Carrier must be notified of the assignment of goods for him
to validly transfer the goods to the consignee.
- In claiming the goods, consignee must present to the
carrier the deed of sale or donation in his favor as evidence.
- Otherwise, the rights of the assignee may be defeated by a
levy on the goods by a creditor of the assignor, or by a prior
notification of a subsequent sale of the goods by the
assignor to another.
2. Effects of Transfer
Art. 1514, supra
NOTES:
Rights Acquired by Transfer of Document of Title
- Transfer: Transferee does not acquire a better title
than his transferor. It is made by:
> Assignment of the rights of the consignee of a non-
negotiable document of title to another;
> Order document of title was sold or assigned
without indorsement.
- Before endorsement: Rights of the transferee may be
defeated by the rights of a prior party who was illegally
deprived of possession of such document.
- Transferee can bring an action to compel the transferor to
endorse the document, unless a contrary intention appears,
but the negotiation will take effect only as of the time
endorsement is actually made.
- Rules governing sale of goods not covered by a document
of title will apply.
WARRANTIES OF SELLER OF DOCUMENTS OF TITLE
Article 1516. A person who for value negotiates or
transfers a document of title by indorsement or delivery,
including one who assigns for value a claim secured by a
document of title unless a contrary intention appears,
warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair
the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and
that the goods are merchantable or fit for a particular
purpose, whenever such warranties would have been
implied if the contract of the parties had been to transfer
without a document of title the goods represented thereby.
NOTES:
Implied Warranties
- Genuineness and validity of the document
- Right to negotiate or transfer the document
- Warranties of a vendor of goods
- No implied warranty:

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> The common carrier will fulfill its obligation to
deliver the goods
> The previous indorsers will fulfill their obligation
> He will pay the note if the maker or drawee does not
honor the instrument (since the obligation relates to
specific goods possessed by the carrier, which cannot be
substituted).
RULES ON LEVY/GARNISHMENT OF GOODS
Art. 1514, supra
Article 1519. If goods are delivered to a bailee by the
owner or by a person whose act in conveying the title to
them to a purchaser in good faith for value would bind the
owner and a negotiable document of title is issued for them
they cannot thereafter, while in possession of such bailee, be
attached by garnishment or otherwise or be levied under an
execution unless the document be first surrendered to the
bailee or its negotiation enjoined. The bailee shall in no case
be compelled to deliver up the actual possession of the
goods until the document is surrendered to him or
impounded by the court.
Article 1520. A creditor whose debtor is the owner of a
negotiable document of title shall be entitled to such aid
from courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity in
regard to property which cannot readily be attached or
levied upon by ordinary legal process.
NOTES:
Creditors’ Right Against the Goods
- Goods in the hands of the carrier covered by a negotiable
document of title cannot be attached or levied upon, unless
the document be first surrendered to the carrier or
impounded by the court or its negotiation be enjoined.
- Mercantile theory of documents of title: Negotiable
document of title represents the goods; carrier should not
deliver the goods without surrendering the negotiable bill of
lading to them or for the law to allow attachment or levy on
the goods, regardless of an outstanding negotiable
document of title.
- An innocent purchaser of a negotiable document of title to
whom it was negotiated by the consignee acquired
ownership of the goods even if the negotiation took
place after a levy of attachment or garnishment on the
goods by a creditor of the vendor, or after a notice of
stoppage in transitu was served on the carrier.
Chapter X: REMEDIES OF AN UNPAID SELLER
DEFINITION OF UNPAID SELLER
Article 1525. The seller of goods is deemed to be an unpaid
seller within the meaning of this Title:
SALES | Prof. Jardeleza 58
(1) When the whole of the price has not been paid or
tendered;
(2) When a bill of exchange or other negotiable instrument
has been received as conditional payment, and the condition
on which it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or
otherwise.
In articles 1525 to 1535 the term "seller" includes an agent
of the seller to whom the bill of lading has been indorsed, or
a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the
position of a seller.
NOTES:
In articles 1525 to 1535 the term "seller" includes an agent
of the seller to whom the bill of lading has been indorsed, or
a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the
position of a seller. (n)
REMEDIES OF UNPAID SELLER
- Possessory Lien
- Stoppage in transit
- Special Right of Resale
- Special Right to Rescind
NOTES:
These 4 remedies have a hierarchical application which
means that the right to resell and to rescind can be availed
of by the unpaid seller only when either of the 2 prior rights
of possessory lien or stoppage in transit have been
exercised by the unpaid seller. The designation “special” is
attached to the rights to resell and to rescind, because they
are rights accorded only to the unpaid seller as technically
defined by the law, and are not the same nature as the right
to rescind under Art. 1191 of the CC to reciprocal contracts.
1. Possessory Lien
Article 1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods may have
passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price
while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping
the goods in transitu after he has parted with the possession
of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this
Title.
Where the ownership in the goods has not passed to the
buyer, the unpaid seller has, in addition to his other
remedies a right of withholding delivery similar to and
coextensive with his rights of lien and stoppage in transitu
where the ownership has passed to the buyer.

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Article 1527. Subject to the provisions of this Title, the
unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or
tender of the price in the following cases, namely:
(1) Where the goods have been sold without any stipulation
as to credit;
(2) Where the goods have been sold on credit, but the term
of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding
that he is in possession of the goods as agent or bailee for
the buyer.
Article 1503. When there is a contract of sale of specific
goods, the seller may, by the terms of the contract, reserve
the right of possession or ownership in the goods until
certain conditions have been fulfilled. The right of
possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to
a carrier or other bailee for the purpose of transmission to
the buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of
the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill
of lading, the ownership would have passed to the buyer on
shipment of the goods, the seller's property in the goods
shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the
contract.
Where goods are shipped, and by the bill of lading the goods
are deliverable to order of the buyer or of his agent, but
possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession
of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price
and transmits the bill of exchange and bill of lading together
to the buyer to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill of lading if he
does not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in good faith, for value, the bill
of lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the facts
making the transfer wrongful.
Article 1535. Subject to the provisions of this Title, the
unpaid seller's right of lien or stoppage in transitu is not
affected by any sale, or other disposition of the goods which
SALES | Prof. Jardeleza 59
the buyer may have made, unless the seller has assented
thereto.
If, however, a negotiable document of title has been issued
for goods, no seller's lien or right of stoppage in transitu
shall defeat the right of any purchaser for value in good faith
to whom such document has been negotiated, whether such
negotiation be prior or subsequent to the notification to the
carrier, or other bailee who issued such document, of the
seller's claim to a lien or right of stoppage in transitu.
a. Partial delivery
Article 1528. Where an unpaid seller has made part
delivery of the goods, he may exercise his right of lien on the
remainder, unless such part delivery has been made under
such circumstances as to show an intent to waive the lien or
right of retention.
b. Loss of lien
Article 1529. The unpaid seller of goods loses his lien
thereon:
(1) When he delivers the goods to a carrier or other bailee
for the purpose of transmission to the buyer without
reserving the ownership in the goods or the right to the
possession thereof;
(2) When the buyer or his agent lawfully obtains possession
of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not
lose his lien by reason only that he has obtained judgment
or decree for the price of the goods.
NOTES:
The unpaid seller loses his possessory lien when he parts
with physical possession of the goods, as when he delivers
the goods to the carrier. In that case, he still has the remedy
of stoppage in transit, but only if the buyer has in the
meantime become insolvent.
c. Revival of lien
2. Stoppage in transitu – Arts. 1530-1534, 1535 (supra),
1632
Article 1530. Subject to the provisions of this Title, when
the buyer of goods is or becomes insolvent, the unpaid seller
who has parted with the possession of the goods has the
right of stopping them in transitu, that is to say, he may
resume possession of the goods at any time while they are
in transit, and he will then become entitled to the same
rights in regard to the goods as he would have had if he had
never parted with the possession.
Article 1531. Goods are in transit within the meaning of the
preceding article:

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(1) From the time when they are delivered to a carrier by
land, water, or air, or other bailee for the purpose of
transmission to the buyer, until the buyer, or his agent in
that behalf, takes delivery of them from such carrier or
other bailee;
(2) If the goods are rejected by the buyer, and the carrier or
other bailee continues in possession of them, even if the
seller has refused to receive them back.
Goods are no longer in transit within the meaning of the
preceding article:
(1) If the buyer, or his agent in that behalf, obtains delivery
of the goods before their arrival at the appointed
destination;
(2) If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges to the
buyer or his agent that he holds the goods on his behalf and
continues in possession of them as bailee for the buyer or
his agent; and it is immaterial that further destination for
the goods may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or
airplane chartered by the buyer, it is a question depending
on the circumstances of the particular case, whether they
are in the possession of the carrier as such or as agent of the
buyer.
If part delivery of the goods has been made to the buyer, or
his agent in that behalf, the remainder of the goods may be
stopped in transitu, unless such part delivery has been
under such circumstances as to show an agreement with the
buyer to give up possession of the whole of the goods.
Article 1532. The unpaid seller may exercise his right of
stoppage in transitu either by obtaining actual possession of
the goods or by giving notice of his claim to the carrier or
other bailee in whose possession the goods are. Such notice
may be given either to the person in actual possession of the
goods or to his principal. In the latter case the notice, to be
effectual, must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to
the carrier, or other bailee in possession of the goods, he
must redeliver the goods to, or according to the directions
of, the seller. The expenses of such delivery must be borne
by the seller. If, however, a negotiable document of title
representing the goods has been issued by the carrier or
other bailee, he shall not be obliged to deliver or justified in
delivering the goods to the seller unless such document is
first surrendered for cancellation.
Article 1533. Where the goods are of perishable nature, or
where the seller expressly reserves the right of resale in
case the buyer should make default, or where the buyer has
been in default in the payment of the price for an
unreasonable time, an unpaid seller having a right of lien or
having stopped the goods in transitu may resell the goods.
He shall not thereafter be liable to the original buyer upon
SALES | Prof. Jardeleza 60
the contract of sale or for any profit made by such resale,
but may recover from the buyer damages for any loss
occasioned by the breach of the contract of sale.
Where a resale is made, as authorized in this article, the
buyer acquires a good title as against the original buyer.
It is not essential to the validity of resale that notice of an
intention to resell the goods be given by the seller to the
original buyer. But where the right to resell is not based on
the perishable nature of the goods or upon an express
provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the
question whether the buyer had been in default for an
unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the
time and place of such resale should be given by the seller to
the original buyer.
The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this
requirement may make a resale either by public or private
sale. He cannot, however, directly or indirectly buy the
goods.
Article 1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the goods,
where he expressly reserved the right to do so in case the
buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable
time. The seller shall not thereafter be liable to the buyer
upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the
contract.
The transfer of title shall not be held to have been rescinded
by an unpaid seller until he has manifested by notice to the
buyer or by some other overt act an intention to rescind. It
is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to give
notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before
the right of rescission was asserted.
Article 1632. Should the vendor have profited by some of
the fruits or received anything from the inheritance sold, he
shall pay the vendee thereof, if the contrary has not been
stipulated.
NOTES:
Notwithstanding that the ownership in the goods may have
passed to the buyer, the unpaid seller of goods has, in case
of the insolvency of the buyer, a right to stopping the goods
in transit after he has parted with the possession of them
(Art. 1529).
a. Requisites
b. When considered in transit
NOTES:

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Goods are no longer in transit within the meaning of the
preceding article:
(1) If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination;
(2) If, after the arrival of the goods at the appointed
destination, the carrier or other bailee
acknowledges to the buyer or his agent that he
holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his
agent; and it is immaterial that further destination
for the goods may have been indicated by the
buyer;
(3) If the carrier or other bailee wrongfully refuses
to deliver the goods to the buyer or his agent in
that behalf.
If the goods are delivered to a ship, freight train,
truck, or airplane chartered by the buyer, it is a
question depending on the circumstances of the
particular case, whether they are in the possession
of the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or
his agent in that behalf, the remainder of the goods may be
stopped in transitu, unless such part delivery has been
under such circumstances as to show an agreement with the
buyer to give up possession of the whole of the goods. (n)
c. Sale of goods in transit
Article 1532. The unpaid seller may exercise his
right of stoppage in transitu either by obtaining
actual possession of the goods or by giving notice of
his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be given
either to the person in actual possession of the
goods or to his principal. In the latter case the notice,
to be effectual, must be given at such time and under
such circumstances that the principal, by the
exercise of reasonable diligence, may prevent a
delivery to the buyer.
When notice of stoppage in transitu is given by the
seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or
according to the directions of, the seller. The
expenses of such delivery must be borne by the
seller. If, however, a negotiable document of title
representing the goods has been issued by the
carrier or other bailee, he shall not be obliged to
deliver or justified in delivering the goods to the
seller unless such document is first surrendered for
cancellation. (n)
3. Right of Resale – Art. 1533
a. Time to resell
SALES | Prof. Jardeleza 61
Article 1533. Where the goods are of perishable
nature, or where the seller expressly reserves the
right of resale in case the buyer should make defaut,
or where the buyer has been in default in the
payment of the price for an unreasonable time, an
unpaid seller having a right of lien or having stopped
the goods in transitu may resell the goods. He shall
not thereafter be liable to the original buyer upon
the contract of sale or for any profit made by such
resale, but may recover from the buyer damages for
any loss occasioned by the breach of the contract of
sale.
Where a resale is made, as authorized in this article,
the buyer acquires a good title as against the original
buyer.
It is not essential to the validity of resale that notice
of an intention to resell the goods be given by the
seller to the original buyer. But where the right to
resell is not based on the perishable nature of the
goods or upon an express provision of the contract
of sale, the giving or failure to give such notice shall
be relevant in any issue involving the question
whether the buyer had been in default for an
unreasonable time before the resale was made.
It is not essential to the validity of a resale that
notice of the time and place of such resale should be
given by the seller to the original buyer.
The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this
requirement may make a resale either by public or
private sale. He cannot, however, directly or
indirectly buy the goods. (n)
NOTES:
Katigbak v. CA held that if the buyer fails to take delivery
and pay the purchase price of the subject matter of the
contract, the seller, without need of first rescinding the
contract judicially, is entitled to resell the same, and if he is
obliged to sell it for less than the contract price, the buyer is
liable for the difference.
b. Right to sue buyer for damages
4. Right to Rescind – Art. 1534
Article 1534. An unpaid seller having the right of
lien or having stopped the goods in transitu, may
rescind the transfer of title and resume the
ownership in the goods, where he expressly
reserved the right to do so in case the buyer should
make default, or where the buyer has been in default

