SALES
NATURE AND FORM OF CONTRACT The elements of a contract of sale are a.) consent or meeting
Articles 1458 -1488
Define sale?
Sale is a contract where one party (seller/vendor) obligates
himself to transfer the ownership of and deliver the
determinate thing, while the other party (buyer or vendee)
obligates himself to pay for said thing a price certain in
money or its equivalent. (Art. 1458)
Suppose art. 1458 didn’t specify that the seller must transfer
the ownership of the object, does he still have this
obligation?
Yes, for after all, this transfer of ownership is clearly the
fundamental aim of the contract. A buyer is not interested in
a mere physical transfer: he is after ownership.
What are the characteristics of the contract of sale?
A contract of sale is a.) Consensual; b.) Bilateral reciprocal;
c.) Onerous; d.) Commutative; e.) Principal; f.) Nominate
Why is the contract of sale an onerous contract?
A sale is onerous, because to acquire the rights, valuable
considerations must be given.
Why is the contract of sale a consensual contract?
Sale is consensual, because the contract is perfected by mere
consent.
Why is the contract of sale a bilateral reciprocal contract?
Sale is bilateral consensual, because both parties are
bound by obligations dependent upon each other.
Why is the contract of sale a commutative contract?
Sale is commutative as a rule, because the values
exchanged are almost equivalent to each other.
Why is the contract of sale a principal contract?
Sale is a principal contract, because for the contract to
validly exist there is no necessity for it to depend upon the
existence of another valid contract.
Why is the contract of sale a nominate contract?
Sale is a nominate contract, because the Code refers to it by a
special designation, i.e., the contract of sale.
What are elements of a contract of sale?
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of the minds, b.) Determinate subject matter, c.) price
certain in money or its equivalent.
What are the stages in a contract of sale?
The stages of a contract of sale are a.) generation or
negotiation, b.) perfection, c.) consummation.
Distinguish sale from a lease contract?
In a sale, the seller transfer ownership; in a lease contract,
the lessor or landlord transfer merely the temporary
possession and use of the property.
Classify or give kinds of a contract of sale?
Generally, they are: 1. Absolute-when the sale is not subject
to any condition, 2. Conditional- when the sale contemplates
a contingency or is subject to a certain condition.
Define natural elements of a contract of sale?
Those which are inherent in the contract, and which in the
absence of any contrary provision, are deemed to exist in the
contract.
What is an accidental elements in a contract of sale?
Those which may be present or absent in the stipulation,
such as place or time of payment, or the presence of a
condition.
What are the requisites of the thing which constitutes the
object of sale?
1. The thing must be existing. 2. Thing must be licit or legal.
3. thing must be determinate or capable of being determined
without the need of a new contract. 4. The vendor must have
a right to transfer ownership of the thing at the time it is
delivered.
When is a thing determinate?
It is determinate when the thing is particularly designated or
physically segregated from all others of the same class. But a
thing is still determinate if at the time the contract is entered
into, the thing is capable being more determinate without
necessity of a new further agreement of the parties. (Art.
1460)
Seller sold 500 piculs of sugar to buyer. Because seller was
not able to produce 500 piculs of sugar on said plantation he
was not able to deliver. Is he liable?
Yes, because no specific lot of sugar can be pointed out as
having been lost. Sugar here was still generic.
Is a sale of a future thing valid?
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Yes, provided that the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
existence.
Distinguish Rei Sperati from Emptio Spei?
Emptio rei sperati (sale of an expected thing), if the
expected thing does not materialize, the sale is not effective.
While, emptio spei ( sale of the hope itself) it does not
matter whether the expected thing materialized or not; what
is important is that the hope itself validly existed. (Art. 1461)
What is Emptio rei speratae?
Emptio rei speratae is a sale of a future thing certain as to
itself but uncertain as to its quality or quantity. Such sale is
subject to the condition that it shall come into existence.
Give examples of things having potential existence and
therefore may be objects of valid sales?
Wine which a vineyard is expected to produce; fruits to grow;
milk that a cow may yield in the coming year: wool which
may grow upon a sheep.
What are future goods?
Future goods are those still to be a.) manufactured, b.)
raised, c.) acquired by seller after the perfection of the
contract, d.) things whose acquisition depends upon
contingency which may or may not happen. (Art. 1462)
What are the goods which may form the subject of a contract
of sale?
They may either be: 1. Existing goods, 2. Future goods.
May the sole owner of a thing sell an undivided interest
therein?
Yes, Art, 1463 of the civil code states: The Sole owner of a
thing may sell an undivided interest therein.
What is the effect if the sole owner of a thing would sell an
undivided interest in such thing?
The buyer becomes a co-owner over the thing.
May a property subject to reserva troncal be sold?
Yes, Article 1465 of the civil code states. Things subject to a
resolutory condition may be the object of a contract of sale.
Distinguish sale from agency?
In sale, the buyer pays the price; the agent delivers the price
which in turn he got from his buyer. In sale, the buyer after
delivery becomes the owner; the agent who is supposed to
sell does not become the owner, even if the property has
already been delivered to him.
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SALES
Is there a distinction between a contract of sale and a
contract to sell?
Yes. In the contract of sale, the title pass to the buyer upon
delivery of the thing sold, while, in contract to sell,
ownership is reserved to the seller and is not to pass until full
payment of the purchase price is made.
Y acquired a booklet of 1oo sweeptake tickets directly from
PCSO. Y, paid 18,000 for the booklet, less the customary
discount. What kind of contract did Y enter into?
Y entered into a contract of purchase and sale. Y, become the
agent of PCSO.
What is the rule to determine if the contract is one of sale or
a piece of work?
If ordered in the ordinary course of business, Sale. If
manufactured specially and not for the market it is a contract
for a piece of work. (Art. 1467)
What is a contract for a piece of work?
Contract for a piece of work- goods are to be manufactured
specially for the customer and upon his special order, and
not for the general market.
If I ask someone to construct a house for me, is this a
contract of sale or for a piece of work.
It is a contract for a piece of work. But, if he will construct on
his own land, and I will get both the land and the house, it
would seem that this can be very well treated as a sale.
What is the rule to determine whether the contract entered
into is one of sale or barter?
1st rule- intent of parties. 2nd rule- if intent does not clearly
appear: 1. If thing is more valuable than money- barter, 2.
50-50- sale, 3. If thing is less valuable than money- sale.
(Art. 1468)
What is barter?
By the contract of barter or exchange, one of the parties
binds himself to give one thing in consideration of the other’s
promise to give another thing.
If I give my truck worth 1 million to Sacra in consideration of
Sacra’s giving to me .4 million cash, and a car worth .6
million, is the transaction a sale or a barter?
It depends on the mutual intent of the parties. If the intent is
not clear, the transaction is barter.
What are the requisites of price in the contract of sale?
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Price must observe the following requisites: 1. Price must be
in money or its equivalent. 2. Price must be certain or
ascertainable. 3. Price must be real not simulated.
When price is considered certain?
Price is considered certain when it is referred to another
thing certain, or it will be determined by a specified person.
Rey’s right in Y Company was sold in 3/100 of the entire net
value of the business. Said value was, in turn, to be fixed by a
specified board of assessors. Is the price certain?
Yes, for there was no need of any further meeting of the
minds on the price.
What is the effect of gross inadequacy of price?
As a rule, it does not affect the contract of sale, except it may
indicate: 1. Defect in the consent; or 2. The parties really
intended a donation or some other forms of contract;
however, if the inadequacy of price results in lesion or badge
of fraud against the creditors, then, the contract is
rescissible.
May the fixing of a price left to the discretion of one of the
contracting parties?
No, as a general rule. However, if the price fixed is accepted
by the other party, the sale is perfected.
If the price is simulated, what is the effect on the contract of
sale?
The sale is void but the act may be shown to have been in
reality a donation or some other act or contract.
What is the effect if the simulated price is fictitious?
There being no price, there is no cause or consideration;
hence, the contract is void as a sale.
When price is considered certain?
Price is considered certain if it could be determined with
reference to another thing certain.
What could be the effect if the price of securities cannot be
ascertained?
If the price cannot really be ascertained, the sale is
inefficacious because what last clause of article 1472 provides
is that price must be certain.
Delia sold to Mar a fountain pen today at the price equivalent
to the stock quotation two days from today of 100 shares of
Jacks Corporation. Is the sale valid?
Yes provided the stock quotation price two days later can be
ascertained, otherwise if it cannot be ascertained at the time
or two days from today the sale is inefficacious.
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SALES
Why price is cannot be left to the discretion of one of the
contracting parties?
Price cannot be left to the discretion of one of the contracting
parties for it cannot be said that the other consented to the
price he did not and could not previously know. Moreover, to
be just, the price must be determined impartially by both
parties.
What is the effect if determination of price be left to the
vendor?
If left to the judgment of the vendor, the transaction may be
valid as donation if he can share that such was the intention
of both parties to the contract and if there are no reasons of a
different nature which militate against its validity.
Is the contract perfected if the price fixed by one party but
accepted by the other?
Yes, where the price fixed by one party is accepted by the
other, the contract is deemed because in this situation there
exist true meeting of minds upon the price.
Almar sold to Basty his car. It was agreed that Basty would
fix the price a week later. At the appointed time Basty named
the price at P500,000.00. Almar agreed. Is the sale
perfected?
Yes, for there exist a true meeting of mind between Almar
and Basty when Basty accepted the price being named by
Almar.
Give the effect of failure to determine price where the
contract is executor?
If the price cannot be determined in accordance with the
Civil Code, or any other manner, the contract without is
without effect. Consequently, there is no obligation on the
part of the vendor to deliver the thing and the part of the
vendee to pay.
What if delivery has been made what would be the effect?
If the thing or any part thereof has already been delivered or
appropriated by the buyer, the latter must pay a reasonable
price therefore. The reasonable price or value of goods is
generally the market price of the object of the contract.
Ayson and Badz entered into a contract that is complete in
itself, except that there was no agreement with reference to
the price. What would be the basis of the price of the object
of the contract?
If the terms of sale are complete except for an agreement
with reference to the price, the Law implies a price
equivalent to the reasonable value of the goods in case where
the buyer has appointed the thing sold. And where the buyer
accepts the delivery knowing the price claimed by the seller,
he cannot thereafter refuse to pay for it at price even when
there is no agreement as to price.
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If the vendor has made use of the thing delivered, is he still
not obliged to pay the vendee?
Where the goods are delivered and was used by the buyer, he
should not be allowed to enrich himself unjustly at another’s
expense. So he must pay reasonable price. The seller’s price
however, must be the one to be paid if the buyer knew how
much the seller was charging and there was an acceptance of
the goods delivered. This implies that there is an implied
assent to the price fixed.
What are the requisites for a perfection of a Contract of
Purchase or Contact of Sale?
The requisites for a perfection of a Contract of Purchase or
Contact of Sale are:
1. From the moment the parties has agreed upon a
determinate thing;
2. The object of the contract; and
3. Certain price whether in money or something
representing it.
When is Contract of Sale perfected?
The Contract of Sale being a consensual contract is perfected
by mere consent.
Give the effect of failure to pay price, or the non-delivery of
the thing bought?
Valid. Failure to pay price, or the non-delivery of the thing
bought will not render the contract not perfected because
Contract of sale is a consensual contract thus perfected by
mere consent.
Delivery of the thing bought or payment of the price is not
necessary for the perfection of the contract and failure of the
vendee to pay the stipulated price after the execution of the
contract does not convert the contract into one without cause
or consideration as to vitiate the validity of the contract, it
not being essential for the existence of the cause that
payment or full payment be made at the time of the contract.
For lack of consideration act results at most in default on the
part of the vendee for which the vendee may exercise his
legal remedies.
Give the exceptions where contract is perfected by mere
delivery?
The exceptions are:
1. When by virtue of stipulation of parties or law of the
sale is subject to suspensive condition, the contract is
perfected only from the fulfillment of the condition.
2. Where the contract was expressly made subject to the
approval of higher authorities.
What is the effect of perfection?
One’s contract is perfected, nothing is left to the parties to do
except the execution of their mutual obligation, whereby it
gives the vendee the right to compel the vendor to deliver the
thing but acquire no real right over it until the delivery is
made.
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SALES
When is sale by auction perfected?
The sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer or in other
customary manner.
May the bidder retract his bid before the hammer falls?
Yes. Every bidding is merely an offer and, therefore, before it
is accepted, it may be withdrawn. The assent is signified on
the part of the seller by knocking down the hammer.
May the auctioneer withdraw the goods from the sale before
the fall of the hammer?
Yes, unless the auction has been announced to be without
reserve. The bid is merely an offer, not an acceptance of an
offer ton sell. Therefore it can be rejected. What the
auctioneer does in withdrawing is merely reject the offer.
When seller can bid in the auction?
The seller or his agent may bid in an auction sale provided:
1. Such right was reserved;
2. Notice was given that the sale is subject to a right to bid
on behalf of the seller; or
3. The right to bid by the seller is not prohibited by law or
stipulation.
Can the seller employ others to bid for him?
Yes, provided he has notified the public that the auction is
subject to the right to bid on behalf of the seller. Notice to
public must not be fraudulent.
Who may attack the Auction sale?
Last sentence of paragraph 4, article 1476 does not limit the
rest of paragraph that in case seller actually buys, he only can
complain. Objection to such sale is also available to the
debtor in an auction for deficiency after the sale.
When is ownership to the thing sold transferred?
Ownership is transferred from the moment there is either
actual or constructive delivery even if the price is not fully
paid, when the sale is conditional and ownership is
transferred not upon delivery but payment of price.
What are the kinds of delivery?
The kinds of delivery are:
1. Actual;
2. Constructive
What is the concept of reservati domini or contractual
reservation of title?
It is an stipulation where the parties agree that despite
delivery, the ownership of the t ing shall remain with the
seller even the purchaser has fully paid the price.
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Is the contractual reservation valid?
Yes. The parties may stipulate that despite delivery, the
ownership of the thing shall remain with the seller until the
purchaser has fully paid the price.
Distinguish the concept of pactum reservati domini and
contract to sell?
The distinctions are:
1. Pactum reservati domini is a form of conditional
contract, while, contract to sell is a contract preparatory
to Contract of sale;
2. In the first delivery of the object of contract has been
made, while in the second, there is no delivery yet;
3. In the first non-payment the injured party may file an
action for specific performance or rescission of the
contract, while, in the second there can be no action ,
for it merely prevents execution of the Contract of Sale.
What are the kinds of promise (scope) provided in article
1479?
The scopes of article 1479 are:
1. An accepted unilateral promise to sell where the
promise decides to buy;
2. An accepted unilateral promise to buy when the
promise decides to buy;
3. A bilateral promise to buy where the promise decides to
sell reciprocally accepted, where either party to decides
to exact compliance.
Give the effect if unilateral promise is unaccepted?
A unilateral promise or offer45 to sell or to buy a thing which
is not accepted creates no juridical effect or legal bond. Such
accepted offer is called policitation.
Define option?
Option is a contract granting a person the privilege to buy or
not; to buy a certain object at any time within the agreed
period at a fixed time.
What is the effect of bilateral promise (mutual promise)?
When one party accepts the other’s promise to sell, a
determinate thing for a price certain, it is reciprocally
demandable. It generates a binding contract of sale.
How must acceptance of unilateral promise be done?
The acceptance of unilateral promise to sell must be plain,
clear, and unconditional. Therefore, if there is a qualified
acceptance with terms different from the offer, there is no
acceptance, that is no promise to buy and there is no
perfected sale.
How long is the offer bound by his promise when option is
granted?
The offer is bound by his promise by the stipulation of the
parties. If there is no stipulation then the Court will fix the
term.
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SALES
Who bears the lost or deterioration?
a. If the thing is lost before perfection, the seller and not the
one who intends to purchase bears the loss, because there
was no cause or consideration, thus, there was no contract.
b. If thing is lost at the time of perfection, the contract is void
or inexistent. The legal effect is the same as when the object
is lost before the perfection of the Contract of sale.
c. If the thing is lost after perfection but before its delivery, that
is, even before the ownership is transferred to the buyer, the
risk of loss is shifted to the buyer, an exception to the rule of
res peruit domino.
d. If the thing is lost after delivery, the buyer bears the loss
fo;;owing the general rule res peruit domino.
B bought a vessel from S on condition that S could prove he
was the owner thereof by pertinent document. Before the
condition was complied with, the vessel sank in a storm. Can
s demand the price?
No, S cannot demand the price. The condition was never
fulfilled, therefore the Contract of Sale was never perfected.
Thus S bears the loss.
What if the condition was fulfilled. Is the Sale been
perfected?
Yes. If the condition had been fulfilled, the sale would have
been perfected, and B would have to pay the price even if it
had not yet been delivered to him.
Bea’s hi-lux was sold on credit. Shortly after its delivery, it
was destroyed by fortuitous event. Is the buyer still liable for
the price?
Yes, because after its delivery to him, he became the owner,
and therefore it is who bears the loss.
Define fungibles?
Fungibles are personal property which may be replaced with
equivalent thing. It is apparently same as consumables.
What is the coverage of article 1481?
The coverage of the article is as follows:
1. Sale of goods be description;
2. Sale of goods by sample; and
3. Sale of goods by description and sample
Define the coverage:
1. Sale of goods be description accrue where the seller
sells things as being of particular kind, the buyer not
knowing whether the seller’s representations are true or
false, but relying on them as true; or as otherwise
stated, where the purchaser has not seen the article sold
release on the description given him by the vendor, or
has seen the goods but the want of identity do not
apparent on inspection.
2. Sale of goods by sample, it is that where the seller
warrants that the bulk of the goods shall correspond
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with the sample in kind, quality, and character. Only
the sample is exhibited. The bulk is not present and so
there is no opportunity to exercise or inspect it.
3. Sale of goods by description and sample, must satisfy all
warranties appropriate to either kind of sale, and it is
not sufficient that the bulk of the goods correspond with
the sample if they do not also correspond with the
description.
May the contract be rescinded if the bulk of goods do not
correspond with the description?
Yes. If the bulk of goods does not correspond with the
description the buyer may rescind the contract.
When may the buyer rescind a contract?
The buyer may rescind a contract when:
1. If the bulks of goods delivered do not correspond with
the description;
2. If the bulks of goods delivered do not correspond with
the sample.
Is it sufficient that the bulk of goods correspond with the
sample, but not correspond with the description?
No, it is not sufficient that the bulk of goods correspond with
the sample, but not correspond with the description.
Define earnest money?
Earnest money is a money given by the buyer to the seller to
had the bargain. It is actually a partial payment of the
purchase price and is considered proof of perfection of the
contract.
Is earnest money deductable from the total price?
Yes, since earnest money constitutes advance payment it
must be deducted from the total price.
What is option money?
Option money is a money given as distinct consideration for
the option contract.
Distinguish earnest money and option money?
Earnest money as distinguish from option money is that:
1. the former is part of purchase while the latter is the
money given as distinc consideration for the option
contract;
2. the former is given only when there is already sale,
while the latter applies to a sale not yet perfected; and
3. when earnest money is given, buyer is bound to pay
balance, while when the woud- buyer fives option
money, he is not required to buy.
Can option money become earnest money?
Yes, option money can become earnest money when parties
so stipulate.
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SALES
What is the form of a contract of Sale?
Contract of Sale may entered into in any form provided the
essential requisites for its validity are present.
When statute of fraud applicable?
Statute of frauds is applicable only to executor contracts,
where no performance has been done and not to contracts
which are totally or partially performed.
What is the reason for the rule that statute of fraud is
applicable only to executor contracts?
The reason of the rule is that partial performance, like the
writing, furnishes reliable evidence of the intention of the
parties or the existence of the contract. A contrary rule would
result in injustice or unfairness to the party who has
performed his obligation.
Dan orally sold a parcel of land to Jerry. Is the sale valid?
Yes, the sale is valid but it is unenforceable but the law
requires that sale of real property must be in writing to be
enforceable.
If the contract of sale is in private writing, then it is valid and
binding only as between the parties and not as against third
persons without notice until sale is registered in the Registry
of Property. Dan has the right to compel Jerry to put the
contract in a public document so that it be registered to
effect third person.]
In a sale of real property, if made through an agent. Is it
valid?
It is void, unless the agent’s authority in writing and to be
effective against third person. And that it must be registered
with the Register of Deeds.
What are the limitations on the forms of a Contract of Sale?
The limitations are:
1. by the provision of the Statute of fraud; or
2. by the provision of applicable statute.
Enumerate the remedies of vendor in sale of personal
property payable in installment?
The vendor of personal property payable in installments may
exercise any of the following remedies:
1. elect fulfillment upon the vendee’s failure to pay;
2. cancel the sale, if the vendee shall have failed to pay two
or more installment; or
3. foreclosure the chattel mortgage, if one has been
constituted if the vendee shall have failed to pay two or
more installments.
Give the requisites before any of the remedies maybe
applied?
The requisites are:
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1. there must be a contract;
2. the contract must be one of a sale;
3. it is sale of personal property; and
4. sale must be an installment plan.
What is the purpose of the enumeration of the remedies?
The purpose is to prevent abuse of the foreclosure of chattel
mortgage by selling at low price and then suing for
deficiency.
What is the nature of the remedies?
The remedies are alternative and not to be exercised
cumulatively or successively and the election of one is waiver
of the right to resort to the others.
When the vendor had chosen exact fulfillment of the
obligation, could he still recover from the purchaser unpaid
balance of the price?
Yes. The vendor right is not limited to the proceeds of the
sale, on execution of the mortgage goods.
He may still recover from the purchaser the unpaid balance
of the price, if any or the real and personal properties of the
purchase not exempt by law, from attachment or execution.
What is the remedy of the vendor who chooses cancellation
of the contract for the vendee’s failure to pay two or more
installments?
The remedy of the vendor who chooses cancellation of the
contract for the vendee’s failure to pay two or more
installments is to demand the return of payments already
made unless there is stipulation to the contrary.
Can vendor who chooses foreclosure of chattel mortgage
recover unpaid balances?
No, if the vendor has chosen the remedy of foreclosure of
chattel mortgage, he shall have no further action against the
vendee for the recovery of the unpaid balance of the price
and any agreement to the contrary is void.
How is foreclosure effected?
Foreclosure is effected by selling the mortgaged personal
property at public auction and applying the proceeds of the
sale to the satisfaction of the claim secured by the mortgage.
Give instances that the remedies can not be applied?
Remedies not applied in:
1. Real Estate Mortgage;
2. sale of personal property on straigt terms or cash basis.
Del bought a particular automobile on installment plan. Del
defaulted in the payment of one of the installment. Has the
seller Sal, the right to exact fulfillment of the obligation to
pay?
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SALES
Yes, specific performance does not require default in two or
more installments, unlike cancellation and foreclosure of
chattel mortgage.
B bought a particular laptop, but defaulted in the payment of
two installments. May the seller ask for the cancellation of
the sale?
Yes, because two installments are already in default.
What is the scope of article 1485?
It shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the
thing.
Give the reason for the rule on Lease of Personal Property
with option to buy?
The reason is that this may really considered sale of personal
property in installments. Thus it is to prevent indirect
violation of the remedies of the vendor on sale of personal
property when vendee fails to pay installment.
What is the meaning of the clause “when the lessor has
deprived the lessee of the possession or enjoyment of the
thing?
This means that for failure to pay, the lessor is apparently
exercising the right of an unpaid seller, and has taken
possession of the property. This is so even if the property had
been given up in obedience to the lessor’s extrajudicial
demand, such surrender not really voluntary.
When lease construed as Sale?
Even if the word lease is employed when the sale on
installment is evidently intended, it must be construed as a
Sale.
May a party stipulate that the installments or rent paid shall
not be returned?
Yes, In sale of personal property by installment a lease of
personal property with option to buy, the parties may
stipulate that the installment or rents paid are not to be
returned. Such stipulation is valid insofar as not
unconscionable.
What is the happen if the stipulation is unconscionable?
If the stipulation is unconscionable the Court has the power
to order the return of a portion of the total amount paid in
installment or rents.
What happen when the parties has no stipulations the
installment or rents be returned?
If there is no stipulation that installment or rents paid be
returned, the installment be returned minus reasonable rent.
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B bought a car from S on installment. It was agreed that the
installments already paid should not be returned even if then
sale is cancelled. Is the stipulation valid?
Yes. The stipulation is valid unless unconscionable.
Who pays for expenses in execution and registration?
The vendor (seller) has the duty to pay not only expenses for
execution of the sale, but also for the registration of the same
in the absence of any agreement between the parties.
B sells his car to C, they agree that the expenses for
registration be borne by C. is the stipulation valid?
Yes. Parties may stipulate as who bears the expenses of
execution and registration provided it is not unconscionable.
Who bears the expenses incurred subsequent to the transfer
of title?
Expenses incurred are to be borne by the buyer, unless
caused by the fault of the seller.
What is the nature of expropriation?
Expropriation is involuntary in nature, that is, the owner
may be compelled to surrender the property after all the
essential requisites have been complied with. Therefore,
generally, expropriation does not result in a sale.
What is the exception to the rule?
In the case of Gutierrez v Court of Tax Appeals, May 31,
1957, the Supreme Court held that the acquisition by the
government of private properties thru the exercise of
eminent domain, said properties being justly compensated,
is a sale or exchange within the meaning of the income tax
laws and profits derived therefrom are taxable as capital
gain; and this is so although the acquisition was against the
will of the owner of the property and there was no meeting of
the minds of the parties.
When is a transaction considered sale?
If the property owner voluntarily sells the property to the
government, this would be a sale, and not an example of
expropriation.
Distinguish eminent domain from expropriation.
Eminent Domain refers to the right given to the state,
whereas expropriation usually refers to the process.
What are the essentials requisites for expropriation?
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The essential requisites are the following:
a. Taking by competent authority
b. Observance of due process of law
c. Taking for public use
d. Payment of just compensation
What is just compensation?
Just compensation is the market value PLUS the
consequential damages, if any, MINUS the consequential
damages, if any, MINUS the consequential benefits if any.
However, the benefits may be set off only against the
consequential if any. However, the benefits may be set off
only against the consequential damages, and not against the
basic value of the property.
What is market value?
It is the price which the property will bring w is brought hen
it is offered for sale by one who desires but is not obliged to
sell it, and is bought by one who is under no necessity of
having it.
Province of Camarines Sur v. CA
41 SCRA 388, 1993
The fixing of just compensation in expropriation proceedings
shall be made in accordance with rule 67 of the Rules of
Court and not on the basis of the valuation declared in the
tax declaration of the subject property by the owner or
assessor which has been declared unconstitutional.
CAPACITY TO BUY OR SELL
Articles 1489 – 1492
Incapacity to buy may be absolute or relative. Distinguish.
Absolute incapacity is when a party cannot bind himself in
any case. Whereas, relative incapacity is when certain
persons, under certain circumstances, cannot buy certain
property.
What is the effect of purchase by minors?
When minors buy, the contract is generally voidable, but in
the case of necessaries, “where necessaries are sold and
delivered to a minor or other person without capacity to act,
he must pay a reasonable price therefor.
Castillo v. Castillo
L-18238, Jan. 22, 1980
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If the deed of sale of the land lists as purchasers both the
husband and the wife, the presumption is that it is
paraphernal property.
Godinez v. Fong
120 SCRA 223, 1983
If a Filipino sells a parcel of land to a Chinese who later sells
the same to another Filipino, the second sale is VALID
because the purpose of the Constitution of preserving the
land in favor of Filipinos has not been frustrated.
What is the reason why generally a husband and wife cannot
sell to each other?
The reasons are:
a. to avoid prejudice to third persons
b. to prevent one spouse from unduly influencing the other
c. to avoid by indirection the violation of the prohibition against
donations
What are the exceptions wherein a husband and wife can sell
property to each other during the marriage?
1. When a separation of property was agreed upon in the marriage
settlements; or
2. When there has been a judicial separation of property.
In relation to the preceding question, what is the effect of
sale?
Generally, a sale by one spouse to another is void. However,
not everybody can assail the validity of the transaction. Thus,
creditors who became such after the transaction cannot
assail its validity for the reason that they cannot be said to
have been prejudiced. But prior creditors as well as the heirs
of either spouse may invoke the nullity of the sale. When the
proper party brings the actions, the sale should be declared
void by the courts. The spouse themselves, since they are
parties to an illegal act, cannot avail themselves of the
illegality of the sale. The law will generally leave them as they
are.
A husband and his wife were living together under the
conjugal partnership system. May the husband sell his own
parcel of land to his wife?
No, because such sale expressly prohibited by law and is,
therefore, considered VOID.
In the preceding problem, who can attack the validity of the
sale?
Although the sale is void, not everybody is given the right to
assail the validity of the transaction. For instance, the
spouses themselves, since they are parties to an illegal act,
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cannot avail themselves of the illegality of the sale, the law
will generally leave them as they are. And also, the creditors
who became such only after the transaction cannot attack the
validity of the sale for the reason that they cannot be said to
have been prejudiced. Thus, only people who can question
the sale are the following: heirs of either spouse, as well as
prior creditors.
A husband sold his land to his wife. Later, he borrowed
money from C. The loan matured. When C discovered that
the husband did not have any cash or any property, he
decided to question the sale that had previously been made
in favor of the wife. Can the creditor go after such property?
No, for he was not yet a creditor at the time the transaction
took place. Therefore, it cannot be said that he had been
prejudiced by the sale.
A husband and wife were living under the conjugal
partnership system. Later, because of a quarrel, the wife left
the husband, without judicial approval. They have thus been
living apart for the last 10 years. Do you think that they can
now sell the property to each other?
They still cannot, for they are still husband and wife, and
there has been no separation of property agreed before the
marriage, nor a judicial separation of property elected during
the marriage.
Would your answer to the preceding problem be the same if
there has been legal separation?
No, the answer will not be the same. One of the effects of
legal separation is the dissolution of the conjugal
partnership. Once the conjugal partnership ends, the system
that will prevail is the separation of property system, and
here the sale can be validly done.
May a husband validly sell the wife’s property for her?
Yes, but only if he acts as an agent for her, with a specific or
special power of attorney to effectuate the sale.
What is the reason for a relative incapacity to buy?
Public policy prohibits the transactions in view of the
fiduciary relationship involved.
What is purchase thru another?
“Through the mediation of another”- this must be proved,
that is, that there was really an agreement between the
intermediary and the person disqualified; otherwise, the sale
cannot be set aside.
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What is purchase by agent himself?
An agent is not allowed, without his principal’s permission,
to sell to himself what he has been ordered to buy; or to buy
for himself what he has been ordered to sell. The fiduciary
relations between them estop the agent from asserting a title
adverse to that of the principal. And therefore such a sale to
himself would be ineffectual and void because it is expressly
prohibited by law.
What is purchase by attorney?
A lawyer is not allowed to purchase the property of his client
which is in litigation. To do otherwise would be a breach of
pre7ofessional conduct and would constitute malpractice. But
assigning the amount of the judgment by client to his attorney, who did
not take any part in the case where said judgment was rendered is
valid.
Meaning of “Any others specially disqualified by law”
This refers to those prohibited by reason of the fiduciary
relationship involved. This is so by the principle of “ejusdem
generis”. While aliens cannot buy land because of the
Constitution, they do not fall under the phrase “ any others
specially disqualified by law”.
What is the status of sale under Art. 1491?
Generally, sales entered into in disregard of the prohibition
under this article are not void but they are merely voidable.
At a mortgage foreclosure sale carried out as a result of a
judicial proceeding, A, attorney for the mortgage creditor
bought the mortgaged real estate. If A had bought the
property for himself, is the sale void or voidable?
The sale is void. This is so, because it is a contract prohibited
by law.
If A had bought the property for his client, did he violate the
absolute terms of Art.1491 of NCC?
If A bought the property for his client, there would be no
violation of the prohibition stated in Art. 1491 because then
there would be no breach of trust or confidence in such a
case. He would be merely acting as agent of his client; and
under the law, such client is not prohibited from buying the
property.
Suppose that a client executed a deed of assignment of the
property which was the object of litigation in favor of his
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lawyer who handled his case in said litigation, may such deed
of assignment be ratified?
The nullity of such prohibited contract is definite and
permanent and cannot be cured by ratification. In this
aspect, the permanent disqualification of public and judicial
officers and lawyers grounded on public policy differs from
the first thee cases of guardians, agents and administrators,
as to whose transactions, it has been opined that they may be
ratified by means of and in the form of a new contract, in
which case its validity shall be determined only by the
circumstances at the time of the execution of the contract.
Republic v Court of Appeals
L-59447, Dec. 27, 1982
The Iglesia ni Kristo, a corporation sole, is not a natural
person and has no nationality, cannot acquire alienable
lands of the public domain, and cannot therefore register the
same in its name under an Original Certificate of Title. It
may, however, get a Transfer Certificate of Title since the
land covered by this is no longer “public land”. The INK
should be allowed because the true owners are natural
persons.
Maharlika Publishing Corp v. Tagle
GR 65594, July 9, 1986
The wife of the Chief of the Retirement Division of the GSIS
is prohibited from bidding for the purchase of land
foreclosed by the GSIS. The sale to her of such property, after
a public bidding is void.
What is the Applicability of Relative Incapacity to Legal
Redemption, Compromises and Renunciation?
If a ward’s property is sold, the guardian, even if he be an
adjacent owner, and even if all the other requisites for legal
redemption are present, cannot exercise the right of legal
redemption.
What is Cross reference?
Refer to the following articles:
a. Legal redemption (Art. 1619, NCC);
b. Compromises (Art. 2028, NCC);
c. Renunciation (Arts. 6 and 1270, NCC).
EFFECTS OF THE CONTRACT WHEN THE
THING SOLD HAS BEEN LOST
Articles 1493 – 1494
What is the effect of Loss of Object before sale?
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This refers to a case of loss of the object even before the
perfection of the contract. It is evident that there would be
no cause or consideration; hence, the contract is void.
Observe that it is the seller here who naturally will have to
bear the loss.
Give an illustration.
I sold to Maria my house in Baguio which, unknown to both
of us, had been completely destroyed last night. The sale is
null and void. There is, thus, no need of annulling the
contract because there is nothing that has to be annulled.
Distinguish Complete Loss from Partial Loss.
Note the difference in the rules –
a. When the object has been COMPLETELY LOST;
b. When the object has been PARTLY or PARTIALLY LOST;
What are the available remedies in the preceding problem?
a. Withdrawal (or rescission);
b. Specific performance as to remainder by payment of proportional
price.
What are the remedies in case of Loss of Specific Goods?
The remedies are:
a. Cancellation (avoidance);
b. Or Specific performance as to the remaining existing goods (if the
sale was divisible).
OBLIGATIONS OF THE VENDOR
Articles 1495 -1581
What are the obligations of the vendor?
The following are the obligations of the vendor:
a. To transfer ownership (cannot be waived)
b. To deliver (cannot be waived)
c. To warrant the object sold (this can be waived or modified since
the warranty is not an essential element of the contract of sale)
d. To preserve the thing from perfection to delivery, otherwise he
can be held liable for damages (Art. 1163, NCC).
What are the effects of failure to deliver on time?
The effects of failure to deliver on time are:
a. If the seller promised to deliver at a stipulated period, and such
period is of the essence of the contract, but did not comply with
his obligation on time, he has no right to demand payment of the
price. As a matter of fact, the vendee-buyer may ask for the
rescission or resolution of the sale.
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b. If failure by seller to deliver on time is not due to his fault, as
when it was the buyer who failed to supply the necessary credit for
the transportation of the goods, delay on the part of the seller may
be said to be sufficiently excused.
What is the effect of non- delivery?
If the seller fails to deliver, and the buyer has no fault, the
latter may ask for the resolution or rescission of the contract.
What is the duty to deliver at execution sales?
When the property is sold at an execution sale, the judgment
debtor is not required to deliver the property sold right away.
What is the reason behind?
The reason is because of the redemption period. The
judgment debtor has a period of one year within which to
redeem the property. In the meantime, the buyer should not
take actual possession of the property. If he does so, an
action of forcible entry may be brought against him.
What is the remedy of the judgment debtor if the buyer takes
actual possession of the property within the redemption
period?
The judgment debtor would be entitled to get damages as
well as possession of the property, unless the period of
redemption has already expired , in which case he can only
get damages.
When does the period of redemption commence?
The period of redemption commences to run not from the
date of the auction or tax sale but from the day the sale was
registered in the office of the Register of Deed, so that the
delinquent registered owner or third parties interested in the
redemption may know that the delinquent property has been
sold.
How is ownership transferred?
As a rule, in the absence of agreement, ownership is not
transferred, even if sold, unless there has been a delivery.
A sold his piano to B, who immediately paid the price.
Because the piano was at the repair shop at the time the
contract was perfected, no delivery was made. Before
delivery could be made, C, a creditor of A, who has filed a suit
against him, attached the piano. What right has B over the
piano?
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 SALES

