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SALES CHAN NOTES acquired by the seller after the perfection of the contract of sale, in this Title called
"future goods."
I. Introduction There may be a contract of sale of goods, whose acquisition by the seller depends
A. Essential Requirements of Contracts upon a contingency which may or may not happen. (n)
1465. Things subject to a resolutory condition may be the object of the contract of
1305. A contract is a meeting of minds between two persons whereby one binds sale. (n)
himself, with respect to the other, to give something or to render some service. 1503. When there is a contract of sale of specific goods, the seller may, by the terms
(1254a) of the contract, reserve the right of possession or ownership in the goods until certain
1306. The contracting parties may establish such stipulations, clauses, terms and conditions have been fulfilled. The right of possession or ownership may be thus
conditions as they may deem convenient, provided they are not contrary to law, reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other
morals, good customs, public order, or public policy. (1255a) bailee for the purpose of transmission to the buyer.
1318. There is no contract unless the following requisites concur: Where goods are shipped, and by the bill of lading the goods are deliverable to the
(1) Consent of the contracting parties; seller or his agent, or to the order of the seller or of his agent, the seller thereby
(2) Object certain which is the subject matter of the contract; reserves the ownership in the goods. But, if except for the form of the bill of lading, the
(3) Cause of the obligation which is established. (1261) ownership would have passed to the buyer on shipment of the goods, the seller's
1356. Contracts shall be obligatory, in whatever form they may have been entered property in the goods shall be deemed to be only for the purpose of securing
into, provided all the essential requisites for their validity are present. However, when performance by the buyer of his obligations under the contract.
the law requires that a contract be in some form in order that it may be valid or Where goods are shipped, and by the bill of lading the goods are deliverable to order
enforceable, or that a contract be proved in a certain way, that requirement is absolute of the buyer or of his agent, but possession of the bill of lading is retained by the seller
and indispensable. In such cases, the right of the parties stated in the following article or his agent, the seller thereby reserves a right to the possession of the goods as
cannot be exercised. (1278a) against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of
B. Definitions exchange and bill of lading together to the buyer to secure acceptance or payment of
1. Contract of Sale (Own even before payment) 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
1458. By the contract of sale one of the contracting parties obligates himself to right thereby. If, however, the bill of lading provides that the goods are deliverable to
transfer the ownership and to deliver a determinate thing, and the other to pay therefor the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the
a price certain in money or its equivalent. consignee named therein, one who purchases in good faith, for value, the bill of
A contract of sale may be absolute or conditional. (1445a) 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
1. Sps. Herrera v Caguiat (2007) delivery of the bill of lading indorsed by the consignee named therein, or of the goods,
2. Nabus v Pacson (2009) without notice of the facts making the transfer wrongful. (n)
3. Reyes v Tuparan (2011)
1. People’s Homesite & Housing Corp. v CA (1984) - there can be no perfected
2. Contract to Sell (Payment muna bago own) sale of a subdivision lot where the award thereof was expressly made subject to
approval by higher authorities and there eventually was no acceptance
1478. The parties may stipulate that ownership in the thing shall not pass to the manifested by the supposed awardee.
purchaser until he has fully paid the price. (n) 2. Lim v CA (1990)
3. Pingol v CA (1993)
1. Salazar v CA (1996)
2. Castillo v Reyes (2007) II. Parties to a Contract of Sale
3. United Muslim and Christian Urban Poor Asso. v BRYC-V Dev’t Corp. (2009) A. Capacity of Parties

3. Conditional Contract of Sale (Perfection of the contract is 1489. All persons who are authorized in this Code to obligate themselves, may enter
conditioned) 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
1461. Things having a potential existence may be the object of the contract of sale. capacity to act, he must pay a reasonable price therefor. Necessaries are those
The efficacy of the sale of a mere hope or expectancy is deemed subject to the referred to in article 290. (1457a)
condition that the thing will come into existence. 1490. The husband and the wife cannot sell property to each other, except:
The sale of a vain hope or expectancy is void. (n) (1) When a separation of property was agreed upon in the marriage
1462. The goods which form the subject of a contract of sale may be either existing settlements; or
goods, owned or possessed by the seller, or goods to be manufactured, raised, or (2) When there has been a judicial separation of property under article 191.
(1458a)
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1491. The following persons cannot acquire by purchase, even at a public or judicial The foregoing provisions shall not prejudice the rights of creditors who acted in good
auction, either in person or through the mediation of another: faith. (117a)
(1) The guardian, the property of the person or persons who may be under 96 FC. The administration and enjoyment of the community property shall belong to
his guardianship; both spouses jointly. In case of disagreement, the husband's decision shall prevail,
(2) Agents, the property whose administration or sale may have been subject to recourse to the court by the wife for proper remedy, which must be availed
intrusted to them, unless the consent of the principal has been given; of within five years from the date of the contract implementing such decision.
(3) Executors and administrators, the property of the estate under In the event that one spouse is incapacitated or otherwise unable to participate in the
administration; administration of the common properties, the other spouse may assume sole powers
(4) Public officers and employees, the property of the State or of any of administration. These powers do not include disposition or encumbrance without
subdivision thereof, or of any government-owned or controlled corporation, or authority of the court or the written consent of the other spouse. In the absence of
institution, the administration of which has been intrusted to them; this such authority or consent, the disposition or encumbrance shall be void. However, the
provision shall apply to judges and government experts who, in any manner transaction shall be construed as a continuing offer on the part of the consenting
whatsoever, take part in the sale; spouse and the third person, and may be perfected as a binding contract upon the
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior acceptance by the other spouse or authorization by the court before the offer is
courts, and other officers and employees connected with the administration withdrawn by either or both offerors. (206a)
of justice, the property and rights in litigation or levied upon an execution 124 FC. The administration and enjoyment of the conjugal partnership shall belong to
before the court within whose jurisdiction or territory they exercise their both spouses jointly. In case of disagreement, the husband's decision shall prevail,
respective functions; this prohibition includes the act of acquiring by subject to recourse to the court by the wife for proper remedy, which must be availed
assignment and shall apply to lawyers, with respect to the property and rights of within five years from the date of the contract implementing such decision.
which may be the object of any litigation in which they may take part by virtue In the event that one spouse is incapacitated or otherwise unable to participate in the
of their profession; administration of the conjugal properties, the other spouse may assume sole powers
(6) Any others specially disqualified by law. (1459a) of administration. These powers do not include disposition or encumbrance without
1492. The prohibitions in the two preceding articles are applicable to sales in legal authority of the court or the written consent of the other spouse. In the absence of
redemption, compromises and renunciations. (n) such authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting
B. Absolute Incapacity 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
1327. The following cannot give consent to a contract: withdrawn by either or both offerors. (165a)
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to 2. Between Spouses
write. (1263a)
1397. The action for the annulment of contracts may be instituted by all who are 1490. The husband and the wife cannot sell property to each other, except:
thereby obliged principally or subsidiarily. However, persons who are capable cannot (1) When a separation of property was agreed upon in the marriage
allege the incapacity of those with whom they contracted; nor can those who exerted settlements; or
intimidation, violence, or undue influence, or employed fraud, or caused mistake base (2) When there has been a judicial separation of property under article 191.
their action upon these flaws of the contract. (1302a) (1458a)
1399. When the defect of the contract consists in the incapacity of one of the parties, 1492. The prohibitions in the two preceding articles are applicable to sales in legal
the incapacitated person is not obliged to make any restitution except insofar as he redemption, compromises and renunciations. (n)
has been benefited by the thing or price received by him. (1304)
1. Medina v CIR
C. Relative Incapacity: Married Persons
1. Contract with Third Parties 3. Applicability to Common Law Spouses

73 FC. Either spouse may exercise any legitimate profession, occupation, business or 133 FC. From the common mass of property support shall be given to the surviving
activity without the consent of the other. The latter may object only on valid, serious, spouse and to the children during the liquidation of the inventoried property and until
and moral grounds. what belongs to them is delivered; but from this shall be deducted that amount
In case of disagreement, the court shall decide whether or not: received for support which exceeds the fruits or rents pertaining to them. (188a)
(1) The objection is proper, and 147 FC. When a man and a woman who are capacitated to marry each other, live
(2) Benefit has occurred to the family prior to the objection or thereafter. If the exclusively with each other as husband and wife without the benefit of marriage or
benefit accrued prior to the objection, the resulting obligation shall be under a void marriage, their wages and salaries shall be owned by them in equal
enforced against the separate property of the spouse who has not obtained shares and the property acquired by both of them through their work or industry shall
consent. be governed by the rules on co-ownership.
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In the absence of proof to the contrary, properties acquired while they lived together (6) Any others specially disqualified by law. (1459a)
shall be presumed to have been obtained by their joint efforts, work or industry, and 1492. The prohibitions in the two preceding articles are applicable to sales in legal
shall be owned by them in equal shares. For purposes of this Article, a party who did redemption, compromises and renunciations. (n)
not participate in the acquisition by the other party of any property shall be deemed to
have contributed jointly in the acquisition thereof if the former's efforts consisted in the 1. Guardians, Agents and Administrators
care and maintenance of the family and of the household.
Neither party can encumber or dispose by acts inter vivos of his or her share in the 1. PH Trust Co. v Roldan (1956)
property acquired during cohabitation and owned in common, without the consent of 2. Distajo v CA (2000)
the other, until after the termination of their cohabitation.
When only one of the parties to a void marriage is in good faith, the share of the party 2. Judges and Lawyers
in bad faith in the co-ownership shall be forfeited in favor of their common children. In
case of default of or waiver by any or all of the common children or their descendants, 1. Rubias v Batiller (1973)
each vacant share shall belong to the respective surviving descendants. In the 2. Macariola v Asuncion (1982)
absence of descendants, such share shall belong to the innocent party. In all cases, 3. Director of Lands v Ababa (1979)
the forfeiture shall take place upon termination of the cohabitation. (144a)
148 FC. In cases of cohabitation not falling under the preceding Article, only the 3. Public Officers
properties acquired by both of the parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to their 1. Maharlika Publishing v Tagle (1986)
respective contributions. In the absence of proof to the contrary, their contributions
and corresponding shares are presumed to be equal. The same rule and presumption 4. Other Disqualifications
shall apply to joint deposits of money and evidences of credit.
If one of the parties is validly married to another, his or her share in the co-ownership 1. Mangayao v de Guzman (1974)
shall accrue to the absolute community or conjugal partnership existing in such valid 2. De Leon v CA (1992)
marriage. If the party who acted in bad faith is not validly married to another, his or her 3. Yap v Grageda (1983)
shall be forfeited in the manner provided in the last paragraph of the preceding Article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in both III. Formation of the Contract of Sale
faith. (144a)
1475. The contract of sale is perfected at the moment there is a meeting of minds
1. Calimlim-Canullas v Fortun (1984) 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
D. Special Disqualifications provisions of the law governing the form of contracts. (1450a)
1476. In the case of a sale by auction:
1491. The following persons cannot acquire by purchase, even at a public or judicial (1) Where goods are put up for sale by auction in lots, each lot is the subject
auction, either in person or through the mediation of another: of a separate contract of sale.
(1) The guardian, the property of the person or persons who may be under (2) A sale by auction is perfected when the auctioneer announces its
his guardianship; perfection by the fall of the hammer, or in other customary manner. Until
(2) Agents, the property whose administration or sale may have been such announcement is made, any bidder may retract his bid; and the
intrusted to them, unless the consent of the principal has been given; auctioneer may withdraw the goods from the sale unless the auction has
(3) Executors and administrators, the property of the estate under been announced to be without reserve.
administration; (3) A right to bid may be reserved expressly by or on behalf of the seller,
(4) Public officers and employees, the property of the State or of any unless otherwise provided by law or by stipulation.
subdivision thereof, or of any government-owned or controlled corporation, or (4) Where notice has not been given that a sale by auction is subject to a
institution, the administration of which has been intrusted to them; this right to bid on behalf of the seller, it shall not be lawful for the seller to bid
provision shall apply to judges and government experts who, in any manner himself or to employ or induce any person to bid at such sale on his behalf or
whatsoever, take part in the sale; for the auctioneer, to employ or induce any person to bid at such sale on
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior behalf of the seller or knowingly to take any bid from the seller or any person
courts, and other officers and employees connected with the administration employed by him. Any sale contravening this rule may be treated as
of justice, the property and rights in litigation or levied upon an execution fraudulent by the buyer. (n)
before the court within whose jurisdiction or territory they exercise their 1477. The ownership of the thing sold shall be transferred to the vendee upon the
respective functions; this prohibition includes the act of acquiring by actual or constructive delivery thereof. (n)
assignment and shall apply to lawyers, with respect to the property and rights 1478. The parties may stipulate that ownership in the thing shall not pass to the
which may be the object of any litigation in which they may take part by virtue purchaser until he has fully paid the price. (n)
of their profession;
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1479. A promise to buy and sell a determinate thing for a price certain is reciprocally 1324. When the offerer has allowed the offeree a certain period to accept, the offer
demandable. may be withdrawn at any time before acceptance by communicating such withdrawal,
An accepted unilateral promise to buy or to sell a determinate thing for a price certain except when the option is founded upon a consideration, as something paid or
is binding upon the promisor if the promise is supported by a consideration distinct promised. (n)
from the price. (1451a)
1480. Any injury to or benefit from the thing sold, after the contract has been 1. Offer
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. 1475. The contract of sale is perfected at the moment there is a meeting of minds
This rule shall apply to the sale of fungible things, made independently and for a upon the thing which is the object of the contract and upon the price.
single price, or without consideration of their weight, number, or measure. From that moment, the parties may reciprocally demand performance, subject to the
Should fungible things be sold for a price fixed according to weight, number, or provisions of the law governing the form of contracts. (1450a)
measure, the risk shall not be imputed to the vendee until they have been weighed, 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
counted, or measured and delivered, unless the latter has incurred in delay. (1452a) thing and the cause which are to constitute the contract. The offer must be certain and
1481. In the contract of sale of goods by description or by sample, the contract may the acceptance absolute. A qualified acceptance constitutes a counter-offer.
be rescinded if the bulk of the goods delivered do not correspond with the description Acceptance made by letter or telegram does not bind the offerer except from the time
or the sample, and if the contract be by sample as well as description, it is not it came to his knowledge. The contract, in such a case, is presumed to have been
sufficient that the bulk of goods correspond with the sample if they do not also entered into in the place where the offer was made. (1262a)
correspond with the description.
The buyer shall have a reasonable opportunity of comparing the bulk with the 1. Villonco v Bormaheco (1975) - there was a perfected sale that arose from the
description or the sample. (n) exchange of correspondences, even if literally, there was a correction or
1482. Whenever earnest money is given in a contract of sale, it shall be considered as modification contained in the acceptance, the changes were not substantial, but
part of the price and as proof of the perfection of the contract. (1454a) merely clarificatory. Such is corroborated also by the fact, that upon receipt of
1483. Subject to the provisions of the Statute of Frauds and of any other applicable the check covering the earnest money, Bormaheco had encashed the same.
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 a. Forms of Offer
parties. (n)
1484. In a contract of sale of personal property the price of which is payable in 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
installments, the vendor may exercise any of the following remedies: thing and the cause which are to constitute the contract. The offer must be certain and
(1) Exact fulfillment of the obligation, should the vendee fail to pay; the acceptance absolute. A qualified acceptance constitutes a counter-offer.
(2) Cancel the sale, should the vendee's failure to pay cover two or more Acceptance made by letter or telegram does not bind the offerer except from the time
installments; it came to his knowledge. The contract, in such a case, is presumed to have been
(3) Foreclose the chattel mortgage on the thing sold, if one has been entered into in the place where the offer was made. (1262a)
constituted, should the vendee's failure to pay cover two or more 1325. Unless it appears otherwise, business advertisements of things for sale are not
installments. In this case, he shall have no further action against the definite offers, but mere invitations to make an offer. (n)
purchaser to recover any unpaid balance of the price. Any agreement to the 1326. Advertisements for bidders are simply invitations to make proposals, and the
contrary shall be void. (1454-A-a) advertiser is not bound to accept the highest or lowest bidder, unless the contrary
1485. The preceding article shall be applied to contracts purporting to be leases of appears. (n)
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-A-a) 1. Zayco v Serra (1923)
1486. In the case referred to in the two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee shall be valid b. Forms of Acceptance
insofar as the same may not be unconscionable under the circumstances. (n)
1487. The expenses for the execution and registration of the sale shall be borne by 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
the vendor, unless there is a stipulation to the contrary. (1455a) thing and the cause which are to constitute the contract. The offer must be certain and
1488. The expropriation of property for public use is governed by special laws. (1456) 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
A. Preparatory 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. (1262a)
1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable. 2. Vices of Consent
An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promisor if the promise is supported by a consideration distinct 1330. A contract where consent is given through MVIUiF mistake, violence,
from the price. (1451a) intimidation, undue influence, or fraud is voidable. (1265a)
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1338. There is fraud when, through insidious words or machinations of one of the 2. Villamor v CA (1991) - It held that the cause or the impelling reason on the part
contracting parties, the other is induced to enter into a contract which, without them, of the buyers-offerees in executing the deed of option as appearing in the deed
he would not have agreed to. (1269) itself was the sellers-offerors’ having agreed to buy the original half of the land
1331. In order that mistake may invalidate consent, it should refer to the substance of at 570.00 per square meter “which was greatly higher than the actual
the thing which is the object of the contract, or to those conditions which have reasonable prevailing price,”47 and that such cause or consideration is clear
principally moved one or both parties to enter into the contract. from the deed itself. Note that the separate consideration under the option was
Mistake as to the identity or qualifications of one of the parties will vitiate consent only in fact an integral part of the higher price they paid originally for the first parcel
when such identity or qualifications have been the principal cause of the contract. of land bought, which the Court considered to be fine, so long as it was not part
A simple mistake of account shall give rise to its correction. (1266a) of the price to be paid for the other parcel of land.