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in the payment of the price for an unreasonable
time. The seller shall not thereafter be liable to the
buyer upon the contract of sale, but may recover
from the buyer damages for any loss occasioned by
the breach of the contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has
manifested by notice to the buyer or by some other
overt act an intention to rescind. It is not necessary
that such overt act should be communicated to the
buyer, but the giving or failure to give notice to the
buyer of the intention to rescind shall be relevant in
any issue involving the question whether the buyer
had been in default for an unreasonable time before
the right of rescission was asserted. (n)
CHAPTER XI: PERFORMANCE OF CONTRACT
DELIVERY OF THING SOLD
1. Place, time and manner of delivery – Arts. 1521, 1169,
1524
Article 1521. Whether it is for the buyer to take
possession of the goods or of the seller to send them
to the buyer is a question depending in each case on
the contract, express or implied, between the
parties. Apart from any such contract, express or
implied, or usage of trade to the contrary, the place
of delivery is the seller's place of business if he has
one, and if not his residence; but in case of a contract
of sale of specific goods, which to the knowledge of
the parties when the contract or the sale was made
were in some other place, then that place is the place
of delivery.
Where by a contract of sale the seller is bound to
send the goods to the buyer, but no time for sending
them is fixed, the seller is bound to send them within
a reasonable time.
Where the goods at the time of sale are in the
possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer unless
and until such third person acknowledges to the
buyer that he holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour. What
is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and
incidental to putting the goods into a deliverable
state must be borne by the seller. (n)
Article 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee
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judicially or extrajudicially demands from them the
fulfillment of their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law
expressly so declare; or
(2) When from the nature and the
circumstances of the obligation it appears
that the designation of the time when the
thing is to be delivered or the service is to
be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as
when the obligor has rendered it beyond
his power to perform.
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent
upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
(1100a)
Smith Bell v. Matti 44 Phil 874 (1922)
Facts: Smith, Bell & Co. obligated itself to sell to Vicente
Sotelo 2 steel tanks, 2 expellers and 2 electric motors with
respective approximate delivery dates. There was delay in
the delivery of the goods; and so, Sotelo refused to accept
and pay the prices stipulated alleging that his company
(Manila Oil Refining & By-Products Co.) suffered damages
because of the delay as it intended to use the goods in
manufacturing coconut oil. He also argued that the expellers
and the motors were not in good condition.
Held: Sotelo is bound to pay for the goods: (a) No definite
date was fixed for the delivery. (2) Contracts were executed
at the time of the world war when there existed rigid
restrictions on the export from the United States. Delivery
was subject to a condition - the fulfillment of which
depended not only upon the effort of the plaintiff, but upon
the will of third persons who could in no way be compelled
to fulfill the condition. In cases like this, which are not
expressly provided for, but impliedly covered, by the Civil
Code, the obligor will be deemed to have sufficiently
performed his part of the obligation, if he has done all that
was in his power, even if the condition has not been fulfilled
in reality.
NOTES:
Lagoon v. Hooven Cimalco Industries, Inc. held that where it
is stipulated that deliveries must be made to the buyer or
his duly authorized representative named in the contracts,
the seller is bound to deliver in such manner only, unless
the buyer specifically designated someone to receive
delivery.
2. When time is of essence
Soler v. Chesley 43 Phil 52 (1922)

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Facts: Soler purchased from WM. H. Anderson & Co. a
coconut oil machinery to be shipped from the US to Manila.
Soler sold to Chesley all his rights and interest in this
contract of sale. Delivery was delayed, and the other part of
the machinery arrived in Manila 7 months later than agreed
upon.
Held: Time was an essential element of the contract
executed by Soler and Chesley because it was one of the
determining elements of Chesley’s consent. He expected
that said machinery would arrive within a short time. Soler,
not Anderson & Co., is the one who contracted the
obligation, and therefore, he is the only one to be
responsible for the obligation arising from the contract. –
“He who contracts and assumes an obligation is presumed
to know the circumstances under which said obligation can
be complied with.” Thus, no right to compel Chesley to
comply with his obligation to pay Soler.
Republic v. Litton 94 Phil 52 (1953)
Facts: Defendant entered into a contract with plaintiff to
supply and deliver 96,000 padlocks and large quantities of
writing supplies on or before March 1, 1946. Defendant
delivered only 34,200 padlocks on April 18, 1946 and failed
to deliver the other materials to be used during the
5.
elections of April 23, 1946; delivery was made after the
elections. Due to the failure of defendants to supply the
necessary materials on time, plaintiff made open market
purchases of the materials which were more expensive than
the price of the materials in its contract with the defendant.
Held: The contract (purchase order) expressly stated that
delivery should not be later than March 1, 1946. Defendant
then cannot use as a defense, the delay in the issuance of an
export license by the proper authorities, or that the vessels
carrying the materials were not allowed to berth at the
piers, and other fortuitous events.
3. Effects of delivery – Art. 1477, 1478
Article 1477. The ownership of the thing sold shall
be transferred to the vendee upon the actual or
constructive delivery thereof. (n)
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price. (n)
4. When not bound to deliver – Arts. 1524, 1536, 1198
Article 1524. The vendor shall not be bound to
deliver the thing sold, if the vendee has not paid him
the price, or if no period for the payment has been
fixed in the contract. (1466)
Article 1536. The vendor is not bound to deliver the
thing sold in case the vendee should lose the right to
make use of the terms as provided in article 1198.
(1467a)
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Article 1198. The debtor shall lose every right to
make use of the period:
(1) When after the obligation has been
contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt;
(2) When he does not furnish to the
creditor the guaranties or securities which
he has promised;
(3) When by his own acts he has impaired
said guaranties or securities after their
establishment, and when through a
fortuitous event they disappear, unless he
immediately gives new ones equally
satisfactory;
(4) When the debtor violates any
undertaking, in consideration of which the
creditor agreed to the period;
(5) When the debtor attempts to abscond.
(1129a)
Sale of Movables – Arts. 1522, 1537, 1480
Article 1522. Where the seller delivers to the buyer
a quantity of goods less than he contracted to sell,
the buyer may reject them, but if the buyer accepts
or retains the goods so delivered, knowing that the
seller is not going to perform the contract in full, he
must pay for them at the contract rate. If, however,
the buyer has used or disposed of the goods
delivered before he knows that the seller is not
going to perform his contract in full, the buyer shall
not be liable for more than the fair value to him of
the goods so received.
Where the seller delivers to the buyer a quantity of
goods larger than he contracted to sell, the buyer
may accept the goods included in the contract and
reject the rest. If the buyer accepts the whole of the
goods so delivered he must pay for them at the
contract rate.
Where the seller delivers to the buyer the goods he
contracted to sell mixed with goods of a different
description not included in the contract, the buyer
may accept the goods which are in accordance with
the contract and reject the rest.
In the preceding two paragraphs, if the subject
matter is indivisible, the buyer may reject the whole
of the goods. The provisions of this article are
subject to any usage of trade, special agreement, or
course of dealing between the parties. (n)
Article 1537. The vendor is bound to deliver the
thing sold and its accessions and accessories in the
condition in which they were upon the perfection of
the contract.
Article 1480. Any injury to or benefit from the thing

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sold, after the contract has been perfected, from the
moment of the perfection of the contract to the time
of delivery, shall be governed by articles 1163 to
1165, and 1262.
This rule shall apply to the sale of fungible things,
made independently and for a single price, or
without consideration of their weight, number, or
measure.
Should fungible things be sold for a price fixed
according to weight, number, or measure, the risk
shall not be imputed to the vendee until they have
been weighed, counted, or measured and delivered,
unless the latter has incurred in delay. (1452a)
a. Delivery by installment – Art. 1583
Article 1583. Unless otherwise agreed, the buyer of
goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be
delivered by stated instalments, which are to be
separately paid for, and the seller makes defective
deliveries in respect of one or more instalments, or
the buyer neglects or refuses without just cause to
take delivery of or pay for one or more instalments,
it depends in each case on the terms of the contract
and the circumstances of the case, whether the
breach of contract is so material as to justify the
injured party in refusing to proceed further and
suing for damages for breach of the entire contract,
or whether the breach is severable, giving rise to a
claim for compensation but not to a right to treat the
whole contract as broken. (n)
b. Delivery of wrong quantity – Art. 1522 (supra)
6. Sale of Immovables – Arts. 1539, 1540
Article 1539. The obligation to deliver the thing
sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in
conformity with the following rules:
If the sale of real estate should be made with a
statement of its area, at the rate of a certain price for
a unit of measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the
contract; but, should this be not possible, the vendee
may choose between a proportional reduction of the
price and the rescission of the contract, provided
that, in the latter case, the lack in the area be not less
than one-tenth of that stated.
SALES | Prof. Jardeleza 64
The same shall be done, even when the area is the
same, if any part of the immovable is not of the
quality specified in the contract.
The rescission, in this case, shall only take place at
the will of the vendee, when the inferior value of the
thing sold exceeds one-tenth of the price agreed
upon.
Nevertheless, if the vendee would not have bought
the immovable had he known of its smaller area of
inferior quality, he may rescind the sale. (1469a)
Article 1540. If, in the case of the preceding article,
there is a greater area or number in the immovable
than that stated in the contract, the vendee may
accept the area included in the contract and reject
the rest. If he accepts the whole area, he must pay
for the same at the contract rate. (1470a)
Azarraga v. Gay 52 Phil 599 (1928)
Facts: Azarraga sold 2 parcels of lands to Gay for a lump
sum of P47k, payable in installments but Gay failed to pay
the total amount and alleges that the plaintiff through
misrepresentation led the defendant to believe that the
second parcel contained 98 hectares which was actually
only 60 ha. and induced the vendee to bind herself to pay
the price of P47k for the 2 parcels of land, which he
represented contained an area of no less than 200 hectares,
to which price the defendant would not have bound herself
had she known that the real area of the second parcel; and,
consequently, she is entitled to a reduction in the price of
the two parcels in proportion to the area lacking, that is,
that the price be reduced to P38k.
Held: The two parcels are defined by means of the
boundaries given in the instrument. Therefore, the case falls
within the provision of Art. 1471 of the CC: In case of the
sale of real estate for a lump sum and not at the rate of a
specified price for each unit of measure, there shall be no
increase or decrease of the price even if the area be found to
be more or less than that stated in the contract.
a. Where price is at certain rate per unit – Art. 1539-
1540 (supra)
Cebu Windland Dev. Corp. v. Ong Siao Hua 588 SCRA
120 (2009) (supra)
NOTES:
In Rudolf Lietz Inc. v. CA, the statement of the area of the
immovable is not conclusive and the price may be reduced
or increased depending on the area actually delivered.
b. Sale for a lump sum – Art. 1542
Article 1542. In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no
increase or decrease of the price, although there be a
greater or less area or number than that stated in

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the contract.
The same rule shall be applied when two or more
immovables as sold for a single price; but if, besides
mentioning the boundaries, which is indispensable
in every conveyance of real estate, its area or
number should be designated in the contract, the
vendor shall be bound to deliver all that is included
within said boundaries, even when it exceeds the
area or number specified in the contract; and, should
he not be able to do so, he shall suffer a reduction in
the price, in proportion to what is lacking in the area
or number, unless the contract is rescinded because
the vendee does not accede to the failure to deliver
what has been stipulated. (1471)
NOTES:
In both Asiain v. Jalandoni and Roble v Arbasa, the Court
held that although under Art. 1452, in the sale of real estate
by lump sum, there be a greater or lesser area or number
than that stated in the contract, the rule admits of exception
because the sale of land under description “more or less” or
similar words in designating quantity covers “only a
reasonable excess or deficiency.” In Roble, the Court held
that a deficiency or excess of “644sq. m” is not reasonable.
The exception to this rule is when expressly the buyer
assumes the risk on the actual area of the land bought.
7. Inspections and Acceptance
a. Right of inspection – Art. 1584
Article 1584. Where goods are delivered to the
buyer, which he has not previously examined, he is
not deemed to have accepted them unless and until
he has had a reasonable opportunity of examining
them for the purpose of ascertaining whether they
are in conformity with the contract if there is no
stipulation to the contrary.
Unless otherwise agreed, when the seller tenders
delivery of goods to the buyer, he is bound, on
request, to afford the buyer a reasonable
opportunity of examining the goods for the purpose
of ascertaining whether they are in conformity with
the contract.
Where goods are delivered to a carrier by the seller,
in accordance with an order from or agreement with
the buyer, upon the terms that the goods shall not be
delivered by the carrier to the buyer until he has
paid the price, whether such terms are indicated by
marking the goods with the words "collect on
delivery," or otherwise, the buyer is not entitled to
examine the goods before the payment of the price,
in the absence of agreement or usage of trade
La Fuerza v. CA 23 SCRA 1217 (1968)
permitting such examination. (n)
Facts: Respondent Associated Engineering is engaged in the
manufacture and installation of flat belt conveyors and thru
its manager, offered its services to manufacture and install a
conveyor system in La Fuerza’s wine manufacturing
SALES | Prof. Jardeleza 65
b. Manifestation of acceptance – Art. 1585
Article 1585. The buyer is deemed to have accepted
the goods when he intimates to the seller that he has
accepted them, or when the goods have been
delivered to him, and he does any act in relation to
them which is inconsistent with the ownership of
the seller, or when, after the lapse of a reasonable
time, he retains the goods without intimating to the
seller that he has rejected them. (n)
c. Breach of warranty – Art. 1586
Article 1586. In the absence of express or implied
agreement of the parties, acceptance of the goods by
the buyer shall not discharge the seller from liability
in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if,
after acceptance of the goods, the buyer fails to give
notice to the seller of the breach in any promise of
warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller
shall not be liable therefor. (n)
d. Refusal to accept –Art. 1587 – 1589
Article 1587. Unless otherwise agreed, where goods
are delivered to the buyer, and he refuses to accept
them, having the right so to do, he is not bound to
return them to the seller, but it is sufficient if he
notifies the seller that he refuses to accept them. If
he voluntarily constitutes himself a depositary
thereof, he shall be liable as such. (n)
Article 1588. If there is no stipulation as specified
in the first paragraph of article 1523, when the
buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the
moment they are placed at his disposal. (n)
Article 1589. The vendee shall owe interest for the
period between the delivery of the thing and the
payment of the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered
produce fruits or income;
(3) Should he be in default, from the time of
judicial or extrajudicial demand for the
payment of the price. (1501a)