The piano not having been delivered to him by A, B has only necessarily mean physical or material delivery. It may be
a personal right to demand its delivery – for it is generally constructive, as when it is placed at the disposal of the other.
only delivery that transfers the real right of ownership.

In the preceding problem, may B oppose the attachment

levied by C?

Not having any right or ownership over the piano, B may not
legally oppose the attachment levied thereon by C.

Roque v. Lapuz
What is the effect of delivery to buyer (Who used another
money)? L-32811, March 31, 1980

In general, delivery of the property to a person who has The fact that a formal deed of conveyance was not made
purchased the property in his own name will give title to said indicates very strongly that the parties did not intend to
purchaser, and not to the owner of the money used. immediately transfer the ownership. What they intended was
to transfer ownership only after full payment of the price.

What is the effect if ownership is not transferred despite

delivery? What are the different kinds of delivery or tradition?

The delivery of the sugar to the warehouse of the buyer The different kinds of delivery are:
transfers ownership provided that the sale had already been
perfected but ownership in not transferred, although there a. Actual or real
has been perfection and delivery, if it was intended that no b. Legal formalities
such transfer of ownership will take place until full payment 1. Legal formalities
of the price. 2. Symbolical tradition or traditio simbolica
3. Traditio longa manu
4. Traditio brevi manu
5. Traditio constitutum possessorium
What is the meaning of tradition? c. Quasi-tradition

Tradition, or delivery, is a mode of acquiring ownership, as a

consequence of certain contracts such as sale, by virtue of
which, actually or constructively, the object is placed in the
control and possession of the vendee.
What is an example of Symbolical tradition or traditio
simbolica?
An example is the delivery of the key of the place where the
movable sold is being kept.

Albert v. University Publishing Co.

L-9300, Sept. 17, 1958 What is Traditio longa manu?