1. Asiain v Jalandoni (1923) 4. Right of First Refusal

3. Option Contract 1. Ang Yu Asuncion v CA (1994) - Under the Ang Yu Asuncion ruling, insofar as
the optionee is concerned, whether or not he gives a separate consideration for
1479. A promise to buy and sell a determinate thing for a price certain is reciprocally the option, he would be saddled with the same dilemma: if the optioner
demandable. withdraws the offer prior to the time he (the optionee) shall have exercised the
An accepted unilateral promise to buy or to sell a determinate thing for a price certain option or accepted the offer, his acceptance could not give rise to a valid and
is binding upon the promisor if the promise is supported by a consideration distinct binding sale. (1324)
from the price. (1451a) 2. Equatorial Realty Dev’t v Mayfair Theater (1996) - in a situation where the right
1324. When the offerer has allowed the offeree a certain period to accept, the offer of first refusal clause found in a valid lease contract was violated and the
may be withdrawn at any time before acceptance by communicating such withdrawal, property was sold to a buyer who was aware of the existence of such right, the
except when the option is founded upon a consideration, as something paid or resulting contract is rescissible by the person in whose favor the right of first
promised. (n) refusal was given, and although no particular price was stated in the covenant
granting the right of first refusal, the same price by which the third-party buyer
1. De la Cavada v Diaz (1918) bought the property shall be deemed to be the price by which the right of first
2. Soriano v Bautista (1962) refusal shall therefore be exercisable; the enforceability of the right of first
3. Nietes v CA (1972) - notice of the exercise of the option need not be coupled refusal depends on the obligatory force of the main contract (contract of lease).
with actual payment of the price, so long as this is delivered to the owner of the 3. Paranaque Kings v CA (1997)
property upon performance of his part of the agreement. 4. Rosencor v Inquing (2001)
4. Cronico v JM Tuason (1977) 5. Tanay Recreation v Fausto (2005)
5. Carceller v CA (1999) - facts showed clearly that there was every intention on
the part of the lessor to dispose the leased premises under the option, and the 5. Mutual Promise to Buy and Sell
lessee had intended to purchase the leased premises, and having invested very
substantial amount to introduce improvements therein, then the exercise of the 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
option within a reasonable period after the end of the lease, immediately after demandable.
the lessee was informed of the denial of the request for the extension of the An accepted unilateral promise to buy or to sell a determinate thing for a price certain
lease, should be considered still a valid exercise of the option that would give is binding upon the promisor if the promise is supported by a consideration distinct
grounds for an action for specific performance against the lessor to execute the from the price. (1451a)
necessary sale contract in favor of the lessee. The delay of 18 days was
considered neither “substantial” nor “fundamental” that would defeat the B. Perfection
intention of the parties when they executed the lease contract with option to
purchase. 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.
a. Meaning of Consideration From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts. (1450a)
1. Sanches v Rigos (1972) – refused to apply presumption of consideration for 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
option contracts; the burden of proof to show that the option contract was thing and the cause which are to constitute the contract. The offer must be certain and
supported by a separate consideration is with the party seeking to show it since the acceptance absolute. A qualified acceptance constitutes a counter-offer.
in the case of an option contract, Article 1479 being the specific provision, Acceptance made by letter or telegram does not bind the offerer except from the time
requires such separate consideration for an option to be valid. (Cf. 1354) But it came to his knowledge. The contract, in such a case, is presumed to have been
option would still constitute a valid offer; if such is exercised prior to its entered into in the place where the offer was made. (1262a)
withdrawal, that is equivalent to an offer being accepted prior to withdrawal. 1325. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer. (n)
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1326. Advertisements for bidders are simply invitations to make proposals, and the 5. DBP v Medrano (2011)
advertiser is not bound to accept the highest or lowest bidder, unless the contrary
appears. (n) 2. Sale by Auction
1330. A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable. (1265a) 1476. In the case of a sale by auction:
1338. There is fraud when, through insidious words or machinations of one of the (1) Where goods are put up for sale by auction in lots, each lot is the subject
contracting parties, the other is induced to enter into a contract which, without them, of a separate contract of sale.
he would not have agreed to. (1269) (2) A sale by auction is perfected when the auctioneer announces its
1476. In the case of a sale by auction: perfection by the fall of the hammer, or in other customary manner. Until
(1) Where goods are put up for sale by auction in lots, each lot is the subject such announcement is made, any bidder may retract his bid; and the
of a separate contract of sale. auctioneer may withdraw the goods from the sale unless the auction has
(2) A sale by auction is perfected when the auctioneer announces its been announced to be without reserve.
perfection by the fall of the hammer, or in other customary manner. Until (3) A right to bid may be reserved expressly by or on behalf of the seller,
such announcement is made, any bidder may retract his bid; and the unless otherwise provided by law or by stipulation.
auctioneer may withdraw the goods from the sale unless the auction has (4) Where notice has not been given that a sale by auction is subject to a
been announced to be without reserve. right to bid on behalf of the seller, it shall not be lawful for the seller to bid
(3) A right to bid may be reserved expressly by or on behalf of the seller, himself or to employ or induce any person to bid at such sale on his behalf or
unless otherwise provided by law or by stipulation. for the auctioneer, to employ or induce any person to bid at such sale on
(4) Where notice has not been given that a sale by auction is subject to a behalf of the seller or knowingly to take any bid from the seller or any person
right to bid on behalf of the seller, it shall not be lawful for the seller to bid employed by him. Any sale contravening this rule may be treated as
himself or to employ or induce any person to bid at such sale on his behalf or fraudulent by the buyer. (n)
for the auctioneer, to employ or induce any person to bid at such sale on 1403(d). The following contracts are unenforceable, unless they are ratified:
behalf of the seller or knowingly to take any bid from the seller or any person (1) Those entered into in the name of another person by one who has been given no
employed by him. Any sale contravening this rule may be treated as authority or legal representation, or who has acted beyond his powers;
fraudulent by the buyer. (n) (2) Those that do not comply with the Statute of Frauds as set forth in this number. In
1479. A promise to buy and sell a determinate thing for a price certain is reciprocally the following cases an agreement hereafter made shall be unenforceable by action,
demandable. unless the same, or some note or memorandum, thereof, be in writing, and subscribed
An accepted unilateral promise to buy or to sell a determinate thing for a price certain by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
is binding upon the promisor if the promise is supported by a consideration distinct received without the writing, or a secondary evidence of its contents:
from the price. (1451a) (a) An agreement that by its terms is not to be performed within a year from
the making thereof;
1. Perfection of Contract (b) A special promise to answer for the debt, default, or miscarriage of
another;
1475. The contract of sale is perfected at the moment there is a meeting of minds (c) An agreement made in consideration of marriage, other than a mutual
upon the thing which is the object of the contract and upon the price. promise to marry;
From that moment, the parties may reciprocally demand performance, subject to the (d) An agreement for the sale of goods, chattels or things in action, at a price
provisions of the law governing the form of contracts. (1450a) 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
1. Coronel v CA (1996) - The seller executed a “Receipt of Down Payment” in in action or pay at the time some part of the purchase money; but when a
favor of the buyer acknowledging the receipt therein of the downpayment as sale is made by auction and entry is made by the auctioneer in his sales
purchase price of the property described therein, and indicating the balance of book, at the time of the sale, of the amount and kind of property sold, terms
the purchase price, with specific obligation to transfer the title upon full payment of sale, price, names of the purchasers and person on whose account the
of the balance. The Court held that there was a perfected contract of sale, there sale is made, it is a sufficient memorandum;
being no reservation of any title until full payment of the purchase price. The (e) An agreement for the leasing for a longer period than one year, or for the
Coronel ruling is consistent with the doctrine that sale being governed by the sale of real property or of an interest therein;
Statute of Frauds, requires that the memorandum that would evidence the (f) A representation as to the credit of a third person.
contract should contain all the essential requisites of the subject matter and (3) Those where both parties are incapable of giving consent to a contract.
price. In a contract to sell, full payment doesn’t automatically transfer ownership; 1326. Advertisements for bidders are simply invitations to make proposals, and the
prospective seller still has to convey title to the prospective buyer by entering advertiser is not bound to accept the highest or lowest bidder, unless the contrary
into a contract of absolute sale. appears. (n)
2. San Lorenzo Dev’t Corp v CA (2005)
3. Manila Metal Container Corp. v PNB (2006)
4. Traders Royal Bank v Cuison Lumber (2009)
7

3. Earnest Money v Option Money a third persons, if it is not embodied in a public instrument AND recorded in the
Registry of Deeds.
1428. When, after an action to enforce a civil obligation has failed the defendant
voluntarily performs the obligation, he cannot demand the return of what he has 2. Exception: When Form Important
delivered or the payment of the value of the service he has rendered. a. Form Important for Enforceability
1482. Whenever earnest money is given in a contract of sale, it shall be considered as a.1 Statute of Frauds
part of the price and as proof of the perfection of the contract. (1454a)
1403. The following contracts are unenforceable, unless they are ratified:
1. Cifra v CA (1991) – earnest money + P20,000; freedom to rescind (1) Those entered into in the name of another person by one who has been
2. Laforteza v Machuca (2000) given no authority or legal representation, or who has acted beyond his
3. Limson v CA (2001) powers;
4. San Miguel Properties v Huang (2000) - that it is not the giving of earnest (2) Those that do not comply with the Statute of Frauds as set forth in this
money, but the proof of the concurrence of all the essential elements of the sale number. In the following cases an agreement hereafter made shall be
which establishes the existence of a perfected sale. 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;
4. Place of Perfection evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:
1391. The action for annulment shall be brought within four years. (a) An agreement that by its terms is not to be performed within a
year from the making thereof;
This period shall begin: (b) A special promise to answer for the debt, default, or miscarriage
In cases of IVUI intimidation, violence or undue influence, from the time the defect of of another;
the consent ceases. (c) An agreement made in consideration of marriage, other than a
In case of MF mistake or fraud, from the time of the discovery of the same. mutual promise to marry;
And when the action refers to contracts entered into by minors or other incapacitated (d) An agreement for the sale of goods, chattels or things in action,
persons, from the time the guardianship ceases. (1301a) 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
C. Formalities of the Contract some of them, of such things in action or pay at the time some part
1. General Rule: Form Not Important 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
1483. Subject to the provisions of the Statute of Frauds and of any other applicable sale, of the amount and kind of property sold, terms of sale, price,
statute, a contract of sale may be made in writing, or by word of mouth, or partly in names of the purchasers and person on whose account the sale is
writing and partly by word of mouth, or may be inferred from the conduct of the made, it is a sufficient memorandum;
parties. (n) (e) An agreement for the leasing for a longer period than one year,
1358. The following must appear in a public document: or for the sale of real property or of an interest therein;
(1) Acts and contracts which have for their object the creation, transmission, ( f ) A representation as to the credit of a third person.
modification or extinguishment of real rights over immovable property; sales (3) Those where both parties are incapable of giving consent to a contract.
of real property or of an interest therein are governed by articles 1403, No. 2, 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403,
and 1405; are ratified by the failure to object to the presentation of oral evidence to prove the
(2) The cession, repudiation or renunciation of hereditary rights or of those of same, or by the acceptance of benefit under them.
the conjugal partnership of gains;
(3) The power to administer property, or any other power which has for its 1. Ortega v Leonardo (1958)
object an act appearing or which should appear in a public document, or 2. Paredes v Espino (1968)
should prejudice a third person; 3. Claudel v CA (1991) - after premising that the “rule of thumb is that a sale of
(4) The cession of actions or rights proceeding from an act appearing in a land, once consummated, is valid regardless of the form it may have been
public document. entered into,” held that “in the event that a third party, as in this case, disputes
All other contracts where the amount involved exceeds five hundred pesos the ownership of the property, the person against whom that claim is brought
must appear in writing, even a private one. But sales of goods, chattels or cannot present any proof of such sale and hence has no means to enforce the
things in action are governed by articles, 1403, No. 2 and 1405. (1280a) contract.” In reaching such conclusion, the Court quoted directly Article 1403,
which provides that only a note or memorandum can take the sale of real
1. Dalion v CA (1990) property out of the provisions of the Statute of Frauds.
1. Secuya v Vda. De Selma (2000) - that while the sale of land appearing in a
private deed is binding between the parties, it cannot be considered binding on
8

b. Form Important for Validity not alterable by the parties interested in the electronic document, existed under which
b.1 Sale of Realty through an Agent -
(a) A method is used to identify the party sought to be bound and to indicate
1874. When a sale of a piece of land or any interest therein is through an agent, the said party's access to the electronic document necessary for his consent or
authority of the latter shall be in writing; otherwise, the sale shall be void. (n) approval through the electronic signature;
(b) Said method is reliable and appropriate for the purpose for which the
1. City-Lite Realty Corporation v CA (2000) electronic document was generated or communicated, in the light of all
circumstances, including any relevant agreement;
b. 2 Sale of Large Cattle (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
1581. The form of sale of large cattle shall be governed by special laws. (n) signature; and
529 RAC. Registration necessary to validity of transfer. No transfer shall be valid (d) The other party is authorized and enabled to verify the electronic
unless the same is registered and a certificate of transfer obtained as herein provided, signature and to make the decision to proceed with the transaction
but the large cattle under two years of age may be registered and branded gratis for authenticated by the same.
the purpose of effecting a valid transfer, if the registration and transfer are made at the RA 8792, Sec. 11. Authentication of Electronic Data Messages and Electronic
same time. Documents. - Until the Supreme Court by appropriate rules shall have so provided,
electronic documents, electronic data messages and electronic signatures, shall be
b. 3 Electronic Commerce Act authenticated by demonstrating, substantiating and validating a claimed identity of a
user, device, or another entity is an information or communication system, among
RA 8792, Sec. 7. Legal Recognition of Electronic Documents - Electronic documents other ways, as follows;
shall have the legal effect, validity or enforceability as any other document or legal (a) The electronic signature shall be authenticated by proof than a letter ,
writing, and - character, number or other symbol in electronic form representing the
(a) Where the law requires a document to be in writing, that requirement is persons named in and attached to or logically associated with an electronic
met by an electronic document if the said electronic document maintains its data message, electronic document, or that the appropriate methodology or
integrity and reliability and can be authenticated so as to be usable for security procedures, when applicable, were employed or adopted by such
subsequent reference, in that - person, with the intention of authenticating or approving in an electronic data
i. The electronic document has remained complete and unaltered, message or electronic document;
apart from the addition of any endorsement and any authorized (b) The electronic data message or electronic document shall be
change, or any change which arises in the normal course of authenticated by proof that an appropriate security procedure, when
communication, storage and display; and applicable was adopted and employed for the purpose of verifying the
ii. The electronic document is reliable in the light of the purpose for originator of an electronic data message and/or electronic document, or
which it was generated and in the light of all relevant circumstances. detecting error or alteration in the communication, content or storage of an
(b) Paragraph (a) applies whether the requirement therein is in the form of an electronic document or electronic data message from a specific point, which,
obligation or whether the law simply provides consequences for the using algorithm or codes, identifying words or numbers, encryptions, answers
document not being presented or retained in its original from. back or acknowledgement procedures, or similar security devices.
(c) Where the law requires that a document be presented or retained in its The supreme court may adopt such other authentication procedures, including the use
original form, that requirement is met by an electronic document if - of electronic notarization systems as necessary and advisable, as well as the
i. There exists a reliable assurance as to the integrity of the certificate of authentication on printed or hard copies of the electronic document or
document from the time when it was first generated in its final form; electronic data messages by electronic notaries, service providers and other duly
and recognized or appointed certification authorities.
ii. That document is capable of being displayed to the person to The person seeking to introduce an electronic data message or electronic document
whom it is to be presented: Provided, That no provision of this Act in any legal proceeding has the burden of proving its authenticity by evidence capable
shall apply to vary any and all requirements of existing laws on of supporting a finding that the electronic data message or electronic document is
formalities required in the execution of documents for their validity. what the person claims it be.
For evidentiary purposes, an electronic document shall be the functional equivalent of In the absence of evidence to the contrary, the integrity of the information and
a written document under existing laws. communication system in which an electronic data message or electronic document is
This Act does not modify any statutory rule relating to admissibility of electronic data recorded or stored may be established in any legal proceeding -
massages or electronic documents, except the rules relating to authentication and a.) By evidence that at all material times the information and communication
best evidence. system or other similar device was operating in a manner that did not affect
RA 8792, Sec. 8. Legal Recognition of Electronic Signatures. - An electronic signature the integrity of the electronic data message and/or electronic document, and
on the electronic document shall be equivalent to the signature of a person on a there are no other reasonable grounds to doubt the integrity of the
written document if that signature is proved by showing that a prescribed procedure, information and communication system,
9