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business. A P5k down payment was delivered by La Fuerza
in check to Assoc. Eng’g which then started to install the
conveyor system. The balance of P8,250 is to be paid by the
defendant upon the completion of the installation. Work
was completed in May 1960 and 5 trial runs were made
from June to July 1960 where it was discovered that the
conveyor system did not function to La Fuerza’s satisfaction.
Thus, when the Associated Eng’g billed La Fuerza for the
balance of the contract price, the latter refused to because
the conveyor system installed did not serve the purpose for
which the same was manufactured and installed at such a
heavy expense. The flat belt conveyors installed in the
factory of the defendant are still there. La Fuerza prayed for
rescission the contract and refund of its 5k down payment.
Held: Art. 1571 of the CC provides that an action to rescind
'shall be barred after 6 months from delivery of the thing
sold'". In the case at bar, La Fuerza did not avail of the right
to demand rescission until the filing of its answer in the CFI
on April 17, 1961 (over 10 months after the installation of
the conveyors in question had been completed on May 30,
1960). Art. 1497 provides that the thing sold shall be
understood as delivered when it is placed in the control and
possession of the vendee. Acceptance cannot be regarded as
a condition to complete delivery.
NOTES:
Even with refusal of acceptance, delivery, whether actual or
constructive, will produce its legal effects, as, for example,
transferring the risk of loss thereof of the subject matter to
the buyer who has become the owner thereof.
PAYMENT OF PRICE
NOTES:
Generally in a sale, payment of the price is a “resolutory
condition” and the remedy of the seller is to exact fulfillment
or in case of a substantial breach, to rescinf the contract
under Art. 1191 of the CC.
1. Liability for interest – Arts. 1582
Article 1582. The vendee is bound to accept
delivery and to pay the price of the thing sold at the
time and place stipulated in the contract.
If the time and place should not have been
stipulated, the payment must be made at the time
and place of the delivery of the thing sold. (1500a)
2. Suspension of payments – Arts. 1590, 1560, 1664
Article 1590. Should the vendee be disturbed in the
possession or ownership of the thing acquired, or
should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure
of mortgage, he may suspend the payment of the
SALES | Prof. Jardeleza 66
price until the vendor has caused the disturbance or
danger to cease, unless the latter gives security for
the return of the price in a proper case, or it has
been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize
the suspension of the payment of the price. (1502a)
Article 1560. If the immovable sold should be
encumbered with any non-apparent burden or
servitude, not mentioned in the agreement, of such a
nature that it must be presumed that the vendee
would not have acquired it had he been aware
thereof, he may ask for the rescission of the contract,
unless he should prefer the appropriate indemnity.
Neither right can be exercised if the non-apparent
burden or servitude is recorded in the Registry of
Property, unless there is an express warranty that
the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution
of the deed, the vendee may bring the action for
rescission, or sue for damages.
One year having elapsed, he may only bring an
action for damages within an equal period, to be
counted from the date on which he discovered the
burden or servitude. (1483a)
Article 1664. The lessor is not obliged to answer for
a mere act of trespass which a third person may
cause on the use of the thing leased; but the lessee
shall have a direct action against the intruder. There
is a mere act of trespass when the third person
claims no right whatever. (1560a)
De la Cruz v. Legaspi 98 Phil 43 (1955)
Facts: De la Cruz sued the Legaspi spouses to compel
delivery of a parcel of land they had sold to him. The
spouses refused to accept payment of the purchase price
(P450) he had tendered and unduly retained possession of
the land. The Legaspi spouses admitted the sale and the
price, but they alleged that after the document of sale was
signed and ratified before the Notary Public, de la Cruz
refused to pay the sum of P450. They asserted that for lack
of consideration, the document of sale should be annulled.
Held: The consideration existed; there was merely a failure
to pay the said consideration. In other words, when after the
notarization of the contract, plaintiff failed to hand the
money to defendants as he previously promised, there was
default on his part at most, and defendants' right was to
demand interest — legal interest — for the delay, or to
demand rescission in court. Also, there was no agreement or
allegation that payment on time was essential. Even if the
contract of sale had expressly provided for "automatic
rescission upon failure to pay the price," the trial judge
could allow plaintiff to enforce the contract, as the judgment
does, in effect because defendants had not made a previous
demand on him, by suit or notarial act.

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Bareng v. CA 107 Phil 641 (1960)
Facts: Petitioner Bareng purchased from respondent Alegria
a cinematographic equipment installed at the Pioneer
Theater in Laoag, Ilocos Norte. The payment is on
installment basis through promissory notes. Before the
second promissory note fell due, the other respondent Ruiz
informed Bareng that he was a co-owner of the equipment
in question. He requested Bareng to suspend the payments
to Alegria of the balance of the price because he was not
agreeable to the sale. Alegria sought to collect the second
promissory note, but Bareng refused to pay on account of
Ruiz’s claims until the Alegria had settled his dispute with
Ruiz. Alegria and Ruiz reached a compromise but Bareng
refused to pay and prayed for the rescission of the sale for
supposed violation by Alegria of certain express warranties
as to the quality of the equipment, and asked for payment of
damages for alleged violation of Alegria’s warranty of title.
Held: The right of a vendee to suspend payment of the price
of the thing sold in the face of any danger that he might be
disturbed in its possession of ownership is conferred by Art.
1590. Petitioner Bareng had the right to suspend payment
of the balance from the time he was informed by Ruiz of the
latter’s claims of co-ownership over the cinema equipment
in question. HOWEVER, this right ended as soon as “the
vendor has caused the disturbance or danger to cease,” i.e.,
when Alegria had caused the disturbance or danger to cease
when he reached a compromise with Ruiz, whereby Ruiz
expressed his conformity to the sale to Bareng, subject to
the payment of his share in the price by Alegria. Thus,
petitioner Bareng was in default on the unpaid balance of
the price of the equipment, plus interests.
3. Sale of real property – Arts. 1592, 1560 (supra)
Article 1592. In the sale of immovable property,
even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the
contract has been made upon him either judicially or
by a notarial act. After the demand, the court may
not grant him a new term. (1504a)
1. Effect of non payment – Art. 1191
Article 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent
upon him.
The injured party may choose between the
fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.
SALES | Prof. Jardeleza 67
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing,
in accordance with articles 1385 and 1388 and the
Mortgage Law. (1124)
Laforteza v. Machuca 333 SCRA 643 (1992)
Facts: Plaintiff sold a house and lot to defendant for
P630,000: 30k as earnest money, and 600k upon the
issuance of a new title in the name of the property’s
predecessor, and upon execution of extrajudicial settlement
of the predecessor’s estate in favor of defendant. The
agreement also stipulated that upon issuance of the new
title, the buyer-lessee shall be notified in writing and shall
have 30 days to pay the 600k which shall be paid to the
seller upon the execution of the extra-judicial settlement.
Defendant paid the earnest money. After 8 months from the
agreement, plaintiff informed defendant of the issuance of a
new title and that defendant had 3 days to pay the balance.
Defendant asked for an extension, and was approved by
only one of the plaintiffs. Plaintiff refused to accept the
balance and informed him that the property was no longer
for sale. Plaintiffs contend that the agreement is merely a
lease agreement with option to purchase for 6 months. Since
payment was made after the lapse of the option period, the
payment did not give rise to the perfection of the contract of
sale.
Held: Technically, the failure of defendant to pay the balance
was a breach of contract and thus a ground for its rescission.
The extension is also ineffective since it was only approved
by one of the plaintiffs. However, after the expiration of the
6-month period, plaintiffs were also not ready to comply
with their obligation of delivering the new title of the house
and lot. It was only after 8 months that plaintiffs informed
defendant that they had secured the new title. Defendant
could not be considered in delay because pursuant to the
law on reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in
a proper manner with what was incumbent upon him.
Luzon Brokerage v. Maritime Bldg. 43 SCRA 93 (1972)
(supra)
b. Maceda Law: Sales of Residential Realty on
Installment (RA 6552)
Section 1. This Act shall be known as the "Realty
Installment Buyer Act."
Section 2. It is hereby declared a public policy to
protect buyers of real estate on installment
payments against onerous and oppressive
conditions.
Section 3. In all transactions or contracts involving
the sale or financing of real estate on installment
payments, including residential condominium
apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four, as
amended by Republic Act Numbered Sixty-three

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hundred eighty-nine, where the buyer has paid at
least two years of installments, the buyer is entitled
to the following rights in case he defaults in the
payment of succeeding installments:
(a) To pay, without additional interest, the
unpaid installments due within the total
grace period earned by him which is hereby
fixed at the rate of one month grace period
for every one year of installment payments
made: Provided, That this right shall be
exercised by the buyer only once in every
five years of the life of the contract and its
extensions, if any.
(b) If the contract is canceled, the seller
shall refund to the buyer the cash
surrender value of the payments on the
property equivalent to fifty per cent of the
total payments made, and, after five years
of installments, an additional five per cent
every year but not to exceed ninety per cent
of the total payments made: Provided, That
the actual cancellation of the contract shall
take place after thirty days from receipt by
the buyer of the notice of cancellation or
the demand for rescission of the contract by
a notarial act and upon full payment of the
cash surrender value to the buyer.
Down payments, deposits or options on the contract
shall be included in the computation of the total
number of installment payments made.
Section 4. In case where less than two years of
installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from
the date the installment became due.
If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel
the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall
have the right to sell his rights or assign the same to
another person or to reinstate the contract by
updating the account during the grace period and
before actual cancellation of the contract. The deed
of sale or assignment shall be done by notarial act.
Section 6. The buyer shall have the right to pay in
advance any installment or the full unpaid balance of
the purchase price any time without interest and to
have such full payment of the purchase price
annotated in the certificate of title covering the
property.
Section 7. Any stipulation in any contract hereafter
entered into contrary to the provisions of Sections 3,
4, 5 and 6, shall be null and void.
Valarao v. CA 394 SCRA 155 (1999)
Facts: Petitioner spouses sold to private respondent
Arellano under a Deed of Conditional Sale a parcel of land in
Diliman, QC. The contract stipulated that should the vendee
fail to pay 3 successive monthly installments or any 1 year-
SALES | Prof. Jardeleza 68
end lump sum payment within the period stipulated, the
sale shall be considered automatically rescinded without
the necessity of judicial action and all payments made by the
vendee shall be forfeited in favor of the vendors by way of
rental for the use and occupancy of the property and as
liquidated damages. All improvements introduced by the
vendee to the property shall belong to the vendors without
any right of reimbursement. Vendee failed to pay the
installments due for 2 months. Arellano offered to pay said
2 monthly installment plus the installment due for that
month but refused by petitioner spouses.
Held: The rescission of the contract and the forfeiture of the
payments already made could not be effected because the
case falls under RA 6552 (Maceda Law), Section 3. Private
respondent was entitled to a 1-month grace period for every
year of installments paid, which means that she had a total
grace period of 3 months from the date she tried to pay for
the 3 monthly installments due to the petitioner spouses.
Active Realty v. Daroya 382 SCRA 152 (2002)
Facts: Respondent bought a 515 sq. m lot for P224,025 in
petitioner’s subdivision. Respondent shall pay the contract
price in 60 monthly instalments (which amounted to
P346,367 = amt. higher than stated in the contract price).
Respondent was in default of 3 monthly amortizations.
Petitioner cancelled the contract. When respondent offered
to pay for the balance, petitioner refused as it has allegedly
sold the lot to another buyer.
Held: The contract to sell is governed by RA 6552, Section 3.
It provided for the rights of the buyer in case of default in
the payment of succeeding instalments, where he has
already paid at least 2 yrs. of instalments. Petitioner failed
to comply with the mandatory twin requirements for a valid
and effective cancellation under the law (i.e. failed to send a
notarized notice of cancellation and refund the cash
surrender value). Petitioner to refund to the respondent the
actual value of the land (P875k) she lost to another buyer,
plus int. rate of 12%/annum until fully paid or to deliver a
substitute lot at the choice of the respondent.
CHAPTER XII: WARRANTIES
Warranty is an affirmation of fact or any promise made by a
seller in relation to the thing sold, and that the decisive test
is whether the seller assumes to assert a fact of which the
buyer is ignorant of (Goodyear Philippines, Inc, v, Sy).
EXPRESS WARRANTIES
1. Distinguish from condition – Arts. 1545
Article 1545. Where the obligation of either party
to a contract of sale is subject to any condition which
is not performed, such party may (a) refuse to
proceed with the contract or (b) he may waive
performance of the condition. If the other party has
promised that the condition should happen or be
performed, such first mentioned party may also
treat the non-performance of the condition as a
breach of warranty.

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Where the ownership in the thing has not passed,
the buyer may treat the fulfilment by the seller of his
obligation to deliver the same as described and as
warranted expressly or by implication in the
contract of sale as a condition of the obligation of the
buyer to perform his promise to accept and pay for
the thing. (n)
NOTES:
Romero v. CA emphasized the distinction between a
condition imposed on the perfection of the contract (where
failure to comply results in the failure of the contract) and a
condition imposed on the performance of an obligation
(where failure to comply only gives the other party the
option to either refuse to proceed with the sale or to waive
the condition as mandated under Art. 1545; and that the
choice is not with the obligor but with the injured party.
Non-fulfilment of a warranty = constitute a breach of
contract
Non-happening of the condition = although may extinguish
the obligation upon which it is based, generally does not
amount to a breach of contract of sale
In addition to the aforesaid legal effects of the non-
happening of the condition and the non-fulfilment of the
warranty, the following differences also apply:
1. Condition generally goes into the root of the
existence of the obligation; warranty goes into the
performance of such obligation, and in fact may
constitute an obligation in itself;
2. Condition must be stipulated by the parties in
order to form part of an obligation; warranty may
form part of the obligation or contract by provision
of law, without the parties having expressly agreed
thereto; and
3. Condition may attach itself either to the obligations
of the seller or of the buyer; warranty, whether
express or implied, relates to the subject matter
itself or to the obligations of the seller as to the
subject matter of the sale
2. Distinguish from opinion, dealer’s talk – Art. 1546,
1340, 1341
Article 1546. Any affirmation of fact or any promise
by the seller relating to the thing is an express
warranty if the natural tendency of such affirmation
or promise is to induce the buyer to purchase the
same, and if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing, nor
any statement purporting to be a statement of the
seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation or
statement as an expert and it was relied upon by the
buyer. (n)
SALES | Prof. Jardeleza 69
Article 1340. The usual exaggerations in trade,
when the other party had an opportunity to know
the facts, are not in themselves fraudulent. (n)
Article 1341. A mere expression of an opinion does
not signify fraud, unless made by an expert and the
other party has relied on the former's special
knowledge. (n)
Songco v. Sellner 37 Phil 254 (1917)
Facts: Sellner bought Songco’s sugar cane as it stood in the
fields for P12k and executed 3 promissory notes of P4k
each. Two of these notes were paid, and the present action
was instituted to recover the third. According to Sellner, his
refusal to pay the balance of the purchase price stems from
a false representation made by Songco as to the quantity of
uncut cane standing in the fields at the time of purchase.
Songco estimated that this cane would produce 3,000 piculs
of sugar. However, in reality it only produced 2,017 piculs.
Held: Sellner is bound to pay the purchase price
notwithstanding the disparity between Songco’s estimate
and the quantity actually obtained because the
representation made by Songco was a matter of opinion and
is not an actionable deceit. To render a contract void, the
false representations must be as to matters of fact
substantially affecting the buyer's interest, not as to matters
of opinion, judgment, probability, or expectation. When the
purchaser undertakes to make an investigation of his own,
and the seller does nothing to prevent this investigation
from being as full as he chooses to make it, the purchaser
cannot afterwards allege that the seller made
misrepresentations.
3. Distinguish from false representation – Art. 1342
Article 1342. Misrepresentation by a third person
does not vitiate consent, unless such
misrepresentation has created substantial mistake
and the same is mutual. (n)
Gochangco v. Dean 47 Phil 687 (1925)
Facts: Plaintiffs purchased a land of the Pasay Estate by
installments. Defendant R. L. Dean was the owner of 2
parcels of land situated in Masbate. The plaintiffs and
defendant agreed to exchange their respective properties,
but before the final execution of the contract of exchange,
plaintiff Gochangco went to Masbate to examine the parcels
of land offered for exchange by Dean. The contract of
exchange was later executed, wherein defendant Dean
stated that his property is sold with all the coconut trees
(more than 6,000 trees were on the land, according to him),
together with all improvements existing on the land.
Plaintiffs alleged that Dean made false and fraudulent
representations as to the existence of the 6,000 coconut
trees, and sought to annul the contract of exchange and
thereby recover the land they had exchanged with Dean.