FACTS: The Plaintiff, author of a text in Criminal Law, This is by mere consent or agreement that if the movable
promised to deliver the manuscript of his book to the sold cannot yet be transferred to the possession of the buyer
defendant, his publisher, on or before Dec. 31, 1948. On Dec at the time of the sale.
16, 1948, plaintiff wrote a letter to the company stating that
the manuscript was already at its disposal, and ready for
printing should the company desire to publish it the next
month; that he was however keeping the manuscript in his What is Traditio brevi manu?
office because of fear of loss, destruction, or copying by
others, and because he desired to add new decisions of the If the buyer had already the possession of the object even
Supreme Court that might be published from time to time before the purchase, as w en the tenant of the car buys the car,
before the manuscript would be actually sent to the printer. that is, his possession as an owner.
He also stated, however, that if the company insisted on
having the manuscript right away, it should let him know
because he would then actually deliver it immediately.
What is Traditio constitutum possessorium?
ISSUE: Was there already delivery?
This is the opposite of tradition brevi manu. The possession
HELD: Yes, for the above-mentioned facts constitute a
as owner has changed, for example, to possession as a lessee.
delivery of the manuscript. Delivery indeed does not

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What is an example of traditio constitutum possessorium?
I sold my car but continued to possess it as a lessee of the
purchaser.
What is Quasi-tradition?
It is the delivery of rights, credits or incorporeal property made
by:
a. Placing titles of ownership in the hands of a lawyer;
b. Or allowing the buyer to make use of the rights.
Vitorias v. Leuenberger and CA
GR 31189, March 31, 1987
Where there is no express provision that title shall not pass
until payment of the price and the thing sold has been
delivered, title passes from the moment the thing sold is
placed in the possession and control of the buyer. Delivery
produces its natural effects in law, the principal and most
important of which being the conveyance of ownership
without prejudice to the right of the vendor to claim payment
of the price.
What is the effect of sale that is made through a public
instrument?
When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the
thin which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
What is constructive delivery?
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.
What are the two kinds of constructive delivery?
The two kinds of constructive delivery are:
a. Legal formalities – This applies to real and personal property
since the law does not distinguish.
b. Tradition simbolica
Power Commercial & Industrial Corp v CA
Spouses Reynaldo & Angelito R Quimbao, and PNB
GR 119745, June 20, 1997
84 SCAD 67
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Symbolic delivery, as species of constructive delivery, effects
the transfer of ownership thru the execution of a public
document. Its efficacy can, however, be prevented if the
vendor does not possess control over the thing sold, in which
case this legal fiction must yield to reality.
The key word is control, not possession of the land.
In constructive delivery, what are the three requisites in
order that ownership may be transmitted?
1. The seller must have control over the thing; otherwise how can he
put another in control?
2. The buyer must be put under control
3. There must be the intention to deliver the thing for purposes of
ownership( not, for example, of merely allowing the ownership or
examination of the keys, nor for the purpose of having said keys
repaired).
What are the rules on Constructive Delivery?
a. If a seller has no actual possession, he cannot transfer ownership
by constructive delivery. The reason is that in every kind of
delivery, the transferee should have control, but here control
cannot be had since it is in the possession of another.
b. There can be no constructive delivery by means of a public
instrument if there is a stipulation to that effect. Hence the
Supreme Court has held that if there is a clause to the effect that
the buyer “will take possession after four months,” at the end of 4
months it cannot be said that there is an automatic delivery. At
said time, there must still be a delivery. The same is true in a case
of a sale by installment, where it is stipulated that title should not
be transferred till after the payment of that last installment; or
where the vendor reserves the right to use and enjoy their
property until the gathering of the crops still growing.
c. The Civil Code does not provide that the execution of the deed is a
conclusive presumption of the delivery of possession. What it says
is that the execution thereof shall be equivalent to delivery which
means that the disputable presumption established can be
rebutted by clear and convincing evidence, such as evidence of the
fact that the buyer did not really obtain the material possession of
the building. Hence, it may be said that the execution of the
contract is only presumptive delivery.
What is the effect of non-payment of the price?
Execution of the deed of sale, in the absence of any defect,
transfers delivery, even if the selling price, in whole or in part
has not yet been paid, for it is not payment that transfers
ownership.
Puatu v Mendoza and David
64 Phil. 457
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FACTS: Puatu sold a parcel of land to Mendoza for P39,000 in public
instrument. The amount of P14,200 was paid, leaving a balance of
P24,800. The land was mortgaged to Puatu as security for the balance.
Puatu sued for the balance. Mendoza claimed that the sale was not
absolute since not all the purchase price has been paid and that
therefore he should be refunded what he had already paid.
HELD: The sale was consummated and absolute, and the defendant
must now pay the balance. The plaintiff has done all he is required to
do in the contract of sale. The land has already been delivered by the
execution of the public instrument. The buyer must now comply with
his obligations.
What does delivery thru execution of a quedan mean?
If the parties in a sale intended that the copra sold should be
placed then and there under the control of the buyer the
issuance of a quedan, delivery is effected upon the execution
of thje quedan, and the subsequent loss of the thing sold
should be borne by the purchaser.
A sold a piano to B by private instrument for P500,000. Who
had ownership of the piano at the moment next after B had
paid the P500,000 to A? Explain.
At the moment next after B had paid the P500,000 to A,
ownership over the piano still resided in A, the execution of
the private instrument not being a mode of transferring
ownership. Payment of the price without tradition or
delivery is not a mode of acquiring ownership over the piano.
A person bought in Iloilo a tractor for a certain price. It was
agreed that delivery of the tractor should be made within a
certain time at the warehouse of the purchaser in Manila,
and the balance of the price should be paid at the moment of
delivery. While enroute to Manila, the tractor was delivered
by the vendor to a third person to secure a loan obtained by
him for his personal convenience. Do you think that the
purchaser can recover the tractor from the third person?
Why?
No, because no delivery was ever made to the buyer, hence
he never became the owner of the tractor. Not being the
owner he had no real right over the property, so he cannot
bring an action to recover if from an individual in lawful
possession of the tractor.
If the thing sold cannot be transferred to the possession of
the vendee at the time of the sale, what is the remedy?
The delivery of movable property may likewise be made by
the mere consent or agreement of the contracting parties, if
the thing sold cannot be transferred to the possession of the
vendee at the time of the sale, or if the latter already had it in
his possession for any other reason.
What is the basis of traditio constitutum possessorium?
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The basis of is traditio constitutum possessorium consent.
What is the effect if the seller continues to occupy the land as
tenant?
Where a seller continues to occupy the land as tenant, the
possession, by fiction of law, is deemed to be constituted in
the buyer.
How are incorporeal properties delivered?
The incorporeal properties are delivered by:
1. Constructive tradition- execution of public instrument
2. Quasi-tradition – placing of titles of ownership in the possession
of the buyer, or the use by the buyer of his rights, with the seller’s
consent.
What is the effect of delivery of land title deeds?
The delivery of land title deeds is equivalent to a delivery of
the property itself.
What is transaction “on sale or return”?
When goods are delivered to the buyer "on sale or return" to
give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer of
delivery, but he may revest the ownership in the seller by
returning or tendering the goods within the time fixed in the
contract, or, if no time has been fixed, within a reasonable
time.
What kind of sale is the above-stated problem?
This is a sale that depends on the discretion of the buyer; it is
a sale with a resolutory condition.
What are transaction “on approval or on trial or
satisfaction”?
When goods are delivered to the buyer on approval or on
trial or on satisfaction, or other similar terms, the ownership
therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller
or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the
goods, on the expiration of such time, and, if no time has
been fixed, on the expiration of a reasonable time. What is a
reasonable time is a question of fact.
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What kind of sale is the above-stated problem?
This is a sale really dependent on the quality of the goods; it
is a sale with suspensive condition. Here, the buyer may in
time become the owner under the conditions specified in the
law; otherwise, he seller is still the owner.
(A) S delivered to b a refrigerator “on sale or return”. Did B
become owner upon delivery?
Yes, in view of the delivery. Of course, B may revest the
ownership in S by returning or tendering the refrigerator to
him within the time fixed in the contract; or if no time has
been fixed, within a reasonable time.
In the preceding problem, can B return the goods even if he
finds nothing wrong with the quality of the goods?
Yes, for discretion here is with the buyer.
In letter (A), if B does not return the refrigerator in due time,
what will be the consequences of his inaction?
The sale will be considered absolute, and the price may be
recovered since after all, delivery had been made.
In letter (A), if B had not yet returned the goods, does he
have to pay for them even if the refrigerator has been
destroyed by a fortuitous event?
Yes, for ownership has been transferred to him, and being
the owner, he bears the loss.
In a case of “on sale or return”, does the buyer has the right
to return if the thing is abused?
In case of “on sale or return”, the buyer has no right to return
if he has materially abused the condition of the thing. The
sale in this case becomes absolute.
What about if the objects deteriorate without the fault of the
buyer?
In case of “on sale or return”, if the objects deteriorate
without the fault of the buyer, the buyer can still return,
provided the reasonable period for returning has not yet
lapsed.
Give the difference between a contract “on sale or return”
and a delivery of property with option to purchase.
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In the first, ownership is transferred at once; in the second,
there is no transfer of ownership till the owner agrees to buy.
X, the owner of a certain jewelry, entrust them to Y for sale
or return of the jewelry upon a specified period of time. Y
sells the jewelry to Z, but retains the price. Can X obtain
possession of the jewelry from Z? Why?
This problem calls for a distinction in view of the use of the
words “ for sale or return,” a phrase which has technical
signification in the law of SALES although of course the
phrase used in SALEs in “on sale or return” but there’s no
such technical meaning in the law of AGENCY.
What are some rules on Sale “on approval or trial or
satisfaction”
Some of the rules are:
1. The risk of loss remains with seller, although there has been
delivery, until the sale becomes absolute.
2. Risk of loss remains with seller although there has been delivery,
if the sale has not yet become absolute.
3. Buyer must give goods a trial except when it is evident that it
cannot perform the work intended.
4. Period within which buyer must signify his acceptance
commences to run only when all the parts essential for the
operation of the object have been delivered.
5. If it is stipulated that a third person must satisfy approval or
satisfaction, the provision is valid, but the third person must be in
good faith. If refusal to accept is not justified, seller may still sue.
6. Generally, the sale and delivery to a buyer who is an expert on the
object purchased is NOT obviously a sale on approval, trial, or
satisfaction.
What is the exception in the second paragraph of the above-
mentioned rules?
The exceptions are:
1. If buyer is at fault;
2. If buyer had expressly agreed to bear loss.
What is reservation of ownership despite delivery?
This applies only to the sale of “specific goods. Although
delivery has been made, seller may reserve ownership till
certain conditions are fulfilled. Of course, the most
important controlling element is the intention.
Chrysler Phil. Corp. v Court of Appeals
L-55684, Dec. 19, 1984
18

As a general rule, the seller, as the owner, bears the risk of
loss in line with the principle of “res perit domino” (owner
bears the loss).
What are the instances when seller is still owner despite
delivery?
The instances are:
1. Express stipulation.
2. If under the bill of lading the goods are deliverable to seller or
agent or their order.
3. If bill of lading, although stating that the goods are to be delivered
to buyer or his agent, is kept by the seller of his agent.
4. When the buyer although the goods are deliverable to order of
buyer, and although the bill of lading is given to him, does not
honor the bill of exchange sent along with it. But of course
innocent third parties (innocent holders and purchasers for value)
should not be adversely affected.
What is an example?
S sold B a radio; the radio was shipped on board a carrier.
The bill of lading stated that the radio is deliverable to the
order of B. The bill of lading was sent to B, accompanied by a
bill of exchange which B was supposed to honor. If B does
not honor the bill of exchange, but wrongfully retains the bill
of lading, ownership remains with the seller. If B sells the bill
of lading to X, X can obtain ownership of the goods if he is an
innocent purchaser.
Who bears the risk of loss of specific goods?
The risk of loss of specific goods shall be borne by the seller.
A agreed to sell to B his cat. Before the actual sale takes
place, the cat dies thru no fault of A. Is A liable to B for the
price?
No, the destruction of the cat before ownership passed
excuses performance. If the dog had died after ownership
had passed, the loss would be B’s even though there was no
delivery yet.
A sold to B a cat for 200.00. It was agreed that B will pay for
and get the animal the next day. Before B can pay the
purchase price, the dog dies through fortuitous event. Must B
still pay for the animal?
Yes, since he was already the owner even if there was
delivery yet. Under American law, there is no need for
delivery to transfer ownership insofar as specific goods are
concerned if the contract is one of sale, and not a contract to
sell.
Who between the vendor and the vendee must bear the risk
of loss after the contract of sale has been perfected, but
before the thing sold has been delivered?
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
If the object of a contract is lost before delivery, it is the
vendor who is still the owner and must bear the loss and not
the vendee. This is in conformity with the principle of res
perit domini. The owner of the thing must bear the risk of
loss.
What did the buyer acquires after the seller sold the thing to
the former?
As a general rule, the buyer acquires only the rights which
would the seller have over the thing sold to him. This rule
was based on the principle “nemo dat quod non habet”.
Are there any exceptions to the rule?
Yes, as when, the owner of the goods by his conduct
precluded from denying the seller’s authority and under the
second paragraph (1, 2, 3) of art. 1505.
A sells a parcel of land to B with the consent of the owner C.
Can C declare the sale to be null and void because A has no
authority to sell such property?
No, C is stopped from denying A’s authority to sell.
A bought a pair of shoes from a shoe store and repair shop. It
was later discovered, however, that the shoes did not did not
belong to the store but to a customer who had left it there for
repair. Did A acquire good title to the shoes?
Yes, although the store was not the owner of the shoes. The
shoes were purchased at a merchant’s store. A contrary rule
would retard commerce.
B, in good faith, has purchase a diamond ring from C, his
friend. C gave B a bill of sale. Later on, A identified the ring
as one she had lost about a year ago. There is no question as
to the veracity of O’s claim. In the meantime, C has
disappeared. What advice would you give B in reference to
O’s demand that the ring be returned to him?
I would advise B to return the ring to O, and not expect to be
reimbursed by O the amount he had paid C. the law says that
one who has lost any movable may recover it from the person
in possession of the same, without such possessor being
entitled to reimbursement, except if the acquisition in good
faith had been at the public sale or auction, or at a
merchant’s store, fair, or market.
What is a store?
It is the place where goods are kept and sold by one engaged
in buying and selling.
A bought a car from B, an insane person, and in turn sold the
car to C who is in good faith. Was the sale valid?
Yes, the sale is valid. C becomes the owner of the car after it
has been delivered to him. However, considering that the
contract between A and B is concerned, the contract between
them is considered as voidable contract. Hence, the contract
19

between A and C can only be valid before the original
contract has been annulled.
Can a buyer acquire title from a theft, a person who stole and
then sold the goods to him?
No, because the owner has been unlawfully deprived of the
thing. Hence, the true owner can get it back without
reimbursement.
How about if the buyer acquired the stolen automobile in
good faith at a public auction? Does he have a legal title over
it?
No, under the law, even if he acquired it at a public auction
in good faith, he acquires nothing over it. The true owner of
the thing can get it back however the buyer is entitled for
reimbursement.
What are the documents included by art. 1507?
The documents referred to by art. 1507 are a) any bill of
lading b) dock warrant c) quedan d) warehouse receipt or
order e) any other document used as proof of possession or
as authority to transfer the goods represented by the
document.
When are the documents considered to be negotiable?
The documents are negotiable if the goods are deliverable to
bearer or to the order of a certain person.
What is the effect of an error or the incorrectness in the
description of the goods?
A mere typographical error or grammatical error does not
affect the negotiability of the document, for what should be
considered is the intent. And also a mere incorrectness in the
description of the goods will not destroy the negotiability of
the document
How negotiable document of title is negotiated?
It is negotiated by mere delivery or endorsement plus
delivery.
When a mere delivery is sufficient?
A mere delivery is sufficient if deliverable to bearer or if
deliverable to the order of a certain person and that person
has indorse it in blank by putting his name at the back of the
document and by signing his name at the back of the
document.
What is the effect of indorsement and delivery?
Indorsement and delivery of a negotiable quedan ipso facto
transfer possession and ownership of the property referred to therein.
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
What is the effect of undated indorsement?
It is not necessary to date an endorsement because no
additional protection is given thereby to businessman. As a
matter of fact, to require dating would be to impede business
transactions.
The document says “deliver to the order of Mr. X.” In order
to negotiate it, what would be the proper way of doing it?
Mr. X must sign his name at the back and then deliver. Mere
delivery without signing is not sufficient.
What is a non-negotiable instrument?
A non-negotiable instrument is an instrument which is not
negotiable, an instrument which does not meet the
requirements laid down to qualify an instrument as a
negotiable one, or an instrument which in its inception was
negotiable but has lost its negotiability.
A negotiable document of title was mark “non-negotiable” by
a warehouseman. Is it still negotiable?
Yes, insofar as the various holders of the note are concerned,
the note is still negotiable. Regarding the intent and the
liability of the maker, this article does not deal with the
same.
What is the effect of delivery when the document cannot be
negotiated by mere delivery?
The effect is that a non-negotiable document cannot be
negotiated and the indorsement of such document gives the
transferee no additional right.
A document of title was non-negotiable. Mat it still be given
or assigned to another?
Yes, but this does not have the effect of a negotiation. It is a
mere transfer or assignment.
A document of title contained the words “deliver to Mr. X.”
May it be negotiated?
No, but it may be transferred.
Suppose it is indorsed by Mr. X?
The indorsement is useless and does not give the indorse any
additional right. There is in this case only a transferor
assignment.
What are the requirements so that a document is considered
negotiable?
An instrument to be negotiable must conform to the following
requirements:
a) It must be in writing and signed by the maker and drawer;
b) Must contain an unconditional promise or order to pay a
sum certain in money;
20