b.) By showing that the electronic data message and/or electronic document No contract may be entered into upon future inheritance except in cases expressly
was recorded or stored by a party to the proceedings who is adverse in authorized by law.
interest to the party using it; or All services which are not contrary to law, morals, good customs, public order or
c.) By showing that the electronic data message and/or electronic document public policy may likewise be the object of a contract. (1271a)
was recorded or stored in the usual and ordinary course of business by a 1348. Impossible things or services cannot be the object of contracts. (1272)
person who is not a party to the proceedings and who did not act under the 1462. The goods which form the subject of a contract of sale may be either existing
control of the party using the record. 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
IV. Subject Matter of the Sale "future goods."
A. Requisites There may be a contract of sale of goods, whose acquisition by the seller depends
upon a contingency which may or may not happen. (n)
1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered. (n) a. Emptio Rei Speratae/Emptio Spei
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 1461. Things having a potential existence may be the object of the contract of sale.
the object of contracts. The efficacy of the sale of a mere hope or expectancy is deemed subject to the
No contract may be entered into upon future inheritance except in cases expressly condition that the thing will come into existence.
authorized by law. The sale of a vain hope or expectancy is void. (n)
All services which are not contrary to law, morals, good customs, public order or 1347. All things which are not outside the commerce of men, including future things,
public policy may likewise be the object of a contract. (1271a) may be the object of a contract. All rights which are not intransmissible may also be
1306. The contracting parties may establish such stipulations, clauses, terms and the object of contracts.
conditions as they may deem convenient, provided they are not contrary to law, No contract may be entered into upon future inheritance except in cases expressly
morals, good customs, public order, or public policy. (1255a) authorized by law.
1409. The following contracts are inexistent and void from the beginning: All services which are not contrary to law, morals, good customs, public order or
(1) Those whose cause, object or purpose is contrary to law, morals, good public policy may likewise be the object of a contract. (1271a)
customs, public order or public policy; *Emptio Rei Speratae - A purchase in the hope of an uncertain future profit; the purchase
(2) Those which are absolutely simulated or fictitious; of a thing not yet inexistence or not yet in the possession of the seller, as, the cast of a
(3) Those whose cause or object did not exist at the time of the transaction; net or a crop to be grown, and the price of which is to depend on the actual gain.
(4) Those whose object is outside the commerce of men; *Emptio Spei - If the price is fixed and not subject to fluctuation, but is to be paid whether
(5) Those which contemplate an impossible service; the gain be greater or less.
(6) Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained; 1. Pichel v Alonzo (1982) – Right to sell coconuts xD
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of b. Subject to a Resolutory Condition
illegality be waived.
1411. When the nullity proceeds from the illegality of the cause or object of the 1465. Things subject to a resolutory condition may be the object of the contract of
contract, and the act constitutes a criminal offense, both parties being in pari delicto, sale. (n)
they shall have no action against each other, and both shall be prosecuted. Moreover, 1608. The vendor may bring his action against every possessor whose right is derived
the provisions of the Penal Code relative to the disposal of effects or instruments of a from the vendee, even if in the second contract no mention should have been made of
crime shall be applicable to the things or the price of the contract. the right to repurchase, without prejudice to the provisions of the Mortgage Law and
This rule shall be applicable when only one of the parties is guilty; but the innocent the Land Registration Law with respect to third persons. (1510)
one may claim what he has given, and shall not be bound to comply with his promise.
(1305) 1. Arsenal v IAC (1986)
1416. When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designed for the protection of the plaintiff, he may, if public 2. Must be Licit
policy is thereby enhanced, recover what he has paid or delivered.
1347. All things which are not outside the commerce of men, including future things,
1. Must be Existing, Future, or Contingent may be the object of a contract. All rights which are not intransmissible may also be
the object of contracts.
1347. All things which are not outside the commerce of men, including future things, No contract may be entered into upon future inheritance except in cases expressly
may be the object of a contract. All rights which are not intransmissible may also be authorized by law.
the object of contracts. All services which are not contrary to law, morals, good customs, public order or
public policy may likewise be the object of a contract. (1271a)
10

1459. The thing must be licit and the vendor must have a right to transfer the or measure of the goods in the mass, and though the number, weight or measure of
ownership thereof at the time it is delivered. (n) the goods in the mass is undetermined. By such a sale the buyer becomes owner in
1575. The sale of animals suffering from contagious diseases shall be void. common of such a share of the mass as the number, weight or measure bought bears
A contract of sale of animals shall also be void if the use or service for which they are to the number, weight or measure of the mass. If the mass contains less than the
acquired has been stated in the contract, and they are found to be unfit therefor. number, weight or measure bought, the buyer becomes the owner of the whole mass
(1494a) and the seller is bound to make good the deficiency from goods of the same kind and
quality, unless a contrary intent appears. (n)
1. Martinez v CA (1974) 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and
3. Must be Determinate or Determinable even substitute another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with respect to the co-
1460. A thing is determinate when it is particularly designated or physical segregated owners, shall be limited to the portion which may be allotted to him in the division
from all others of the same class. upon the termination of the co-ownership. (399)
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 necessity of a 1. Yturalde v CA (1972)
new or further agreement between the parties. (n) 2. Gaite v Fonacier (1961) - sale covering a specific mass had not made any
1349. The object of every contract must be determinate as to its kind. The fact that the provisions in their contract for the measuring or weighing of the subject matter
quantity is not determinate shall not be an obstacle to the existence of the contract, sold, and that the price agreed upon was not based on such measurement, then
provided it is possible to determine the same, without the need of a new contract “[t]he subject matter of the sale is, therefore, a determinate object, the mass,
between the parties. (1273) and not the actual number of units or tons contained therein.

1. Meliza v City of Iloilo (1968) 4. Things in Litigation


2. Atilano v Atilano (1969) - when one seeks to sell or buy a real property, one
sells or buys the property as he sees it in its actual setting and by its physical 1381. The following contracts are rescissible:
metes and bounds, and not by the mere lot number assigned to it in the (1) Those which are entered into by guardians whenever the wards whom
certificate of title. It was clear that when the brothers entered into a contract, they represent suffer lesion by more than one-fourth of the value of the things
they were referring to lot 535-A because even before that, the purchasing which are the object thereof;
brother had been occupying said lot as his residence. (2) Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number;
B. Particular Kinds (3) Those undertaken in fraud of creditors when the latter cannot in any other
1. Generic Things manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into
1. Yu Tek & Co. v Gonzales (1915) by the defendant without the knowledge and approval of the litigants or of
competent judicial authority;
2. Future Goods (5) All other contracts specially declared by law to be subject to rescission.
(1291a)
1461. Things having a potential existence may be the object of the contract of sale. 1385. Rescission creates the obligation to return the things which were the object of
The efficacy of the sale of a mere hope or expectancy is deemed subject to the the contract, together with their fruits, and the price with its interest; consequently, it
condition that the thing will come into existence. can be carried out only when he who demands rescission can return whatever he may
The sale of a vain hope or expectancy is void. (n) be obliged to restore.
1462. The goods which form the subject of a contract of sale may be either existing Neither shall rescission take place when the things which are the object of the contract
goods, owned or possessed by the seller, or goods to be manufactured, raised, or are legally in the possession of third persons who did not act in bad faith.
acquired by the seller after the perfection of the contract of sale, in this Title called In this case, indemnity for damages may be demanded from the person causing the
"future goods." loss. (1295)
There may be a contract of sale of goods, whose acquisition by the seller depends 13.14 ROC. Notice of lis pendens. — In an action affecting the title or the right of
upon a contingency which may or may not happen. (n) possession of real property, the plaintiff and the defendant, when affirmative relief is
claimed in his answer, may record in the office of the registry of deeds of the province
3. Undivided Interest/Share in which the property is situated notice of the pendency of the action. Said notice shall
contain the names of the parties and the object of the action or defense, and a
1463. The sole owner of a thing may sell an undivided interest therein. (n) description of the property in that province affected thereby. Only from the time of
1464. In the case of fungible goods, there may be a sale of an undivided share of a filing such notice for record shall a purchaser, or encumbrancer of the property
specific mass, though the seller purports to sell and the buyer to buy a definite affected thereby, be deemed to have constructive notice of the pendency of the
number, weight or measure of the goods in the mass, and though the number, weight action, and only of its pendency against the parties designated by their real names.
11

The notice of lis pendens hereinabove mentioned may be cancelled only upon order 1351. The particular motives of the parties in entering into a contract are different from
of the court, after proper showing that the notice is for the purpose of molesting the the cause thereof. (n)
adverse party, or that it is not necessary to protect the rights of the rights of the party 1352. Contracts without cause, or with unlawful cause, produce no effect whatever.
who caused it to be recorded. (24a, R-14) The cause is unlawful if it is contrary to law, morals, good customs, public order or
public policy. (1275a)
1. Atkins Kroll v Domingo (1924) 1353. The statement of a false cause in contracts shall render them void, if it should
2. Laroza v Guia (1985) not be proved that they were founded upon another cause which is true and lawful.
(1276)
5. Things Subject to Conditions 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. (1277)
1465. Things subject to a resolutory condition may be the object of the contract of 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
sale. (n) invalidate a contract, unless there has been fraud, mistake or undue influence. (n)
1608. The vendor may bring his action against every possessor whose right is derived
from the vendee, even if in the second contract no mention should have been made of A. Must be Real
the right to repurchase, without prejudice to the provisions of the Mortgage Law and
the Land Registration Law with respect to third persons. (1510) 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. (n)
1. Arsenal v IAC (supra)
1. Adequacy of Price
V. Price or Consideration
1355. Except in cases specified by law, lesion or inadequacy of cause shall not
1469. In order that the price may be considered certain, it shall be sufficient that it be invalidate a contract, unless there has been fraud, mistake or undue influence. (n)
so with reference to another thing certain, or that the determination thereof be left to 1470. Gross inadequacy of price does not affect a contract of sale, except as it may
the judgment of a special person or persons. indicate a defect in the consent, or that the parties really intended a donation or some
Should such person or persons be unable or unwilling to fix it, the contract shall be other act or contract. (n)
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 1. Bagnas v CA (1989) – piso rin pero plus services to be rendered; not
price. considered valuable; buyer had no intention to pay; contract is void.
Where such third person or persons are prevented from fixing the price or terms by 2. Vda. De Gordon v CA (1981)
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. (1447a) 2. False Consideration
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 1353. The statement of a false cause in contracts shall render them void, if it should
other act or contract. (n) not be proved that they were founded upon another cause which is true and lawful.
1471. If the price is simulated, the sale is void, but the act may be shown to have been (1276)
in reality a donation, or some other act or contract. (n) 1354. Although the cause is not stated in the contract, it is presumed that it exists and
1472. The price of securities, grain, liquids, and other things shall also be considered is lawful, unless the debtor proves the contrary. (1277)
certain, when the price fixed is that which the thing sold would have on a definite day, 1471. If the price is simulated, the sale is void, but the act may be shown to have been
or in a particular exchange or market, or when an amount is fixed above or below the in reality a donation, or some other act or contract. (n)
price on such day, or in such exchange or market, provided said amount be certain.
(1448) 1. Ong v Ong (1985) - the Court held “that the apparent inadequacy is of no
1473. The fixing of the price can never be left to the discretion of one of the moment since it is the usual practice in deeds of conveyance to place a nominal
contracting parties. However, if the price fixed by one of the parties is accepted by the amount although there is a more valuable consideration given.” Moreover, even
other, the sale is perfected. (1449a) assuming that said consideration of P1.00 was suspicious, such circumstance
1474. Where the price cannot be determined in accordance with the preceding alone, does not necessarily justify the inference [that the buyers] were not
articles, or in any other manner, the contract is inefficacious. However, if the thing or purchasers in good faith or for value.”
any part thereof has been delivered to and appropriated by the buyer he must pay a 2. Ladanga v CA (1984)
reasonable price therefor. What is a reasonable price is a question of fact dependent
on the circumstances of each particular case. (n) 3. Absence of Consideration
1350. In onerous contracts the cause is understood to be, for each contracting party,
the prestation or promise of a thing or service by the other; in remuneratory ones, the 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
service or benefit which is remunerated; and in contracts of pure beneficence, the invalidate a contract, unless there has been fraud, mistake or undue influence. (n)
mere liberality of the benefactor. (1274)
12

1470. Gross inadequacy of price does not affect a contract of sale, except as it may 5. Must be Certain or Ascertainable at the Time of Perfection
indicate a defect in the consent, or that the parties really intended a donation or some
other act or contract. (n) 1469. In order that the price may be considered certain, it shall be sufficient that it be
1471. If the price is simulated, the sale is void, but the act may be shown to have been so with reference to another thing certain, or that the determination thereof be left to
in reality a donation, or some other act or contract. (n) the judgment of a special person or persons.
1476. In the case of a sale by auction: Should such person or persons be unable or unwilling to fix it, the contract shall be
(1) Where goods are put up for sale by auction in lots, each lot is the subject inefficacious, unless the parties subsequently agree upon the price.
of a separate contract of sale. If the third person or persons acted in bad faith or by mistake, the courts may fix the
(2) A sale by auction is perfected when the auctioneer announces its price.
perfection by the fall of the hammer, or in other customary manner. Until Where such third person or persons are prevented from fixing the price or terms by
such announcement is made, any bidder may retract his bid; and the fault of the seller or the buyer, the party not in fault may have such remedies against
auctioneer may withdraw the goods from the sale unless the auction has the party in fault as are allowed the seller or the buyer, as the case may be. (1447a)
been announced to be without reserve.
(3) A right to bid may be reserved expressly by or on behalf of the seller, 1. Velasco v CA (1973) – no perfected contract, still had to agree on payment
unless otherwise provided by law or by stipulation. schedule/structure. Although part of the downpayment has been paid, a definite
(4) Where notice has not been given that a sale by auction is subject to a agreement on the manner of payment of the purchase price was an essential
right to bid on behalf of the seller, it shall not be lawful for the seller to bid element in the formation of a binding and enforceable contract of sale.
himself or to employ or induce any person to bid at such sale on his behalf or 2. Toyota Show v CA (1995) – Boasted about having the car, no perfected
for the auctioneer, to employ or induce any person to bid at such sale on contract of sale; BA Finance did not allow for Sosa to credit. There was never
behalf of the seller or knowingly to take any bid from the seller or any person any perfected contract between the parties under the agreement that only
employed by him. Any sale contravening this rule may be treated as provided for a downpayment of 5100,000.00, but did not indicate the total
fraudulent by the buyer. (n) purchase price nor the manner by which the balance shall be paid.
1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good VI. Obligations of the Vendor
customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious; 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant
(3) Those whose cause or object did not exist at the time of the transaction; the thing which is the object of the sale. (1461a)
(4) Those whose object is outside the commerce of men; 1496. The ownership of the thing sold is acquired by the vendee from the moment it is
(5) Those which contemplate an impossible service; delivered to him in any of the ways specified in articles 1497 to 1501, or in any other
(6) Those where the intention of the parties relative to the principal object of manner signifying an agreement that the possession is transferred from the vendor to
the contract cannot be ascertained; the vendee. (n)
(7) Those expressly prohibited or declared void by law. 1497. The thing sold shall be understood as delivered, when it is placed in the control
These contracts cannot be ratified. Neither can the right to set up the defense of and possession of the vendee. (1462a)
illegality be waived. 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
1. Buenaventura v CA (2003) deed the contrary does not appear or cannot clearly be inferred.
2. Province of Cebu v Heirs of Morales (2008) 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. (1463a)
4. Must be in Money or its Equivalent 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
1458. By the contract of sale one of the contracting parties obligates himself to possession of the vendee at the time of the sale, or if the latter already had it in his
transfer the ownership and to deliver a determinate thing, and the other to pay therefor possession for any other reason. (1463a)
a price certain in money or its equivalent. 1500. There may also be tradition constitutum possessorium. (n)
A contract of sale may be absolute or conditional. (1445a) 1501. With respect to incorporeal property, the provisions of the first paragraph of
1468. If the consideration of the contract consists partly in money, and partly in article 1498 shall govern. In any other case wherein said provisions are not applicable,
another thing, the transaction shall be characterized by the manifest intention of the the placing of the titles of ownership in the possession of the vendee or the use by the
parties. If such intention does not clearly appear, it shall be considered a barter if the vendee of his rights, with the vendor's consent, shall be understood as a delivery.
value of the thing given as a part of the consideration exceeds the amount of the (1464)
money or its equivalent; otherwise, it is a sale. (1446a) 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an
1641. As to all matters not specifically provided for in this Title, barter shall be option to return the goods instead of paying the price, the ownership passes to the
governed by the provisions of the preceding Title relating to sales. (1541a) 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,
1. Republic v PH Resources (1958) – PH Resources, allowed to intervene. within a reasonable time. (n)
13