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Held: The defendant did not deliberately violate the truth in
stating his belief that there were more than 6,000 coconut
trees on said lands. Plaintiff Gochangco himself estimated
that there were, indeed, more than 6,000 coconut trees
when he went to Masbate to examine the parcels of land.
Thus, the plaintiffs have not established their alleged right
to the judgment prayed for in their complaint.
PMC v. Go Jocco 48 Phil 621 (1926)
Facts: Defendant sold plaintiff 1,500 tons of coconut oil.
Plaintiff took samples of the oil from defendant’s tanks for
examination. Upon finding that the oil quality was
satisfactory, plaintiff paid the purchase price. Plaintiff sold
the oil to a foreign company. When it loaded the oil to the
vessel, it also included its own manufactured oil, and oil
from another source. The company refused to accept the oil
on the ground that it was contaminated with kapok and
cotton-seed oil. Plaintiff claims damages against defendant
for making false representations as to its oil. Defendant
avers that plaintiff had no right of action having examined
the oil at the time of its delivery and that its loss was due to
its own fault.
Held: There is no false representation on the part of the
defendant. Plaintiff examined the oil before paying the price.
He has no cause of action under Art. 336, Code of
Commerce: Buyer who examines merchandise upon
receiving it shall not have a right of action against the seller
alleging a defect in the quantity or quality of the
merchandise. Assuming that there has been mixing of other
oils with the coconut oil in question, it cannot be presumed
that the defendant intended to mislead the plaintiff. Also,
assuming that contamination did exist, the comparatively
small quantity of the contaminating oil alleged to have
mixed with the coconut oil can only be regarded as an
impurity and did not change the essential character of the
merchandise. In commercial sales, the fact that the vendor
does not volunteer detailed statements of all he knows,
whether important or not, in regard to the goods sold by
him, is not fraud per se.
IMPLIED WARRANTIES – Art. 1547
NOTES:
Implied warranties are those which by law constitute part
of every contract of sale, whether or not the parties were
aware of them, and whether or not the parties intended
them. Although only a seller is bound by the implied
warranties of law, nevertheless, by express contractual
stipulation, an agent of the seller may bind himself to such
warranties.
Article 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the
seller that he has a right to sell the thing at
the time when the ownership is to pass, and
that the buyer shall from that time have and
enjoy the legal and peaceful possession of
the thing;
(2) An implied warranty that the thing shall
SALES | Prof. Jardeleza 70
be free from any hidden faults or defects, or
any charge or encumbrance not declared or
known to the buyer.
This article shall not, however, be held to
render liable a sheriff, auctioneer,
mortgagee, pledgee, or other person
professing to sell by virtue of authority in
fact or law, for the sale of a thing in which a
third person has a legal or equitable
interest. (n)
a. Seller has right to sell
NOTES:
Since warranty goes into the issue of performance of
obligation, the warranty of the seller “that he has a right to
sell” refers only to the transfer of ownership at the point of
consummation, and not to any representation as to
ownership and the capacity to transfer the same at the point
of perfection.
Although Art. 1456 uses the phrase “unless a contrary
intention appears,” there can be no legal waiver of such
warranty without changing the basic nature of the
relationship, for the warranty on the part of the seller that
he has the capacity to sell, i.e., to transfer ownership of the
subject matter pursuant to the sale, is the essence of the
sale; unless, it amounts to clear assumption of risk on the
part of the buyer, as when the obligation of the seller is
subject to condition.
b. Warranty against eviction – Arts. 1548 – 1559,
1560 (supra)
Article 1548. Eviction shall take place whenever by
a final judgment based on a right prior to the sale or
an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing
purchased.
The vendor shall answer for the eviction even
though nothing has been said in the contract on the
subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor. (1475a)
NOTES:

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The seller’s implied warranty against eviction only applies
(i.e., there has been a breach of warranty) when the
following conditions are present:
1. Purchaser has been deprived of, or evicted
from, the whole or part of the thing sold;
2. Eviction is by a final judgment;
3. Basis thereof is by virtue of a right prior to the
sale made by the seller; and
4. Seller has been summoned and made co-
defendant in the suit for eviction at the
instance of the buyer
Article 1549. The vendee need not appeal from the
decision in order that the vendor may become liable
for eviction. (n)
Article 1550. When adverse possession had been
commenced before the sale but the prescriptive
period is completed after the transfer, the vendor
shall not be liable for eviction. (n)
Article 1551. If the property is sold for nonpayment
of taxes due and not made known to the vendee
before the
sale, the vendor is liable for eviction. (n)
Article 1552. The judgment debtor is also
responsible for eviction in judicial sales, unless it is
otherwise decreed in the judgment. (n)
Article 1553. Any stipulation exempting the vendor
from the obligation to answer for eviction shall be
void, if he acted in bad faith. (1476)
Article 1554. If the vendee has renounced the right
to warranty in case of eviction, and eviction should
take place, the vendor shall only pay the value which
the thing sold had at the time of the eviction. Should
the vendee have made the waiver with knowledge of
the risks of eviction and assumed its consequences,
the vendor shall not be liable. (1477)
NOTES:
In other words, a general waiver of the warranty does not
create the effect of waiver but merely limits the liability of
the seller to the value of the thing sold at the time of
eviction.
When the waiver is of a specific case of expected eviction,
the waiver has the effect of wiping put the warranty as to
that specific risk, but not as to eviction caused by other
reasons not covered in the waiver.
Article 1555. When the warranty has been agreed
upon or nothing has been stipulated on this point, in
case eviction occurs, the vendee shall have the right
to demand of the vendor:
(1) The return of the value which the thing
sold had at the time of the eviction, be it
SALES | Prof. Jardeleza 71
greater or less than the price of the sale;
(2) The income or fruits, if he has been
ordered to deliver them to the party who
won the suit against him;
(3) The costs of the suit which caused the
eviction, and, in a proper case, those of the
suit brought against the vendor for the
warranty;
(4) The expenses of the contract, if the
vendee has paid them;
(5) The damages and interests, and
ornamental expenses, if the sale was made
in bad faith. (1478)
Article 1556. Should the vendee lose, by reason of
the eviction, a part of the thing sold of such
importance, in relation to the whole, that he would
not have bought it without said part, he may demand
the rescission of the contract; but with the obligation
to return the thing without other encumbrances that
those which it had when he acquired it.
He may exercise this right of action, instead of
enforcing the vendor's liability for eviction.
The same rule shall be observed when two or more
things have been jointly sold for a lump sum, or for a
separate price for each of them, if it should clearly
appear that the vendee would not have purchased
one without the other. (1479a)
Article 1557. The warranty cannot be enforced
until a final judgment has been rendered, whereby
the vendee loses the thing acquired or a part thereof.
(1480)
Article 1558. The vendor shall not be obliged to
make good the proper warranty, unless he is
summoned in the suit for eviction at the instance of
the vendee. (1481a)
Article 1559. The defendant vendee shall ask,
within the time fixed in the Rules of Court for
answering the complaint, that the vendor be made a
co-defendant. (1482a)
NOTES:
There is no need for the buyer to resist to the fullest the
action for eviction taken against him, since the warranty is a
covenant on the part of the seller, and by having given the
seller proper notice of the eviction, (i.e., by making him a
party to the case) the buyer is deemed to have complied
with what is incumbent upon him, and the seller, being a
party to the case, must then take the lead to resist the claim
of the third party on the subject matter of the sale.
c. Warranty against non-apparent servitudes – Art.
1560 (supra)

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NOTES:
Under Art. 1460, the warranty shall apply only when the
following conditions are present:
- The immovable sold is encumbered with any non-
apparent burden or servitude, not mentioned in
the agreement; and
- The nature of such non-apparent burden or
servitude is such that it must presume that the
buyer would not have acquired it had he been
aware thereof.
d. Warranty against hidden encumbrance or defects –
Arts. 1561 – 1580
NOTES:
The warranty applies to both movable and immovable
subject matters. In Investments & Dev’t., Inc. v. CA, the Court
held that the implied warranty against hidden defects under
Art. 1547 of the CC covers only those that make the object of
the sale unfit for the use for which it was intended at the
time of the sale, and that in the sale of agricultural land, the
existing tenancy relationship pertaining thereto cannot be
considered as “hidden fault or defect” since it did not go into
the use of the land.
Requisites to Recover on account of hidden defects are as
follows (Nutrimix Feeds Corp. v. CA):
- Defect must be hidden;
- Defect must exist at the time the sale was made;
- Defect must ordinarily have been excluded from
the contract;
- Defect must be important (render the thing unfit or
considerably decreases fitness);
- Action must be instituted within the statute of
limitations
Article 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing
sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price for it;
but said vendor shall not be answerable for patent
defects or those which may be visible, or for those
which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have
known them. (1484a)
Article 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows:
(1) Where the buyer, expressly or by
implication, makes known to the seller the
particular purpose for which the goods are
acquired, and it appears that the buyer
relies on the seller's skill or judgment
(whether he be the grower or manufacturer
or not), there is an implied warranty that
SALES | Prof. Jardeleza 72
the goods shall be reasonably fit for such
purpose;
(2) Where the goods are brought by
description from a seller who deals in
goods of that description (whether he be
the grower or manufacturer or not), there
is an implied warranty that the goods shall
be of merchantable quality. (n)
Article 1563. In the case of contract of sale of a
specified article under its patent or other trade
name, there is no warranty as to its fitness for any
particular purpose, unless there is a stipulation to
the contrary. (n)
Article 1564. An implied warranty or condition as
to the quality or fitness for a particular purpose may
be annexed by the usage of trade. (n)
Article 1565. In the case of a contract of sale by
sample, if the seller is a dealer in goods of that kind,
there is an implied warranty that the goods shall be
free from any defect rendering them
unmerchantable which would not be apparent on
reasonable examination of the sample. (n)
Article 1566. The vendor is responsible to the
vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof.
This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware of
the hidden faults or defects in the thing sold. (1485)
Article 1567. In the cases of articles 1561, 1562,
1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a
proportionate reduction of the price, with damages
in either case. (1486a)
Article 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor
was aware of them, he shall bear the loss, and shall
be obliged to return the price and refund the
expenses of the contract, with damages. If he was
not aware of them, he shall only return the price and
interest thereon, and reimburse the expenses of the
contract which the vendee might have paid. (1487a)
Article 1569. If the thing sold had any hidden fault
at the time of the sale, and should thereafter be lost
by a fortuitous event or through the fault of the
vendee, the latter may demand of the vendor the
price which he paid, less the value which the thing
had when it was lost.
If the vendor acted in bad faith, he shall pay damages
to the vendee. (1488a)
Article 1570. The preceding articles of this
Subsection shall be applicable to judicial sales,
except that the judgment debtor shall not be liable
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for damages. (1489a) any injury due to his negligence, and not arising
from the redhibitory fault or defect. (1498)
Article 1571. Actions arising from the provisions of
the preceding ten articles shall be barred after six Article 1580. In the sale of animals with redhibitory
months, from the delivery of the thing sold. (1490) defects, the vendee shall also enjoy the right
mentioned in article 1567; but he must make use
Article 1572. If two or more animals are sold thereof within the same period which has been fixed
together, whether for a lump sum or for a separate for the exercise of the redhibitory action. (1499)
price for each of them, the redhibitory defect of one
shall only give rise to its redhibition, and not that of
the others; unless it should appear that the vendee
would not have purchased the sound animal or
animals without the defective one. e. Additional warranties for consumer products – RA
7394 (Consumer Act), Art. 68
The latter case shall be presumed when a team, yoke
pair, or set is bought, even if a separate price has Article 68. Additional Provisions on Warranties. –
been fixed for each one of the animals composing the In addition to the Civil Code provisions on sale with
same. (1491) warranties, the following provisions shall govern the
sale of consumer products with warranty:
Article 1573. The provisions of the preceding
article with respect to the sale of animals shall in like a) Terms of express warranty. – Any seller
manner be applicable to the sale of other things. or manufacturer who gives an express
(1492) warranty shall:
1) set forth the terms of warranty
Article 1574. There is no warranty against hidden in clear and readily
defects of animals sold at fairs or at public auctions, understandable language and
or of live stock sold as condemned. (1493a) clearly identify himself as the
warrantor;
Article 1575. The sale of animals suffering from 2) identify the party to whom the
contagious diseases shall be void. A contract of sale warranty is extended;
of animals shall also be void if the use or service for 3) state the products or parts
which they are acquired has been stated in the covered;
contract, and they are found to be unfit therefor. 4) state what the warrantor will
(1494a) do in the event of a defect,
malfunction of failure to conform
Article 1576. If the hidden defect of animals, even in to the written warranty and at
case a professional inspection has been made, whose expense;
should be of such a nature that expert knowledge is 5) state what the consumer must
not sufficient to discover it, the defect shall be do to avail of the rights which
considered as redhibitory. accrue to the warranty; and
6) stipulate the period within
But if the veterinarian, through ignorance or bad which, after notice of defect,
faith should fail to discover or disclose it, he shall be malfunction or failure to conform
liable for damages. (1495) to the warranty, the warrantor will
perform any obligation under the
Article 1577. The redhibitory action, based on the warranty.
faults or defects of animals, must be brought within
forty days from the date of their delivery to the b) Express warranty – operative from
vendee. moment of sale. – All written warranties or
guarantees issued by a manufacturer,
This action can only be exercised with respect to producer, or importer shall be operative
faults and defects which are determined by law or from the moment of sale.
by local customs. (1496a) 1) Sales Report. – All sales made
by distributors of products
Article 1578. If the animal should die within three covered by this Article shall be
days after its purchase, the vendor shall be liable if reported to the manufacturer,
the disease which cause the death existed at the time producer, or importer of the
of the contract. (1497a) product sold within thirty (30)
days from date of purchase, unless
Article 1579. If the sale be rescinded, the animal otherwise agreed upon. The report
shall be returned in the condition in which it was shall contain, among others, the
sold and delivered, the vendee being answerable for date of purchase, model of the