c) Must be payable in demand or at a fixed or determinable
future time;
d) Must be payable to order or bearer; and
e) Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable
certainty.
Who may negotiate negotiable document of title?
The owner of the document may negotiate or by any person
to whom the possession or custody of the document has been
entrusted by the owner .
A document of title contained the following words. “deliver
to the order of X or to the order of the person to whom this
document has been entrusted by X.” Later, X entrusted the
document to Y. May Y negotiate the same by indorsement?
Yes, (see art.1512, No. 2, 1st paragraph )
Who bears loss in case of unauthorized negotiation?
If the owner of negotiable document of title entrusts the
document to a friend for deposit, but the friend betrays the
trust and negotiates the document by delivering it to another
in good faith, the said owner cannot impugn the validity of
the negotiation. As between the two innocents persons, he
who made the loss possible should bear the loss, without
prejudice to his right to recover from the wrongdoer.
What are the rights which are acquired by a person to whom
a negotiable document of title has been duly negotiated?
A person to whom a negotiable document of title has been duly
negotiated acquires thereby:
a) Such title to the goods as the person negotiating the
document to him had or had the ability to convey to the
purchaser in good faith for value and also such title to he
goods as the person to whose order the goods were to be
delivered by the terms of the document had or had the
ability to convey to purchaser in good faith for value; and
b) Those mentioned in no.2 of article 1513.
What constitute a holder in due course?
A holder in due course is a holder who has taken the instrument
under the following conditions:
a) That it is complete and regular upon its face;
b) That he became the holder of it before it was overdue, and
without notice that it had been previously dishonored, if
such was the fact;
c) That he took it in good faith and for value;
d) That at the time it was negotiated to him, he had no notice of
any infirmity in the instrument, or defect in title of the
person negotiating it.
What are the rights of a person to whom document has been
transferred?
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
The rights of a person to whom a negotiable document of title has
been transferred, or of the transferee of a non-negotiable
document are as follows:
a) The title to the goods as against the transferor;
b) The right to notify the bailee of the transfer thereof; and
c) The right to acquire the obligation of the bailee to hold the
goods for him.
Are these rights of a transferee absolute?
No, the right if the transferee is not absolute as it is subject
to the terms of any agreement with the transferor. He merely
steps into the shoes of the transferor.
What is the effect of attachment of goods covered by non-
negotiable document?
If it is a non-negotiable document of title, it does not effect
the delivery of the goods covered by it. Accordingly, before
notification, the bailee is not bound to the transferee whose
right may defeated by a levy of an attachment or execution
upon the goods by the creditor of the transferor or by a
notification to such bailee of the subsequent sale of the
goods.
What is the effect of attachment of goods covered by
negotiable document?
If the document is negotiable, the goods cannot be attached
or be levied under an execution unless the documents be first
surrender to the bailee of its negotiation enjoined.
What is the right of a transferee?
A mere transferee does not acquire directly the obligation of
the bailee to hold for him.
What should the transferee must do in order to acquire
direct obligation?
The transferee, in order to acquire direct obligation, he must
notify the bailee.
When shall a negotiation be made?
A negotiation shall take effect as of the time when the
indorsement is actually made.
What is the rule where the document is subsequently
indorsed?
For the purpose of determining whether the transferee is a
purchaser for value in good faith without notice, the
negotiation shall take effect as of the time when the
indorsement is actually made, not at the time the document
is delivered.
What are the rights of a person to whom an order document
of title has been delivered which is not properly negotiated
by mere delivery?
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The following are his or her rights:
a) The rights to the goods as against the transferor; and
b) The right to compel the transferor to indorse the document.
Are these rights absolute?
No, if the intention of the parties is that the document should
be merely transferred, the transferee has no right to require
the transferor to indorse the document.
What are the implied warranties of the person who
negotiates a document of title by indorsement or delivery?
A person who for value negotiates or transfers a document of title
by indorsing or delivery, including one who assigns for value a claim
secured by a document of title unless a contract intention appears,
warrants:
a) That the document is genuine;
b) That he has legal right to negotiate or transfer it;
c) That he has knowledge of no fact which would impair its
validity;
d) That he has a right to transfer the title if the goods and that
the goods are merchantable or fit to a particular purpose,
whenever such warranties would have been implied if the
contract of the parties had been to transfer without a
document of title of the goods represented thereby.
What are the liability of a person negotiating or transferring
a document which he knows that the document was a forgery
or he had stolen it, or he had the knowledge that that the
document was invalid for want of consideration, or the goods
has been damaged?
The liability of that person is limited only to a violation of the
four warranties set forth in Article 1516. One who assigns for
value a claim secured by a document of title is also liable for
violation of any of the for warranties.
What is the effect of indorsee’s knowledge of fraud
indorsement?
If the indorsee knows that any of the former indorsements is
a forgery, he does not acquire a valid title to the document.
What is the rule for failure of the bailee to comply with his
obligation?
The bailee upon failure to comply with their obligations does
not make the present indorsers liable because indorser
warrants only the things mentioned in article 1516.
When negotiation is not impaired by fraud, mistake, duress,
lost, theft, accident, or conversion?
A negotiable document maybe negotiated by any person in
possession of the same , however such possession may have
been acquired. In other words, it may be negotiated even by
theft or finder and the holder thereof would acquire a good
title thereof if he paid the value therefor in good faith
without notice of the seller’s defect of title.
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
A document of title contained the words “deliver to bearer.”
The document was stolen by T.J subsequently indorse it to
C.J, a purchaser in good faith. Is the negotiation to C.J valid?
Yes, notwithstanding the theft by T.J, C.J is a purchaser in
good for value in good faith; that is, C.J did not know that
the document had been stolen by T.J.
Was the theft of the goods would invalidate the transaction?
No, under article 1518, the rule speaks of a theft document
and not the theft of goods itself.
What is the rule with regards to the attachment or levy upon
the goods covered by negotiable document in possession of
the bailee?
The rule is that, while the goods are in the possession of the
bailee, the goods cannot be attached or levied under an execution
unless:
a) The document must be first surrender; or
b) Its negotiation is enjoined; or
c) The document is impounded by the court.
What is the effect if the depositor is not the owner?
The provisions of article 1519 do not apply if the person
depositing is not the owner of the goods or one who has no
right to convey the title to the goods binding the owner. This
prohibition is for the protecti0n of the bailee since he could
be made liable to a subsequent purchaser for value in good
faith.
Can they compel the bailee to surrender the goods?
No, the bailee cannot be compelled to surrender the goods except:
a) If the document is surrendered to him;
b) Or if the document is impounded by the court.
What is the right given to a creditor whose debtor is the
owner of a negotiable document of title?
Under Article 1520 of the Civil Code, a creditor
whose debtor is the owner of a negotiable document of title
shall be entitled to such aid from the courts of appropriate
jurisdiction by injunction and otherwise in attaching
document in satisfying the claim by means thereof as is
allowed at law or in equity in regard to property which
cannot readily be attached or levied upon by ordinary legal
process.
May the document of title of the debtor in regard to property
which cannot readily be attached or levied upon by ordinary
legal process, nevertheless, be the subject of an injunction or
attachment?
Yes, provided the debtor is the owner of a
negotiable document of title. In this case, the creditor shall
be entitled to such aid from courts of appropriate jurisdiction
by injunction and otherwise in attaching such document or
in satisfying the claim by means thereof as is allowed at law
or in equity. (Article 1520)
22

X is the creditor of Y, the owner of a negotiable document of
title covering goods delivered to a bailee by the latter.
Generally there can be no attachment or levy over the goods
except in those instances provided under Article 1519 of the
Civil Code. In the event that attachment or levy is allowed,
what is the protection given to X as the creditor of Y?
A creditor of the owner of a negotiable document
of title, like X, has the protection provided under Article
1520 of the Civil Code. X shall be entitled to such aid from
courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity.
X is the creditor of Y, the owner of a document of title
covering goods subject of attachment or levy. X is now
claiming the protection of a creditor under Article 1520 of
the Civil Code. Is X correct?
No, X is not correct. The protection granted under
Article 1520 applies only to the creditor of the owner of a
negotiable document of title covering goods subject of
attachment or levy under Article 1519.
What is the requirement so that the creditor of the owner of
a document of title covering goods subject of attachment or
levy is protected under Article 1520 of the Civil Code?
It is required that the debtor is the owner of a negotiable
document of title.
Angelina lent money to Brad, the owner of a negotiable
document of title covering goods delivered to a bailee by the
latter. Generally there can be no attachment or levy over the
goods except in those instances provided under Article 1519
of the Civil Code. If the bailee is forced to surrender the
goods, what is the remedy available to Angelina.
A creditor of the owner of a negotiable document
of title, like X, has the protection provided under Article
1520 of the Civil Code. X shall be entitled to such aid from
courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the
claim by means thereof as is allowed at law or in equity.
Angelina is the creditor of Brad, the owner of a document of
title covering goods which are now being surrendered to by
Jennifer, the depositary, because the document of title has
been impounded by the court. Angelina is now claiming the
protection of a creditor under Article 1520 of the Civil Code.
Is Angelina correct?
No, Angelina is not correct. The protection granted
under Article 1520 applies only to the creditor of the owner
of a negotiable document of title covering goods subject of
attachment or levy under Article 1519. The given problem
does not mention that the document of title covering the
goods is negotiable
What is the condition so that the creditor of the owner of a
document of title covering goods subject of attachment or
levy may avail of the protection of injunction from the
courts?
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
Under Article 1520 of the Civil Code, it is required
that the debtor is the owner of a negotiable document of
title.
If the debtor of a creditor is the owner of a negotiable
document of title, what are his remedies under the law if the
goods covered by the document is being subjected to
attachment?
Under Article 1520 of the Civil Code, a creditor
whose debtor is the owner of a negotiable document of title
shall be entitled to such aid from the courts of appropriate
jurisdiction by injunction and otherwise in attaching
document in satisfying the claim by means thereof as is
allowed at law or in equity in regard to property which
cannot readily be attached or levied upon by ordinary legal
process.
May the document of title of the debtor in regard to property
which cannot readily be attached or levied upon by ordinary
legal process, nevertheless, be the subject of an injunction?
Yes, provided the debtor is the owner of a
negotiable document of title. In this case, the creditor shall
be entitled to such aid from courts of appropriate jurisdiction
by injunction and otherwise in attaching such document or
in satisfying the claim by means thereof as is allowed at law
or in equity. (Article 1520)
What will govern as to the place of delivery of the goods
subject of a contract of sale?
Under Article 1521 of the Civil, it is the agreement
of the parties, express or implied, which shall govern the
place of delivery of the goods. In the absence of an
agreement, it shall be based on the usage of trade. If there is
no such usage, the buyer must get them at the seller’s
business of place or residence.
Is there an exception to the rule that in the absence of an
agreement, express or implied, as well as usage of trade, the
buyer must get the goods at the seller’s business of place or
residence?
Yes, if the goods that are the subject of sale are
specific and the parties know when the contract was made
that such goods were in some other place, then the delivery
shall be in the place where the specific goods are found. (Art
1521)
What prevails in case there is a disagreement as to the place
of delivery of the goods, the agreement of the parties or the
usage of trade or business?
Based on the Obligatory Force of Contracts, the
agreement of the parties, whether express or implied, as to
the place of delivery of the goods subject of the contract of
sale shall prevail over the usage of trade or business. (Art
1521)
Will there be sufficient delivery if the goods were delivered at
a place near the original location agreed upon by the parties?
23

Generally, there will be no sufficient delivery in
this case. Article 1521 provides that what governs is the
agreement between the parties, whether express or implied
as to the place of delivery. However, the Supreme Court has
ruled in one case that there is sufficient delivery when a
fortuitous event prevents delivery at the actual place
agreed upon, forcing a delivery at a place near the original
one. (Bean, Admr. v. The Cadwallader Co., 10 Phil. 606)
If delivery was made at a different place agreed upon and the
buyer accepted the goods without complaint, can the buyer
later on claim that there no “delivery” contemplated under
the law?
No, the buyer cannot later on claim breach of the
obligation under the contract of sale. In Sullivan v. Gird,
1921, 22 Ariz. 332, it was held that there is sufficient delivery
when the original place is changed, but the buyer accepted
the goods at a different place without complaint so long as
the seller was in good faith.
If the contract of sale does not state the time when the seller
shall send the goods to the buyer, when must the seller send
said goods?
Where by a contract of sale the seller is bound to
send the goods to the buyer, but no time for sending them is
fixed, the seller is bound to send them within a
reasonable time. (Art. 1521, par 2)
What are the circumstances that may be considered when no
time has been fixed for the delivery of the goods subject of a
contract of sale?
The seller must send the goods “within a
reasonable time” considering the following factors: 1)
character of the goods; 2) purpose intended; 3) ability of
seller to produce the goods; 4) transportation facilities; 5)
distance thru which the goods must be carried; and 6) usual
course of business in that particular trade. (Smith, Bell and
Co. v. Sotelo Matti, 44 Phil. 874).
What is the effect on the seller’s obligation to deliver the
goods if the same are in the hands of a third person?
Article 1521 of the Civil Code provides, “where the
goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to
the buyer unless and until such third person acknowledges to
buyer that he holds the goods on the buyer’s behalf.”
However, this rule applies only to sale of goods already
existing at the time of the sale, but in the hands of a third
party, not when the goods are still to be manufactured.
Who shall shoulder the expenses for putting the goods in a
deliverable state?
The seller, unless otherwise agreed, shall shoulder
the expenses (Art. 1521, last par.) This rule also applies even
if the buyer has the duty to take delivery.
In a contract of sale, when must demand or tender of
delivery be made?
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
In the absence of agreement, demand or tender of
delivery shall be made at a reasonable hour.
What may the buyer do if the seller delivers a quantity of
goods less than what was contracted?
Under Art 1522, par. 1 of the Civil Code, the buyer
may reject the goods. However, the buyer may also accept
the goods delivered at the contract rate.
If the seller delivers a quantity of goods less than what was
contracted and the buyer accepts or retains such goods
knowing that the seller is not going to perform the contract
in full, at what rate must the buyer pay for the goods?
Article 1522 provides that the buyer must pay the
goods delivered at the contract rate.
If the seller delivers a quantity of goods less than what was
contracted and the buyer has used or disposed of the goods
delivered before knowing that the seller is not going to
perform his contract in full, at what rate must the buyer pay
for the goods?
In this case, the buyer shall not be liable for more
than the fair value to him of the goods so received. (Art 1522,
par. 1, 2nd sentence)
Angelina bought 10 bottles of perfume from Brad, only 7 of
which arrived. She sold 5 bottles to her friends thinking that
the others were coming. However, Brad is unable to deliver
the remaining 3 bottles. What price must Angelina pay for
the bottles?
Since Angelina has disposed of the goods delivered
before he knows that the seller is not going to perform his
contract in full, she shall not be liable for more than the fair
value to him of the goods received. (Art 1522, par. 1, 2nd
sentence)
What may the buyer do if the seller delivers a quantity of
goods larger than what was contracted?
Under Art 1522, par. 2 of the Civil Code, the buyer
may accept the goods agreed upon and reject the rest.
However, the buyer may choose to accept all the goods but
he must pay for them at the contract rate.
Angelina bought from Brad 500 cans of sardines at Php 12.00
each. 1000 cans were delivered Brad. What are the rights of
Angelina?
Angelina may accept the 500 and return the other
500 cans. She may also choose to accept all but she must pay
for them at the contract price of Php 12.00 per can.
If a buyer agrees to purchase a designated amount but
actually orders a lesser amount, can the seller complain if he
decided to deliver the lesser quantity?
No, the seller cannot complain, this is a clear case
of a waiver. (Quiroga v. Parsons Phil. 501).
24