When goods are delivered to the buyer on approval or on trial or on satisfaction, or (1) The provisions of any factors' act, recording laws, or any other provision
other similar terms, the ownership therein passes to the buyer: of law enabling the apparent owner of goods to dispose of them as if he were
(1) When he signifies his approval or acceptance to the seller or does any the true owner thereof;
other act adopting the transaction; (2) The validity of any contract of sale under statutory power of sale or under
(2) If he does not signify his approval or acceptance to the seller, but retains the order of a court of competent jurisdiction;
the goods without giving notice of rejection, then if a time has been fixed for (3) Purchases made in a merchant's store, or in fairs, or markets, in
the return of the goods, on the expiration of such time, and, if no time has accordance with the Code of Commerce and special laws. (n)
been fixed, on the expiration of a reasonable time. What is a reasonable time 1506. Where the seller of goods has a voidable title thereto, but his title has not been
is a question of fact. (n) avoided at the time of the sale, the buyer acquires a good title to the goods, provided
1503. When there is a contract of sale of specific goods, the seller may, by the terms he buys them in good faith, for value, and without notice of the seller's defect of title.
of the contract, reserve the right of possession or ownership in the goods until certain (n)
conditions have been fulfilled. The right of possession or ownership may be thus 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose
reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other the right to make use of the terms as provided in article 1198. (1467a)
bailee for the purpose of transmission to the buyer. 1198. The debtor shall lose every right to make use of the period:
Where goods are shipped, and by the bill of lading the goods are deliverable to the (1) When after the obligation has been contracted, he becomes insolvent,
seller or his agent, or to the order of the seller or of his agent, the seller thereby unless he gives a guaranty or security for the debt;
reserves the ownership in the goods. But, if except for the form of the bill of lading, the (2) When he does not furnish to the creditor the guaranties or securities
ownership would have passed to the buyer on shipment of the goods, the seller's which he has promised;
property in the goods shall be deemed to be only for the purpose of securing (3) When by his own acts he has impaired said guaranties or securities after
performance by the buyer of his obligations under the contract. their establishment, and when through a fortuitous event they disappear,
Where goods are shipped, and by the bill of lading the goods are deliverable to order unless he immediately gives new ones equally satisfactory;
of the buyer or of his agent, but possession of the bill of lading is retained by the seller (4) When the debtor violates any undertaking, in consideration of which the
or his agent, the seller thereby reserves a right to the possession of the goods as creditor agreed to the period;
against the buyer. (5) When the debtor attempts to abscond. (1129a)
Where the seller of goods draws on the buyer for the price and transmits the bill of 1537. The vendor is bound to deliver the thing sold and its accessions and
exchange and bill of lading together to the buyer to secure acceptance or payment of accessories in the condition in which they were upon the perfection of the contract.
the bill of exchange, the buyer is bound to return the bill of lading if he does not honor All the fruits shall pertain to the vendee from the day on which the contract was
the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added perfected. (1468a)
right thereby. If, however, the bill of lading provides that the goods are deliverable to 1538. In case of loss, deterioration or improvement of the thing before its delivery, the
the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the rules in article 1189 shall be observed, the vendor being considered the debtor. (n)
consignee named therein, one who purchases in good faith, for value, the bill of 1189. When the conditions have been imposed with the intention of suspending the
lading, or goods from the buyer will obtain the ownership in the goods, although the efficacy of an obligation to give, the following rules shall be observed in case of the
bill of exchange has not been honored, provided that such purchaser has received improvement, loss or deterioration of the thing during the pendency of the condition:
delivery of the bill of lading indorsed by the consignee named therein, or of the goods, (1) If the thing is lost without the fault of the debtor, the obligation shall be
without notice of the facts making the transfer wrongful. (n) extinguished;
1504. Unless otherwise agreed, the goods remain at the seller's risk until the (2) If the thing is lost through the fault of the debtor, he shall be obliged to
ownership therein is transferred to the buyer, but when the ownership therein is pay damages; it is understood that the thing is lost when it perishes, or goes
transferred to the buyer the goods are at the buyer's risk whether actual delivery has out of commerce, or disappears in such a way that its existence is unknown
been made or not, except that: or it cannot be recovered;
(1) Where delivery of the goods has been made to the buyer or to a bailee for (3) When the thing deteriorates without the fault of the debtor, the impairment
the buyer, in pursuance of the contract and the ownership in the goods has is to be borne by the creditor;
been retained by the seller merely to secure performance by the buyer of his (4) If it deteriorates through the fault of the debtor, the creditor may choose
obligations under the contract, the goods are at the buyer's risk from the time between the rescission of the obligation and its fulfillment, with indemnity for
of such delivery; damages in either case;
(2) Where actual delivery has been delayed through the fault of either the (5) If the thing is improved by its nature, or by time, the improvement shall
buyer or seller the goods are at the risk of the party in fault. (n) inure to the benefit of the creditor;
1505. Subject to the provisions of this Title, where goods are sold by a person who is (6) If it is improved at the expense of the debtor, he shall have no other right
not the owner thereof, and who does not sell them under authority or with the consent than that granted to the usufructuary. (1122)
of the owner, the buyer acquires no better title to the goods than the seller had, unless 1539. The obligation to deliver the thing sold includes that of placing in the control of
the owner of the goods is by his conduct precluded from denying the seller's authority the vendee all that is mentioned in the contract, in conformity with the following rules:
to sell. If the sale of real estate should be made with a statement of its area, at the rate of a
Nothing in this Title, however, shall affect: 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
14

contract; but, should this be not possible, the vendee may choose between a possession of the vendee at the time of the sale, or if the latter already had it in his
proportional reduction of the price and the rescission of the contract, provided that, in possession for any other reason. (1463a)
the latter case, the lack in the area be not less than one-tenth of that stated. 1500. There may also be tradition constitutum possessorium. (n)
The same shall be done, even when the area is the same, if any part of the 1501. With respect to incorporeal property, the provisions of the first paragraph of
immovable is not of the quality specified in the contract. article 1498 shall govern. In any other case wherein said provisions are not applicable,
The rescission, in this case, shall only take place at the will of the vendee, when the the placing of the titles of ownership in the possession of the vendee or the use by the
inferior value of the thing sold exceeds one-tenth of the price agreed upon. vendee of his rights, with the vendor's consent, shall be understood as a delivery.
Nevertheless, if the vendee would not have bought the immovable had he known of its (1464)
smaller area of inferior quality, he may rescind the sale. (1469a) 1164. The creditor has a right to the fruits of the thing from the time the obligation to
1540. If, in the case of the preceding article, there is a greater area or number in the deliver it arises. However, he shall acquire no real right over it until the same has been
immovable than that stated in the contract, the vendee may accept the area included delivered to him. (1095)
in the contract and reject the rest. If he accepts the whole area, he must pay for the
same at the contract rate. (1470a) 1. General Rule
1541. The provisions of the two preceding articles shall apply to judicial sales. (n)
1542. In the sale of real estate, made for a lump sum and not at the rate of a certain 1477. The ownership of the thing sold shall be transferred to the vendee upon the
sum for a unit of measure or number, there shall be no increase or decrease of the actual or constructive delivery thereof. (n)
price, although there be a greater or less area or number than that stated in the 1496. The ownership of the thing sold is acquired by the vendee from the moment it is
contract. delivered to him in any of the ways specified in articles 1497 to 1501, or in any other
The same rule shall be applied when two or more immovables as sold for a single manner signifying an agreement that the possession is transferred from the vendor to
price; but if, besides mentioning the boundaries, which is indispensable in every the vendee. (n)
conveyance of real estate, its area or number should be designated in the contract, 1497. The thing sold shall be understood as delivered, when it is placed in the control
the vendor shall be bound to deliver all that is included within said boundaries, even and possession of the vendee. (1462a)
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 1. Kuenzle v Macke (1909) – no delivery to Kuenzle, no sale. Macke owns prop.
the area or number, unless the contract is rescinded because the vendee does not 2. Ocejo Perez v Int’l Bank (1918) – sugar belongs to Ocejo, bank’s pledge was
accede to the failure to deliver what has been stipulated. (1471) not in a public instrument. Ocejo was able to make delivery in spite
1543. The actions arising from articles 1539 and 1542 shall prescribe in six months, absence/lack of payment by Chua.
counted from the day of delivery. (1472a) 3. Obana v CA (1985)

A. Transfer of Ownership to the Vendee 2. Exceptions


a. Sale or Return Transactions
1459. The thing must be licit and the vendor must have a right to transfer the b. Sale on Approval, Trial, or Satisfaction
ownership thereof at the time it is delivered. (n)
1477. The ownership of the thing sold shall be transferred to the vendee upon the 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an
actual or constructive delivery thereof. (n) option to return the goods instead of paying the price, the ownership passes to the
1478. The parties may stipulate that ownership in the thing shall not pass to the buyer on delivery, but he may revest the ownership in the seller by returning or
purchaser until he has fully paid the price. (n) tendering the goods within the time fixed in the contract, or, if no time has been fixed,
1487. The expenses for the execution and registration of the sale shall be borne by within a reasonable time. (n)
the vendor, unless there is a stipulation to the contrary. (1455a) When goods are delivered to the buyer on approval or on trial or on satisfaction, or
1496. The ownership of the thing sold is acquired by the vendee from the moment it is other similar terms, the ownership therein passes to the buyer:
delivered to him in any of the ways specified in articles 1497 to 1501, or in any other (1) When he signifies his approval or acceptance to the seller or does any
manner signifying an agreement that the possession is transferred from the vendor to other act adopting the transaction;
the vendee. (n) (2) If he does not signify his approval or acceptance to the seller, but retains
1497. The thing sold shall be understood as delivered, when it is placed in the control the goods without giving notice of rejection, then if a time has been fixed for
and possession of the vendee. (1462a) the return of the goods, on the expiration of such time, and, if no time has
1498. When the sale is made through a public instrument, the execution thereof shall been fixed, on the expiration of a reasonable time. What is a reasonable time
be equivalent to the delivery of the thing which is the object of the contract, if from the is a question of fact. (n)
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 1. Villarta v CA (1987) – sale on approval, pumili pa siya ng alahas niya
keys of the place or depository where it is stored or kept. (1463a)
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
15

c. Executory Sales (1) The provisions of any factors' act, recording laws, or any other provision
i. Express Reservation of law enabling the apparent owner of goods to dispose of them as if he were
the true owner thereof;
1478. The parties may stipulate that ownership in the thing shall not pass to the (2) The validity of any contract of sale under statutory power of sale or under
purchaser until he has fully paid the price. (n) the order of a court of competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in
1. Luzon Brokerage v Maritime Bldg. (1972) accordance with the Code of Commerce and special laws. (n)

2. Implied Reservation 1. Aznar v Yapdiangco (1965) – kotse, for it to benefit Aznar, dapat si Marella at
least may voidable title – pero wala, void talaga.
1503(1). When there is a contract of sale of specific goods, the seller may, by the 2. Noel v CA (1995) – conjugal property, no right to have alienated Gregorio’s.
terms of the contract, reserve the right of possession or ownership in the goods until 3. Cavite Dev’t Bank v Lim (2000)
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 Exceptions:
other bailee for the purpose of transmission to the buyer. a. Estoppel
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 1431. Through estoppel an admission or representation is rendered conclusive upon
reserves the ownership in the goods. But, if except for the form of the bill of lading, the the person making it, and cannot be denied or disproved as against the person relying
ownership would have passed to the buyer on shipment of the goods, the seller's thereon.
property in the goods shall be deemed to be only for the purpose of securing 1433. Estoppel may in pais or by deed.
performance by the buyer of his obligations under the contract. 1434. When a person who is not the owner of a thing sells or alienates and delivers it,
Where goods are shipped, and by the bill of lading the goods are deliverable to order and later the seller or grantor acquires title thereto, such title passes by operation of
of the buyer or of his agent, but possession of the bill of lading is retained by the seller law to the buyer or grantee.
or his agent, the seller thereby reserves a right to the possession of the goods as 1437. When in a contract between third persons concerning immovable property, one
against the buyer. of them is misled by a person with respect to the ownership or real right over the real
Where the seller of goods draws on the buyer for the price and transmits the bill of estate, the latter is precluded from asserting his legal title or interest therein, provided
exchange and bill of lading together to the buyer to secure acceptance or payment of all these requisites are present:
the bill of exchange, the buyer is bound to return the bill of lading if he does not honor (1) There must be fraudulent representation or wrongful concealment of facts
the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added known to the party estopped;
right thereby. If, however, the bill of lading provides that the goods are deliverable to (2) The party precluded must intend that the other should act upon the facts
the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the as misrepresented;
consignee named therein, one who purchases in good faith, for value, the bill of (3) The party misled must have been unaware of the true facts; and
lading, or goods from the buyer will obtain the ownership in the goods, although the (4) The party defrauded must have acted in accordance with the
bill of exchange has not been honored, provided that such purchaser has received misrepresentation.
delivery of the bill of lading indorsed by the consignee named therein, or of the goods, 1439. Estoppel is effective only as between the parties thereto or their successors in
without notice of the facts making the transfer wrongful. (n) interest.
1911. Even when the agent has exceeded his authority, the principal is solidarily liable
3. Seller Not the Owner at the Time of Delivery with the agent if the former allowed the latter to act as though he had full powers. (n)

1462. The goods which form the subject of a contract of sale may be either existing 1. Hernaez v Hernaez (1915)
goods, owned or possessed by the seller, or goods to be manufactured, raised, or 2. Siy Cong Bieng v HSBC (1932)
acquired by the seller after the perfection of the contract of sale, in this Title called 3. Jalbuena v Lizarraga (1915)
"future goods." 4. Bucton v Gabar (1974)
There may be a contract of sale of goods, whose acquisition by the seller depends
upon a contingency which may or may not happen. (n) b. Factors Act, Recording Laws, Torrens System
1459. The thing must be licit and the vendor must have a right to transfer the c. Validity of the Sale under Statutory Power or Court
ownership thereof at the time it is delivered. (n) Order to Sell
1505. Subject to the provisions of this Title, where goods are sold by a person who is d. Sale in Merchant’s Store, Market, or Fair
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 599. The usufructuary may claim any matured credits which form a part of the usufruct
the owner of the goods is by his conduct precluded from denying the seller's authority if he has given or gives the proper security. If he has been excused from giving
to sell. security or has not been able to give it, or if that given is not sufficient, he shall need
Nothing in this Title, however, shall affect: the authorization of the owner, or of the court in default thereof, to collect such credits.
16

The usufructuary who has given security may use the capital he has collected in any 1477. The ownership of the thing sold shall be transferred to the vendee upon the
manner he may deem proper. The usufructuary who has not given security shall actual or constructive delivery thereof. (n)
invest the said capital at interest upon agreement with the owner; in default of such 1495. The vendor is bound to transfer the ownership of and deliver, as well as
agreement, with judicial authorization; and, in every case, with security sufficient to warrant the thing which is the object of the sale. (1461a)
preserve the integrity of the capital in usufruct. (507) 1521. Whether it is for the buyer to take possession of the goods or of the seller to
1505(3). Subject to the provisions of this Title, where goods are sold by a person who send them to the buyer is a question depending in each case on the contract, express
is not the owner thereof, and who does not sell them under authority or with the or implied, between the parties. Apart from any such contract, express or implied, or
consent of the owner, the buyer acquires no better title to the goods than the seller usage of trade to the contrary, the place of delivery is the seller's place of business if
had, unless the owner of the goods is by his conduct precluded from denying the he has one, and if not his residence; but in case of a contract of sale of specific goods,
seller's authority to sell. which to the knowledge of the parties when the contract or the sale was made were in
Nothing in this Title, however, shall affect: some other place, then that place is the place of delivery.
(1) The provisions of any factors' act, recording laws, or any other provision Where by a contract of sale the seller is bound to send the goods to the buyer, but no
of law enabling the apparent owner of goods to dispose of them as if he were time for sending them is fixed, the seller is bound to send them within a reasonable
the true owner thereof; time.
(2) The validity of any contract of sale under statutory power of sale or under Where the goods at the time of sale are in the possession of a third person, the seller
the order of a court of competent jurisdiction; has not fulfilled his obligation to deliver to the buyer unless and until such third person
(3) Purchases made in a merchant's store, or in fairs, or markets, in acknowledges to the buyer that he holds the goods on the buyer's behalf.
accordance with the Code of Commerce and special laws. (n) 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.
1. Sun Bros. v Velasco (1958) Unless otherwise agreed, the expenses of and incidental to putting the goods into a
2. Masiclat v Centeno (1956) deliverable state must be borne by the seller. (n)

4. Sale by a Person having a Voidable Title 1. Place, time and manner of delivery

1506. Where the seller of goods has a voidable title thereto, but his title has not been 1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not
avoided at the time of the sale, the buyer acquires a good title to the goods, provided paid him the price, or if no period for the payment has been fixed in the contract.
he buys them in good faith, for value, and without notice of the seller's defect of title. (1466)
(n) 1169. Those obliged to deliver or to do something incur in delay from the time the
559. The possession of movable property acquired in good faith is equivalent to a title. obligee judicially or extrajudicially demands from them the fulfillment of their
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, obligation.
may recover it from the person in possession of the same. However, the demand by the creditor shall not be necessary in order that delay may
If the possessor of a movable lost or which the owner has been unlawfully deprived, exist:
has acquired it in good faith at a public sale, the owner cannot obtain its return without (1) When the obligation or the law expressly so declare; or
reimbursing the price paid therefor. (464a) (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
1. Tagatac v Jimenez (1957) service is to be rendered was a controlling motive for the establishment of
2. De Garcia v CA (1971) the contract; or
3. EDCA Publishing v Santos (1990) (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
B. Delivery of the thing with fruits and accessions 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)
1537. The vendor is bound to deliver the thing sold and its accessions and 1521. Whether it is for the buyer to take possession of the goods or of the seller to
accessories in the condition in which they were upon the perfection of the contract. send them to the buyer is a question depending in each case on the contract, express
All the fruits shall pertain to the vendee from the day on which the contract was or implied, between the parties. Apart from any such contract, express or implied, or
perfected. (1468a) 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,
1163. Every person obliged to give something is also obliged to take care of it with which to the knowledge of the parties when the contract or the sale was made were in
the proper diligence of a good father of a family, unless the law or the stipulation of the some other place, then that place is the place of delivery.
parties requires another standard of care. (1094a) Where by a contract of sale the seller is bound to send the goods to the buyer, but no
1164. The creditor has a right to the fruits of the thing from the time the obligation to time for sending them is fixed, the seller is bound to send them within a reasonable
deliver it arises. However, he shall acquire no real right over it until the same has been time.
delivered to him. (1095)
17