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product bought, its serial number,
name and address of the buyer.
The report made in accordance
with this provision shall be
equivalent to a warranty
registration with the
manufacturer, producer, or
importer. Such registration is
sufficient to hold the
manufacturer, producer, or
importer liable, in appropriate
cases, under its warranty.
2) Failure to make or send report.
– Failure of the distributor to make
the report or send them the form
required by the manufacturer,
producer, or importer shall relieve
the latter of its liability under the
warranty: Provided, however, That
the distributor who failed to
comply with its obligation to send
the sales reports shall be
personally liable under the
warranty. For this purpose, the
manufacturer shall be obligated to
make good the warranty at the
expense of the distributor.
3) Retail. – The retailer shall be
subsidiarily liable under the
warranty in case of failure of both
the manufacturer and distributor
to honor the warranty. In such
case, the retailer shall shoulder the
expenses and costs necessary to
honor the warranty. Nothing
therein shall prevent the retailer
from proceeding against the
distributor or manufacturer.
4) Enforcement of warranty or
guarantee. – The warranty rights
can be enforced by presentment of
a claim. To this end, the purchaser
needs only to present to the
immediate seller either the
warranty card of the official
receipt along with the product to
be serviced or returned to the
immediate seller. No other
documentary requirement shall be
demanded from the purchaser. If
the immediate seller is the
manufacturer's factory or
showroom, the warranty shall
immediately be honored. If the
product was purchased from a
distributor, the distributor shall
likewise immediately honor the
warranty. In the case of a retailer
other than the distributor, the
former shall take responsibility
without cost to the buyer of
presenting the warranty claim to
SALES | Prof. Jardeleza 74
the distributor in the consumer's
behalf.
5) Record of purchases. –
Distributors and retailers covered
by this Article shall keep a record
of all purchases covered by a
warranty or guarantee for such
period of time corresponding to
the lifetime of the product's
respective warranties or
guarantees.
6) Contrary stipulations – null and
void. – All covenants, stipulations
or agreements contrary to the
provisions of this Article shall be
without legal effect.
c) Designation of warranties. – A written
warranty shall clearly and conspicuously
designate such warranty as:
1) "Full warranty" if the written
warranty meets the minimum
requirements set forth in
paragraph (d); or
2) "Limited warranty" if the
written warranty does not meet
such minimum requirements.
d) Minimum standards for warranties. –
For the warrantor of a consumer product to
meet the minimum standards for warranty,
he shall:
1) remedy such consumer product
within a reasonable time and
without charge in case of a defect,
malfunction or failure to conform
to such written warranty;
2) permit the consumer to elect
whether to ask for a refund or
replacement without charge of
such product or part, as the case
may be, where after reasonable
number of attempts to remedy the
defect or malfunction, the product
continues to have the defect or to
malfunction.
The warrantor will not be required to
perform the above duties if he can show
that the defect, malfunction or failure to
conform to a written warranty was caused
by damage due to unreasonable use
thereof.
e) Duration of warranty. – The seller and
the consumer may stipulate the period
within which the express warranty shall be
enforceable. If the implied warranty on
merchantability accompanies an express
warranty, both will be of equal duration.
Any other implied warranty shall endure
not less than sixty (60) days nor more than

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one (1) year following the sale of new
consumer products.
f) Breach of warranties. –
(1) In case of breach of express warranty,
the consumer may elect to have the goods
repaired or its purchase price refunded by
the warrantor. In case the repair of the
product in whole or in part is elected, the
warranty work must be made to conform to
the express warranty within thirty (30)
days by either the warrantor or his
representative. The thirty-day period,
however, may be extended by conditions
which are beyond the control of the
warrantor or his representative. In case the
refund of the purchase price is elected, the
amount directly attributable to the use of
the consumer prior to the discovery of the
non-conformity shall be deducted.
(2) In case of breach of implied warranty, the
consumer may retain in the goods and recover
damages, or reject the goods, cancel and contract
and recover from the seller so much of the purchase
price as has been paid, including damages.
f. Warranty in sale of animals – Art. 1568 (supra)
g. Implied Warranty of Quality – Art. 1562(1) (supra),
1564 (supra)
NOTES:
Requisites for breach of the implied warranty to apply
(Nutrimix Feeds Corp. v. CA):
- That the buyer sustained injury because of the
product;
- That the injury occurred because the product was
defective ot unreasonably unsafe; and
- The defect existed when the product left the hands
of the seller.
Nutrimix Feeds Corp. also held that a manufacturer or a
seller of a product cannot be held liable for any damage
allegedly caused by the product in the absence of any proof
that the product in question is defective.
h. Sale by sample or description – Art. 1574 (supra),
1562(2) (supra), 1481
Article 1481. In the contract of sale of goods by
description or by sample, the contract may be
rescinded if the bulk of the goods delivered do not
correspond with the description or the sample, and
if the contract be by sample as well as description, it
is not sufficient that the bulk of goods correspond
with the sample if they do not also correspond with
the description.
SALES | Prof. Jardeleza 75
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the
sample. (n)
NOTES:
In a sale by sample, there is an implied warranty that the
goods shall be free from any defect which is not apparent or
reasonable upon examination of the sample and which
would render the goods unmerchantable (Mendoza v
David).
However, in a sale of goods by description, Mendoza v David
held that a “seller’s description of the goods which is made
part of the basis of the transaction creates a warranty that
the goods will conform to that description. Where the goods
are bought by description, there is an implied warranty that
the goods are of merchantable quality.”
EFFECTS OF WARRANTIES
EFFECTS OF WAIVERS
BUYERS OPTIONS IN CASE OF BREACH OF WARRANTY –
Art. 1599
Article 1599. Where there is a breach of warranty
by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up
against the seller, the breach of warranty by
way of recoupment in diminution or
extinction of the price;
(2) Accept or keep the goods and maintain
an action against the seller for damages for
the breach of warranty;
(3) Refuse to accept the goods, and
maintain an action against the seller for
damages for the breach of warranty;
(4) Rescind the contract of sale and refuse
to receive the goods or if the goods have
already been received, return them or offer
to return them to the seller and recover the
price or any part thereof which has been
paid.
When the buyer has claimed and been
granted a remedy in anyone of these ways,
no other remedy can thereafter be granted,
without prejudice to the provisions of the
second paragraph of article 1191.
Where the goods have been delivered to the
buyer, he cannot rescind the sale if he knew
of the breach of warranty when he accepted
the goods without protest, or if he fails to
notify the seller within a reasonable time of
the election to rescind, or if he fails to
return or to offer to return the goods to the
seller in substantially as good condition as

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they were in at the time the ownership was
transferred to the buyer. But if
deterioration or injury of the goods is due
to the breach or warranty, such
deterioration or injury shall not prevent the
buyer from returning or offering to return
the goods to the seller and rescinding the
sale.
Where the buyer is entitled to rescind the
sale and elects to do so, he shall cease to be
liable for the price upon returning or
offering to return the goods. If the price or
any part thereof has already been paid, the
seller shall be liable to repay so much
thereof as has been paid, concurrently with
the return of the goods, or immediately
after an offer to return the goods in
exchange for repayment of the price.
Where the buyer is entitled to rescind the
sale and elects to do so, if the seller refuses
to accept an offer of the buyer to return the
goods, the buyer shall thereafter be deemed
to hold the goods as bailee for the seller,
but subject to a lien to secure the payment
of any portion of the price which has been
paid, and with the remedies for the
enforcement of such lien allowed to an
unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such
loss, in the absence of special circumstances
showing proximate damage of a greater amount, is
the difference between the value of the goods at the
time of delivery to the buyer and the value they
would have had if they had answered to the
warranty. (n)
Ang v. CA 567 SCRA 53 (2008)
Facts: A car-swapping scheme was done between Soledad's
Mitsubishi GSR + P55k and Ang's Mitsubishi Lancer (both by
Deed of Absolute Sale). Ang later offered the Mitsubishi GSR
("vehicle") for sale through Far Eastern Motors. The vehicle
was eventually sold to Paul Bugash for P225k by Deed of
Absolute Sale. But before the deed could be registered in
Bugash's name, the vehicle was seized by virtue of a writ of
replevin issued by the RTC Cebu City on account of the
alleged failure of Ronaldo Panes, the owner of the vehicle
prior to Soledad, to pay the mortgage debt constituted
thereon. To secure the release of the vehicle, Ang paid BA
Finance but Soledad refused to reimburse the amount paid
despite repeated demands. Ang filed 3 successive
complaints for damages against Soledad.
Held: Ang's claim had prescribed. Warranties by the seller
may be express or implied. Art. 1546 of the CC defines
express warranty. On the other hand, an implied warranty is
that which the law derives by application or inference from
the nature of the transaction or the relative situation or
SALES | Prof. Jardeleza 76
circumstances of the parties, irrespective of any intention of
the seller to create it. In Soledad declaring that he owned
and had clean title to the vehicle at the time the Deed of
Absolute Sale was forged, he gave an implied warranty of
title. Since what Soledad, as seller, gave was an implied
warranty, the prescriptive period to file a breach thereof is
6 months after the delivery of the vehicle, following Art.
1571. But even if the date of filing of the action is reckoned
from the date petitioner instituted his first complaint for
damages on November 9, 1993, and not on July 15, 1996
when he filed the complaint subject of the present petition,
the action just the same had prescribed, it having been filed
16 months after July 28, 1992, the date of delivery of the
vehicle.
Chapter XIII: BREACH OF CONTRACTS
REMEDIES OF THE SELLER
Art. 1636: In the preceding articles in this Title governing
the sale of goods, unless the context or subject matter
otherwise requires:
(1) “Document of title to goods” includes any bill of lading,
dock warrant, “quedan,” or warehouse receipt or order
for the delivery of goods, or any other document used
in the ordinary course of business in the sale or transfer
of goods, as proof of the possession or control of the
goods, or authorizing or purporting to authorize the
possessor of the document to transfer or receive, either
by indorsement or by delivery, goods represented by
such document.
“Goods” includes all chattels personal but not things in
action or money of legal tender in the Philippines. The
term includes growing fruits or crops.
“Order” relating to documents of title means an order by
indorsement on the documents.
“Quality of goods” includes their state or condition.
“Specific goods” means goods identified and agreed upon at
the time a contract of sale is made.
An antecedent or pre-existing claim, whether for money or
not, constitutes “value” where goods or documents of
title are taken either in satisfaction thereof or as
security therefor.
(2) A person is insolvent within the meaning of this Title
who either has ceased to pay his debts in the ordinary
course of business or cannot pay his debts as they
become due, whether insolvency proceedings have
been commenced or not.
(3) Goods are in a “deliverable state” within the meaning of
this Title when they are in such a state that the buyer

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would, under the contract, be bound to take delivery of
them.
Article 1594: Actions for breach of the contract of sale of
goods shall be governed particularly by the provisions of
this Chapter, and as to matters not specifically provided for
herein, by other applicable provisions of this Title.
Article 1595. Where, under a contract of sale, the
ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the goods
according to the terms of the contract of sale, the seller may
maintain an action against him for the price of the goods.
Where, under a contract of sale, the price is payable on a
certain day, irrespective of delivery or of transfer of title and
the buyer wrongfully neglects or refuses to pay such price,
the seller may maintain an action for the price although the
ownership in the goods has not passed. But it shall be a
defense to such an action that the seller at any time before
the judgment in such action has manifested an inability to
perform the contract of sale on his part or an intention not
to perform it.
Although the ownership in the goods has not passed, if they
cannot readily be resold for a reasonable price, and if the
provisions of article 1596, fourth paragraph, are not
applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify
the buyer that the goods are thereafter held by the seller as
bailee for the buyer. Thereafter the seller may treat the
goods as the buyer's and may maintain an action for the
price.
Article 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may
maintain an action against him for damages for
nonacceptance.
The measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events from the
buyer's breach of contract.
Where there is an available market for the goods in
question, the measure of damages is, in the absence of
special circumstances showing proximate damage of a
different amount, the difference between the contract price
and the market or current price at the time or times when
the goods ought to have been accepted, or, if no time was
fixed for acceptance, then at the time of the refusal to
accept.
If, while labor or expense of material amount is necessary
on the part of the seller to enable him to fulfill his
obligations under the contract of sale, the buyer repudiates
the contract or notifies the seller to proceed no further
therewith, the buyer shall be liable to the seller for labor
performed or expenses made before receiving notice of the
buyer's repudiation or countermand. The profit the seller
would have made if the contract or the sale had been fully
performed shall be considered in awarding the damages.
SALES | Prof. Jardeleza 77
Article 1597. Where the goods have not been delivered to
the buyer, and the buyer has repudiated the contract of sale,
or has manifested his inability to perform his obligations
thereunder, or has committed a breach thereof, the seller
may totally rescind the contract of sale by giving notice of
his election so to do to the buyer.
Article 1598. Where the seller has broken a contract to
deliver specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall be
performed specifically, without giving the seller the option
of retaining the goods on payment of damages. The
judgment or decree may be unconditional, or upon such
terms and conditions as to damages, payment of the price
and otherwise, as the court may deem just.
Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in diminution
or extinction of the price;
(2) Accept or keep the goods and maintain an action against
the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191.
Where the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach of warranty
when he accepted the goods without protest, or if he fails to
notify the seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to return the goods
to the seller in substantially as good condition as they were
in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the
breach or warranty, such deterioration or injury shall not
prevent the buyer from returning or offering to return the
goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon returning
or offering to return the goods. If the price or any part
thereof has already been paid, the seller shall be liable to
repay so much thereof as has been paid, concurrently with
the return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to
do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to
hold the goods as bailee for the seller, but subject to a lien to
secure the payment of any portion of the price which has
been paid, and with the remedies for the enforcement of
such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in
the absence of special circumstances showing proximate
damage of a greater amount, is the difference between the