When is there “implied acceptance” of excess goods
delivered?
Acceptance, even if not express, is implied when
the buyer exercises acts of ownership over the excess goods.
What may the buyer do if the seller delivers the goods agreed
upon mixed with goods of a different description?
Under Article 1522, par 3, the buyer may accept
the goods which are in accordance with the contract and
reject the rest.
When may the buyer reject all the goods delivered in case
what was delivered is of larger quantity or of a different
quality?
Under Article 1522, par. 4, the buyer may reject
the whole of the goods delivered in these instances if the
subject matter is indivisible.
When is delivery to a carrier considered as delivery to buyer?
Generally, delivery to a carrier is deemed delivery
to the buyer if it is the duty of the seller to send the goods to
the buyer. This rule, however to some conditions provided
under Article 1523 of the Civil Code.
Is the seller required to enter into a contract with the carrier
on behalf of the buyer to have the effect of the required
delivery?
Article 1523, par 2 of the Civil Code states that if
the carrier is not authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer as
may be reasonable, having regard to the nature of the goods
and the other circumstances of the case.
What is the effect if the seller fails to make the contract with
the carrier on behalf of the buyer if the latter has not
authorized said carrier?
The 2nd sentence of Article 1523, par 2 states that if
the seller omits to make such contract when required to do
so, and the goods are lost or destroyed in course of transit,
the buyer may decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller responsible in
damages.
What is the duty of the seller in case the circumstances of the
delivery would usually require the goods to be insured
during their transit?
Article 1523, par 3 states that unless otherwise
agreed, where goods are sent by the seller to the buyer under
circumstances in which the seller knows or ought to know
that it is usual to insure, the seller must give such notice to
the buyer as may enable him to insure them during their
transit.
What are the consequences if the seller fails to notify the
buyer of the need to insure the goods during their transit?
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The goods shall be deemed to be at the risk of the
seller during such transit. (Art. 1253, par 3)
What are the two kinds of Delivery to Carrier? Explain each.
Delivery to carrier may be: 1) C.I.F. (cost,
insurance, freight) where the selling price includes insurance
and freight and shall be shouldered by the seller; or 2)
F.O.B. (free on board) where the property passes as soon as
the goods are delivered aboard the carrier and the buyer as
the owner of the goods is to bear all expenses after they are
so delivered.
What are the different kinds of F.O.B. sale and what are the
consequences of each kind?
The F.O.B. sale may be: 1) f.o.b. at the place of
shipment (the buyer must pay the freight); 2) f.o.b.
alongside the vessel (from the moment the goods are
brought alongside the vessel, the buyer must pay for the
freight or expenses); or 3) f.o.b. at the place of
destination (the seller must pay the freight since the
contract states “free on board till destination”).
What are the obligations of the seller and the buyer in
contracts of “c.i.f.” sale? In “f.o.b.” sale?
In “c.i.f.” (cost, insurance, freight) sales of goods,
the buyer pays a fixed price, while the seller pays the
insurance and freight up to the place of destination. In other
words, the seller is responsible for all expenses, such as
insurance and freight, pays for all charges, such as export
taxes and other charges or fees, and be responsible for the
goods up to the point of destination. The buyer, on the other
hand, who paid a fixed price, shall accept delivery of the
goods at the point of destination, pays all charges, such as
taxes and duties at such point, and be responsible for the
goods once the seller’s responsibility ceases.
In “f.o.b.” (free on board) sales of goods, the goods
are shipped by the seller to a certain point without any
expense to the buyer, but after delivery at such point all
subsequent expenses incident to the transportation and
delivery shall be paid by the buyer. Thus, if the sale is “f.o.b.”
at the place of shipment, the buyer must pay the freight, if
“f.o.b.” at the place of destination, the seller must pay the
freight.
What are the kinds of contract of sale when the seller is
obliged to pay the freight when goods are delivered through a
carrier?
The seller is obliged to pay the freight if the sale is either 1)
“c.i.f.” sale or 2) “f.o.b.” at the place of destination.
Angelina in Baguio agrees to ship goods to Brad at Dagupan
City, “F.O.B. Dagupan City.” Before the goods reach Dagupan
City, they are destroyed by a fortuitous event. Who bears the
loss?
Angelina bears the loss because ownership (title)
does not pass till the goods reach Dagupan City. Hence, the
seller bears the loss. If the price has been given him, he must
return the same. If no payment has yet been made, he cannot
successfully demand the price from the buyer.
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When is the vendor not bound to deliver the goods subject of
a Contract of Sale?
Under Article 1524 of the Civil Code, the vendor
shall not be bound to deliver the things sold if the vendee has
not paid him the price or if no period for the payment has
been fixed in the contract.
If the vendee has not paid the vendor the price, is the latter
obliged to deliver the things sold to the former?
No, the vendor is not bound to deliver the things
sold if the vendee has not paid him the price. (Art 1524)
If no period for the payment has been fixed, is the vendor
bound to deliver the things sold?
No, the vendor is not bound to deliver the things
sold if no period has been fixed for the period of payment.
(Art 1524)
What is the reason why the vendor shall not be bound to
deliver the things sold if the vendee has not paid him the
price or if no period for the payment has been fixed in the
contract?
The reason is because a sale is a reciprocal
contract giving rise to reciprocal obligations.
If a period for the payment has been fixed by the parties, can
the seller refuse to deliver the things sold until the period of
payment arrives?
No, the seller must deliver the things sold even if
said period has not yet arrived (Florendo v. Foz, 20 Phil.
388). He will then have to wait for the end of the period
before he can demand the price, except if the buyer has lost
the benefit of the term (see Article 1198 – instances when the
debtor shall lose every right to make use of the period).
If a period for the payment has been fixed by the parties, can
the seller nevertheless refuse to deliver the things sold until
the period of payment arrives?
Generally, no, the seller must deliver the things
sold and wait for the period of payment to arrive. However,
the seller may refuse to deliver the things if the vendee has
lost the right to make use of the period and still refuses to
pay (see Arts 1536 and 1198).
If a period for payment has been agreed upon in a contract of
sale, the vendor cannot avail of the right under Article 1524.
Is there an exception to this rule such that the vendor can
nevertheless refuse to deliver the things sold until period of
payment arrives?
Yes, the exception is provided under Articles 1536
and 1198. The seller may refuse to deliver the things if the
vendee has lost the right to make use of the period and still
refuses to pay
Civil Law Review Project
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SALES
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad. No agreement was made as to the
day of payment. Angelina, despite not giving Brad any
payment, is asking for the delivery of the vehicle claiming
that Brad is obliged to deliver since the sale was perfected by
mere consent. Is Angelina correct?
No, Angelina is not correct. Under Article 1524 of
the Civil Code, the vendor is not bound to deliver the thing
sold if no period has been fixed for the period of payment.
Angelina agreed to buy the Toyota Innova (ABC 123) of Brad.
Angelina, despite not giving Brad any payment, is asking for
the delivery of the vehicle claiming that Brad is obliged to
deliver even if no payment has been made yet since the sale
was perfected by mere consent. Is Angelina correct?
No, Angelina is not correct. Under Article 1524 of
the Civil Code, the vendor is not bound to deliver the thing
sold if the vendee has not paid him the price. Since a sale is a
reciprocal contract, the delivery and payment are
reciprocal obligations.
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad. They agreed that payment shall be
made a week later. On December 6, 2010 Angelina, despite
not giving Brad any payment, is asking for the delivery of the
vehicle. Brad refused to deliver the car claiming that he is not
bound to deliver the thing sold because no payment has yet
been made. Is Brad correct?
No, Brad must deliver the vehicle because Article
1524 of the Civil Code does not apply when a period for
payment has been agreed upon in the contract of sale and
said period has not yet arrived (Florendo v. Foz, 20 Phil.
388). He will then have to wait for the end of the period
before he can demand the price from Angelina, except if the
latter has lost the benefit of the term (see Article 1198 –
instances when the debtor shall lose every right to make use
of the period).
When is the seller deemed to be an “unpaid seller”?
The seller is deemed to be an unpaid seller in the
following instances: 1) when the whole price has not been
paid or tendered; and 2) when a bill of exchange or other
negotiable instrument has been received as conditional
payment, and the condition on which it was received has
been broken by reason of dishonor of the instrument, the
insolvency of the buyer, or otherwise (Article 1525, 1st par).
What does the term “seller” in Articles 1525-1535 include?
The term “seller” includes any person who is in the
position of the seller, such an agent of such seller to whom
the bill of lading has been indorsed, or a consignor or agent
who has himself, paid, or is directly responsible for the price
(Article 1525, 2nd par).
If only a part of the price has been paid or tendered, is the
seller still an “unpaid seller”?
Yes, he is still an unpaid seller. Article 1525
provides that a seller who has not been paid the whole
price is deemed an unpaid seller.
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When is the holder of a negotiable instrument deemed an
“unpaid seller”?
If the negotiable instrument has been received as
conditional payment, and the condition on which it was
received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise, the
holder of such negotiable instrument shall be deemed as an
unpaid seller.
When is the agent of the seller to whom a bill of lading has
been indorsed deemed an “unpaid seller”?
If the bill of lading has been received as
conditional payment and the condition on which it was
received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise, the
agent of the seller to whom a bill of lading has been indorsed
shall be deemed as an unpaid seller.
What is the reason why mere delivery of a negotiable
instrument does not extinguish the obligation of the buyer to
pay?
The obligation to pay is not extinguished because
the seller may still be an unpaid seller if the negotiable
instrument is dishonored.
What happens if a negotiable instrument that has been
received as conditional payment was subsequently
dishonored?
The obligation to pay is not extinguished because
the seller becomes an unpaid seller (Article 1525).
If a negotiable instrument has been received as conditional
payment and the condition on which it was received has been
broken by reason of the insolvency of the buyer, what
happens to the obligation of the buyer to pay?
The obligation to pay is not extinguished because
the seller becomes an unpaid seller (Article 1525).
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad for the price of Php 350,000.00.
On the agreed date for payment, Angelina only paid Php
250,000.00. Is Brad deemed an “unpaid seller” in this case?
Yes, Brad is still an unpaid seller. Article 1525
provides that a seller who has not been paid the whole
price is deemed an unpaid seller. Therefore, unless Brad
receives the balance of the purchase price, he is deemed an
unpaid seller.
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad for the price of Php 350,000.00.
On the agreed date for payment, Angelina issued a negotiable
instrument in favor of Brad as payment. However, the
negotiable instrument was subsequently dishonored. Is Brad
deemed an “unpaid seller” in this case?
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Yes, Brad is an unpaid seller. If a negotiable
instrument has been received as conditional payment, and
the condition on which it was received has been broken by
reason of dishonor of the instrument, the insolvency of the
buyer, or otherwise, the holder of such negotiable instrument
shall be deemed as an unpaid seller.
What are the rights of an unpaid seller if ownership has
already passed to the buyer?
Notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller of goods, as
such, has the following remedies: 1) possessory lien in the
nature of a pledge; 2) right of stoppage in transitu if the
seller has parted with the possession; 3) right or resale;
and 4) right to rescind the sale (Article 1526)
What are the remedies of an unpaid seller if ownership has
not yet passed to the buyer?
Where the ownership in the goods has not passed
to the buyer, the unpaid seller has, in addition to his other
remedies, a right of withholding delivery similar to and co-
existent with his rights of lien and stoppage in transitu where
the ownership has passed to the buyer (Art 1526, last
paragraph).
When is the right of possessory lien available to an unpaid
seller?
The right of possessory lien is available to the
unpaid seller when the ownership has already passed to the
buyer but the seller still has possession over the goods.
What is the effect to the possessory lien if the unpaid seller
losses possession of the goods?
The possessory lien is lost after the seller loses
possession of the goods but his lien (no longer possessory) as
an unpaid seller remains; hence he is still a preferred
creditor with respect to the price if the specific goods sold
(Article 2241, no. 3).
When is the right of stoppage in transitu available to an
unpaid seller?
The right of stoppage in transitu is available to an
unpaid seller if the buyer is insolvent and the seller has
already parted with the possession over the goods subject of
the sale (Article 1526, no. 2)
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad for the price of Php 350,000.00.
On the agreed date for payment, Angelina only paid Php
250,000.00. Can Brad withhold delivery of the vehicle?
Yes, Brad is an unpaid seller in this case. Under
the second paragraph of Article 1526, an unpaid seller has
the right of withholding the delivery of the goods subject of
the sale.
If a negotiable instrument has been received as conditional
payment and the condition on which it was received has been
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broken by reason of the insolvency of the buyer, may the
seller exercise the right of stoppage in transitu?
The right of stoppage in transitu is available to an
unpaid seller if the buyer is insolvent and the seller has
already parted with the possession over the goods subject of
the sale (Article 1526, no. 2). In the given problem, the seller
is deemed an unpaid seller under the provision of Article
1525. Therefore, the remedies under Article 1526 are
available to him.
On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad for the price of Php 350,000.00.
On the agreed date for payment, Angelina only paid Php
250,000.00. Claiming the right of possessory lien available
to an unpaid seller, Brad refuses to deliver the vehicle and
retains it while he is in possession of said car. Is Brad
correct?
Yes, Brad is correct. Under Article 1525, he is still
an unpaid seller. Article 1526 provides that the right of
possessory lien is available to the unpaid seller when the
ownership has already passed to the buyer but the seller still
has possession over the thing sold.
When is the right to retain the goods available to the unpaid
seller?
The unpaid seller of goods who is in possession of
them is entitled to retain possession of them until payment
or tender of the price in the following cases: 1) where the
goods have been sold without any stipulation as to credit; 2)
where the goods have been sold on credit, but the term of
credit has expired; and 3) where the buyer becomes insolvent
(Article 1527, 1st par).
May the seller exercise his right of lien or retention even if he
is in possession of the goods as a mere agent or bailee for the
buyer?
Yes, he may exercise his right or retention
notwithstanding that he is in possession of the goods as
agent or bailee for the buyer (Article 1527, 2nd par).
May an unpaid seller still exercise the right to retain
possession of the goods sold on credit?
Yes, under Article 1527, even if the goods were sold
on credit, the unpaid seller may still exercise the right to
retain possession of the goods if the term of credit has
already expired.
If a negotiable instrument has been received as conditional
payment and the condition on which it was received has been
broken by reason of the insolvency of the buyer, may the
seller exercise the right of lien or retention of the goods?
Yes, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them
until payment or tender of the price in the following cases: 1)
where the goods have been sold without any stipulation as to
credit; 2) where the goods have been sold on credit, but the
term of credit has expired; and 3) where the buyer becomes
insolvent (Article 1527, 1st par).
Civil Law Review Project
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On December 4, 2010, Angelina agreed to buy the Toyota
Innova (ABC 123) of Brad for the price of Php 350,000.00.
On the agreed date for payment, Angelina only paid Php
250,000.00. Can Brad withhold delivery of the vehicle?
Yes, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them
until payment or tender of the price in the following cases: 1)
where the goods have been sold without any stipulation as to
credit; 2) where the goods have been sold on credit, but the
term of credit has expired; and 3) where the buyer
becomes insolvent (Article 1527, 1st par).
Angelina agreed to buy the Toyota Innova (ABC 123) of Brad.
They made no arrangements as to credit. Angelina, despite
not giving Brad any payment, is asking for the delivery of the
vehicle claiming that Brad is obliged to deliver even if no
payment has been made yet since the sale was perfected by
mere consent. Is Brad justified in withholding delivery of the
vehicle?
Yes, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them
until payment or tender of the price in the following cases: 1)
where the goods have been sold without any stipulation
as to credit; 2) where the goods have been sold on credit,
but the term of credit has expired; and 3) where the buyer
becomes insolvent (Article 1527, 1st par).
Angelina sold Brad a specific diamond ring to be paid 6
months later. By mutual agreement, Brad is made already
the owner, but Angelina will act as the depositary of the ring
in the meantime. If the term expires, and Brad has not yet
paid, may Angelina still continue possessing the ring even if
she is no longer the owner?
Yes, for she has not been paid. Her no longer being
the owner is not important, for the law says: “The seller may
exercise his right or retention notwithstanding that he is in
possession of the goods as agent or bailee for the buyer”
(Article 1527, 2nd par).
What is the condition for the possessory lien under Article
1527 to be available to an unpaid seller?
This possessory lien, however, remains only so
long as the property is still with the vendor.
Can the possessory lien of an unpaid seller be exercised if
there has already been partial delivery of the goods?
Yes. Under Article 1528, where an unpaid seller
has made part delivery of the goods, he may exercise his
right on the remainder, unless such part delivery has been
made under such circumstances as to show an intent to
waive the lien or right of retention.
Angelina bought 10 bottles of perfume from Brad, only 7 of
which arrived. Since Angelina has not yet fully paid the
purchase price, may Brad exercise his right of possessory
lien over the remaining 3 bottles of perfume?
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Yes. Under Article 1528, where an unpaid seller
has made part delivery of the goods, he may exercise his
right on the remainder, unless such part delivery has been
made under such circumstances as to show an intent to
waive the lien or right of retention.
Angelina bought 10 bottles of perfume from Brad, only 7 of
which arrived. Since Angelina has not yet fully paid the
purchase price, Brad exercised his right of possessory lien
over the remaining 3 bottles of perfume Angelina claims that
Brad can no longer withhold delivery of the remainder
because the right of possessory lien is available only if the
goods are still in the possession of the seller. Is Angelina
correct?
No, Angelina is not correct. Brad has the right to
withhold delivery of the remaining 3 bottles because under
Article 1528, where an unpaid seller has made part delivery
of the goods, he may exercise his right on the remainder,
unless such part delivery has been made under such
circumstances as to show an intent to waive the lien or right
of retention.
Under what circumstances is the unpaid seller no longer
allowed to exercise the right of retention over the remainder
of the goods where partial delivery has already been made?
The right of lien over the remainder of the goods
where partial delivery has been made is no longer available if
such part delivery has been made under such circumstances
as to show an intent to waive the lien or right of retention
(Article 1528).
When does the unpaid seller lose his lien on or right of
retention over the goods?
The unpaid seller loses his right of lien or retention in the
following cases: 1) when he delivers the goods to a carrier or other
bailee for the purpose of transmission to the buyer without reserving
the ownership in the goods or the right to the possession thereof; 2)
when the buyer or his agent lawfully obtains possession of the goods;
and 3) by waiver thereof (Article 1529)
Is the lien of an unpaid seller over the goods sold lost if he
obtains judgment for the price of the goods?
No, such lien is not lost. Under Article 1529, last
paragraph, the unpaid seller of goods, having a lien thereon,
does not lose his lien by reason only that he has obtained
judgment for the price of the goods.
Can an unpaid seller waive his possessory lien on or right of
retention over the goods sold?
Yes, waiver is one of the instances that would
result in the loss of the possessory lien or right of retention
that the unpaid seller has over the goods (Article 1529, no. 3)
Under the circumstances mentioned under Article 1529, the
possessory lien of an unpaid seller is lost. Is the vendor’s lien
also lost?
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No, under the circumstances mentioned in Article
1529, the lien lost is only the possessory lien and not the
vendor’s lien.
Angelina delivered the goods to the carrier for transmission
to the buyer, Brad. She, however, reserved her right to the
ownership in the goods. Does she lose her possessory lien?
No, she does not lose her possessory lien in view of
the reservation. Under Article 1529, one of the instances
when the unpaid seller’s possessory lien is lost is when he
delivers the goods to a carrier or other bailee for the purpose
of transmission to the buyer without reserving the ownership
in the goods or the right to the possession thereof.
An unpaid seller who is still in possession of the goods sold
brought an action to get the purchase price. Does he lose his
lien?
No, the bringing of an action is not one of the ways
of losing the possessory lien. As a matter of fact, even if he
has already obtained a money judgment in his favor, the
possessory lien still remains with him (Article 1529).
Brad, an unpaid seller who is still in possession of the goods
sold brought an action against Angelina to get the purchase
price. Does he lose his lien by virtue of the filing of the
collection complaint?
No, the bringing of an action is not one of the ways
of losing the possessory lien. As a matter of fact, even if Brad
has already obtained a money judgment in his favor, the
possessory lien still remains with him (Article 1529).
An unpaid seller, who possessed the goods through a
warehouseman, delivered to the buyer a negotiable
warehouse receipt. Does the unpaid seller still have a
possessory lien?
Not anymore. Under Article 1529, no. 2, an unpaid
seller’s possessory lien is lost when the buyer or his agent
lawfully obtains possession on the goods. The negotiable
warehouse receipt automatically transferred both title and
right of possession to the goods in the buyer.
What is meant by the right of stoppage in transitu?
The right of stoppage in transitu refers to the right
of the unpaid seller to resume possession of the goods at
anytime while they are in transit by virtue of which he will
then be entitled to the same rights in regard to the goods as
he would have had if he had never parted with the possession
(Article 1530).
When is the right of stoppage in transitu available to the
unpaid seller?
This right is available to the unpaid seller when he
has already parted with the possession of the goods and the
buyer is or becomes insolvent (Article 1530).
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The unpaid seller may exercise his right of stoppage in
transitu when he has already parted with the possession of
the goods and the buyer is or becomes insolvent. What is the
right of stoppage in transitu?
The right of stoppage in transitu refers to the right
of the unpaid seller to resume possession of the goods at
anytime while they are in transit by virtue of which he will
then be entitled to the same rights in regard to the goods as
he would have had if he had never parted with the possession
(Article 1530).
What is the effect if the unpaid seller exercises his right of
stoppage in transitu?
Upon exercise of the right of stoppage in transitu,
the unpaid seller will then be entitled to the same rights in
regard to the goods as he would have had if he had never
parted with the possession (Article 1530).
When will the buyer’s insolvency give rise to the unpaid
seller’s right of stoppage in transitu?
The seller’s right of stoppage in transitu exists
whether the buyer is insolvent at the time of or after the sale.
This is because Article 1530 provides that the right if
stoppage in transitu available when the seller has already
parted with the possession of the goods and the buyer is or
becomes insolvent.
Under Article 1530 of the Civil Code, the right of stoppage in
transitu is available to the seller when he has already parted
with the possession of the goods and the buyer is or becomes
insolvent. What is the meaning of INSOLVENCY under this
provision?
The insolvency need not be judicially declared. It is
enough that the obligations exceed a man’s assets (Paras).
Angelina bought 100 cases of Manila Beer from Brad with the
understanding that the goods will be delivered by ship from
Manila to Cebu. While the goods were being transported,
Brad learns that Angelina has become insolvent. Can Brad
stop the delivery of the goods and resume possession
thereof?
Yes, Brad can exercise his right of stoppage in
transitu. Under Article 1530, when the buyer of goods is or
becomes insolvent, the unpaid seller who has parted with
the possession of the goods has the right of stopping them in
transitu, that is to say, he may resume possession of the
goods at any time while they are in transit, and he will then
become entitled to the same rights in regard to the goods as
he would have if he had never parted with the possession.
Angelina bought 100 cases of Manila Beer from Brad with the
understanding that the goods will be delivered by ship from
Manila to Cebu. While the goods were being transported,
Brad learns that Angelina has become insolvent. Brad wants
stop the delivery of the goods and resume possession
thereof. Angelina, on the other hands, claims that the right of
stoppage in transitu is not available to Brad because she has
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not yet been judicially declared insolvent. Is Angelina
correct?
No, Angelina is not correct and Brad can exercise
his right of stoppage in transitu. Under Article 1530, when
the buyer of goods is or becomes insolvent, the unpaid seller
who has parted with the possession of the goods has the right
of stopping them in transitu, that is to say, he may resume
possession of the goods at any time while they are in transit,
and he will then become entitled to the same rights in regard
to the goods as he would have if he had never parted with the
possession. The insolvency need not be judicially
declared. It is enough that the obligations exceed a man’s
assets (Paras).
When are goods considered “in transit”?
Goods are in transit within the meaning of Article
1530 in the following instances: 1) from the time when they
are delivered to a carrier by land, water, or air, or other
bailee for the purpose of transmission to the buyer, until the
buyer, or his agent in that behalf, takes delivery of them from
such carrier or other bailee; or 2) if the goods are rejected by
the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive
them back (Article 1531).
When are goods no longer considered “in transit”?
Goods are no longer in transit within the meaning
of Article 1530 in the following instances: 1) if the buyer, or
his agent in that behalf, obtains delivery of the goods before
their arrival at the appointed destination; 2) if, after the
arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that
he holds the goods on his behalf and continues in possession
of them as bailee for the buyer or his agent; and it is
immaterial that further destination for the goods may have
been indicated by the buyer; or 3) if the carrier or other
bailee wrongfully refuses to deliver the goods to the buyer or
his agent in that behalf (Article 1531).
If the goods already reached the place of destination, can
they still be considered “in transit”?
Yes, goods that have reached the place of
destination are still considered” “in transit” if the good are
rejected by the buyer and the carrier or other bailee
continues in possession of them (Article 1531).
If the goods are rejected by the buyer but the seller refuses to
receive them back, are the goods considered “in transit”?
Yes, goods that have reached the place of
destination are still considered” “in transit” if the good are
rejected by the buyer provided the carrier or other bailee
continues in possession of them, even if the seller has
refused to receive them back (Article 1531).
Despite not having arrived at the appointed place of
destination, can the goods, nevertheless, be considered as no
longer “in transit”?
Yes, goods that have not yet reached the place of
destination may already be considered as no longer “in
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transit” if the buyer, or his agent in that behalf, has obtained
delivery of the goods (Article 1531).
If the goods have arrived at the appointed destination but the
carrier or other bailee continues possession of them, are the
goods still “in transit”?
Not necessarily. If, after the arrival of the goods at
the appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds the
goods on his behalf and continues in possession of them as
bailee for the buyer or his agent, the goods are no longer “in
transit” (Article 1531).
If the goods have arrived in the appointed destination and
the carrier or other bailee continues possession of them as
bailee for the buyer or his agent but the buyer has indicated a
further destination, are the goods still “in transit”?
Not anymore. Under Article 1531, if, after the
arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that
he holds the goods on his behalf and continues in possession
of them as bailee for the buyer or his agent; and it is
immaterial that further destination for the goods
may have been indicated by the buyer.
If upon arrival of the goods the buyer unjustifiably refuses to
receive the goods, may the seller still exercise the right of
stoppage in transitu?
Yes, because in this instance, the goods are still
considered “in transit” and therefore, the seller may still
exercise the right of stoppage.
If the goods are delivered to a ship, freight train, truck, or
airplane chartered by the buyer, are the goods still
considered “in transit” or not anymore?
Under Article 1531, if the goods are delivered to a
ship, freight train, truck, or airplane chartered by the buyer,
it is a question depending on the circumstances of the
particular case, whether they are in possession of the carrier
as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or
his agent in that behalf, is the right of stoppage in transitu
still available to the unpaid seller?
Yes, the remainder of the goods may be stopped in
transitu, unless such part delivery has been under such
circumstances as to show an agreement with the buyer to
give up possession of the whole of the goods (Article 1531).
How is the right of stoppage in transitu exercised?
The unpaid seller may exercise his right of
stoppage in transitu either by obtaining actual possession of
the goods or by giving notice of his claim to the carrier or
other bailee in whose possession the goods are (Article 1532,
1st par).
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What is required in the exercise of the right of stoppage in
transitu?
There must be intent to repossess the goods (Paras).
If the right of stoppage in transitu is exercised by giving a
notice of the claim, to whom should the unpaid seller give
such notice?
The notice must be given either 1) to the person on
actual possession of the goods; or 2) to his principal (Article
1532, 1st par).
If the notice of the seller’s exercise of the right of stoppage in
transitu is given to the principal, what is the condition
required by law?
If the notice is given to the principal, it must be
given at such time and under such circumstances that the
principal, by the exercise of reasonable diligence, may
prevent a delivery to the buyer (Article 1532, 1st par).
If notice of stoppage in transitu is given by the seller to the
carrier, or other bailee in possession of the goods, what is the
obligation of the latter?
Upon receipt of the notice of stoppage in transitu,
the carrier, or other bailee in possession of the goods, must
deliver the goods to, or according to the directions of, the
seller (Article 1532, 2nd par).
Who shall bear the expenses if the goods are delivered back
to the seller exercising his right of stoppage in transitu?
The expenses for such delivery must be borne by the seller
(Article 1532, 2nd par).
If a negotiable document of title representing the goods has
been issued by the carrier or other bailee, what is required
for the unpaid seller to exercise his right of stoppage in
transitu and order the redelivery of the goods?
Under the last sentence of Article 1532, if a
negotiable document of title representing the goods has been
issued by the carrier or other bailee, he shall not be obliged
to deliver or justified in delivering the goods to the seller
unless such document is first surrendered for cancellation.
What are the effects of the exercise of the right of stoppage in
transitu?
After the exercise of the right of stoppage in
transitu, the consequential effects are: 1) the goods are no
longer in transitu; 2) the contract of carriage ends and the
carrier now becomes a mere bailee and he will be liable as
such; 3) the carrier should not deliver anymore to the buyer
or the latter’s agent; otherwise, he will be liable for damages
(Paras); and 4) the carrier must redeliver to, or according to
the directions of, the seller (Article 1532, 2nd par).
When is the right of resale available to the unpaid seller?
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The right of resale is available to the unpaid seller
of goods in the following cases: 1) where the goods are of
perishable nature; 2) where the seller has expressly reserved
the right of resale in case the buyer should make default; and
3) where the buyer has been in default in the payment of the
price for an unreasonable time. It is, however, essential
before the resale can be made that the unpaid seller should
have a right of lien or should have stopped the goods in
transitu (Article 1533, 1st par).
What are the preconditions before the unpaid seller may
exercise the right of resale in the instances allowed by law?
In the exercise of the right of resale, Article 1532,
1st paragraph requires that the unpaid seller should have a
right of lien or should have stopped the goods in transitu.
What is the effect of a resale under Article 1533?
Where a resale is made, as authorized under
Article 1533 (par 2), the buyer acquires a good title as against
the original buyer.
What is the rule regarding any deficiency in the price after
the resale?
The deficiency in the price may be obtained as
damages from the buyer, as when the resale price is lower
than the original selling price.
Is notice of an intention to resell the goods essential to the
validity of a resale?
Notice of an intention to resell the goods is not
essential to the validity of the resale. However, where the
right to resell is not based on the perishable nature of the
goods or upon an express provision of the contract of sale,
the giving or failure to give such notice shall be relevant in
any issue involving the question whether the buyer had been
in default for an unreasonable time before the resale was
made (Article 1533, 3rd paragraph).
Is notice of the time and place of the resale of goods essential
to the validity of such resale?
No, it is not essential to the validity of a resale that
notice of the time and place of such resale should be given by
the seller to the original buyer (Article 1533, 4 th paragraph).
May the seller buy the goods subject of the resale?
No, the seller cannot, directly or indirectly, buy the
goods (Article 1533, last paragraph).
When is the right to rescind the sale available to an unpaid
seller?
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The right to rescind the transfer of title is available
when an unpaid seller has the right of lien or has stopped the
goods in transitu and if he expressly reserved to do so in case
the buyer should be in default or where the buyer has been in
default for an unreasonable time (Article 1534, 1 st
paragraph).
What is the effect of the exercise of the right to rescind?
The buyer who exercises the right to rescind the
transfer of title shall resume the ownership in the goods.
What should be done in order to rescind the transfer of title?
The unpaid seller must manifest by notice to the
buyer or by some other overt act an intention to rescind
(Article 1534, 2nd paragraph).
Is it necessary that the overt act showing an intention to
rescind be communicated to the buyer?
It is not necessary that such overt act should be
communicated to the buyer, but the giving or failure to give
notice to the buyer of the intention to rescind shall be
relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before
the right of rescission was asserted (Article 1534, 2 nd
paragraph).
What is the effect of any sale or disposition of the goods by
the buyer on the unpaid seller’s right of lien or stoppage in
transitu?
Generally, the unpaid seller’s lien or stoppage in
transitu remains even if the buyer has sold or otherwise
disposed of the goods. The exceptions are when the unpaid
seller has given his consent thereto or when the purchaser or
buyer is a purchaser for value in good faith of a negotiable
document of title.
If the buyer has already sold the goods, may an unpaid seller
still exercise his right of lien or stoppage in transitu over the
goods?
Yes, the unpaid seller may still exercises right of
lien or stoppage in transitu over said goods. This is because
under Article 1535, the unpaid seller’s right of lien or
stoppage in transitu is not affected by any sale, or other
disposition of the goods which the buyer may have made,
unless the seller has assented thereto.
May the unpaid seller’s right of lien or stoppage in transitu
still be exercised if a negotiable document of title has been
issued in favor of a purchaser for value in good faith?
No. Under Article 1535, 2nd paragraph, if a
negotiable document of title has been issued for goods, no
seller’s lien or right of stoppage in transitu shall defeat the
right of any purchaser for value in good faith to whom such
document has been negotiated, whether such negotiation be
prior or subsequent to the notification to the carrier or other
bailee who issued such document, of the seller’s claim to a
lien or right of stoppage in transitu.
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If a negotiable document of title has been issued for goods
and has been negotiated in favor of a purchaser for value in
good faith subsequent to the notification to the bailee of the
unpaid seller’s claim to a lien, which shall prevail, the unpaid
seller’s right of lien or the purchaser’s right under the
negotiable document of title?
The right of the purchaser in good faith for value
shall prevail over the unpaid seller’s right of lien. Under the
second paragraph of Article 1535, if a negotiable document of
title has been issued for goods, no seller’s lien or right of
stoppage in transitu shall defeat the right of any purchaser
for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent
to the notification to the carrier or other bailee who issued
such document, of the seller’s claim to a lien or right of
stoppage in transitu.
When shall the debtor lose every right to make use of the
period?
The debtor shall lose every right to make use of the period
when:
1. When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt
or price;
2. When he does not furnish to the creditor the guaranties or
securities which he has promised;
3. When by his own act he has impaired said guaranties or
securities after their establishment, and when through
fortuitous event they disappear, unless he emmediately gives
ones equally satisfactory;
4. When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
5. When the debtor attempts to abscond.
A purchased goods from B. A promised to give certain
securities, as a result of which, A was given one year within
which to pay. A failed to give the securities. Can B be
compelled to deliver?
No. for failure of A to give the securities he loses the right to
make use of the period. But if B so desires, he may
voluntarily deliver.
Sam sold to Muel a car on credit. Does Sam have the right to
withhold the delivery of the car?
Yes, Sam may withhold delivery, unless Muel gives sufficient
guaranty or security.
Give other instances where seller may withhold delivery of
the thing sold?
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1. Seller promise to mortgage his house to secure the purchase
price and he fails to furnish said security as promised;
2. If the payment of the purchase price is secured by a mortgage
on the house of buyer, but the house was partially burned
because of the buyer’s fault;
3. Where the buyer shows intent not to pay the price after the
thing is delivered to him.
Define accessions and accessories?
Accessions are fruits of a thing; or additions or
improvements upon a thing such as the young of an animals,
house or trees on a land.
Accessories are anything attached to the principal thing for
its completion, ornament,or better use such as picture frame,
key of a house.
What is the duty of the vendor in delivering the thing sold?
The vendor is bound to deliver the thing sold in the condition
in which they were upon the perfection of the contract
including its accessions and accessories. The vendor is,
therefore obliged to preserve the thing pending its delivery.
Who owns the fruit after the contract is perfected?
All the fruits shall pertain to the vendee from the day on
when the contract was perfected, but it is evident that a contrary
stipulation may be agreed upon, or a later date may be set.
***The term fruits include natural, industrial, and civil fruits.
Give the effect of loss, deteriorstion or improvement before
delivery?
It is that from the time of perfection to delivery, risk is to be
borne by the buyer.
What are t6he rules in case of loss, deterioration or
improvement of the thing before delivery?
The following rules shall be observed:
1. If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
2. If the thing is lost through fault of the debtor, he shall be
obliged to pay damages to damages; it is understood that the
thing is lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or
cannot be recovered;
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3. When the thing deteriorates without t5he fault of the debtor,
the impairment is to be borne by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor
may choose between the rescission of the obligation and its
fulfillment, with indemnity for damages in either case;
5. If the thing is improved by its nature, or by time, the
improvement shsll inure to the benefit of the creditor;
6. If it is improve at the expense of the debtor, he shall have no
other right than that granted to the usufructuary.
S sold to B a car. Before delivery the car was lost without the
fault of S. Is the obligation to deliver extinguished?
Yes. The obligation to deliver is extinguish and b shall be
oblige to pay the price if he has paid the same.
How sale of Real Estate by unit is should be made?
Sale of real property by unit shall be made with the
statement of its area, at the rate of certain price for a unit of
measure or number, the caused of the contract with respect
to the vendee is the number of such units, and that the entire
area stated in contract must be delivered.
What are the rules if;
a. The delivery is less than what is stated:
1. Proportional reduction in the price regardless of
the extent of deficiency.
2. Rescission of contract:
*if deficiency is at least 1/10 of area
stated
*regardless of the extent of deficiency, if
the buyer would not have bought the
property had he known that the area was
smaller.
b. Delivery of inferior quality:
1. Proportional reduction in the price,
regardless of extent of inferiority.
2. Rescission of contract:
*if inferior value exceeds 1/10 of the
price agreed upon;
* regardless of extent of inferiority
(inferior value), if the buyer would not
have bought the property had he known
the inferiority.
Alvin buys from Dale a piece of land supposed to contain
1,000 square meters at the rate of P10,000 a square meter,
but the land has only 800 sq.m. Can Dale ask for rescission?
Yes, 200 sq.m. is 2/10 of 1,000. The additional 200 must be
given to Dale should he demand them, otherwise Dale may
pay only P 8 million (for 800 sq. m.) or rescind the contract.
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What is the right of the buyer if there is greater area or
number of real property stated in the contract?
1. Accept the area included in the contract and reject the rest
2. Accept all at a contract price
Sally buys from Garry a piece of land to contain 1,000 sq. m.
at the rate of P1,000 a sq. m. but the land really contains
1,599 sq. m. What can Sally do?
Sally may accept 1,000 sq.m. and reject the extra 500, in
which case he will pay only P10 million. However, sally is
allowed to accept all of the 1,500 sq. m., but he must pay P15
million. Sally is in no case allowed to rescind the contract, for
such a remedy is not allowed him under this article.
Where is the right of the buyer when immovable sold is lack
in area, or is of inferior quality, or is greater than that stated
in the contract applicable?
It is applicable to both private and judicial sales when
immovable sold is lack in area, or is of inferior quality, or is
greater than that stated in the contract.
Give the rule when sale of real estate is made through lump
sum (Cuerpo Cierto or Por Precio Alzado)?
In the sale of real estate, made for a lump sum and not at a
rate of a certain sum for a unit measure or number, there
shall be no increase or decrease in the agreed price whether
actual area is greater or lesser than that stated area.
Enumerate the guidelines in a sale real estate made for a
lump sum?
The guidelines are:
 What is mentioned are the boundaries, e.i.,
the technical description of the property
which is indispensable requirement in the
sale of real property.
 If area or number should likewise be
designated, all the area designated within the
boundaries either actually greater in number
of area sated should be delivered.
 If the area with in boundaries is smaller than
that stated, vendor should deliver only that
included in the boundaries
For failure to deliver all area within the boundaries even is
said area is more than that stated, what is the remedy of the
buyer?
The remedies of the buyer are:
1. Reduction in price proportionate to the area not delivered; or
2. Rescission of the contract.
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Jun buys a piece of land a cuerpo cierto. The contract states
certain number of square meters but the land included in the
boundaries happen to be Less. Is jun entitled to pay reduced
price?
No. the law presumes that the purchaser had in mind a
determinate piece of land and that he ascertained its area
and quality before the contract was perfected. If he did nit do
so, or if having done so, he made no objection and consented
to the transaction, he can blame no one but himself.
When action for sale of real estate by unit or lump sum
commenced?
In action of real estate by unit or lump-sum, action arising
therefrom should be commenced within six (6) months from
the day of delivery real or constructive.
Give the rules as to preference of ownership in case double
or multiple sale?
The rules are:
1. If the property is sold by the movable (personal
property), the ownership shall be acquired by the
vendee who first takes possession in good faith.
2. If property sold is immovable (real property), the
ownership shall belong to:
 The vendee who first registers the sale in
good faith in the Registry of Property
(registry of Deeds);
 In the absence of registration, the vendee
who first takes possession in good faith; and
 In the absence of both registration and
possession, the vendee who presents the
oldest title ( who first bought the property) in
good faith
*** These applies also to double donation
As with regards to the provision of Civil code what is meant
by:
a. Registration – refer to registration under the Torrens
System. requires the actual recording. If the property was
never registered as when the registrar forgot to do so
although he has been handed the document, there is no
registration.
b. Possession – either actual or constructive.
c. Title – means title because of the sale, and not any other
tirtle or mode of acquiring property.
What is the basis of the right or priority of the first buyer?
The basis that prius tempore, potior jure or first in time,
stronger in right. The rule can be invoked by the first buyer
only. In order to preserve this right, he must register the
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deed of sale with the registry of Property ahead of any
registration in good faith by a second or subsequent buyer.
Who is a buyer in good faith?
He is one who buys the property of another without notice
that some other person has a right or interest in such
property and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim or
interest of some other person in the property.
Good faith is innocence or lack of knowledge of the first sale
until his contract ripens into full ownership through
registration.
Enumerate the application of mirror doctrine on the law on
double sale?
The applications of the mirror doctrine are:
1. The mirror doctrine will apply where person purchased
a lot with knowledge of facts and circumstances that
should have put him upon inquiry and investigation as
might be necessary to acquint him with the defects in
the title of the owner.
2. A purchaser cannot close his eyes to facts that should
put reasonable man on his guard and then claim that he
acted in good faith under the belief that there was no
defect in the title of the vendor.
3. His mere refusal to believe that such defect exists or the
willful closing of eyes to the possibility of the existence
of a defect in the vendor’s title will not make him an
innocent purchaser for value if afterwards it develops
that the title is in fact defective and it appears that he
has such notice of the defects as would have led to its
discovery had he acted with the measure of precaution
which may reasonably be required of a prudent man in
like situation.
4. Actual possession of land by person other than the
vendor would have been enough to arouse the suspicion
as to the ownership of the land about the purchased.
5. A buyer of a real property which is in possession other
than a seller must be wary and should investigate the
rights of those in possession. Without such inquiry, the
buyer can hardly be regarded as in good faith.
6. As a general rule, buyer’s can rely on the face of the
title. This is, however, inapplicable especially when the
property is in possession of a person or persons other
than the vendor. In this case, the mirror doctrine
applies.
Is double sale applicable to unregistered lands?
No. Since properties are of unregistered lands, subsequent
buyer thereof bought the properties at their peril. The object
of double sale must be registered so that the good faith can
be invoked. For this turns out that seller did not own the
property at the time of the sale.
One who buys from unregistered owner is not a purchaser in
good faith.
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 SALES