Where the goods at the time of sale are in the possession of a third person, the seller (2) When he does not furnish to the creditor the guaranties or securities
has not fulfilled his obligation to deliver to the buyer unless and until such third person which he has promised;
acknowledges to the buyer that he holds the goods on the buyer's behalf. (3) When by his own acts he has impaired said guaranties or securities after
Demand or tender of delivery may be treated as ineffectual unless made at a their establishment, and when through a fortuitous event they disappear,
reasonable hour. What is a reasonable hour is a question of fact. unless he immediately gives new ones equally satisfactory;
Unless otherwise agreed, the expenses of and incidental to putting the goods into a (4) When the debtor violates any undertaking, in consideration of which the
deliverable state must be borne by the seller. (n) creditor agreed to the period;
1523(2,3). Where, in pursuance of a contract of sale, the seller is authorized or (5) When the debtor attempts to abscond. (1129a)
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 d. Acceptance not a condition to delivery
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. 1. La Fuerza v CA (1968)
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 2. Sale of goods
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 1522. Where the seller delivers to the buyer a quantity of goods less than he
delivery to the carrier as a delivery to himself, or may hold the seller responsible in contracted to sell, the buyer may reject them, but if the buyer accepts or retains the
damages. goods so delivered, knowing that the seller is not going to perform the contract in full,
Unless otherwise agreed, where goods are sent by the seller to the buyer under he must pay for them at the contract rate. If, however, the buyer has used or disposed
circumstances in which the seller knows or ought to know that it is usual to insure, the of the goods delivered before he knows that the seller is not going to perform his
seller must give such notice to the buyer as may enable him to insure them during contract in full, the buyer shall not be liable for more than the fair value to him of the
their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk goods so received.
during such transit. (n) Where the seller delivers to the buyer a quantity of goods larger than he contracted to
1537. The vendor is bound to deliver the thing sold and its accessions and sell, the buyer may accept the goods included in the contract and reject the rest. If the
accessories in the condition in which they were upon the perfection of the contract. buyer accepts the whole of the goods so delivered he must pay for them at the
All the fruits shall pertain to the vendee from the day on which the contract was contract rate.
perfected. (1468a) Where the seller delivers to the buyer the goods he contracted to sell mixed with
1164. The creditor has a right to the fruits of the thing from the time the obligation to goods of a different description not included in the contract, the buyer may accept the
deliver it arises. However, he shall acquire no real right over it until the same has been goods which are in accordance with the contract and reject the rest.
delivered to him. (1095) In the preceding two paragraphs, if the subject matter is indivisible, the buyer may
443. He who receives the fruits has the obligation to pay the expenses made by a reject the whole of the goods.
third person in their production, gathering, and preservation. (356) The provisions of this article are subject to any usage of trade, special agreement, or
course of dealing between the parties. (n)
a. Reasonable time 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.
1. Smith Bell v Matti (1922) All the fruits shall pertain to the vendee from the day on which the contract was
perfected. (1468a)
b. When time is of the essence 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,
1. Soler v Chesley (1922) shall be governed by articles 1163 to 1165, and 1262.
2. Republic v Litton (1953) 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.
c. When vendor not bound to deliver 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,
1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not counted, or measured and delivered, unless the latter has incurred in delay. (1452a)
paid him the price, or if no period for the payment has been fixed in the contract.
(1466) a. Delivery of wrong quantity
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) 1522. Where the seller delivers to the buyer a quantity of goods less than he
1198. The debtor shall lose every right to make use of the period: contracted to sell, the buyer may reject them, but if the buyer accepts or retains the
(1) When after the obligation has been contracted, he becomes insolvent, goods so delivered, knowing that the seller is not going to perform the contract in full,
unless he gives a guaranty or security for the debt; 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
18

contract in full, the buyer shall not be liable for more than the fair value to him of the 1540. If, in the case of the preceding article, there is a greater area or number in the
goods so received. immovable than that stated in the contract, the vendee may accept the area included
Where the seller delivers to the buyer a quantity of goods larger than he contracted to in the contract and reject the rest. If he accepts the whole area, he must pay for the
sell, the buyer may accept the goods included in the contract and reject the rest. If the same at the contract rate. (1470a)
buyer accepts the whole of the goods so delivered he must pay for them at the
contract rate. b. Sale for a lump sum
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 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain
goods which are in accordance with the contract and reject the rest. sum for a unit of measure or number, there shall be no increase or decrease of the
In the preceding two paragraphs, if the subject matter is indivisible, the buyer may price, although there be a greater or less area or number than that stated in the
reject the whole of the goods. contract.
The provisions of this article are subject to any usage of trade, special agreement, or The same rule shall be applied when two or more immovables as sold for a single
course of dealing between the parties. (n) 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,
b. Delivery of installments 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
1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in
thereof by installments. the area or number, unless the contract is rescinded because the vendee does not
Where there is a contract of sale of goods to be delivered by stated instalments, which accede to the failure to deliver what has been stipulated. (1471)
are to be separately paid for, and the seller makes defective deliveries in respect of 1471(1). If the price is simulated, the sale is void, but the act may be shown to have
one or more instalments, or the buyer neglects or refuses without just cause to take been in reality a donation, or some other act or contract. (n)
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 1. Sta. Ana v Hernandez (1966)
material as to justify the injured party in refusing to proceed further and suing for 2. Esguerra v Trinidad (2007)
damages for breach of the entire contract, or whether the breach is severable, giving 3. Lietz v CA (2005)
rise to a claim for compensation but not to a right to treat the whole contract as 4. Del Prado v Caballero (2010)
broken. (n)
4. Inspection and acceptance
3. Sale of immovables a. Right of inspection

1471. If the price is simulated, the sale is void, but the act may be shown to have been 1584(2,3). Where goods are delivered to the buyer, which he has not previously
in reality a donation, or some other act or contract. (n) examined, he is not deemed to have accepted them unless and until he has had a
1543. The actions arising from articles 1539 and 1542 shall prescribe in six months, reasonable opportunity of examining them for the purpose of ascertaining whether
counted from the day of delivery. (1472a) 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
1. Azarraga v Gay (1928) 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.
a. Where price is at certain rate per unit of measure 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
1539. The obligation to deliver the thing sold includes that of placing in the control of the carrier to the buyer until he has paid the price, whether such terms are indicated
the vendee all that is mentioned in the contract, in conformity with the following rules: by marking the goods with the words "collect on delivery," or otherwise, the buyer is
If the sale of real estate should be made with a statement of its area, at the rate of a not entitled to examine the goods before the payment of the price, in the absence of
certain price for a unit of measure or number, the vendor shall be obliged to deliver to agreement or usage of trade permitting such examination. (n)
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 b. Manifestation of acceptance
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. 1585. The buyer is deemed to have accepted the goods when he intimates to the
The same shall be done, even when the area is the same, if any part of the seller that he has accepted them, or when the goods have been delivered to him, and
immovable is not of the quality specified in the contract. he does any act in relation to them which is inconsistent with the ownership of the
The rescission, in this case, shall only take place at the will of the vendee, when the seller, or when, after the lapse of a reasonable time, he retains the goods without
inferior value of the thing sold exceeds one-tenth of the price agreed upon. intimating to the seller that he has rejected them. (n)
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) c. Breach of warranty
19

1498. When the sale is made through a public instrument, the execution thereof shall
1586. In the absence of express or implied agreement of the parties, acceptance of be equivalent to the delivery of the thing which is the object of the contract, if from the
the goods by the buyer shall not discharge the seller from liability in damages or other deed the contrary does not appear or cannot clearly be inferred.
legal remedy for breach of any promise or warranty in the contract of sale. But, if, after With regard to movable property, its delivery may also be made by the delivery of the
acceptance of the goods, the buyer fails to give notice to the seller of the breach in keys of the place or depository where it is stored or kept. (1463a)
any promise of warranty within a reasonable time after the buyer knows, or ought to 1499. The delivery of movable property may likewise be made by the mere consent or
know of such breach, the seller shall not be liable therefor. (n) 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
d. Refusal to accept possession for any other reason. (1463a)
1513. A person to whom a negotiable document of title has been duly negotiated
1587. Unless otherwise agreed, where goods are delivered to the buyer, and he acquires thereby:
refuses to accept them, having the right so to do, he is not bound to return them to the (1) Such title to the goods as the person negotiating the document to him had
seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he or had ability to convey to a purchaser in good faith for value and also such
voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n) title to the goods as the person to whose order the goods were to be
1589. The vendee shall owe interest for the period between the delivery of the thing delivered by the terms of the document had or had ability to convey to a
and the payment of the price, in the following three cases: purchaser in good faith for value; and
(1) Should it have been so stipulated; (2) The direct obligation of the bailee issuing the document to hold
(2) Should the thing sold and delivered produce fruits or income; possession of the goods for him according to the terms of the document as
(3) Should he be in default, from the time of judicial or extrajudicial demand fully as if such bailee had contracted directly with him. (n)
for the payment of the price. (1501a) 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
5. Kinds of delivery of any agreement with the transferor.
a. Real or actual delivery 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
1497. The thing sold shall be understood as delivered, when it is placed in the control direct obligation of such bailee to hold possession of the goods for him according to
and possession of the vendee. (1462a) the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a non-
1. Alfredo v Borras (2003) negotiable document of title, the title of the transferee to the goods and the right to
2. APT v T.J. Enterprises (2009) acquire the obligation of such bailee may be defeated by the levy of an attachment of
3. Cebu Windland Dev’t Corp. v Ong (2009) 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
b. Constructive delivery subsequent sale of the goods by the transferor. (n)
i. Symbolic delivery/Delivery by public instrument
1. Board of Liquidator v Floro (1960)
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 iii. Traditio Brevi Manu
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 1499. The delivery of movable property may likewise be made by the mere consent or
keys of the place or depository where it is stored or kept. (1463a) agreement of the contracting parties, if the thing sold cannot be transferred to the
1501. With respect to incorporeal property, the provisions of the first paragraph of possession of the vendee at the time of the sale, or if the latter already had it in his
article 1498 shall govern. In any other case wherein said provisions are not applicable, possession for any other reason. (1463a)
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. 1. Abuan v Garcia (1965)
(1464) 2. Heirs of Pedro Escanlar v CA (1997)

1. PH Suburban v Auditor General (1975) iv. Traditio Constitutum Possessorium


2. Sarmiento v Lesaca (1960)
3. Santos v Santos (2001) 1500. There may also be tradition constitutum possessorium. (n)
4. Santiago v Villamor (2012)
5. Fil-Estate Gold v Vertex Sles (2013) 1. Amigo v Teves (1954)

ii. Traditio Longa Manu v. Delivery to common carrier


20

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 NOV. 3 MTG
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 C. Double Sale
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 1544(1). If the same thing should have been sold to different vendees, the ownership
goods are lost or damaged in course of transit, the buyer may decline to treat the shall be transferred to the person who may have first taken possession thereof in
delivery to the carrier as a delivery to himself, or may hold the seller responsible in good faith, if it should be movable property.
damages. Should it be immovable property, the ownership shall belong to the person acquiring it
Unless otherwise agreed, where goods are sent by the seller to the buyer under who in good faith first recorded it in the Registry of Property.
circumstances in which the seller knows or ought to know that it is usual to insure, the Should there be no inscription, the ownership shall pertain to the person who in good
seller must give such notice to the buyer as may enable him to insure them during faith was first in the possession; and, in the absence thereof, to the person who
their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk presents the oldest title, provided there is good faith. (1473)
during such transit. (n) 526. He is deemed a possessor in good faith who is not aware that there exists in his
1503. When there is a contract of sale of specific goods, the seller may, by the terms title or mode of acquisition any flaw which invalidates it.
of the contract, reserve the right of possession or ownership in the goods until certain He is deemed a possessor in bad faith who possesses in any case contrary to the
conditions have been fulfilled. The right of possession or ownership may be thus foregoing.
reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other Mistake upon a doubtful or difficult question of law may be the basis of good faith.
bailee for the purpose of transmission to the buyer. (433a)
Where goods are shipped, and by the bill of lading the goods are deliverable to the
527. Good faith is always presumed, and upon him who alleges bad faith on the part
seller or his agent, or to the order of the seller or of his agent, the seller thereby
of a possessor rests the burden of proof. (434)
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
1. Express Credit v Velasco (2005)
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.
1. General Rule – primus tempore, potior jure
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
2. Carbonell v CA (1976)
or his agent, the seller thereby reserves a right to the possession of the goods as
3. Tanglao v Parungao (2007)
against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of
2. Requisites
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
4. Cheng v Genato (1998)
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
3. Purchaser in Good Faith
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
526.
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 527.
delivery of the bill of lading indorsed by the consignee named therein, or of the goods, 528.
without notice of the facts making the transfer wrongful. (n)
5. Paylago v Jarabe (1968)
1. David v Misamis Oriental II Electric Cooperative (2012) 6. Agricultural & Home Extension v CA (1992)
7. Nobleza v Nuega (2015)

4. Sale of Movables

1544.
1497.
1498.
1499.
1500.
21

1501. D. Risk of Loss


1. General Rule
8. Rivera v Ong (1917)
1263. In an obligation to deliver a generic thing, the loss or destruction of anything of
5. Sale of Immovables the same kind does not extinguish the obligation. (n)

1544(2). 2. Loss before Perfection

9. Consolidated v CA (2005) 20. Roman v Grimalt (1906) – loss to be bore by seller

6. Sale by Virtue of Execution or Attachment 3. Loss at the Time of Perfection

10. Caramba v CA (1970) 1493. If at the time the contract of sale is perfected, the thing which is the object of the
11. Dagupan v Macam (1965) 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
7. Unregistered Land withdrawing from the contract and demanding the remaining part, paying its price in
proportion to the total sum agreed upon. (1460a)
Sec. 113, PD 1529. 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
12. Hanopol v Pilapil (1963) deteriorated in quality as to be substantially changed in character, the buyer may at
13. Abrigo v De Vera (2004) his option treat the sale:
14. Sabitsana, Jr. v Muertegui (2013) (1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not
8. First Registration/Possession in Good Faith 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. (n)
15. Sanchez v Ramos (1919)
16. Quimson v Rosete (1950) 21. Norkis v CA (1991)
17. Beatingo v Gasis (2011)
18. Roman Catholic Church v Pante (2012) 4. Loss after Perfection but before Delivery
19. Rosario v Soria (2013)
1480. Any injury to or benefit from the thing sold, after the contract has been
9. Oldest Title 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.
1544(3). 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)
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. (1094a)
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. (1095)
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. (1096)
22

1189. When the conditions have been imposed with the intention of suspending the (1) "Document of title to goods" includes any bill of lading, dock warrant,
efficacy of an obligation to give, the following rules shall be observed in case of the "quedan," or warehouse receipt or order for the delivery of goods, or any
improvement, loss or deterioration of the thing during the pendency of the condition: other document used in the ordinary course of business in the sale or
(1) If the thing is lost without the fault of the debtor, the obligation shall be transfer of goods, as proof of the possession or control of the goods, or
extinguished; authorizing or purporting to authorize the possessor of the document to
(2) If the thing is lost through the fault of the debtor, he shall be obliged to transfer or receive, either by indorsement or by delivery, goods represented
pay damages; it is understood that the thing is lost when it perishes, or goes by such document.
out of commerce, or disappears in such a way that its existence is unknown "Goods" includes all chattels personal but not things in action or money of
or it cannot be recovered; legal tender in the Philippines. The term includes growing fruits or crops.
(3) When the thing deteriorates without the fault of the debtor, the impairment "Order" relating to documents of title means an order by indorsement on the
is to be borne by the creditor; documents.
(4) If it deteriorates through the fault of the debtor, the creditor may choose "Quality of goods" includes their state or condition.
between the rescission of the obligation and its fulfillment, with indemnity for "Specific goods" means goods identified and agreed upon at the time a
damages in either case; contract of sale is made.
(5) If the thing is improved by its nature, or by time, the improvement shall An antecedent or pre-existing claim, whether for money or not, constitutes
inure to the benefit of the creditor; "value" where goods or documents of title are taken either in satisfaction
(6) If it is improved at the expense of the debtor, he shall have no other right thereof or as security therefor.
than that granted to the usufructuary. (1122) (2) A person is insolvent within the meaning of this Title who either has
1262. An obligation which consists in the delivery of a determinate thing shall be ceased to pay his debts in the ordinary course of business or cannot pay his
extinguished if it should be lost or destroyed without the fault of the debtor, and before debts as they become due, whether insolvency proceedings have been
he has incurred in delay. commenced or not.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of (3) Goods are in a "deliverable state" within the meaning of this Title when
the thing does not extinguish the obligation, and he shall be responsible for damages. they are in such a state that the buyer would, under the contract, be bound to
The same rule applies when the nature of the obligation requires the assumption of take delivery of them. (n)
risk. (1182a)
c. Loss by fortuitous events
a. General Rule – res perit domino
b. Loss by fault of a party 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,
1480. Any injury to or benefit from the thing sold, after the contract has been shall be governed by articles 1163 to 1165, and 1262.
perfected, from the moment of the perfection of the contract to the time of delivery, This rule shall apply to the sale of fungible things, made independently and for a
shall be governed by articles 1163 to 1165, and 1262. single price, or without consideration of their weight, number, or measure.
This rule shall apply to the sale of fungible things, made independently and for a Should fungible things be sold for a price fixed according to weight, number, or
single price, or without consideration of their weight, number, or measure. measure, the risk shall not be imputed to the vendee until they have been weighed,
Should fungible things be sold for a price fixed according to weight, number, or counted, or measured and delivered, unless the latter has incurred in delay. (1452a)
measure, the risk shall not be imputed to the vendee until they have been weighed, 1163. Every person obliged to give something is also obliged to take care of it with the
counted, or measured and delivered, unless the latter has incurred in delay. (1452a) proper diligence of a good father of a family, unless the law or the stipulation of the
1504. Unless otherwise agreed, the goods remain at the seller's risk until the parties requires another standard of care. (1094a)
ownership therein is transferred to the buyer, but when the ownership therein is 1165. When what is to be delivered is a determinate thing, the creditor, in addition to
transferred to the buyer the goods are at the buyer's risk whether actual delivery has the right granted him by article 1170, may compel the debtor to make the delivery.
been made or not, except that: If the thing is indeterminate or generic, he may ask that the obligation be complied
(1) Where delivery of the goods has been made to the buyer or to a bailee for with at the expense of the debtor.
the buyer, in pursuance of the contract and the ownership in the goods has If the obligor delays, or has promised to deliver the same thing to two or more persons
been retained by the seller merely to secure performance by the buyer of his who do not have the same interest, he shall be responsible for any fortuitous event
obligations under the contract, the goods are at the buyer's risk from the time until he has effected the delivery. (1096)
of such delivery; 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
(2) Where actual delivery has been delayed through the fault of either the ownership therein is transferred to the buyer, but when the ownership therein is
buyer or seller the goods are at the risk of the party in fault. (n) transferred to the buyer the goods are at the buyer's risk whether actual delivery has
1538. In case of loss, deterioration or improvement of the thing before its delivery, the been made or not, except that:
rules in article 1189 shall be observed, the vendor being considered the debtor. (n) (1) Where delivery of the goods has been made to the buyer or to a bailee for
1636. In the preceding articles in this Title governing the sale of goods, unless the the buyer, in pursuance of the contract and the ownership in the goods has
context or subject matter otherwise requires: been retained by the seller merely to secure performance by the buyer of his
23