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value of the goods at the time of delivery to the buyer and
the value they would have had if they had answered to the
warranty.
Sale of Movables
1. Action for the price
Art. 1595, supra
NOTES:
- Seller has a choice between specific performance
and rescission of contract.
- But specific performance is only available in 3
cases:
2. Where ownership of goods has passed to the
buyer
3. Where the price is payable before the delivery
of the goods
4. Where the seller was notified by the buyer of
the latter’s repudiation of the contract after
the seller has completed the manufacture of
the goods or had procured the goods to be
delivered, and the goods could not be readily
resold for a reasonable price
- Reason for limited application: action for damages
could be an adequate remedy in all other cases
2. Action for damages
Art. 1596, supra
NOTES:
- Applies when the buyer wrongfully neglects or
refuses to accept the goods
- Measure of damages:
- the estimated loss directly and naturally resulting
in the ordinary cause of events from the buyer’s
breach of contract
- when goods are already manufactured: if there is
an available market, difference between contract
price and the market or current proce at the time
when the goods ought to have been accepted or at
the time of refusal to accept
- when labor or expense is borne by the seller and
the buyer notified the seller not to proceed:
expenses incurred before receiving the repudiation
and the profit seller would have made if contract
was performed
- The law forbids the seller to increase the buyer’s
damages by continuing work on the goods after
notice of cancellation (not applicable when
completing the work was to give greater value to
the finished product).
3. Rescission
Art. 1597, supra
Article 1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the goods,
SALES | Prof. Jardeleza 78
where he expressly reserved the right to do so in case the
buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable
time. The seller shall not thereafter be liable to the buyer
upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the
contract.
The transfer of title shall not be held to have been rescinded
by an unpaid seller until he has manifested by notice to the
buyer or by some other overt act an intention to rescind. It
is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to give
notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before
the right of rescission was asserted.
Article 1593. With respect to movable property, the
rescission of the sale shall of right take place in the interest
of the vendor, if the vendee, upon the expiration of the
period fixed for the delivery of the thing, should not have
appeared to receive it, or, having appeared, he should not
have tendered the price at the same time, unless a longer
period has been stipulated for its payment.
NOTES:
- When the goods have not been delivered to the
buyer, and the buyer repudiated the sale, the seller
may totally rescind the contract by giving notice to
the buyer.
- Different from rescission in Art. 1534 (remedies of
unpaid seller). In 1534, the seller may still recover
damages.
- Rescission means cancellation of all contractual
relations and would bar any action on the contract.
RECTO LAW: Sale of Movables on Installment
Article 1484. In a contract of sale of personal property the
price of which is payable in installments, the vendor may
exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail
to pay;
(2) Cancel the sale, should the vendee's failure to pay cover
two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one
has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have
no further action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary
shall be void.
Article 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property with
option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
Article 1486. In the case referred to in the two preceding
articles, a stipulation that the installments or rents paid

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shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the
circumstances.
NOTES:
- Rationale of Recto Law: to remedy the abuses
committed with regard to the foreclosure of chattel
mortgages and to prevent mortgagees from seizing
the mortgaged property, buying it at foreclosure
sale for a low price and then bringing suit against
mortgagor for a deficiency judgment
- Requisites for it to apply:
1. object of sale is personal property
2. sale is on installment basis
3. failure of the buyer to pay at least 2
installments
- It is aimed at sales where the price is payable in
several installments, as opposed to “straight
sales” which have only one payment to be paid in
the future.
1. Meaning of “Installment Sale”
Levy Hermanos v. Gervacio (1939)
F: Gervacio bought a car from Hermanos Inc. After making
an initial payment, he executed a promissory note for the
balance. To secure payment, he also executed a chattel
mortgage over the said car. Gervacio failed to make any
other payment. Hermanos foreclosed the mortgage and
wanted to collect the unpaid balance.
H: Recto Law is not applicable to sales on straight term,
wherein the balance after the payment of the initial sum
should be paid in its totality at the time specified in the
promissory note, which is the situation in this case.
2. Remedies available to the unpaid seller
NOTES:
- The unpaid seller has the option to avail any of
these three remedies:
1. exact fulfillment
2. rescission
3. foreclose the chattel mortgage, if one was
constituted
- The remedies under Art. 1484 have been
recognized as alternative, not cumulative, in that
the exercise of one would bar the exercise of the
others.
- The remedies cannot also be pursued
simultaneously.
Delta Motor Sales v. Niu Kim Duan (1992)
F: Niu Kim bought 3 air-conditioning units from Delta
payable in installments. Buyer failed to pay, so seller filed an
action for replevin to repossess the units. Seller succeeded
in retrieving the properties. The amount already paid by the
buyer were treated as rentals for the units pursuant to the
stipulation in the deed of conditional sale.
H: Such a stipulation is valid insofar as the same may not be
unconscionable under the circumstances. However, seller
may no longer exact payment of the balance of the price of
the air-con units.
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3. Remedy of specific performance
NOTES:
- Seller is deemed to have chosen specific
performance when he files an action for recovery.
Generally, the mere sending of demand letters
should not be considered as having barred the
resort to either the remedies of rescission or
foreclosure.
Tajanlangit v. Southern Motors (1967)
F: Tajanlangit bought tractors from Southern Motors. He
executed a promissory note for the payment of several
installments that stipulates that default on his part would
render the entire sum demandable at once plus interest.
Buyer failed to pay. Seller sued for the payment and a
judgment was rendered in favor of him. Seller also asked for
an alias writ of execution to attach buyer’s rights and
interests in certain real properties. Buyer invoked Recto
Law to prohibit sheriff from attaching the land.
H: There is no foreclosure of the chattel mortgage in this
case (merely an attachment). Seller elected to sue on the
promissory note exclusively to exact fulfillment of the
obligation. In choosing this, he may force execution on other
personal or real properties of the buyer and if the proceeds
be insufficient, may attach the mortgaged good.
4. Nature of the remedy of rescission
- Generally, when a seller chooses rescission, he is
under obligation to make restitution, except when
there is a stipulation that the installments paid
shall not be returned, so long as it may not be
unconscionable.
- Seller is deemed to have chosen rescission when he
has clearly indicated to end the contract (sends
notice of rescission, takes possession of subject
matter, or files an action for rescission).
Nonato v. IAC (1985)
F: Nonato purchased a Volkswagen car from People’s Car
Inc. on installment basis secured by a chattel mortgage over
the same car. People’s Car assigned its rights to Investor’s
Finance. Buyer failed to pay two or more installments and
so the car was repossessed by the assignee. Despite
repossession, assignee still demanded that buyer pay the
balance of the price.
H: When the seller’s assignee, a financing company, is able
to take back possession of the motor vehicle with a
condition that the vehicle could be redeemed by the buyers
within 15 days, then such taking of possession is clearly
with intent to rescind the contract. It is thus barred from
exacting further payment.
5. Meaning of “action”
- refers to any judicial or extrajudicial proceeding by
virtue of which the vendor may lawfully be enabled
to exact recovery of the supposed unsatisfied
balance of the purchase price from the purchaser
or his privy.

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- The further “action” being barred in Art. 1484 is
not limited to judicial proceedings, but should
include extrajudicial proceedings.
Cruz v. Filipinas Investment and Finance (1968)
F: Cruz purchased a bus from Far East Motor, payable in
installments, secured by a chattel mortgage over the bus
and an additional security of a mortgage of a parcel of land
made by a third person. Far East assigned its rights to
Filipinas Investment. Buyer failed to pay so Filipinas took
steps to foreclose the chattel mortgage, the proceeds of
which were not sufficient. Filipinas then sought to foreclose
the real estate mortgage.
H: Filipinas can no longer seek to recover the deficiency.
Any deficiency resulting from the foreclosure can no longer
be recovered from the vendee or from the guarantor or
from the mortgage put up by the third person.
6. What constitutes “foreclosure”
- The point by which the seller is deemed to have
chosen foreclosure is only at the time of actual sale
of the subject property at public auction pursuant
to the foreclosure proceedings.
Third party mortgage
Ridad v. Filipinas Investment (1983)
F: Ridad bought a car from Supreme Sales (later assigned
rights to Filipinas). To secure payment of installments,
executed a chattel mortgage over the vehicles purchased
plus another car which was not the subject matter of the
sale. Buyer failed to pay, so seller foreclosed the mortgage
over the 2 cars and also sought to foreclose the additional
security.
H: If it was held in Cruz that a seller is prohibited from
having a recourse against additional security put up by a
third party insofar as how the burden would ultimately fall
on the buyer himself is concerned, there is no ground why
such seller should not likewise be precluded from further
extrajudicially foreclosing the additional security put up by
the buyer himself.
The barring effect of foreclosure
- It is the foreclosure and actual sale at public
auction of the mortgaged chattel that shall bar
further recovery by the seller of any balance on the
buyer’s outstanding obligation. Prior to that point
in time, the seller has every right to receive
payments on the unpaid balance of the price.
Northern Motors v. Sapinoso (1970)
F: Sapinoso bought a car from Northern Motors in
installments secured by a chattel mortgage on the same car.
Buyer failed to pay. Seller pursued an extrajudicial
foreclosure by first praying for a writ of replevin. Pending
the action, buyer made 2 payments.
H: Although the seller had already filed an action for
foreclosure, if prior to the actual sale of the subject property
at public auction, the seller had received further payments
from the buyer, the seller is not obliged to refund said
payments after foreclosure to the buyer. If the mortgage
creditor, before the actual foreclosure sale, is not precluded
from recovering the unpaid balance of the price although he
SALES | Prof. Jardeleza 80
is filed an action for replevin for the purpose extrajudicial
foreclosure, or if the mortgage creditor who has elected to
foreclose but subsequently desists from proceeding with the
auction sale, without gaining an advantage or benefit, and
without causing any harm to the vendee-mortgagor, is not
barred from suing on the unpaid account, there is no reason
why a mortgage creditor should be barred from accepting,
before a foreclosure sale, payments made by the buyer.
Sale of Immovables
1. Anticipatory Breach
Article 1591. Should the vendor have reasonable grounds
to fear the loss of immovable property sold and its price, he
may immediately sue for the rescission of the sale.
Should such ground not exist, the provisions of article 1191
shall be observed.
NOTES:
- If the seller has reasonable grounds to fear the loss
of the immovable property sold and its price, he
may immediately sue for the rescission of the sale.
- Should such ground not exist, Art. 1911 on
rescission shall be observed.
Legarda v. Saldana (1974)
F: Saldana entered into a contract with Legarda, whereby
Legarda agreed to sell 2 equal lots valued at P1,500 each,
payable in installments. Saldana defaulted on some
installments, but the aggregate amount he paid was P1,682.
Legarda cancelled the sale. Saldana now demands delivery
of the lots.
H: It was found that, including interests, Saldana actually
paid more than the value of the 2 lots. Even considering just
the principal amount he paid, it is still more than the value
of one lot. Saldana is thus entitled to the conveyance of one
fully paid lot of his choice. Such is in accordance with law
and equity.
2. PD 957
Section 23. Non-Forfeiture of Payments. No installment
payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from
further payment due to the failure of the owner or
developer to develop the subdivision or condominium
project according to the approved plans and within the time
limit for complying with the same. Such buyer may, at his
option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests,
with interest thereon at the legal rate.
Section 24. Failure to pay installments. The rights of the
buyer in the event of this failure to pay the installments due
for reasons other than the failure of the owner or developer

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to develop the project shall be governed by Republic Act No.
6552.
NOTES:
- These sections provide that no installment
payments made by the buyer in a subdivision or
condominium project shall be forfeited in favor of
the owner or developer when the buyer, after due
notice desists from further payment due to the
failure of the owner or developer to develop the
subdivision or condominium project.
- The sections also grant the buyer the option to be
reimbursed the total amount paid.
- Sec. 23 does not require that a notice be given first
by the buyer to the seller before a demand for
refund can be made as the notice and demand can
be made in the same letter or communication.
- Designed to stem the tide of fraudulent
manipulations perpetrated by unscrupulous
subdivision and condominium sellers and
operators.
Casa Filipina v. OP (1995)
F: Dennis and Rebecca Sevilla agreed to purchase from Casa
Filipina Realty Corporation (CFRC) a parcel of land in
CFRC’s subdivision. The Sevilla spouses failed to pay the amortizations
on time.They then wrote a letter to CFRC regarding the absence of any
improvement in the subdivision, the claim of a bank against
the lot and requested a refund of all installment payments
made on account of the contract.
H: Sevillas are entitled to a refund pursuant to Sec 23 of PD
957 because notice was already given regarding, among
other things, the non-development of the subdivision, and
demanded for refund. Section 23 does not require that a
notice be given first before a demand for refund can be
made. The notice and the demand can be made in the same
letter or communication.
Relucio v. Brillante Garfin (1990)
F: Defendant entered into a contract to buy and sell 2 lots
with the plaintiff. The contract also stated that the plaintiff
will construct roads around the lots as necessary
improvements. After religiously paying the installments,
defendant was asked to pay for interest; she refused.
Plaintiff then withheld execution of the deed of sale and
alleges that he has the right to rescind the contract upon
defendant’s refusal to pay.
H: Defendant is required to pay interest since there is an
interest charge stipulated in the contract. However, plaintiff
cannot validly rescind the contract because of her failure to
put up the required improvements. Sec. 23 of PD 957 vests
upon the buyer to either demand reimbursement or wait for
further development. Defendant, who opted to wait for
further development of the site, cannot be ousted from the
subdivision.
3. Maceda Law: RA 6552 - Sale of Immovables on
Installment
Section 3. In all transactions or contracts involving the sale
or financing of real estate on installment payments,
including residential condominium apartments but
SALES | Prof. Jardeleza 81
excluding industrial lots, commercial buildings and sales to
tenants under Republic Act Numbered Thirty-eight hundred
forty-four, as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid at
least two years of installments, the buyer is entitled to the
following rights in case he defaults in the payment of
succeeding installments:
(a) To pay, without additional interest, the unpaid
installments due within the total grace period earned by
him which is hereby fixed at the rate of one month grace
period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer
only once in every five years of the life of the contract and
its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the
buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments
made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be
included in the computation of the total number of
installment payments made.
Section 4. In case where less than two years of installments
were paid, the seller shall give the buyer a grace period of
not less than sixty days from the date the installment
became due.
If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the
contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall have the
right to sell his rights or assign the same to another person
or to reinstate the contract by updating the account during
the grace period and before actual cancellation of the
contract. The deed of sale or assignment shall be done by
notarial act.
Section 6. The buyer shall have the right to pay in advance
any installment or the full unpaid balance of the purchase
price any time without interest and to have such full
payment of the purchase price annotated in the certificate of
title covering the property.
NOTES:
- Created to protect buyers of real estate on
installment payments against onerous and
oppressive conditions.
McLaughlin v. CA (1986)
F: McLaughlin and Flores entered into a contract of
conditional sale of real property, with the price payable in
installments. Flores defaulted, so McLaughlin filed an action

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for rescission. However, this was compromised as Flores
agreed to pay the balance on a scheduled payment. It was
also agreed that should he default again, his previous
payments shall be forfeited. He still failed to pay so
McLaughlin filed a motion for writ of execution of the
rescission of the contract.
H: McLaughlin cannot rescind the contract and forfeit all
installments since he could cancel the contract only 30 days
after the notice of cancellation. Since the tender of payment
of the balance was made within the 30-day period, this
prevented the cancellation of the contract.
Doctrines of McLaughlin (accdg to Villanueva):
1. Although the law seems to require rescission and
cancellation to be both by notarial act, it would
hold notarial act as merely applicable to rescission,
whereas cancellation need not be by notarial act.
2. Even after the expiration of the grace period
provided by the law, the buyer still can prevent
rescission or cancellation within the 30-day period
when rescission or cancellation is to take effect.
3. 2 grace periods:
a. the one provided for expressly by the law,
which is a minimum of 60 days
b. the period before rescission or cancellation
actually takes effect
Luzon Brokerage v. Maritime (1978)
The court viewed the enactment of the Maceda Law as a
confirmation of its jurisprudential rulings that recognizes
the seller’s right of cancellation of sale on installments of
industrial and commercial properties with full retention of
previous payments.
REMEDIES OF THE BUYER
1. In case of movables
Article 1598. Where the seller has broken a contract to
deliver specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall be
performed specifically, without giving the seller the option
of retaining the goods on payment of damages. The
judgment or decree may be unconditional, or upon such
terms and conditions as to damages, payment of the price
and otherwise, as the court may deem just.
Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in diminution
or extinction of the price;
(2) Accept or keep the goods and maintain an action against
the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
SALES | Prof. Jardeleza 82
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191.
Where the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach of warranty
when he accepted the goods without protest, or if he fails to
notify the seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to return the goods
to the seller in substantially as good condition as they were
in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the
breach or warranty, such deterioration or injury shall not
prevent the buyer from returning or offering to return the
goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon returning
or offering to return the goods. If the price or any part
thereof has already been paid, the seller shall be liable to
repay so much thereof as has been paid, concurrently with
the return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the price.
2. In case of immovable
Art. 1191: The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.
The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment
of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the
Mortgage Law.
3. Suspension of Payment
Article 1590. Should the vendee be disturbed in the
possession or ownership of the thing acquired, or should he
have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has
caused the disturbance or danger to cease, unless the latter
gives security for the return of the price in a proper case, or
it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the
suspension of the payment of the price.