Define Condition Sale? The actions based on implied warranties prescribe in 10n
years since these obligation are imposed by7 law.
Condition Sale condition upon which the obligation of either
party in a contract of sale depends, when not performed.

When is implied warranty not applicable?

What is the effect of the condition? It is not applicable in:

1. If conditions are not fulfilled the party may either: 1. The sale where the phrase is “as is and Where is”.
2. Sale of second-hand articles.
 Refuse to proceeds with the contract; or 3. Sale by virtue of authority in fact or law.
 Proceed with the contract, waiving the
performance of the condition
2. If the condition is in the nature of a promise that it should What does the seller warrant in
happen, the non-fulfillment of such condition may be treated
by the other party as breach of warranty. a. Warranty against eviction?

Seller warrants:

What is condition as used in article 1545? 1. His right to sell at the time the ownership is
to pass
Conditions means uncertain event or contingency on the 2. Buyer will have to enjoy legal and peaceful
happening of which the obligation of the contract depends. possession of the thing.

b. Warranty against hidden defects?

What is express warranty?
Express warranty is any affirmation of facts or any promise
by the seller relating to the thing, the natural tendency of
which is to induce the buyer to purchase the thing, and the
buyer thus induced, thus purchased the same. It includes all
warranties derived from the language of the contract, so long
as the language is express.
When is there a warranty?
The good tests on warranties are:
1. Free from any hidden faults or defects
2. Free from any charge or encumbrance not
declared or known to the buyer.
Define eviction?
Eviction is defined as the judicial process whereby the
vendee is deprived of the whole or part of the thing
purchased by virtue of a final judgment based on a right
based on a right prior to the sale or an act imputable to the
vendor.

a. If the buyer is ignorant, there is warranty;

b. If the buyer is expected to have an opinion and the Enumerate the essential elements of the warranty against
seller has no special opinion, there is no warranty eviction?