obligations under the contract, the goods are at the buyer's risk from the time 1. Filinvest Credit Corp v CA (1989)
of such delivery; 2. Harrison Motor Co v Navarro (2000)
(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. (n) a. Distinguished from Condition
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. (n) 1545. Where the obligation of either party to a contract of sale is subject to any
1189. When the conditions have been imposed with the intention of suspending the condition which is not performed, such party may refuse to proceed with the contract
efficacy of an obligation to give, the following rules shall be observed in case of the or he may waive performance of the condition. If the other party has promised that the
improvement, loss or deterioration of the thing during the pendency of the condition: condition should happen or be performed, such first mentioned party may also treat
(1) If the thing is lost without the fault of the debtor, the obligation shall be the nonperformance of the condition as a breach of warranty.
extinguished; Where the ownership in the thing has not passed, the buyer may treat the fulfillment
(2) If the thing is lost through the fault of the debtor, he shall be obliged to by the seller of his obligation to deliver the same as described and as warranted
pay damages; it is understood that the thing is lost when it perishes, or goes expressly or by implication in the contract of sale as a condition of the obligation of the
out of commerce, or disappears in such a way that its existence is unknown buyer to perform his promise to accept and pay for the thing. (n)
or it cannot be recovered; 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(3) When the thing deteriorates without the fault of the debtor, the impairment (1) Accept or keep the goods and set up against the seller, the breach of
is to be borne by the creditor; warranty by way of recoupment in diminution or extinction of the price;
(4) If it deteriorates through the fault of the debtor, the creditor may choose (2) Accept or keep the goods and maintain an action against the seller for
between the rescission of the obligation and its fulfillment, with indemnity for damages for the breach of warranty;
damages in either case; (3) Refuse to accept the goods, and maintain an action against the seller for
(5) If the thing is improved by its nature, or by time, the improvement shall damages for the breach of warranty;
inure to the benefit of the creditor; (4) Rescind the contract of sale and refuse to receive the goods or if the
(6) If it is improved at the expense of the debtor, he shall have no other right than that goods have already been received, return them or offer to return them to the
granted to the usufructuary. (1122) 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
d. Fruits or improvements ways, no other remedy can thereafter be granted, without prejudice to the
provisions of the second paragraph of article 1191.
1537. The vendor is bound to deliver the thing sold and its accessions and Where the goods have been delivered to the buyer, he cannot rescind the
accessories in the condition in which they were upon the perfection of the contract. sale if he knew of the breach of warranty when he accepted the goods
All the fruits shall pertain to the vendee from the day on which the contract was without protest, or if he fails to notify the seller within a reasonable time of the
perfected. (1468a) 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
5. After Delivery 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
1504. Unless otherwise agreed, the goods remain at the seller's risk until the prevent the buyer from returning or offering to return the goods to the seller
ownership therein is transferred to the buyer, but when the ownership therein is and rescinding the sale.
transferred to the buyer the goods are at the buyer's risk whether actual delivery has Where the buyer is entitled to rescind the sale and elects to do so, he shall
been made or not, except that: cease to be liable for the price upon returning or offering to return the goods.
(1) Where delivery of the goods has been made to the buyer or to a bailee for If the price or any part thereof has already been paid, the seller shall be liable
the buyer, in pursuance of the contract and the ownership in the goods has to repay so much thereof as has been paid, concurrently with the return of
been retained by the seller merely to secure performance by the buyer of his the goods, or immediately after an offer to return the goods in exchange for
obligations under the contract, the goods are at the buyer's risk from the time repayment of the price.
of such delivery; Where the buyer is entitled to rescind the sale and elects to do so, if the
(2) Where actual delivery has been delayed through the fault of either the buyer or seller refuses to accept an offer of the buyer to return the goods, the buyer
seller the goods are at the risk of the party in fault. (n) 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
22. Sun Bros v Perez (1963) been paid, and with the remedies for the enforcement of such lien allowed to
23. Lawyer’s Coop. v Tabora (1965) an unpaid seller by article 1526.
24. Song Fo v Oria (1915) (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
E. Warranties the difference between the value of the goods at the time of delivery to the
1. Express Warranties buyer and the value they would have had if they had answered to the
warranty. (n)
24

The contracting parties, however, may increase, diminish, or suppress this legal
b. Distinguished from Opinion, Dealer’s Talk obligation of the vendor. (1475a)
1550. When adverse possession had been commenced before the sale but the
1546. Any affirmation of fact or any promise by the seller relating to the thing is an prescriptive period is completed after the transfer, the vendor shall not be liable for
express warranty if the natural tendency of such affirmation or promise is to induce the eviction. (n)
buyer to purchase the same, and if the buyer purchases the thing relying thereon. No 1551. If the property is sold for nonpayment of taxes due and not made known to the
affirmation of the value of the thing, nor any statement purporting to be a statement of vendee before the sale, the vendor is liable for eviction. (n)
the seller's opinion only, shall be construed as a warranty, unless the seller made 1555. When the warranty has been agreed upon or nothing has been stipulated on
such affirmation or statement as an expert and it was relied upon by the buyer. (n) this point, in case eviction occurs, the vendee shall have the right to demand of the
1341. A mere expression of an opinion does not signify fraud, unless made by an vendor:
expert and the other party has relied on the former's special knowledge. (n) (1) The return of the value which the thing sold had at the time of the
eviction, be it greater or less than the price of the sale;
3. Songco v Sellner (1917) (2) The income or fruits, if he has been ordered to deliver them to the party
who won the suit against him;
c. Distinguished from False Representation (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. Guinhawa v People (2005) (4) The expenses of the contract, if the vendee has paid them;
5. Gochangco v Dean (1925) (5) The damages and interests, and ornamental expenses, if the sale was
6. PMC v Go Jocco (1926) made in bad faith. (1478)
1557. The warranty cannot be enforced until a final judgment has been rendered,
2. Implied Warranties whereby the vendee loses the thing acquired or a part thereof. (1480)

7. Ang v CA (2008) 8. Power Commercial & Industrial Corp v CA (1997)

a. Implied Warranty of Title 2. Waiver

1590. Should the vendee be disturbed in the possession or ownership of the thing 1554. If the vendee has renounced the right to warranty in case of eviction, and
acquired, or should he have reasonable grounds to fear such disturbance, by a eviction should take place, the vendor shall only pay the value which the thing sold
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the had at the time of the eviction. Should the vendee have made the waiver with
price until the vendor has caused the disturbance or danger to cease, unless the latter knowledge of the risks of eviction and assumed its consequences, the vendor shall
gives security for the return of the price in a proper case, or it has been stipulated that, not be liable. (1477)
notwithstanding any such contingency, the vendee shall be bound to make the *specific v general waiver
payment. A mere act of trespass shall not authorize the suspension of the payment of
the price. (1502a) 3. Effects of Eviction

1. Eviction by Judgment 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
1547. In a contract of sale, unless a contrary intention appears, there is: vendor:
(1) An implied warranty on the part of the seller that he has a right to sell the (1) The return of the value which the thing sold had at the time of the
thing at the time when the ownership is to pass, and that the buyer shall from eviction, be it greater or less than the price of the sale;
that time have and enjoy the legal and peaceful possession of the thing; (2) The income or fruits, if he has been ordered to deliver them to the party
(2) An implied warranty that the thing shall be free from any hidden faults or who won the suit against him;
defects, or any charge or encumbrance not declared or known to the buyer. (3) The costs of the suit which caused the eviction, and, in a proper case,
This article shall not, however, be held to render liable a sheriff, auctioneer, those of the suit brought against the vendor for the warranty;
mortgagee, pledgee, or other person professing to sell by virtue of authority (4) The expenses of the contract, if the vendee has paid them;
in fact or law, for the sale of a thing in which a third person has a legal or (5) The damages and interests, and ornamental expenses, if the sale was
equitable interest. (n) made in bad faith. (1478)
1548. Eviction shall take place whenever by a final judgment based on a right prior to 548. Expenses for pure luxury or mere pleasure shall not be refunded to the
the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a possessor in good faith; but he may remove the ornaments with which he has
part of the thing purchased. embellished the principal thing if it suffers no injury thereby, and if his successor in the
The vendor shall answer for the eviction even though nothing has been said in the possession does not prefer to refund the amount expended. (454)
contract on the subject. 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
25

part, he may demand the rescission of the contract; but with the obligation to return price and refund the expenses of the contract, with damages. If he was not aware of
the thing without other encumbrances that those which it had when he acquired it. them, he shall only return the price and interest thereon, and reimburse the expenses
He may exercise this right of action, instead of enforcing the vendor's liability for of the contract which the vendee might have paid. (1487a)
eviction. 1569. If the thing sold had any hidden fault at the time of the sale, and should
The same rule shall be observed when two or more things have been jointly sold for a thereafter be lost by a fortuitous event or through the fault of the vendee, the latter
lump sum, or for a separate price for each of them, if it should clearly appear that the may demand of the vendor the price which he paid, less the value which the thing had
vendee would not have purchased one without the other. (1479a) when it was lost.
1599. If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)
1570. The preceding articles of this Subsection shall be applicable to judicial sales,
b. Implied Warranty Against Encumbrances of Defects except that the judgment debtor shall not be liable for damages. (1489a)
1571. Actions arising from the provisions of the preceding ten articles shall be barred
1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect after six months, from the delivery of the thing sold. (1490)
between withdrawing from the contract and demanding a proportionate reduction of 1572. If two or more animals are sold together, whether for a lump sum or for a
the price, with damages in either case. (1486a) separate 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
1. Hidden Encumbrances or Defects not have purchased the sound animal or animals without the defective one.
The latter case shall be presumed when a team, yoke pair, or set is bought, even if a
1561. The vendor shall be responsible for warranty against the hidden defects which separate price has been fixed for each one of the animals composing the same.
the thing sold may have, should they render it unfit for the use for which it is intended, (1491)
or should they diminish its fitness for such use to such an extent that, had the vendee 1573. The provisions of the preceding article with respect to the sale of animals shall
been aware thereof, he would not have acquired it or would have given a lower price in like manner be applicable to the sale of other things. (1492)
for it; but said vendor shall not be answerable for patent defects or those which may 1574. There is no warranty against hidden defects of animals sold at fairs or at public
be visible, or for those which are not visible if the vendee is an expert who, by reason auctions, or of live stock sold as condemned. (1493a)
of his trade or profession, should have known them. (1484a) 1575. The sale of animals suffering from contagious diseases shall be void.
1562. In a sale of goods, there is an implied warranty or condition as to the quality or A contract of sale of animals shall also be void if the use or service for which they are
fitness of the goods, as follows: acquired has been stated in the contract, and they are found to be unfit therefor.
(1) Where the buyer, expressly or by implication, makes known to the seller (1494a)
the particular purpose for which the goods are acquired, and it appears that 1576. If the hidden defect of animals, even in case a professional inspection has been
the buyer relies on the seller's skill or judgment (whether he be the grower or made, should be of such a nature that expert knowledge is not sufficient to discover it,
manufacturer or not), there is an implied warranty that the goods shall be the defect shall be considered as redhibitory.
reasonably fit for such purpose; But if the veterinarian, through ignorance or bad faith should fail to discover or
(2) Where the goods are brought by description from a seller who deals in disclose it, he shall be liable for damages. (1495)
goods of that description (whether he be the grower or manufacturer or not), 1577. The redhibitory action, based on the faults or defects of animals, must be
there is an implied warranty that the goods shall be of merchantable quality. brought within forty days from the date of their delivery to the vendee.
(n) This action can only be exercised with respect to faults and defects which are
1563. In the case of contract of sale of a specified article under its patent or other determined by law or by local customs. (1496a)
trade name, there is no warranty as to its fitness for any particular purpose, unless 1578. If the animal should die within three days after its purchase, the vendor shall be
there is a stipulation to the contrary. (n) liable if the disease which cause the death existed at the time of the contract. (1497a)
1564. An implied warranty or condition as to the quality or fitness for a particular 1579. If the sale be rescinded, the animal shall be returned in the condition in which it
purpose may be annexed by the usage of trade. (n) was sold and delivered, the vendee being answerable for any injury due to his
1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of negligence, and not arising from the redhibitory fault or defect. (1498)
that kind, there is an implied warranty that the goods shall be free from any defect 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the
rendering them unmerchantable which would not be apparent on reasonable right mentioned in article 1567; but he must make use thereof within the same period
examination of the sample. (n) which has been fixed for the exercise of the redhibitory action. (1499)
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. 9. Engineering Machinery v CA (1996)
This provision shall not apply if the contrary has been stipulated, and the vendor was 10. Nutrimix Feeds Corp v CA (2004)
not aware of the hidden faults or defects in the thing sold. (1485) 11. De Guzman v Toyota Cubao, Inc. (2006)
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)
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
26

2. Warranties in Sales of Animals/Redhibitory Defects - d. Consumer Act


a defect that renders a thing useless or so diminishes its
usefulness or value that it must be presumed that the buyer Sec. 68(4), RA 7394 Consumer Act. Additional Provisions on Warranties. – In
would not have bought it or would have paid a lesser price if addition to the Civil Code provisions on sale with warranties, the following provisions
aware of the defect shall govern the sale of consumer products with warranty:
a) Terms of express warranty. – Any seller or manufacturer who gives an
1574. express warranty shall:
1575. 1) set forth the terms of warranty in clear and readily
1576. understandable language and clearly identify himself as the
1577. warrantor;
1578. 2) identify the party to whom the warranty is extended;
1579. 3) state the products or parts covered;
1580. 4) state what the warrantor will do in the event of a defect,
malfunction of failure to conform to the written warranty and at
3. Sale by Sample or Description/Merchantable Quality whose expense;
5) state what the consumer must do to avail of the rights which
1574. There is no warranty against hidden defects of animals sold at fairs or at public accrue to the warranty; and
auctions, or of live stock sold as condemned. (1493a) 6) stipulate the period within which, after notice of defect,
1481. In the contract of sale of goods by description or by sample, the contract may malfunction or failure to conform to the warranty, the warrantor will
be rescinded if the bulk of the goods delivered do not correspond with the description perform any obligation under the warranty.
or the sample, and if the contract be by sample as well as description, it is not b) Express warranty – operative from moment of sale. – All written warranties
or guarantees issued by a manufacturer, producer, or importer shall be
sufficient that the bulk of goods correspond with the sample if they do not also
operative from the moment of sale.
correspond with the description.
The buyer shall have a reasonable opportunity of comparing the bulk with the 1) Sales Report. – All sales made by distributors of products
description or the sample. (n) covered by this Article shall be reported to the manufacturer,
producer, or importer of the product sold within thirty (30) days from
1562(2). In a sale of goods, there is an implied warranty or condition as to the quality
date of purchase, unless otherwise agreed upon. The report shall
or fitness of the goods, as follows:
contain, among others, the date of purchase, model of the product
(1) Where the buyer, expressly or by implication, makes known to the seller
bought, its serial number, name and address of the buyer. The
the particular purpose for which the goods are acquired, and it appears that
report made in accordance with this provision shall be equivalent to
the buyer relies on the seller's skill or judgment (whether he be the grower or
a warranty registration with the manufacturer, producer, or importer.
manufacturer or not), there is an implied warranty that the goods shall be
Such registration is sufficient to hold the manufacturer, producer, or
reasonably fit for such purpose;
importer liable, in appropriate cases, under its warranty.
(2) Where the goods are brought by description from a seller who deals in goods of
2) Failure to make or send report. – Failure of the distributor to
that description (whether he be the grower or manufacturer or not), there is an implied
make the report or send them the form required by the
warranty that the goods shall be of merchantable quality. (n)
manufacturer, producer, or importer shall relieve the latter of its
1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of
liability under the warranty: Provided, however, That the distributor
that kind, there is an implied warranty that the goods shall be free from any defect
who failed to comply with its obligation to send the sales reports
rendering them unmerchantable which would not be apparent on reasonable
shall be personally liable under the warranty. For this purpose, the
examination of the sample. (n)
manufacturer shall be obligated to make good the warranty at the
expense of the distributor.
c. Implied Warranty of Quality
3) Retail. – The retailer shall be subsidiarily liable under the
1. Fitness for a Particular Purpose
warranty in case of failure of both the manufacturer and distributor
to honor the warranty. In such case, the retailer shall shoulder the
1562(1). expenses and costs necessary to honor the warranty. Nothing
1564. therein shall prevent the retailer from proceeding against the
1563. distributor or manufacturer.
4) Enforcement of warranty or guarantee. – The warranty rights can
12. Rodriguez v Findlay (1909) 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
27