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NOTES:
- Should the buyer be disturbed in the possession or
ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, the
buyer may suspend payment of the price until the
seller has caused the disturbance or danger to
cease.
- A mere act of trespass shall not authorize the
suspension of payment.
Chapter XIV: EXTINGUISHMENT OF THE SALE
CAUSES
Article 1600. Sales are extinguished by the same causes as
all other obligations, by those stated in the preceding
articles of this Title, and by conventional or legal
redemption.
Article 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition,
and prescription, are governed elsewhere in this Code.
NOTES:
- Sales are extinguished by:
a. performance
b. loss of determinate object of the sale before
delivery
c. merger of the rights of the vendor and vendee
d. prescription of the action to enforce contract
e. cancellation of the sale by virtue of a
stipulation in the contract
f. novation
g. fulfillment of the resolutory condition
h. conventional redemption
i. legal redemption
- The same grounds by which obligations in general
are extinguished also apply to contracts of sale.
- However, sales are also extinguished by
conventional or legal redemption. Redemption as a
mode of extinguishment is unique to contracts of
sale.
CONVENTIONAL REDEMPTION
Article 1601. Conventional redemption shall take place
when the vendor reserves the right to repurchase the thing
SALES | Prof. Jardeleza 83
sold, with the obligation to comply with the provisions of
article 1616 and other stipulations which may have been
agreed upon.
NOTES:
- Shall take place when the seller reserved for
himself the right to repurchase the thing sold, with
the obligation to: (a) return the price of the sale,
(b) the expenses of the contract, (c) any other
legitimate payments made by reason of the sale,
(d) and the necessary and useful expenses made on
the thing sold.
Villarica v. CA (1968)
F: Plaintiff sold to defendant a lot in Davao. Another
instrument was executed where plaintiff was given an
option to buy the same property within 1 year. Plaintiff later
filed for the reformation of the contract, alleging that their
real intention was an equitable mortgage.
H: The right of repurchase is not a right granted to the
vendor by the vendee in a subsequent instrument, but is
right reserved by the vendor in the same instrument of sale
as one of the stipulations of the contract.
Bautista v. Unangst (1968)
F: Defendant rented a car from plaintiff and defaulted on car
rental payments. Defendant then executed a deed of
absolute sale in favor of plaintiff over the subject property.
The contract granted defendant the right to repurchase the
same. Since she was not able to repurchase, plaintiff
demands that she evacuate the premises. Defendant,
however, alleges that plaintiff has no cause of action since
her consent was obtained through force and intimidation.
H: The sale should be construed as equitable mortgage since
it is clearly the intention of the parties to use the property
as security for the loan of defendant (car rental fees).
EQUITABLE MORTGAGE
Article 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any
other obligation.
In any of the foregoing cases, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise
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shall be considered as interest which shall be subject to the

usury laws. 4. Pactum Commissorium

Article 1603. In case of doubt, a contract purporting to be a Article 2088. The creditor cannot appropriate the things
sale with right to repurchase shall be construed as an given by way of pledge or mortgage, or dispose of them. Any
equitable mortgage. stipulation to the contrary is null and void.
Article 1604. The provisions of article 1602 shall also apply
to a contract purporting to be an absolute sale.
NOTES:
- A creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them; any
stipulation to the contrary is null and void.
1. Definition of Equitable Mortgage
- One which reveals the intention of the parties to
charge real property as security for a debt, and DISTINGUISH FROM OPTION TO BUY
contains nothing impossible or contrary to law.
- Requisites: Art. 1602, supra
1. the parties entered in a contract denominated
as a contract of sale
RIGHT TO REDEEM OPTION TO BUY
2. the intention was to secure existing debt by
way of a mortgage Not a separate contract, Principal contract; may
- When in doubt, courts are inclined to construe the but merely part of a be created independent
transaction as an equitable mortgage. main contract of sale of another contract
Must be embedded in a May exist prior to or
Tan v. Valdehueza (1976) contract of sale upon the after the perfection of
F: Defendant executed 2 documents (one registered and the latter’s perfection the sale, or be embedded
other unregistered) of pacto de retro sales. The vendor in another contract, like
remained in possession of the land and paid for the land a lease, upon that
taxes. Vendee instituted a complaint for injunction to enjoin contract’s perfection
the vendors from entering the property. The TC held that Does not need a separate Must have a
the registered deed is equitable mortgage and the consideration consideration separate
unregistered deed is a simple loan with security. and distinct from the
H: Under the new law, registration as a necessary requisite purchase price
for the validity of a mortgage is no longer required. The Redemption period Period for an option
vendors having remained in possession of the land, the cannot exceed 10 years right may exceed 10
contracts which purported to be pacto de retro transactions years
are presumed to be equitable mortgages, whether Exercise requires notice Exercise requires only a
registered or not. to be accompanied by a notice of such exercise
tender of payment given to the optioner
2. Rationale of Equitable Mortgage Extinguishes an existing Results into the
- Designed to curtail the evils brought about by contract of sale perfection of a contract
contracts of sale with right of repurchase, such as of sale
the circumvention of usury laws and pactum
commissorium. Adiarte v. Tumaneng (1951)
F: Plaintiff sold a parcel of land to defendants with a right to
3. Badges of Equitable Mortgage repurchase within 10 years. 15 years later, vendor called
- The contract of sale shall be presumed to be an and offered to repurchase the land. Vendee later agreed
equitable mortgage in the any of the following with the condition that he would remain in possession for
cases: the next 2 years. A contract was executed stipulating the
a. the price is unusually inadequate new agreement.
b. seller remains in possession as lessee or H: The promise by vendee is not a promise to sell by virtue
otherwise of the right to repurchase but an entirely new agreement
c. period of redemption is extended or renewed since the original contract is no longer existing. The
under a separate contract agreement is not an extension of the redemption period,
d. buyer retains part of the purchase price which is prohibited by law. It is, therefore, an option to buy.
e. seller binds himself or continues to pay the
taxes on the thing sold
f. in any other case where it may be clearly PERIOD OF REDEMPTION
inferred that the real intention of the parties is
that the transaction shall secure the payment 1. When no period agreed upon
of a debt or the performance of any other
obligation

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Article 1606. The right referred to in article 1601, in the
absence of an express agreement, shall last four years from
the date of the contract.
Should there be an agreement, the period cannot exceed ten
years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment
was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
2. When period agreed upon
Anchuel v. IAC (1987)
It was stipulated in the sale a retro that the seller cannot
redeem the property within a period of 19 years. The Court
held that such stipulation is void since violated Art. 1601.
The period of redemption in this case would be 10 years.
3. When there is a period of non-redemption
Tayao v. Dulay (1965)
It was stipulated in the sale a retro that the seller’s right of
redemption cannot be exercised within 10 years. Although
the stipulation is void, the nullity of the same did not
convert the contract into a mere indebtedness nor an
equitable mortgage. Art. 1606 would apply in this case,
providing a period of 10 years.
EXERCISE OF THE RIGHT TO REDEEM
Article 1616. The vendor cannot avail himself of the right
of repurchase without returning to the vendee the price of
the sale, and in addition:
(1) The expenses of the contract, and any other legitimate
payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing
sold.
NOTES:
- Vendor must manifest his desire to redeem
accompanied by an actual or simultaneous tender
of payment of the redemption price.
- When vendee refuses redemption, tender of
payment is not necessary (consignation).
- When the vendee is absent, vendor may consign
the amount to court
- The mere sending of letters by the seller
expressing his desire to repurchase the property
without accompanying tender of the redemption
price does not comply with the requirement of law.
Gargollo v. Duero (1961)
F: Plaintiff sold to defendant a parcel of land under a pacto
de retro contract with a right to redeem on or before 1962.
Plaintiff verbally notified defendant of her intent to redeem
the property, but the latter refused to accept payment.
SALES | Prof. Jardeleza 85
Defendant later agreed to turn over the land upon payment
of the purchase and the value of improvements.
H: Failure of the seller to pay the useful improvements
entitles the buyer to retain possession of the land until
actual reimbursement is done by the seller. The vendor is
given no option to require the vendee to remove the useful
improvements on the land.
1. By whom exercised
Article 1610. The creditors of the vendor cannot make use
of the right of redemption against the vendee, until after
they have exhausted the property of the vendor.
Article 1611. In a sale with a right to repurchase, the
vendee of a part of an undivided immovable who acquires
the whole thereof in the case of article 498, may compel the
vendor to redeem the whole property, if the latter wishes to
make use of the right of redemption.
Article 1612. If several persons, jointly and in the same
contract, should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more
than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case each of
the latter may only redeem the part which he may have
acquired.
Article 1613. In the case of the preceding article, the
vendee may demand of all the vendors or co-heirs that they
come to an agreement upon the repurchase of the whole
thing sold; and should they fail to do so, the vendee cannot
be compelled to consent to a partial redemption.
NOTES:
- Vendor, his heirs, assigns or agent
- Creditors of the vendor – only after they have
exhausted the property of the vendor
- Co-owner – if the immovable is owned in common
and all co-owners sold their interests to the same
person (vendee can’t be compelled to accept partial
redemption)
2. From whom to redeem
Article 1615. If the vendee should leave several heirs, the
action for redemption cannot be brought against each of
them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold
has been awarded to one of the heirs, the action for
redemption may be instituted against him for the whole.
NOTES:
- Vendee a retro, his heirs or assigns
- In case of several heirs: can be exercised against
each heir for his share of the property. When the

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property is awarded to only one of them, it may be
redeemed from him.
- If property was sold to a 3rd person: may redeem
the property from the latter even though the right
to redeem was not mentioned in the subsequent
contract (if land is unregistered).
- If the property is registered, the right to redeem
must be annotated in the title of the vendee a retro
in order to prejudice the 3rd person.
3. Effect of redemption
Article 1617. If at the time of the execution of the sale there
should be on the land, visible or growing fruits, there shall
be no reimbursement for or prorating of those existing at
the time of redemption, if no indemnity was paid by the
purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and
some exist at the time of redemption, they shall be prorated
between the redemptioner and the vendee, giving the latter
the part corresponding to the time he possessed the land in
the last year, counted from the anniversary of the date of the
sale.
Article 1618. The vendor who recovers the thing sold shall
receive it free from all charges or mortgages constituted by
the vendee, but he shall respect the leases which the latter
may have executed in good faith, and in accordance with the
custom of the place where the land is situated.
NOTES:
- Vendor a retro receives the property free from all
charges or mortgages constituted by the vendee.
- Vendor shall respect any lease agreement entered
into by the vendee in good faith.
- Vendor can eject such lessee only after the
expiration of the period of lease or of the period of
redemption, whichever is earlier.
- Vendor is entitled to the return of the thing
together with damages.
- Damages: for use and occupation of the thing by
the vendee after payment of redemption price;
value of the crops harvested by the vendee after
offer to redeem.
- Pending fruits shall be appropriated between
redemptioner and the vendee.
- Exception: when there are pending fruits during
the execution of the pacto de retro sale where no
indemnity was paid.
4. Effect of non-redemption
Article 1607. In case of real property, the consolidation of
ownership in the vendee by virtue of the failure of the
vendor to comply with the provisions of article 1616 shall
not be recorded in the Registry of Property without a
judicial order, after the vendor has been duly heard.
NOTES:
SALES | Prof. Jardeleza 86
- Personal property: ownership of the vendee
becomes absolute and irrevocable, by operation of
law
- Immovable property: judicial order is necessary for
the consolidation of ownership to be recorded in
the Register of Deeds (New Civil Code
requirement)
- The proceeding for consolidation of title is an
ordinary civil action where a complaint or petition
must be filed, with the buyer being made a party to
the complaint.
- If the buyer succeeds in proving that the
transaction was indeed a pacto de retro, the vendor
is still given a period of 30 days from the finality of
the judgment within which to repurchase the
property.
- The failure of the buyer, however, to consolidate
ownership does not impair his title or ownership
over the property. This method is merely for the
purpose of registering the consolidated title.
LEGAL REDEMPTION
Article 1619. Legal redemption is the right to be
subrogated, upon the same terms and conditions stipulated
in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.
NOTES:
- The right to be subrogated upon the same terms
and conditions stipulated in the contract, in the
place of the one who acquires a thing by purchase
or dation in payment or by any other transaction
whereby ownership is transmitted by onerous title.
1. Period to redeem
Article 1623. The right of legal pre-emption or redemption
shall not be exercised except within thirty days from the
notice in writing by the prospective vendor, or by the
vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by
an affidavit of the vendor that he has given written notice
thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of
adjoining owners.
NOTES:
- Period starts to run from the date of execution of
the contract. But when the sale is conditional,
period shall be counted from the time such right
could be exercised but shall not exceed 10 years
from the execution of the contract.
- After the period has lapsed, if the vendor should
institute a reformation of the contract on the
ground that the real agreement was one of
mortgage, and the court should decide against him,