The essential elements are:

Give the effect of expression of opinion?
1. The vendee is deprived in whole or in part of the thing
Dealer’s talk like “excellent” cannot be considered as an purchased;
express warranty. Sales talk like “little exaggerations allowed 2. He is so deprived by virtue of a final judgment;
under by the law as a concession to human nature. This is in 3. The judgment is based on a right prior to the sale or an
accordance with the civil law maxim “simplex act imputable to the vendor;
commendation non obligat” or the principle of caveat emptor 4. The vendor was summoned in the suit for eviction at
(let the buyer beware). the instance to the vendee; and
5. There is no waiver on the part of the vendee.

Give the natural element of a contract of sale?
Natural element of a contract of sale is implied to be part of
the contract unless otherwise expressly stipulated or waived.
When actions based on implied warranties prescribed?
Is seller liable for violation of warranty against eviction in
case of double sale?
Yes, the fact that he sold the same land twice makes him
responsible for his fraud or bad faith in depriving any of the
purchasers. Provided, however, that the deprivation be upon
final judgment byb a court of competent authority.

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May a warranty against eviction be waived?
Yes. It could be:
 Consciente where renunciation without
knowledge of the risk, seller pays only the
value of the thing at the time of eviction.
 Intencionada where renunciation with
knowledge.
** if waiver is unclear, it is presumed to be consciente. Intencionada
must be proved.
** waiver is void if seller acted in bad faith.
Is government liable for the eviction of the purchaser at a tax
sale?
No. government is not liable for the eviction of the purchaser
at a tax sale but still the owner of the property sold under
execution at the instance of the judgment creditor is liable
for the eviction, unless otherwise decreed in the judgment.
Neshia sells a parcel of land to Fe. Subsequently, Fernando
files an action for the recovery of possession claiming that he
is the owner of the land. At the instance of Fe, Neshia was
summoned to defend his title. The court renders final
judgment declaring that Fernando has a better right. Fe is
evicted. Is Neshia liable to Fe?
Yes, Neshia is liable to Fe for failure to comply with his
warranty against eviction. Here, the judgment is based on a
right of third person prior to the sale.
What are the responsibilities of the seller?
The seller is responsible for:
1. His own acts;
2. Those of his predecessors-in-interest.
He is not responsible for:
1. Acts imputable to the buyer himself;
2. Fortuitous event.
Is there a need for a vendee to appeal from decision in order
that vendor be held liable?
No. the vendee need not appeal from the decision in order
that the vendor may become liable for eviction. Therefore,
vendee can sue vendor for damages. Provided, however, that
the decision is final.
Give the effect of prescription?
By prescription, one acquires ownership and the other real
rights through the lapse of time in the manner and under the
conditions prescribed by law. In the same way, rights and
actions are lost by prescription.
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What can the vendee enforce in case of prescription if:
a. Completed before sale?
The vendee may lose the thing purchased to a third person
who has acquired title thereto by prescription. When
prescription has commenced to run against the vendor and
was completed before the sale, the vendee can enforce the
warranty against eviction. In this case, the deprivation is
based on a right prior to the sale and an act imputable to the
vendor.
b. Completed after sale?
Even if prescription has started before the sale but has
reached the limit prescribed by law after the sale, the vendor
is not liable for eviction. The reason is because the vendee
could easily interrupt the running of the prescriptive period
by bringing the necessary action.
Is the vendor liable for eviction when the property is sold for
non-payment of taxes due and not made known to the
vendee?
Yes. If the property is sold for non-payment of taxes due and
not made known to the vendee before the sale the vendor is
liable for eviction.
A sells a land to B, the taxes of the land was not paid. The
land was sold at a public auction for non-payment of taxes. B
is evicted. Is A liable?
Yes. A is responsible to B, provided, however, that at the time
of the Sale, the non-payment of taxes was not known to B,
the vendee.
In case of failure of title, what is the remedy of the purchase
in good faith?
It has been held universally that in case of failure of title, a
purchaser in good faith at a judicial sale is entitled to recover
the purchase one from the officer if the funds are still in his
hands or from the judgment debtor (Banzon & Standard Oil
Co, v Osorio, 27 Phil 142).
What are the effects of this article:
In Bobis v. Provincial Sheriff of Camarines Norte, it states as
follows:
(1) A buyer at an execution sale acquires nothing if the
judgment debtor had already assigned or transferred
the property to another before the levy or execution;
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(2) A sheriff who merely adheres to the terms or a writ of
execution is not liable for damages. The same is true of
the buyer at the public auction,
(3) The buyer at an execution sale is a purchaser in bad
faith (and not for value) if he had prior knowledge of a
third party claim filed with the sheriff before the
scheduled execution sale.
What are the effects of stipulation waiving liability for
eviction?
The effects are:
(1) If seller was in good faith – the exemption is valid, but
without prejudice to Art. 1554
(2) If seller was in bad faith – the stipulation is VOID
What is the rule regarding cost of suit?
Paragraph 3 does not include transportation and other
incidental expenses.
Is the right to hold the vendee liable for eviction waivable?
Yes, waiver is allowable. Waiver of evection may partake of two
forms, namely:
(1) Waiver consciente – without knowledge of eviction;
(2) Wiaver intencionada – without knowledge of the risk of
eviction
What is the presumption in waivers ?
The presumption that the waiver was only in consciente. The
waiver intencionada must be clearly proved.
In waiver consciente, what value should be returned?
The value at the time of eviction should be returned. This is
a case of solution indebiti, “undue payment.”
In waiver intencionada, what value should be returned?
Nothing need be returned. This is aleatory in nature, and
buyer assumes the consequences. This is so even if there is a
stipulation that the warranty against eviction exist, provided
that said stipulation is understood by the parties mere pro
forma.
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What are the requisites for reasonable in hidden defects?
(redhibitory defects)
The requisites are:
(1) The defects must be hidden (not known and could not have
been known)
(2) The defect must exist at the time the sale was made;
(3) The defect must ordinarily have been excluded from the
contract;
(4) The defect must be important;
(5) The action must be instituted within the prescribed time –
i.e., six months from the delivery of the thing sold or within
40 days form the date of delivery in case of animals, and
(6) There must be no waiver of warranty on the part of the
vendee.
Under the law, warranty against eviction may be waived.
What are the two kinds of warranty against eviction and
what are their effects?
The waiver may be “consciente” or “intencionada”. In the
first, there is merely a voluntary renunciation made by the
vendee of the right to warranty in case of eviction. The effect
of such renunciation is that the liability of he vendor in case
of eviction shall extend only to the payment of the value of
the thing sold at the time of eviction. In the second, there is
a voluntary renunciation by the vendee of the right to
warranty against eviction, with knowledge of the risk of
eviction and assuming the consequences thereof. The effect
of such renunciation in case of eviction is to relieve the
vendor of any liability whatsoever. (Art 1554 NCC)
What is the effect of stipulation waiving liability for Eviction?
The effects are:
(1) If seller is in good faith – the exemption is valid, but
without prejudice to Art 1554,
(2) If seller was in good faith – the stipulation is VOID.
What must the seller give in case of eviction?
V I C E D : Value, Income ( or fruits), costs, expenses and
damages (and interest and ornamental expenses) if seller was in bad
faith.
What is the rule as to income or fruits?
If the court does not order the buyer to deliver the income or
fruits to the winner, said buyer would be entitled to them.
This is fair for after all, in the meantime, the seller was using
the price money without interest.
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If there is no agreement with regard to warranty in case of
eviction, what is the extent of the liability of the vendor?
When the warranty has been agreed upon or nothing has been
stipulated on this point, in case eviction occurs, the vendee shall have
the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time
of the eviction be it greater or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them
to the party who won the suit against him;
(3) The cost of the suit which caused the eviction and, in a
proper case, those of the suit brought against the vendor for
the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, ornamental expenses, if the sale
was made in bad faith (Art 1555, CC).
Should the vendee lose, by reason of the eviction, a part of the
thing sold of such importance, in relation to the whole that he
would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the
thing without other encumbrances that those which it had when
he acquired it. He may exercise this right of action, instead of
enforcing the vendor’s liability for eviction.
The same rule shall be observed when two or more things have
been jointly sold for a lump sum, or for a separate price for each
of them, if it should clearly appear that the vendee would have
purchased one without the other (Art 1556, CC).
What is the rule regarding damages?
The interest in paragraph 5 refers to interest on costs,
expenses, and damages. The sale must have been made in
BAD FAITH, which must be proves (Pascual v Lesaca, May
30, 1952)
Why is rescission not a remedy in case of TOTAL eviction?
The remedy of rescission contemplates that the one
demanding is able to return whatever he has received under
the contract; and when this cannot be done, rescission
cannot be carried out. It is for this reason that the law on
sales does not make rescission a remedy incase the vendee is
totally evicted from the thing sold, for he can no longer
restore the subject matter of the sale to the vendor. Of
course, incase of partial eviction, rescission may still be
allowed with respect to the subjected matter that remains, as
in the case contemplated in Art 1556.
What is the remedy of the vendee in case of partial eviction?
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The vendee’s remedy is either:
(1) Rescission, or
(2) Enforcement of warranty.
Are there any other remedies to be attached with rescission?
If he chooses rescission, there should be no new
encumbrances, like a “mortgage.” (Andaya v Manansala, April 30,
1960).
When is enforcement of the warranty the proper remedy?
If the circumstances set forth in paragraph 1 of Art 1556 are
not present (as when there are new encumbrances), the only
remedy is to enforce the warranty
When is judgment deemed to be final and what is its
necessity?
A judgment becomes final if on appeal, the decision
decreeing the eviction is affirmed; or if within the period
within which to appeal, no appeal was made. It should be
noted that under Art 1549 CC, the vendee need not appeal
from the decision of the lower court. Thus, it is sufficient
that the judgment be FINAL before the warranty can be
enforced.
What is the necessity for summoning the seller in the suit for
the eviction of the buyer?
The importance are:
(1) This is the preparation for the suite – a condition sine
qua non;
(2) It is immaterial whether or not the seller has good
defense or means of defense. The summons and notice
must nevertheless be given. Once this is done, the
buyer has done all that he had to do;
(3) The notice must be the notice for the suit fir eviction,
NOT the notice in the suit for breach of warranty. The
notice need not be given in a case where the buyer is an
applicant for registration in land registration
proceedings. Here it is sufficient that the buyer
notifies the seller of: (a) his application; (b) any
opposition thereto.
What is the reason for summoning?
Its object is to give the vendor opportunity to show that the
action against the buyer is unjust.
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 SALES

The seller was notified but did not appear. The buyer won in There is not remedy if burden is registered except if there is
the suit filed by the third person. Can the buyer recover an express warranty that the thing is free from all burdens
expenses? and encumbrances.

No, because there really was no breach of warranty.

What is the effect of form of sale?

In an eviction suit, is it permissible for the buyer to file a This article is applicable whether sale is:
cross claim against the seller?
(a) in public instrument;
Yes, it is permissible for the buyer to file a cross claim
against the seller for the enforcement of the warranty should (b) in private instrument;
the buyer likes. This can be done in some cases to save time
and to prevent inconvenience. The suit against the seller (c) made orally.
may be in the form of a third party complaint if the vendor
has not been made a co-defendant. There is not need to first compel the seller to execute a public
instrument before the action is brought.

What is the rule in registration proceedings?

What are the requisites to recover because of hidden defects?
This article applies only when the buyer is the defendant,
hence when the buyer is the petitioner in a registration The requisites are:
proceedings and he loses, the formal notice here is not a
condition precedent. It is enough that he advice the seller of (1) The defects must be hidden (not known and could not
the application for registration and the opposition thereto. have been known)

(2) The defect must exist at the time the sale was made;
How does the Rules of Court apply? (3) The defect must ordinarily have been excluded from the
contract;
The buyer can make use of the Rules of Court in bringing the
seller to the case. (4) The defect must be important (renders thing UNFIT or
considerably decreases FTINESS);

(5) The action must be instituted within the prescribed

What is the rule in case of non-apparent servitudes?
The defect contemplated in this Article is really a sort of
“hidden defect” but remedy is similar to that provided in the
case of eviction. The servitudes contemplated are not legal
easements for these exist by virtue of the law. Therefore, it
cannot be claimed that the buyer was ignorant thereof.
time – i.e., six months from the delivery of the thing
sold or within 40 days form the date of delivery in case
of animals, and
(6) There must be no waiver of warranty on the part of the
vendee.

What is the meaning o “unfit for the use intended”

What are the remedies if made within one year?
The use must have been stated in the contract itself, or can
The remedies are: be inferred from the nature of the object or from the trade or
occupation of the buyer.
(1) rescission;

(2) damages.
What is the meaning of “hidden”

“Hidden” means:
What is the remedy if made after one year?
(a) What may be hidden with respect to one person may not be
The remedy is only Damages. hidden with respect to another;

(b) Just because there is a difference in grade or quality, it does

not necessarily mean that the defect is hidden;
What is the effect if burden or easement is registered?
(c) Defects are sometimes referred to as “redhibitory defects”