manufacturer's factory or showroom, the warranty shall immediately VII. Obligations of the Vendee
be honored. If the product was purchased from a distributor, the A. Obligation to Accept Delivery
distributor shall likewise immediately honor the warranty. In the case
of a retailer other than the distributor, the former shall take 1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not
responsibility without cost to the buyer of presenting the warranty paid him the price, or if no period for the payment has been fixed in the contract.
claim to the distributor in the consumer's behalf. (1466)
5) Record of purchases. – Distributors and retailers covered by this 1169. Those obliged to deliver or to do something incur in delay from the time the
Article shall keep a record of all purchases covered by a warranty or obligee judicially or extrajudicially demands from them the fulfillment of their
guarantee for such period of time corresponding to the lifetime of obligation.
the product's respective warranties or guarantees. However, the demand by the creditor shall not be necessary in order that delay may
6) Contrary stipulations – null and void. – All covenants, stipulations exist:
or agreements contrary to the provisions of this Article shall be (1) When the obligation or the law expressly so declare; or
without legal effect. (2) When from the nature and the circumstances of the obligation it appears
c) Designation of warranties. – A written warranty shall clearly and that the designation of the time when the thing is to be delivered or the
conspicuously designate such warranty as: service is to be rendered was a controlling motive for the establishment of
1) "Full warranty" if the written warranty meets the minimum the contract; or
requirements set forth in paragraph (d); or (3) When demand would be useless, as when the obligor has rendered it
2) "Limited warranty" if the written warranty does not meet such beyond his power to perform.
minimum requirements. In reciprocal obligations, neither party incurs in delay if the other does not comply or is
d) Minimum standards for warranties. – For the warrantor of a consumer not ready to comply in a proper manner with what is incumbent upon him. From the
product to meet the minimum standards for warranty, he shall: moment one of the parties fulfills his obligation, delay by the other begins. (1100a)
1) remedy such consumer product within a reasonable time and 1521. Whether it is for the buyer to take possession of the goods or of the seller to
without charge in case of a defect, malfunction or failure to conform send them to the buyer is a question depending in each case on the contract, express
to such written warranty; or implied, between the parties. Apart from any such contract, express or implied, or
2) permit the consumer to elect whether to ask for a refund or usage of trade to the contrary, the place of delivery is the seller's place of business if
replacement without charge of such product or part, as the case he has one, and if not his residence; but in case of a contract of sale of specific goods,
may be, where after reasonable number of attempts to remedy the which to the knowledge of the parties when the contract or the sale was made were in
defect or malfunction, the product continues to have the defect or to some other place, then that place is the place of delivery.
malfunction. Where by a contract of sale the seller is bound to send the goods to the buyer, but no
The warrantor will not be required to perform the above duties if he can show time for sending them is fixed, the seller is bound to send them within a reasonable
that the defect, malfunction or failure to conform to a written warranty was time.
caused by damage due to unreasonable use thereof. Where the goods at the time of sale are in the possession of a third person, the seller
e) Duration of warranty. – The seller and the consumer may stipulate the has not fulfilled his obligation to deliver to the buyer unless and until such third person
period within which the express warranty shall be enforceable. If the implied acknowledges to the buyer that he holds the goods on the buyer's behalf.
warranty on merchantability accompanies an express warranty, both will be Demand or tender of delivery may be treated as ineffectual unless made at a
of equal duration. reasonable hour. What is a reasonable hour is a question of fact.
Any other implied warranty shall endure not less than sixty (60) days nor Unless otherwise agreed, the expenses of and incidental to putting the goods into a
more than one (1) year following the sale of new consumer products. deliverable state must be borne by the seller. (n)
f) Breach of warranties. – 1) In case of breach of express warranty, the 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose
consumer may elect to have the goods repaired or its purchase price the right to make use of the terms as provided in article 1198. (1467a)
refunded by the warrantor. In case the repair of the product in whole or in 1198. The debtor shall lose every right to make use of the period:
part is elected, the warranty work must be made to conform to the express (1) When after the obligation has been contracted, he becomes insolvent,
warranty within thirty (30) days by either the warrantor or his representative. unless he gives a guaranty or security for the debt;
The thirty-day period, however, may be extended by conditions which are (2) When he does not furnish to the creditor the guaranties or securities
beyond the control of the warrantor or his representative. In case the refund which he has promised;
of the purchase price is elected, the amount directly attributable to the use of (3) When by his own acts he has impaired said guaranties or securities after
the consumer prior to the discovery of the non-conformity shall be deducted. their establishment, and when through a fortuitous event they disappear,
2) In case of breach of implied warranty, the consumer may retain in unless he immediately gives new ones equally satisfactory;
the goods and recover damages, or reject the goods, cancel and (4) When the debtor violates any undertaking, in consideration of which the
contract and recover from the seller so much of the purchase price creditor agreed to the period;
as has been paid, including damages. (5) When the debtor attempts to abscond. (1129a)
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
28

goods so delivered, knowing that the seller is not going to perform the contract in full, B. Obligation to Pay the Price
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 1. Torcuator v Bernabe (2005)
contract in full, the buyer shall not be liable for more than the fair value to him of the
goods so received. 1. Liability for Interests
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 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at
buyer accepts the whole of the goods so delivered he must pay for them at the the time and place stipulated in the contract.
contract rate. If the time and place should not have been stipulated, the payment must be made at
Where the seller delivers to the buyer the goods he contracted to sell mixed with the time and place of the delivery of the thing sold. (1500a)
goods of a different description not included in the contract, the buyer may accept the 1589. The vendee shall owe interest for the period between the delivery of the thing
goods which are in accordance with the contract and reject the rest. and the payment of the price, in the following three cases:
In the preceding two paragraphs, if the subject matter is indivisible, the buyer may (1) Should it have been so stipulated;
reject the whole of the goods. (2) Should the thing sold and delivered produce fruits or income;
The provisions of this article are subject to any usage of trade, special agreement, or (3) Should he be in default, from the time of judicial or extrajudicial demand
course of dealing between the parties. (n) for the payment of the price. (1501a)
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 2. Bareng v CA (1960)
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. 2. Suspension of Payments
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 1590. Should the vendee be disturbed in the possession or ownership of the thing
goods for the purpose of ascertaining whether they are in conformity with the contract. acquired, or should he have reasonable grounds to fear such disturbance, by a
Where goods are delivered to a carrier by the seller, in accordance with an order from vindicatory action or a foreclosure of mortgage, he may suspend the payment of the
or agreement with the buyer, upon the terms that the goods shall not be delivered by price until the vendor has caused the disturbance or danger to cease, unless the latter
the carrier to the buyer until he has paid the price, whether such terms are indicated gives security for the return of the price in a proper case, or it has been stipulated that,
by marking the goods with the words "collect on delivery," or otherwise, the buyer is notwithstanding any such contingency, the vendee shall be bound to make the
not entitled to examine the goods before the payment of the price, in the absence of payment. A mere act of trespass shall not authorize the suspension of the payment of
agreement or usage of trade permitting such examination. (n) the price. (1502a)
1585. The buyer is deemed to have accepted the goods when he intimates to the 1560. If the immovable sold should be encumbered with any non-apparent burden or
seller that he has accepted them, or when the goods have been delivered to him, and servitude, not mentioned in the agreement, of such a nature that it must be presumed
he does any act in relation to them which is inconsistent with the ownership of the that the vendee would not have acquired it had he been aware thereof, he may ask for
seller, or when, after the lapse of a reasonable time, he retains the goods without the rescission of the contract, unless he should prefer the appropriate indemnity.
intimating to the seller that he has rejected them. (n) Neither right can be exercised if the non-apparent burden or servitude is recorded in
1586. In the absence of express or implied agreement of the parties, acceptance of the Registry of Property, unless there is an express warranty that the thing is free from
the goods by the buyer shall not discharge the seller from liability in damages or other all burdens and encumbrances.
legal remedy for breach of any promise or warranty in the contract of sale. But, if, after Within one year, to be computed from the execution of the deed, the vendee may
acceptance of the goods, the buyer fails to give notice to the seller of the breach in bring the action for rescission, or sue for damages.
any promise of warranty within a reasonable time after the buyer knows, or ought to One year having elapsed, he may only bring an action for damages within an equal
know of such breach, the seller shall not be liable therefor. (n) period, to be counted from the date on which he discovered the burden or servitude.
1587. Unless otherwise agreed, where goods are delivered to the buyer, and he (1483a)
refuses to accept them, having the right so to do, he is not bound to return them to the 1664. The lessor is not obliged to answer for a mere act of trespass which a third
seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he person may cause on the use of the thing leased; but the lessee shall have a direct
voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n) action against the intruder.
1588. If there is no stipulation as specified in the first paragraph of article 1523, when There is a mere act of trespass when the third person claims no right whatever.
the buyer's refusal to accept the goods is without just cause, the title thereto passes to (1560a)
him from the moment they are placed at his disposal. (n)
3. Sps Mahusay v B.E. San Diego Inc. (2011)
29

VIII. Breach of Contract The transfer of title shall not be held to have been rescinded by an unpaid seller until
A. Remedies of Unpaid Vendor 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,
1525. he seller of goods is deemed to be an unpaid seller within the meaning of this but the giving or failure to give notice to the buyer of the intention to rescind shall be
Title: relevant in any issue involving the question whether the buyer had been in default for
(1) When the whole of the price has not been paid or tendered; an unreasonable time before the right of rescission was asserted. (n)
(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 1. Possessory Lien
broken by reason of the dishonor of the instrument, the insolvency of the
buyer, or otherwise. 1527. Subject to the provisions of this Title, the unpaid seller of goods who is in
In articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the possession of them is entitled to retain possession of them until payment or tender of
bill of lading has been indorsed, or a consignor or agent who has himself paid, or is the price in the following cases, namely:
directly responsible for the price, or any other person who is in the position of a seller. (1) Where the goods have been sold without any stipulation as to credit;
(n) (2) Where the goods have been sold on credit, but the term of credit has
1526. Subject to the provisions of this Title, notwithstanding that the ownership in the expired;
goods may have passed to the buyer, the unpaid seller of goods, as such, has: (3) Where the buyer becomes insolvent.
(1) A lien on the goods or right to retain them for the price while he is in The seller may exercise his right of lien notwithstanding that he is in possession of the
possession of them; goods as agent or bailee for the buyer. (n)
(2) In case of the insolvency of the buyer, a right of stopping the goods in 1528. Where an unpaid seller has made part delivery of the goods, he may exercise
transitu after he has parted with the possession of them; his right of lien on the remainder, unless such part delivery has been made under
(3) A right of resale as limited by this Title; such circumstances as to show an intent to waive the lien or right of retention. (n)
(4) A right to rescind the sale as likewise limited by this Title. 1529. The unpaid seller of goods loses his lien thereon:
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, (1) When he delivers the goods to a carrier or other bailee for the purpose of
in addition to his other remedies a right of withholding delivery similar to and transmission to the buyer without reserving the ownership in the goods or the
coextensive with his rights of lien and stoppage in transitu where the ownership has right to the possession thereof;
passed to the buyer. (n) (2) When the buyer or his agent lawfully obtains possession of the goods;
1533. Where the goods are of perishable nature, or where the seller expressly (3) By waiver thereof.
reserves the right of resale in case the buyer should make default, or where the buyer The unpaid seller of goods, having a lien thereon, does not lose his lien by reason
has been in default in the payment of the price for an unreasonable time, an unpaid only that he has obtained judgment or decree for the price of the goods. (n)
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 2. Stoppage in Transitu
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. 1531. Goods are in transit within the meaning of the preceding article:
Where a resale is made, as authorized in this article, the buyer acquires a good title (1) From the time when they are delivered to a carrier by land, water, or air,
as against the original buyer. or other bailee for the purpose of transmission to the buyer, until the buyer,
It is not essential to the validity of resale that notice of an intention to resell the goods or his agent in that behalf, takes delivery of them from such carrier or other
be given by the seller to the original buyer. But where the right to resell is not based bailee;
on the perishable nature of the goods or upon an express provision of the contract of (2) If the goods are rejected by the buyer, and the carrier or other bailee
sale, the giving or failure to give such notice shall be relevant in any issue involving continues in possession of them, even if the seller has refused to receive
the question whether the buyer had been in default for an unreasonable time before them back.
the resale was made. Goods are no longer in transit within the meaning of the preceding article:
It is not essential to the validity of a resale that notice of the time and place of such (1) If the buyer, or his agent in that behalf, obtains delivery of the goods
resale should be given by the seller to the original buyer. before their arrival at the appointed destination;
The seller is bound to exercise reasonable care and judgment in making a resale, and (2) If, after the arrival of the goods at the appointed destination, the carrier or
subject to this requirement may make a resale either by public or private sale. He other bailee acknowledges to the buyer or his agent that he holds the goods
cannot, however, directly or indirectly buy the goods. (n) on his behalf and continues in possession of them as bailee for the buyer or
1534. An unpaid seller having the right of lien or having stopped the goods in transitu, his agent; and it is immaterial that further destination for the goods may have
may rescind the transfer of title and resume the ownership in the goods, where he been indicated by the buyer;
expressly reserved the right to do so in case the buyer should make default, or where (3) If the carrier or other bailee wrongfully refuses to deliver the goods to the
the buyer has been in default in the payment of the price for an unreasonable time. buyer or his agent in that behalf.
The seller shall not thereafter be liable to the buyer upon the contract of sale, but may If the goods are delivered to a ship, freight train, truck, or airplane chartered
recover from the buyer damages for any loss occasioned by the breach of the by the buyer, it is a question depending on the circumstances of the
contract.
30

particular case, whether they are in the possession of the carrier as such or 1535. Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage
as agent of the buyer. in transitu is not affected by any sale, or other disposition of the goods which the
If part delivery of the goods has been made to the buyer, or his agent in that behalf, buyer may have made, unless the seller has assented thereto.
the remainder of the goods may be stopped in transitu, unless such part delivery has If, however, a negotiable document of title has been issued for goods, no seller's lien
been under such circumstances as to show an agreement with the buyer to give up or right of stoppage in transitu shall defeat the right of any purchaser for value in good
possession of the whole of the goods. (n) faith to whom such document has been negotiated, whether such negotiation be prior
1532. The unpaid seller may exercise his right of stoppage in transitu either by or subsequent to the notification to the carrier, or other bailee who issued such
obtaining actual possession of the goods or by giving notice of his claim to the carrier document, of the seller's claim to a lien or right of stoppage in transitu. (n)
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 3. Resale
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 1533. Where the goods are of perishable nature, or where the seller expressly
buyer. reserves the right of resale in case the buyer should make default, or where the buyer
When notice of stoppage in transitu is given by the seller to the carrier, or other bailee has been in default in the payment of the price for an unreasonable time, an unpaid
in possession of the goods, he must redeliver the goods to, or according to the seller having a right of lien or having stopped the goods in transitu may resell the
directions of, the seller. The expenses of such delivery must be borne by the seller. If, goods. He shall not thereafter be liable to the original buyer upon the contract of sale
however, a negotiable document of title representing the goods has been issued by or for any profit made by such resale, but may recover from the buyer damages for
the carrier or other bailee, he shall not be obliged to deliver or justified in delivering the any loss occasioned by the breach of the contract of sale.
goods to the seller unless such document is first surrendered for cancellation. (n) Where a resale is made, as authorized in this article, the buyer acquires a good title
1533. Where the goods are of perishable nature, or where the seller expressly as against the original buyer.
reserves the right of resale in case the buyer should make default, or where the buyer It is not essential to the validity of resale that notice of an intention to resell the goods
has been in default in the payment of the price for an unreasonable time, an unpaid be given by the seller to the original buyer. But where the right to resell is not based
seller having a right of lien or having stopped the goods in transitu may resell the on the perishable nature of the goods or upon an express provision of the contract of
goods. He shall not thereafter be liable to the original buyer upon the contract of sale sale, the giving or failure to give such notice shall be relevant in any issue involving
or for any profit made by such resale, but may recover from the buyer damages for the question whether the buyer had been in default for an unreasonable time before
any loss occasioned by the breach of the contract of sale. the resale was made.
Where a resale is made, as authorized in this article, the buyer acquires a good title It is not essential to the validity of a resale that notice of the time and place of such
as against the original buyer. resale should be given by the seller to the original buyer.
It is not essential to the validity of resale that notice of an intention to resell the goods The seller is bound to exercise reasonable care and judgment in making a resale, and
be given by the seller to the original buyer. But where the right to resell is not based subject to this requirement may make a resale either by public or private sale. He
on the perishable nature of the goods or upon an express provision of the contract of cannot, however, directly or indirectly buy the goods. (n)
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 4. Katigbak v CA (1962)
the resale was made.
It is not essential to the validity of a resale that notice of the time and place of such 4. Rescission
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 1534. An unpaid seller having the right of lien or having stopped the goods in transitu,
subject to this requirement may make a resale either by public or private sale. He may rescind the transfer of title and resume the ownership in the goods, where he
cannot, however, directly or indirectly buy the goods. (n) expressly reserved the right to do so in case the buyer should make default, or where
1534. An unpaid seller having the right of lien or having stopped the goods in transitu, the buyer has been in default in the payment of the price for an unreasonable time.
may rescind the transfer of title and resume the ownership in the goods, where he The seller shall not thereafter be liable to the buyer upon the contract of sale, but may
expressly reserved the right to do so in case the buyer should make default, or where recover from the buyer damages for any loss occasioned by the breach of the
the buyer has been in default in the payment of the price for an unreasonable time. contract.
The seller shall not thereafter be liable to the buyer upon the contract of sale, but may The transfer of title shall not be held to have been rescinded by an unpaid seller until
recover from the buyer damages for any loss occasioned by the breach of the he has manifested by notice to the buyer or by some other overt act an intention to
contract. rescind. It is not necessary that such overt act should be communicated to the buyer,
The transfer of title shall not be held to have been rescinded by an unpaid seller until but the giving or failure to give notice to the buyer of the intention to rescind shall be
he has manifested by notice to the buyer or by some other overt act an intention to relevant in any issue involving the question whether the buyer had been in default for
rescind. It is not necessary that such overt act should be communicated to the buyer, an unreasonable time before the right of rescission was asserted. (n)
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 B. Sale of Movables
an unreasonable time before the right of rescission was asserted. (n) 1. Action for Price
a. When ownership has passed
31