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the latter still has 30 days from the time judgment
becomes final to redeem the property.
Conejero v. CA (1966)
F: Paz and her brother are co-owners of a parcel of land. The
brother sold his half interest to Raffinan. It was only after a
year when Paz and her husband were informed of the sale,
when the brother showed the deed of absolute sale. Paz
filed a complaint to be declared entitled to redeem the ½
interest of the brother. They tendered payment of the price
by means of a loan.
H: Paz is no longer entitled to redeem. The right of
redemption shall not be exercised except within 30 days
from notice in writing by the vendor. Such notice is
indispensable and mere knowledge of the sale, acquired in
some other manner by the redemptioner does not satisfy
the statute. Showing of the deed of sale is equivalent to a
written notice required by law.
Butte v. Manuel Uy (1962)
F: Ramirez was a co-owner of a house and lot. He died and
1/3 of his estate went to Ms. Butte. One of the co-owners
sold her share to defendant and sent a notice to BPI, the
administrator of Ramirez’s estate. Butte sent a letter and a
check to Uy offering to redeem the portion sold, but the
latter refused.
H: Redemption is valid. The notice of the sale must come
from the vendor in order to start the count of the
redemption period. The of receipt of vendor’s notice by the
bank cannot be counted as determining the start of the 30
days because the administrator was not the proper
redemptioner.
Castillo v. Samonte (1960)
F: Plaintiff’s brother, without giving any notice, sold all his
rights to the subject property to defendant. After learning
about the sale, plaintiff offered to redeem the property, but
defendant refused
H: Plaintiff is entitled to redeem the hereditary right sold by
his brother. Also, he exercised his right within the
prescribed period – 30 days from notice. When he offered to
redeem, this established his right and he could bring an
action in court at any time thereafter, provided it is not
barred by the Statute of Limitations. The right must be done
within the month-period; the action in court within the
period in the Statute of Limitations.
Doromal v. CA (1975)
Although written notice is given to the co-owner, the 30-day
period does not begin to run from the receipt of such
written notice because the transaction covered in the notice
did not pertain to a perfected contract of sale, and must be
accompanied by the actual execution and delivery of the
deed of sale. It is best that the period should not be deemed
commenced unless the notice of the disposition is made
after the formal deed of disposal has been duly executed.
2. Instances of legal redemption
a. Co-owners
Article 1620. A co-owner of a thing may exercise the right
of redemption in case the shares of all the other co-owners
SALES | Prof. Jardeleza 87
or of any of them, are sold to a third person. If the price of
the alienation is grossly excessive, the redemptioner shall
pay only a reasonable one.
Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the
share they may respectively have in the thing owned in
common.
NOTES:
- A co-owner may exercise the right of redemption in
case the shares of all the other co-owners or any of
them are sold to a third person.
- Third person/stranger – anyone who is not a co-
owner
- If 2 or more co-owners want to exercise the right of
redemption, they may do so in proportion to the
share they respectively own.
- Rationale: (1) public policy to reduce the number
of co-owners until the community is done away
with because co-ownership is a hindrance to the
development and administration of the property;
(2) to keep strangers out of a joint family
ownership
b. Co-heirs
Article 1088. Should any of the heirs sell his hereditary
rights to a stranger before the partition, any or all of the co-
heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do
so within the period of one month from the time they were
notified in writing of the sale by the vendor.
NOTES:
- There is no right of legal redemption available to
the co-heirs when the sale covers a particular
property of the estate, since the legal right of
redemption applies only to the sale by an heir of
his hereditary right.
c. Adjoining landowners of rural land
Article 1621. The owners of adjoining lands shall also have
the right of redemption when a piece of rural land, the area
of which does not exceed one hectare, is alienated, unless
the grantee does not own any rural land.
This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other
apparent servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right
of redemption at the same time, the owner of the adjoining
land of smaller area shall be preferred; and should both
lands have the same area, the one who first requested the
redemption. (1523a)
NOTES:
- Rationale: to prevent the rural land consisting of 1
hectare or less from passing into the hands of a
person other than the adjacent owners who can
make use of the alienated property for the

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improvement and development of the lands; to
consolidate small and scattered lands
- Rural – pertaining to the country (as opposed to
city or town)
- To be determined from the character of the locality
and of the neighboring and surrounding properties.
d. Adjoining landowners of urban land
Article 1622. Whenever a piece of urban land which is so
small and so situated that a major portion thereof cannot be
used for any practical purpose within a reasonable time,
having been bought merely for speculation, is about to be
re-sold, the owner of any adjoining land has a right of pre-
emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining
land shall have a right of redemption, also at a reasonable
price.
When two or more owners of adjoining lands wish to
exercise the right of pre-emption or redemption, the owner
whose intended use of the land in question appears best
justified shall be preferred.
NOTES:
- Urban – from Latin word “urbis” meaning city
- Requisites:
(1) urban land
(2) so small
(3) cannot be used for any practical purpose
within a reasonable time
(4) having been bought merely for speculation
- Owner of adjoining land has a right of pre-emption
at a reasonable price (when requisites 1-3 are
present).
- If all requisites are present, meaning the resale to a
3rd party is perfected, there is a right of legal
redemption.
- When 2 or more adjoining owners wish to exercise
such right, the owner whose intended use of the
land in question appears best justified shall be
preferred.
- Speculation – purchasing or selling with the
expectation of profiting by anticipated, but
conjectural, fluctuations in price
Ortega v. Orcine (1971)
F: Plaintiff seeks to redeem the adjoining lot defendant sold
to Esplana.
H: It is not proper to rule on plaintiff’s right to redeem since
he never alleged, much less proved, the requisites under Art.
1622.
e. Under Public Land Act
Sec. 118. Except in favor of the Government or any of its
branches, units or institutions, or legally constituted
banking corporations, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance
or alienation from the date of the approval of the application
and for a term of five years from and after the date of
SALES | Prof. Jardeleza 88
issuance of the patent or grant nor shall they become liable
to the satisfaction of any debt contracted prior to the
expiration of said period; but the improvements or crops on
the land may be mortgaged or pledged to qualified persons,
associations, or corporations.
No alienation, transfer, or conveyance of any homestead
after five years and before twenty-five years after issuance
of title shall be valid without the approval of the Secretary
of Agriculture and Natural Resources, which approval shall
not be denied except on constitutional and legal grounds.
NOTES:
- Who can exercise:
o By the applicant (if alive) or by his widow
or legal heirs
o Not available when land is sold to another
member of the family of applicant or his
direct descendant or heir
o Cannot be waived
- What transactions are covered:
o Ownership to the land must have been
transferred to another person
o If transaction is a mere promise to sell, no
right to redeem yet
o When the land is sold under pacto de
retro, right to redeem shall be counted
from the date of the execution of the sale
and not from the date of consolidation of
title nor from the registration
- The right can be exercised against any subsequent
purchaser even if the land is registered under the
Torrens System because the fact that it was
acquired through homestead or free patent can be
seen from the description of the property in the
certificate of title.
f. Under Extrajudicial Foreclosure
Sec. 6. In extrajudicial foreclosure of mortgage, the debtor,
his successors-in-interest, any judicial or judgment creditor
of said debtor, or any junior encumbrancer may redeem the
property within 1 year from the deed of sale.
NOTES:
- Where the land involved is a registered land, a 1-
year period shall be counted from the registration
of the sale in the Register of Deeds.
- Redemption price shall be the amount of the
purchase with interest at 1% per month from the
time of the sale up to the time of redemption plus
assessment taxes the purchaser may have paid.
- Written notice of redemption must be given to the
officer who made the sale and a duplicate filed with
the registry of deeds.
- Juridical persons whose property is being sold
extrajudicially shall have the right to redeem the
property until but not after registration of the sale
with Register of Deeds, which shall not be more
than 3 months from foreclosure.
g. Under Agrarian Land Reform Code

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Sec. 12. Lessee's right of Redemption. - In case the
landholding is sold to a third person without the knowledge
of the agricultural lessee, the latter shall have the right to
redeem the same at a reasonable price and consideration:
Provided, That where there are two or more agricultural
lessees, each shall be entitled to said right of redemption
only to the extent of the area actually cultivated by him. The
right of the redemption under this Section may be exercised
within one hundred eighty days from notice in writing
which shall be served by the vendee on all lessees affected
and the Department of Agrarian Reform upon the
registration of the sale, and shall have priority over any
other right of legal redemption. The redemption price shall
be the reasonable price of the land at the time of the sale.
Upon the filing of the corresponding petition or request
with the department or corresponding case in court by the
agricultural lessee or lessees, the said period of one
hundred and eighty days shall cease to run.
Any petition or request for redemption shall be resolved
within sixty days from the filing thereof; otherwise, the said
period shall start to run again.
The Department of Agrarian Reform shall initiate, while the
Land Bank shall finance, said redemption as in the case of
pre-emption.
Chapter XV: BULK SALES LAW
- Meant to protect supply creditors and businessmen
against fraudulent transfers done by merchants
- Primary objective is to compel the seller in bulk to
execute and deliver a verified list of his creditors to
his buyer, and notice of intended sale to be sent in
advance to said creditors, and to use the proceeds
to cover payment of outstanding liabilities.
A. Scope
Sec. 2. Sale and transfer in bulk. — Any sale, transfer,
mortgage or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the
ordinary course of trade and the regular prosecution of the
business of the vendor, mortgagor, transferor, or assignor,
or sale, transfer, mortgage or assignment of all, or
substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor, or
assignor, or of all, or substantially all, of the fixtures and
equipment used in and about the business of the vendor,
mortgagor, transferor, or assignor, shall be deemed to be a
sale and transfer in bulk, in contemplation of this Act:
Provided, however, That if such vendor, mortgagor,
transferor or assignor, produces and delivers a written
waiver of the provisions of this Act from his creditors as
shown by verified statements, then, and in that case, the
provisions of this section shall not apply.
SALES | Prof. Jardeleza 89
People v. Wong (1954)
F: Accused was the owner of a foundry shop built on the
land of Ocampo. He owed Ocampo rental for the lands,
which compelled him to sell his shop. However, he was also
indebted to Shurdut Mills Supply Co. TC found him guilty of
violating Sec. 3 of the Bulk Sales Law.
H: Accused did not violate the Bulk Sales Law. He was
practically forced into signing the deed. Even he hadn’t been
forced, he still would not be criminally liable because the
object of the sale was not covered by the provision. What
was sold was the shop itself and not the stock of
merchandise, goods, wares, provisions or materials in bulk
contemplated in the provision.
B. Coverage of Bulk Sales
Sec. 2, supra
NOTES:
- Stock of goods, wares, merchandise, provisions, or
materials
- Exceptions:
(1) bulk sale in the ordinary course of
business
(2) waiver in writing by creditor
(3) made by executor or sheriff under a
judicial proceeding
(4) properties exempt from attachment and
execution
C. Compliance requirements under the law
- To deliver a sworn statement of listing of creditors
o Names and addresses of all creditors to
whom said seller or mortgagor may be
indebted
o Description of the amount of indebtedness
due or owing, or to become due or owing
by said seller or mortgagor to each of said
creditors
- Pro-rata application of proceeds
o Apply the purchase or mortgage proceeds
to the pro-rata payment of bona fide
claims of the creditors as shown in the
verified statement.
- Written advance disclosure to creditors
o Seller shall at least 10 days before the sale
make a full detailed inventory thereof
showing the quantity and the cost price.
o Seller shall notify every creditor whose
name and address is set forth in the
verified statement at least 10 days before
transferring possession thereof.
- Bulk transfers for nominal value
o It is unlawful to transfer title without
consideration or for a nominal
consideration only.
D. Effects of non-compliance

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Sec. 4. Fraudulent and void sale, transfer or mortgage. —
Whenever any person shall sell, mortgage, transfer, or
assign any stock of goods, wares, merchandise, provisions
or materials, in bulk, for cash or on credit, and shall receive
any part of the purchase price, or any promissory note, or
other evidence of indebtedness for said purchase price or
advance upon mortgage, without having first delivered to
the vendee or mortgagee or to his or its agent or
representative, the sworn statement provided for in section
three hereof, and without applying the purchase or
mortgage money of the said property to the pro rata
payment of the bona fide claim or claims of the creditors of
the vendor or mortgagor, as shown upon such sworn
statement, he shall be deemed to have violated this Act, and
any such sale, transfer or mortgage shall be fraudulent and
void.
Sec. 7. It shall be unlawful for any person, firm or
corporation, as owner of any stock of goods, wares,
merchandise, provisions or materials, in bulk, to transfer
title to the same without consideration or for a nominal
consideration only.
Sec. 11. Any person violating any provision of this Act shall,
upon conviction thereof, be punished by imprisonment not
less than six months, nor more than five years, or fined in
sum not exceeding five thousand pesos, or both such
imprisonment and fine, in the discretion of the court.
People v. Mapoy (1942)
F: Defendant charged with violation of Bulk Sales Law. He
pleaded guilty and the lower court ordered defendant to
settle the liability with a penalty of subsidiary
imprisonment in case of insolvency.
H: The proper remedy is for the collector to collect the debt,
and in case of insolvency, for the mortgaged goods to be
subject to attachment.
Chapter XVI: RETAIL TRADE LIBERALIZATION ACT OF
2000
A. Constitutionality
Ichong v. Hernandez (1957)
F: RA 1180 was passed. The law provides for a prohibition
against foreigners as well as corporations owned by
foreigners from engaging in retail trade in the country.
Petitioner alleges that it violates the Treaty of Amity
between the Philippines and China.
H: RA 1180 is a valid exercise of police power. This law was
enacted to remedy a real and actual danger to national
economy posed by alien dominance and control. Police
power cannot be bargained away through the medium of a
treaty or a contract.
B. Scope and definition
- Retail trade = goods for personal, family or
household use, consumption and utilization
SALES | Prof. Jardeleza 90
- RTLA specifically defines “retail trade” to cover
“any act, occupation or calling of habitually selling
direct to the general public merchandise,
commodities or goods for consumption.”
King v. Hernaez (1962)
F: King, a naturalized Filipino citizen, became the owner of a
grocery wholesale and retail business. He requested
permission from the President of the Philippines to retain
the services of his 3 Chinese employees pursuant to CA 108.
This was denied on the ground that aliens may not be
appointed to operate or administer a retail business under
RA 1180 and the Anti-Dummy Act. King contends that his
Chinese employees are not covered since they hold non-
control positions.
H: The prohibition covers the entire range of employment,
regardless of whether they are control or non-control
positions. Thus, employment of aliens for evening clerical
positions is prohibited. The reason is obvious: to plug any
loopholes that unscrupulous aliens may exploit for the
purpose of circumventing the law.
C. Elements
(1) habitual act or business of selling (as opposed
to incidental)
(2) to the general “public” (must not only be a
particular group of persons)
(3) of merchandise, commodities or goods for
consumption
- Whenever one of the elements is lacking, the
business or activity is not deemed to be retail
trade.
D. Application of Grandfather Rule on 100% Filipino
ownership of corporate entity
- Grandfather Rule: A process of characterizing the
citizenship of shares in one corporation held by
another corporation by attributing the controlling
interest of individual stockholders in the second
layer of corporate ownership
- For purposes of investments, shares belonging to
corporations or partnerships, with at least 60% of
the capital owned by Filipino citizens, shall be
considered as Philippine nationality.
- If it is below 60%, only the number of shares
corresponding to such percentage shall be counted
as of Philippine nationality.
E. Anti-Dummy Act
- Penalizes Filipinos who permit aliens to use them
as nominees or dummies to enjoy privileges
reserved for Filipinos or Filipino corporations.
- Prohibits aliens from intervening in the
management, operation, administration or control
of nationalized business.
- Aliens may take part in technical aspects, provided
no Filipino can do such technical work, and with
express authority from the President of the
Philippines.