4. Sale of movables on installment (Recto Law)


1595(1). 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 1484. In a contract of sale of personal property the price of which is payable in
terms of the contract of sale, the seller may maintain an action against him for the installments, the vendor may exercise any of the following remedies:
price of the goods. (1) Exact fulfillment of the obligation, should the vendee fail to pay;
Where, under a contract of sale, the price is payable on a certain day, irrespective of (2) Cancel the sale, should the vendee's failure to pay cover two or more
delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such installments;
price, the seller may maintain an action for the price although the ownership in the (3) Foreclose the chattel mortgage on the thing sold, if one has been
goods has not passed. But it shall be a defense to such an action that the seller at any constituted, should the vendee's failure to pay cover two or more
time before the judgment in such action has manifested an inability to perform the installments. In this case, he shall have no further action against the
contract of sale on his part or an intention not to perform it. purchaser to recover any unpaid balance of the price. Any agreement to the
Although the ownership in the goods has not passed, if they cannot readily be resold contrary shall be void. (1454-A-a)
for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not 1486. In the case referred to in the two preceding articles, a stipulation that the
applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer installments or rents paid shall not be returned to the vendee or lessee shall be valid
refuses to receive them, may notify the buyer that the goods are thereafter held by the insofar as the same may not be unconscionable under the circumstances. (n)
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. (n) 5. Borbon v Servicewide (1996)
6. Nonato v IAC (1985)
b. When ownership has not passed 7. Delta Motor Sales v Niu Kim Duan (1992)
8. Elisco Tool Manufacturing Corp. v CA (1999)
1595(2). 9. PCI Leasing and Finance, Inc. v Giraffe-X Creative Imaging, Inc. (2007)

2. Action for damages for non-acceptance C. Sale of Immovables


1. Anticipatory Breach
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. 1591. Should the vendor have reasonable grounds to fear the loss of immovable
The measure of damages is the estimated loss directly and naturally resulting in the property sold and its price, he may immediately sue for the rescission of the sale.
ordinary course of events from the buyer's breach of contract. Should such ground not exist, the provisions of article 1191 shall be observed. (1503)
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 2. PD 957, Sections 17-18, 23-24
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 PD 957
was fixed for acceptance, then at the time of the refusal to accept. Section 17. Registration. All contracts to sell, deeds of sale and other similar
If, while labor or expense of material amount is necessary on the part of the seller to instruments relative to the sale or conveyance of the subdivision lots and
enable him to fulfill his obligations under the contract of sale, the buyer repudiates the condominium units, whether or not the purchase price is paid in full, shall be
contract or notifies the seller to proceed no further therewith, the buyer shall be liable registered by the seller in the Office of the Register of Deeds of the province or city
to the seller for labor performed or expenses made before receiving notice of the where the property is situated.
buyer's repudiation or countermand. The profit the seller would have made if the Whenever a subdivision plan duly approved in accordance with Section 4 hereof,
contract or the sale had been fully performed shall be considered in awarding the together with the corresponding owner's duplicate certificate of title, is presented to
damages. (n) the Register of Deeds for registration, the Register of Deeds shall register the same in
accordance with the provisions of the Land Registration Act, as amended: Provided,
3. Rescission however, that it there is a street, passageway or required open space delineated on a
complex subdivision plan hereafter approved and as defined in this Decree, the
1597. Where the goods have not been delivered to the buyer, and the buyer has Register of Deeds shall annotate on the new certificate of title covering the street,
repudiated the contract of sale, or has manifested his inability to perform his passageway or open space, a memorandum to the effect that except by way of
obligations thereunder, or has committed a breach thereof, the seller may totally donation in favor of a city or municipality, no portion of any street, passageway, or
rescind the contract of sale by giving notice of his election so to do to the buyer. (n) open space so delineated on the plan shall be closed or otherwise disposed of by the
1593. With respect to movable property, the rescission of the sale shall of right take registered owner without the requisite approval as provided under Section 22 of this
place in the interest of the vendor, if the vendee, upon the expiration of the period Decree.
fixed for the delivery of the thing, should not have appeared to receive it, or, having Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or
appeared, he should not have tendered the price at the same time, unless a longer developer without prior written approval of the Authority. Such approval shall not be
period has been stipulated for its payment. (1505) granted unless it is shown that the proceeds of the mortgage loan shall be used for
the development of the condominium or subdivision project and effective measures
32

have been provided to ensure such utilization. The loan value of each lot or unit cancellation or the demand for rescission of the contract by a notarial act and
covered by the mortgage shall be determined and the buyer thereof, if any, shall be upon full payment of the cash surrender value to the buyer.
notified before the release of the loan. The buyer may, at his option, pay his Down payments, deposits or options on the contract shall be included in the
installment for the lot or unit directly to the mortgagee who shall apply the payments to computation of the total number of installment payments made.lawphi1™
the corresponding mortgage indebtedness secured by the particular lot or unit being Section 4. In case where less than two years of installments were paid, the seller
paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly shall give the buyer a grace period of not less than sixty days from the date the
after full payment thereto; installment became due.
Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in If the buyer fails to pay the installments due at the expiration of the grace period, the
a subdivision or condominium project for the lot or unit he contracted to buy shall be seller may cancel the contract after thirty days from receipt by the buyer of the notice
forfeited in favor of the owner or developer when the buyer, after due notice to the of cancellation or the demand for rescission of the contract by a notarial act.
owner or developer, desists from further payment due to the failure of the owner or Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or
developer to develop the subdivision or condominium project according to the assign the same to another person or to reinstate the contract by updating the account
approved plans and within the time limit for complying with the same. Such buyer during the grace period and before actual cancellation of the contract. The deed of
may, at his option, be reimbursed the total amount paid including amortization sale or assignment shall be done by notarial act.
interests but excluding delinquency interests, with interest thereon at the legal rate. Section 6. The buyer shall have the right to pay in advance any installment or the full
Section 24. Failure to pay installments. The rights of the buyer in the event of this unpaid balance of the purchase price any time without interest and to have such full
failure to pay the installments due for reasons other than the failure of the owner or payment of the purchase price annotated in the certificate of title covering the
developer to develop the project shall be governed by Republic Act No. 6552. property.
Where the transaction or contract was entered into prior to the effectivity of Republic Section 7. Any stipulation in any contract hereafter entered into contrary to the
Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the provisions of Sections 3, 4, 5 and 6, shall be null and void.
corresponding refund based on the installments paid after the effectivity of the law in Section 8. If any provision of this Act is held invalid or unconstitutional, no other
the absence of any provision in the contract to the contrary. provision shall be affected thereby.lawphi1™
Section 9. This Act shall take effect upon its approval.
10. Casa Filipina Realty v OP (1995) Approved: August 26, 1972.
11. Manila Banking Corp. v Spouses Rabina (2008)
12. Luzon Dev’t Bank v Enriquez (2011) 1. Rillo v CA (1997)
2. Valarao v CA (1999)
3. Maceda Law (RA 6552): Sale of immovables on installment 3. Active Realty v Daroya (2002)
4. Fabrigas v San Francisco del Monte (2005)
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON 5. Jestra Dev’t v Pacifico (2007)
INSTALLMENT PAYMENTS. (Rep. Act No. 6552) 6. Manuel Uy v Valbueco (2013)
Section 1. This Act shall be known as the "Realty Installment Buyer Act." 7. Gatchalian Realty v Angeles (2013)
Section 2. It is hereby declared a public policy to protect buyers of real estate on
pinstallment payments against onerous and oppressive conditions. IX. Extinguishment of Sale
Section 3. In all transactions or contracts involving the sale or financing of real estate A. Causes
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act 1600. Sales are extinguished by the same causes as all other obligations, by those
Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered stated in the preceding articles of this Title, and by conventional or legal redemption.
Sixty-three hundred eighty-nine, where the buyer has paid at least two years of (1506)
installments, the buyer is entitled to the following rights in case he defaults in the 1231. Obligations are extinguished:
payment of succeeding installments: (1) By payment or performance;
(a) To pay, without additional interest, the unpaid installments due within the (2) By the loss of the thing due;
total grace period earned by him which is hereby fixed at the rate of one (3) By the condonation or remission of the debt;
month grace period for every one year of installment payments made: (4) By the confusion or merger of the rights of creditor and debtor;
Provided, That this right shall be exercised by the buyer only once in every (5) By compensation;
five years of the life of the contract and its extensions, if any. (6) By novation.
(b) If the contract is canceled, the seller shall refund to the buyer the cash Other causes of extinguishment of obligations, such as annulment, rescission,
surrender value of the payments on the property equivalent to fifty per cent of fulfillment of a resolutory condition, and prescription, are governed elsewhere in this
the total payments made, and, after five years of installments, an additional Code. (1156a)
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 B. Conventional Redemption
take place after thirty days from receipt by the buyer of the notice of
33

1601. Conventional redemption shall take place when the vendor reserves the right to 13. Adiarte v Tumameng (1951)
repurchase the thing sold, with the obligation to comply with the provisions of article
1616 and other stipulations which may have been agreed upon. (1507) 3. Period of Redemption

8. Villarica v CA (1968) 1606. The right referred to in article 1601, in the absence of an express agreement,
9. Torres v CA (1992) shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
1. Distinguished from Equitable Mortgage 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
1602. The contract shall be presumed to be an equitable mortgage, in any of the was a true sale with right to repurchase. (1508a)
following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate; 14. Heirs of Arches v Diaz (1973)
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another 4. Exercise of Right to Redeem
instrument extending the period of redemption or granting a new period is
executed; 1616. The vendor cannot avail himself of the right of repurchase without returning to
(4) When the purchaser retains for himself a part of the purchase price; the vendee the price of the sale, and in addition:
(5) When the vendor binds himself to pay the taxes on the thing sold; (1) The expenses of the contract, and any other legitimate payments made
(6) In any other case where it may be fairly inferred that the real intention of by reason of the sale;
the parties is that the transaction shall secure the payment of a debt or the (2) The necessary and useful expenses made on the thing sold. (1518)
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the 15. Gargollo v Duero (1961)
vendee as rent or otherwise shall be considered as interest which shall be subject to 16. Abilla v Gobonseng (2002)
the usury laws. (n)
1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall a. Who can exercise
be construed as an equitable mortgage. (n)
1604. The provisions of article 1602 shall also apply to a contract purporting to be an Article 1610. The creditors of the vendor cannot make use of the right of redemption
absolute sale. (n) against the vendee, until after they have exhausted the property of the vendor. (1512)
2088. The creditor cannot appropriate the things given by way of pledge or mortgage, Article 1611. In a sale with a right to repurchase, the vendee of a part of an undivided
or dispose of them. Any stipulation to the contrary is null and void. (1859a) 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
10. Tan v Valdehueza (1976) redemption. (1513)
11. Arrofo v Quino (2005) Article 1612. If several persons, jointly and in the same contract, should sell an
12. Roberts v Papio (2007) undivided immovable with a right of repurchase, none of them may exercise this right
for more than his respective share.
2. Distinguished from Option to Buy 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
1602. The contract shall be presumed to be an equitable mortgage, in any of the acquired. (1514)
following cases: Article 1613. In the case of the preceding article, the vendee may demand of all the
(1) When the price of a sale with right to repurchase is unusually inadequate; vendors or co-heirs that they come to an agreement upon the repurchase of the whole
(2) When the vendor remains in possession as lessee or otherwise; thing sold; and should they fail to do so, the vendee cannot be compelled to consent
(3) When upon or after the expiration of the right to repurchase another to a partial redemption. (1515)
instrument extending the period of redemption or granting a new period is
executed; b. From whom to redeem
(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; 1615. If the vendee should leave several heirs, the action for redemption cannot be
(6) In any other case where it may be fairly inferred that the real intention of brought against each of them except for his own share, whether the thing be
the parties is that the transaction shall secure the payment of a debt or the undivided, or it has been partitioned among them.
performance of any other obligation. But if the inheritance has been divided, and the thing sold has been awarded to one of
In any of the foregoing cases, any money, fruits, or other benefit to be received by the the heirs, the action for redemption may be instituted against him for the whole. (1517)
vendee as rent or otherwise shall be considered as interest which shall be subject to
the usury laws. (n) c. Effect of redemption
34

1617. If at the time of the execution of the sale there should be on the land, visible or b. Co-heirs
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 1088. Should any of the heirs sell his hereditary rights to a stranger before the
executed. partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
Should there have been no fruits at the time of the sale and some exist at the time of reimbursing him for the price of the sale, provided they do so within the period of one
redemption, they shall be prorated between the redemptioner and the vendee, giving month from the time they were notified in writing of the sale by the vendor. (1067a)
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. (1519a) c. Adjoining landowners of rural land
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 1621. The owners of adjoining lands shall also have the right of redemption when a
may have executed in good faith, and in accordance with the custom of the place piece of rural land, the area of which does not exceed one hectare, is alienated,
where the land is situated. (1520) unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains,
d. Effect of non-redemption 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
1607. In case of real property, the consolidation of ownership in the vendee by virtue time, the owner of the adjoining land of smaller area shall be preferred; and should
of the failure of the vendor to comply with the provisions of article 1616 shall not be both lands have the same area, the one who first requested the redemption. (1523a)
recorded in the Registry of Property without a judicial order, after the vendor has been
duly heard. (n) d. Adjoining landowners of urban land

C. Legal Redemption 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,
1619. Legal redemption is the right to be subrogated, upon the same terms and having been bought merely for speculation, is about to be re-sold, the owner of any
conditions stipulated in the contract, in the place of one who acquires a thing by adjoining land has a right of pre-emption at a reasonable price.
purchase or dation in payment, or by any other transaction whereby ownership is If the re-sale has been perfected, the owner of the adjoining land shall have a right of
transmitted by onerous title. (1521a) redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right of pre-emption
1. Period to redeem or redemption, the owner whose intended use of the land in question appears best
justified shall be preferred. (n)
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 e. Under the Public Land Act
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 CA 141, Section 118. Except in favor of the Government or any of its branches, units,
notice thereof to all possible redemptioners. or institutions, lands acquired under free patent or homestead provisions shall not be
The right of redemption of co-owners excludes that of adjoining owners. (1524a) 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 issuance of the patent or grant,
17. Butte v Manuel Uy (1962) nor shall they become liable to the satisfaction of any debt contracted prior to the
18. Conejero v CA (1966) expiration of said period, but the improvements or crops on the land may be
19. Doromal v CA (1975) mortgaged or pledged to qualified persons, associations, or corporations.
20. Francisco v Boiser (2000)
21. Misterio v Cebu State College (2005) No alienation, transfer, or conveyance of any homestead after five years and before
22. Cebu State College v Misterio (2015) twenty-five years after issuance of title shall be valid without the approval of the
Secretary of Agriculture and Commerce, which approval shall not be denied except on
2. Instances of Legal Redemption constitutional and legal grounds.
a. Co-owners
Section 119. Every conveyance of land acquired under the free patent or homestead
1620. A co-owner of a thing may exercise the right of redemption in case the shares of provisions, when proper, shall be subject to repurchase by the applicant, his widow, or
all the other co-owners or of any of them, are sold to a third person. If the price of the legal heirs, within a period of five years from the date of the conveyance.
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 f. Under extrajudicial foreclosure
only do so in proportion to the share they may respectively have in the thing owned in
common. (1522a) Act 3175, Sec. 6. In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest or any judicial
35

creditor or judgment creditor of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust under which the property is sold,
may redeem the same at any time within the term of one year from and after the date
of the sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not inconsistent with the provisions of this Act.

g. Under Agrarian Land Reform Act

RA 6389, 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.