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What is the effect of long inaction?
If the buyer examines the tobacco at time of purchase, and
questions only after 3 years, and the seller has not made any
misrepresentation, there is no breach of warranty. In fact
under Art 1571, the action prescribes in six months.
A lease purchase agreement was entered into between
Filinvest and Philrock over a rick crushing machine. It was
agreed that after payment of the price, Philrock would
become the owner of the same. After testing the machine,
Philrock complained that it could process only 5 tons of rock
a day instead of the agreed 10 to 20 tons a day, hence it
demanded that Filinvest should make good of the same.
Philrock went to court seeking for rescission of the lease,
damages and injunction. Filinvest contented that it is not
liable for warranty. Decide.
Filinvest is not liable. Philrock inspected and tested the
machine, and it is more knowledgeable, if not, and expert on
the object of the contract; hence, Philrock cannot hold
Filinvest liable for damages. It is true that Art 1561, NCC,
vendor shall be responsible for warranty against hidden
defects which the thing sold may have should they render the
thing unfit for the use it is intended or diminish its fitness for
such use, yet the law likewise states that the vendor shall not
be answerable for patent defects or those which are visible or
for those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known
them. (Art 1561, NCC).
What are the requisites of the warranty against hidden
encumbrances?
The requisites for this warranty are:
(1) The encumbrance must be so important;
(2) The encumbrance is not registered;
(3) The vendee has no knowledge of such encumbrance;
and
(4) Action brought within the reglementary period – one
year from the execution of the deed of sale. (Art 1561
CC)
When is defect deemed to be important?
The defect is important when:
(1) It renders the thing sold unfit for the use for which it is
intended;
(2) If it diminishes or decreases its fitness to such an
extent that the vendee would not have acquired it had
he been aware or would have given a lower price for it.
In what cases where the vendor may not be held liable for the
defects of the thing sold?
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When the defects are so patent or those which may be visible
or for those which are not visible if the vendee is an expert
who by reason of his trade or profession, he should have
known them (Art 1561 CC).
Raymundo sold a parcel of land to IDI for P122,769.00
payable in three installments, the last installment ot be paid
within one year from the date of issuance of the Original
Certificate of Title over the property which Raymundo
obligated himself to secure. After the OCT was issued, the
TCT was issued in the name if IDI. IDI later sold the land to
Agencia for P456,000. As a result, the TCT was issued in the
name of Agencia. The land was later transferred to Aguirre.
In the meantime, the tenant on the property was forced to
stop cultivating the land because of the buildozing caused by
the present owner. The tenant sued IDI and Aguirre for
disturbance compensation. IDI in turn filed a cross-claim
against Raymundo in case of a judgment adverse to it.
Agencia and Aguirre filed a cross-claim against IDI. The trial
court rendered judgment in favor of the tenant and ordered
Aguirre to pay the tenant disturbance compensation in the
amount of P24,000. It also ordered IDI to pay Aguirre
P24,000 as damages. Hence this appeal. If you were the
ponente, how would you decide? Why?
I would decide against the petitioner. The SC had the
occasion to hold that “hidden faults or defects” pertain only
to those that make the object of sale until for use for which it
was intended at the time of the sale. If the object of the sale
is an agricultural land, the existing tenancy relationship with
respect to the land cannot be a “hidden fault or defect”. It is
not a lien or encumbrance that the vendor’s warrant did not
exist at the time of the sale. It is a relationship which any
buyer of agricultural land would reasonable expect to be
present and which it is its duty to specifically look into and
provide for.
If a person sells a second-hand motor vehicle, is he liable for
damages in case there are defects or it is unfit for the
purpose intended? Is there any exception?
Explain.
Generally, in the sale of a designated and specific article sold
as second hand, there is no implied warranty as to its
quality or fitness for the purpose intended, at least where it is
subject to inspection at the time of the sale. On the other
hand, there is also authority that in sale of articles, there may
be, under some circumstances, an implied warranty of
fitness for the ordinary purpose of the article sold for the
particular purpose of the buyer.
There is no implied warranty as to the condition, adaption,
fitness, or suitability for the purpose for which a thing was
made or the quality of an article sold as and for a second-
hand article.
The exception to the rile is found in Art 1562, NCC, which
provides that in sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods as follows:
where the buyer, expressly or by implication, makes known
to the seller the particular purpose for which the goods are
acquired, and it appears that the buyer relies on the seller’s
skill or judgment (whether he be a\the grower or
manufacturer or not), there is an implied warranty that the
goods shall be reasonably fit for such purpose.
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What is the meaning of merchantible quality?
For general purpose of a thing, and not necessarily the
particular purpose for which it has been acquired.
What is the effect of sale under patent name or trade name?
There is generally NO warranty as to the article’s fitness for
any particular purpose.’
What is the significance of the usage of trade?
The parties are presumed to be acquainted with the usages of
trade.
In the case of a contract of sale by sample, is there an implied
warranty the goods shall be free from any hidden defect
rendering them unmerchantable which would not be
apparent or reasonable examination of the sample?
Yes, if the seller is a dealer in goods old by sample. (Art 1565
CC)
Why is the seller responsible for hidden defects even if he is
in good faith?
Because he has to repair the damage done. The object of the
law is reparation, not punishment. Thus for example, the
seller of an unworthy vessel is liable for hidden defects even
if he did not know of them.
Seller and buyer agreed that seller would be exempted from
hidden defects. But seller knew of hidden defects. Would
seller be liable?
Yes, because of his bad faith. To hold otherwise would be to
legalize fraud.
Who is a purchaser in good faith and for value?
A purchaser in good faith and for value is one who buys
property of another, without notice that some other person
has a right to or interest in such property and pays a full and
fair price for the same, at the time of such purchase or before
he has notice of the claim or interest of some other person in
the property.
What does good faith consist of?
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Good faith consist of an honest intention to abstain from
taking unconscientious advantage of another. Good faith is
the opposite of fraud and of bad faith, and its non-existence
must be established by competent proof. One cannot be said
to be a buyer in good faith if he had notices of the claim of
third person aside from the claim or right of the registered
owner, especially if the claims were annotated on the title are
the lots which were shown to be they buyer together with the
decision of the Court of Appeals, and the buyers were fully
aware that the subject were under litigation. A purchaser of
a valued price of property cannot just close is eyes to facts
which should put a reasonable man upon his guard and then
claim that he acted in good faith under the belief that there
were no defect in the title of the vendors.
X is the owner of a parcel of land. He sold it to Y who did not
register the deed of sale. Later on, X mortgaged the same
land to Z. Between the two contracts, which shall prevail?
Explain.
An unrecorded sale shall prevail because the owner has
already parted with his property at the time of the mortgage,
and the mortgage is always subject to the better rights of
third parties.
Spouses Victoriano and Crisanta dela Rosa were the
registered owners of a parcel of land. On May 4, 1931,
Victoriano sold ½ of the land to Juliana Salazar who
constructed a house. The document was not registered. On
June 6, 1961, the children of the spouses sold the entire land
to Nuguid. It was registered on March 10, 1964 and a title
was issued. Between the first and the second buyer, who has
a better right? Why?
The ownership should belong to the vendee who in good
faith first recorded it in the Registry of Property. Although
the second sale was made by the heirs of Dela Rosa, the said
heirs are deemed the continuation of the personality of the
decedent. Hence, the second buyer is the owner. Petitioner
was a purchaser in good faith and for value. The title was
free from any annotation or encumbrance. If the property
sold is registered land, the purchase in good faith has a right
to rely on the certificate of the title and is under no duty to go
behind it to look for laws, for previous registration is
required to be coupled with good faith.
In action for annulment of documents and reconveyance
with damages, Francisco Veloso contended that he never
authorized anyone to sell his real property. He alleged that
his wife was in possession of the title; but when his wife went
abroad, he found out that his title was missing. He
discovered that there was a sale by his wife over the said
property supported by a General Power of Attorney. His title
was cancelled under the name Aglaloma Escario. Can he
recover the property? Why?
No because she was a buyer in good faith and for value. She
relied on the power of attorney presented by the wife of the
plaintiff. Being the wife if the owner and having with her the
title of the property, there was no reason for the private
respondent not to believe in her authority. Moreover, the
power of attorney was notarized and as such carried with it
the presumption of its due execution. This, having had no
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inkling on any irregularity and having not participation
thereof, private respondent was a buyer in good faith . It has
been consistently held that a purchaser in good faith is one
who buys property of another without notice that some other
person has a right to ir interest in such property and pays a
full and fair price of the same, at the time of such purchase,
or before he has notice of the claim or interest of some other
person in the property.
A property was mortgaged but there was an annotation of the
right of usufruct. The obligation was not paid, hence, there
was foreclosure of the mortgage. Finally, there was sale. Is
the morgagee-buyer, a buyer in good faith? Why?
Yes, it is well-established rule that every person dealing with
registered land may safely rely on the correctness of the
certificate of title issued and the law will in no way oblige
him to go behind the certificate to determine the condition of
the property. An innocent purchaser for value ins one who
buys the property of another without notice that some other
person has a right to or interest in such property and pays a
full and fair price for the same at the time of such purchase
or before he has notice of the claim of another person. The
annotation of usufructuary rights does not impose upon the
mortgagee-buyer the obligation to investigate the validity of
its mortgagor’s title. Usufruct have a right to enjoy the
property of another with the obligation of preserving its form
and substance.. (Art 562).
Can a forged or fraudulent document vest title? Why?
Yes, in Spouses Romulo and Sally Eduarte vs CA, it was said
that the rights of an innocent purchase for value must be
respected and protected notwithstanding the fraud employed
by the seller in securing his title.
Define “accion redhibitoria” and “accion quantu minoris”
“Accion redhibitoria” is an action instituted by the vendee
against the vendor to avoid a sale on account of some vice or
defect in the thing sold which renders it unfit for the use
intended or which will diminish its fitness for such use to
such an extent that, had the vendee been aware thereof, he
would hot have acquired it. “accion quantu minoris”, on the
other hand, is an action to procure him return of a part of the
purchase price paid by the vendee to the vendor by reason of
such defect. (Arts 1561, 1562, 1564, 1565, 1567, CC)
If there is a breach by the vendor of the implied warranty
against hidden defects of or encumbrances upon the thing
sold, what are the remedies of the vendee? What is the
period of prescription for such remedies?
The vendee may elect between withdrawing from the
contract (accion redhibitoria) and demanding a
proportionate reduction of the price (accion quantu
minoris), with dames in either case (Art 1567, CC).
Generally, the period of prescription is six months (Art 1571,
CC). However, in redhibitory actions based on the faults or
defects of animals, the period is forty days (Art 1577, CC).
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Whether six months or forty days, the period must be
counted from the date of delivery to the vendee.
What are the remedies in case of hidden defects?
The remedies are:
(1) Withdrawal or rescission (accion redibitoria) plus damages;
(2) Proportionate reduction (accion quanti minors o
estimatoria) – reduction in the price, plus damages.
Is this warranty applicable in lease?)
Yes, this warranty in sales is applicable to lease. (Yap v.
Tiaoqui)
On June 10,2010, S sold to B a specific a car which S acquired
from a friend last June 1, 2010. On August 10, 2010, the car
was totally destroyed which was traced to a crack in the
engine block. S was not aware of the defect. Is S, the seller,
liable to B?
a. No, because S was innocent and a seller in good faith.
b. No, because S has all the opportunity to examine the car
before buying it.
c. Yes, S is liable to return the price and expenses
incurred by B.
d. Yes, S is liable to return the price, expenses and damages
actually suffered by B.
On February 15, 2010, A sold to B a specific car. On March 3,
2010, the car was totally destroyed which was traced to a
crack in the engine block. A, the vendor, was aware of the
defect. Is A, the vendor, liable to B?
Yes, A shall bear the loss and is liable to return the price,
expenses and damages actually suffered by B.
Statement No. 1: If the thing sold should be lost in
consequence of the hidden faults, and the vendor was aware
of them, he shall bear the loss, and shall be obliged to return
the price and refund the expenses of the contract, with
damages.
Statement No.2: If the vendor was not aware of the hidden
defects , he shall only return the price and interest thereon,
and reimburse the expenses of the contract which the vendee
might have paid.
a. Both are true
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b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
What is the effect of loss of thing on account of hidden
defects when the vendor was aware of such hidden defects?
The vendor shall bear the loss and the vendee hall have the
right to recover the price paid, expenses of the contract, with
damages.
What is the effect of loss of thing on account of hidden
defects when the vendor was not aware of such hidden
defects?
The vendor shall be obliged to return the price paid, interest
thereon and expenses of the contract if paid by the vendee.
If the thing sold was lost on account of hidden defects and
the vendor was aware of such hidden defects, the vendee can
recover the following except:
a. the price paid
b. interest thereon
c. expenses of the contract
d. damages
If the thing sold was lost on account of hidden defects and
the vendor was not aware of such hidden defects, the vendee
can recover the following except:
a. the price paid
b. interest thereon
c. expenses of the contract if paid by the vendee
d. damages
Statement No. 1: If the thing sold was lost on account of
hidden defects and the vendor was aware of such hidden
defects, the vendee can recover the price paid, interest
thereon, expenses of the contract, with damages.
Statement No.2: If the thing sold was lost on account of
hidden defects and the vendor was not aware of such hidden
defects, the vendee can recover the price paid, interest
thereon, and expenses of the contract if paid by the vendee.
a. Both are true
b. Both are false
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c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
If the thing sold should be lost in consequence of the hidden
faults and the vendor was aware of them. The following are
his obligations except:
a. he shall bear the loss
b. he shall be obliged to return the price
c. he shall refund the expenses of the contract, with damages
d. he shall return the price and interest thereon,
expenses of the contract which the vendee might
have paid.
If the thing sold should be lost in consequence of the hidden
faults and the vendor was not aware of them. The following
are his obligations except:
a. he shall return the price
b. he shall return the interest thereon
c. he shall reimburse the expenses of the contract which the
vendee might have paid
d. he shall return the price and refund the expenses
of the contract, with damages
If the thing sold has hidden faults at the time o f sale and
should thereafter be lost by a fortuitous event or through the
fault of the vendee, the vendor has the following obligation:
a. the vendor pays the price which the vendee paid as is
b. the vendor pays the price which the vendee paid
less the value which the thing had when it was lost
c. the vendor pays only the value which the thing had when it
was lost
d. the vendor pays damages to the vendee regardless of
whether or not the vendor had acted in bad faith
Statement No. 1: If the thing sold has hidden faults at the
time o f sale and should thereafter be lost by a fortuitous
event or through the fault of the vendee, the vendor has the
obligation to pay only the value which the thing had when it
was lost.
Statement No. 2: If the thing sold has hidden faults at the
time o f sale and should thereafter be lost by a fortuitous
event or through the fault of the vendee, the vendor pays
damages to the vendee regardless of whether or not the
vendor had acted in bad faith.
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a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
S sold a car for P300,000 to B. Unknown to B, the car then
had a cracked engine block, the replacement of which would
cost P75,000. Despite his knowledge of this defect, S
obtained a waiver from B of the latter’s right under the
warranty against hidden defects. Subsequently, the car was
wrecked due to the recklessness of B who only then
discovered the defects. What right, and to what extent, if any,
has B against S?
B can recover approximately P75,000, which may represent
the difference between the purchase price and the true value. The
waiver is void because S knew of the defect.
S sold a car for P300,000 to B. Unknown to B, the car then
had a cracked engine block, the replacement of which would
cost P75,000. Despite his knowledge of this defect, S
obtained a waiver from B of the latter’s right under the
warranty against hidden defects. Subsequently, the car was
wrecked due to the recklessness of B who only then
discovered the defects. Which of the following statements is
true?
a. S still liable to reimbursed B of P75,000 the
difference between the purchase price and true
value.
b. The waiver is void because B has no knowledge of the
defect.
c. S is not liable anymore because the car got loss due to the
recklessness of B.
d. The liability of S remains to be 300,000 because of breach
of warranty against hidden defects.
If the thing with hidden defect was lost through fortuitous
event or through the fault of the vendee, what right, and to
what extent, if any, has the vendee against the vendor?
The vendee may demand of the vendor the price which he
paid, less the value which the thing had when it was lost. If
the vendor acted in bad faith, he shall pay damages to the
vendee.
What is the effect if the thing with hidden defect was lost due
to fortuitous event or fault of the vendee and the vendor has
no knowledge of such hidden defect?
The vendor is liable to return the difference between the
price paid and the value of the thing when it was lost. Such
that, if the price is P10,000 and at the time of the loss of the
thing sold as only P8,000, the vendee may still recover from
the vendor P2,000.
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Statement No. 1: If the thing with hidden defect was lost
through fortuitous event or fault of the vendee and the
vendor has no knowledge of such hidden defect, the vendor
is obliged to return the price paid less the value which the
thing had when it was lost.
Statement No.2: If the vendor acted in bad faith (with
knowledge of the hidden defect), the vendor shall pay
damages to the vendee.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
If the thing with hidden defect was lost through fortuitous
event or fault of the vendee and the vendor has no knowledge
of such hidden defect, the vendor is obliged to return:
a. the price paid less the value which the thing had
when it was lost
b. the price paid, expenses of the contract, with damages
c. price paid, interest thereon and expenses of the contract if
paid by the vendee
d. the original price paid only
Antonio sold a car for P200,000 to Bartolome. Unknown to
Bartolome, the car then had a break defect, the replacement
of which would cost P15,000. Despite his knowledge of this
defect, Antonio obtained a waiver from Bartolome of the
latter’s right under the warranty against hidden defects.
Subsequently, the car was wrecked due to the recklessness of
Bartolome who only then discovered the defects. What right,
and to what extent, if any, has Bartolome against Antonio?
Bartolome can recover approximately P15,000, which may
represent the difference between the purchase price and the
true value. The waiver is void because Antonio knew of the
defect.
Allan sold a car for P200,000 to Bart. Unknown to Bart, the
car then had a break defect, the replacement of which would
cost P15,000. Subsequently, the car was wrecked due to the
recklessness of Bart who only then discovered the defects.
What right, and to what extent, if any, has Bart against Allan?
a. the vendor pays the price which the vendee paid as is
b. the vendor pays the price which the vendee paid
less the value which the thing had when it was lost
c. the vendor pays only the value which the thing had when it
was lost
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d. the vendor pays damages to the vendee regardless of
whether or not the vendor had acted in bad faith
Do the provisions under Articles 1561 to 1569 of the Civil
Code applicable also to judicial sales?
Yes, under Article 1570 of the Civil Code, the provisions
under articles 1561 to 1569 of the Civil Code shall be
applicable to judicial sales, except that the judgment debtor
shall not be liable for damages.
What are the actions that shall be barred after six months
from the delivery of the thing sold?
The following are the actions that shall be barred after six
months from the delivery of the thing sold:
1. breach of warranty against hidden defects
2. rescission of contract because of hidden defects
3. proportionate reduction in the price because of hidden
defects
The following are the actions that shall be barred after six
months from the delivery of the thing sold. Which is the
exception?
a. breach of warranty against hidden defects
b. rescission of contract because of hidden defects
c. proportionate reduction in the price because of hidden
defects
d. redhibitory action, based on the frauds or defects
of animals
For what causes of action, if any, does the new Civil Code
provide a period of limitation of six months?
The following causes of action have a period of limitation of
six months:
1. breach of warranty against hidden defects
2. rescission of contract because of hidden defects
3. proportionate reduction in the price because of hidden
defects
What is the prescriptive period for actions arising from
breach of warranty against hidden defects, rescission of
contract because of hidden defects, and proportionate
reduction in the price because of hidden defects?
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The prescriptive period for actions arising from breach of
warranty against hidden defects, rescission of contract
because of hidden defects, and proportionate reduction in
the price because of hidden defects is six months from
delivery of the thing sold.
B bought from S two carabaos for P50,000 to be used for
breeding purposes. The male carabao in infected with mouth
and foot disease (not contagious), while the female carabao
is in sound state. What right, and to what extent, if any, has B
against A?
The right of B is to ask for the rescission of the contract
because the two carabaos are bought in “set” for breeding
purposes. However if these carabaos will not be used for
breeding purposes, the only right of B is to ask for rescission
or reduction in the price pertaining to the male carabao, or
unless it is shown that he would not have bought the sound
animal without the other.
What is the effect of sale of two or more animals when one of
the animals has redhibitory defect?
In sale of animals, the redhibitory defect of one animal shall
give rise only to its redhibition and this will not apply to the
other sound animal, unless the buyer could prove that he
would not have purchased the sound animal or animals
without the defective one. This proof is unnecessary when
animals are bought as team, yoke, pair or set, even if a
separate has been fixed for each one of them.
In sale of animals, the redhibitory defect of one animal shall
give rise only to its redhibition and this will not apply to the
other sound animal, unless the buyer could prove that he
would not have purchased the sound animal or animals
without the defective one. What are the exceptions when
proof by the buyer that he would not have purchased the
sound animal or animals without the defective one is not
necessary?
The exceptions are when the animals are bought as team,
yoke, pair or set, even if a separate has been fixed for each
one of them.
If two or more animals are sold together, does the
redhibitory defect of one shall only give rise to its
redhibition, and not of the others whether the price was a
lump sum?
Yes, under Article 1572 of the Civil Code, if two or more
animals are sold together, whether for a lump sum or for a
separate price for each of them, the redhibitory defect of one
shall only give rise to its redhibition, and not of the others;
unless it should appear that the vendee would not have
purchased the sound animal or animals without the defective
one.
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Statement No. 1: If two or more animals are sold together,
the redhibitory defect of one shall only give rise to its
redhibition, and not of the others when the animals are
bought only for a separate price for each of them and not for
a lump sum.
Statement No. 2: In sale of animals, the redhibitory defect of
one animal shall give rise only to its redhibition and this will
not apply to the other sound animal, regardless of whether
or not the buyer could prove that he would not have
purchased the sound animal or animals without the defective
one.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
Is Article 1572 of the Civil Code applicable also to sale of
other things?
Yes, under Article 1573 of the Civil Code, it provides that the
provisions of the preceding article (article 1572) with respect
to the animals shall in like manner be applicable to the sale
of other things.
What are the instances when there is no warranty against
hidden defects of animals sold?
The following are the instances when there is no warranty
against hidden defects of animals sold:
1. Animals sold at fairs
2. Animals sold at public auctions
3. Livestock sold as condemned, declared known to the buyer
In three of the following there is no warranty against hidden
defects of animals. Which is the exception?
a. Animals sold at fairs
b. Animals sold at public auctions
c. Livestock sold as condemned, declared known to the buyer
d. Livestock sold as is
Which of the following statements is not true?
a. There is no warranty against hidden defects of animals
sold at fairs.
b. Ther e is no warranty against hidden defects of animals
sold at public auctions.
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c. There is no warranty against hidden defects of
livestock sold as condemned regardless of whether
or not communicated to the buyer.
d. There is no warranty against hidden defects of livestock
sold as condemned provided it is communicated to the
buyer.
Which of the following statements is true?
a. There is warranty against hidden defects of animals sold at
fairs.
b. Ther e is warranty against hidden defects of animals
sold at public auctions.
c. There is warranty against hidden defects of livestock sold
as condemned regardless of whether or not communicated to
the buyer.
d. There is warranty against hidden defects of
livestock sold as condemned when such fact is not
communicated to the buyer.
What are the two kinds of void sales with respect to animals?
The two kinds of void sales with respect to animals are the following:
1. Sale of animals suffering from contagious disease
2. Sale of animals which are found to be unfit for the use or
service stated in the contract for which they are acquired
Statement No. 1: The sale of animals suffering from
contagious disease shall be void.
Statement No. 2: A contract of sale of animals shall also be
void if the use or service for which they are acquired has
been stated in the contract, and they are found to be unfit
therefor.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
Which of the following statements is not true?
a. The sale of animals suffering from contagious disease shall
be void.
b. The sale of animals suffering from contagious
disease shall be voidable.
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c. The sale of animals which are found to be unfit for the use
stated in the contract for which they are acquired shall be
void.
d. The sale of animals which are found to be unfit for the
service stated in the contract for which they are acquired
shall be void.
Which of the following statements is true?
a. The sale of animals suffering from any disease whether
contagious or not shall be void.
b. The sale of animals suffering from contagious disease shall
be voidable.
c. The sale of animals which are found to be unfit for
the use or service stated in the contract for which
they are acquired shall be void.
d. The sale of animals which are found to be unfit for the use
or service stated in the contract for which they are acquired
shall be voidable.
B manifested to S that he is buying a male carabao for
breeding purposes. S offered to B his carabao for P20,000, a
“tested bore” for breeding. However, it turns out that the
carabao is castrated. What is the effect of such sale?
The sale is void because the carabao will be unfit for
breeding purposes. Under Article 1575 of the Civil Code, a
contract of sale of animals shall also be void if the use or
service for which they are acquired has been stated in the
contract, and they are found to be unfit therefor.
What is a redhibitory defect?
It is a defect of such a nature that expert knowledge, even in
case of professional inspection, is not sufficient to discover.
What is the nature of the defect to be redhibitory?
To be redhibitory, it is not sufficient if the defect was not
discovered by an expert. What is required is that the defect
would not have been discovered even with the aid of an
expert. However, if the expert through ignorance failed to
discover it, or through bad faith, failed to reveal the same to
the vendee, he shall be held liable for damages.
B bought from S a male carabao for P20,000 to be used for
breeding purposes. The service of a veterinarian was
engaged to check if the carabao was in good condition for
breeding purposes. Unfortunately, the carabao has a
redhibitory defect. What is the liability, if any, of the
veterinarian?
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The veterinarian shall be liable for damages if through
ignorance or bad faith has failed to discover or disclose the defect to
the vendee.
For what causes of action, if any, does the new Civil Code
provide a period of limitation of forty (40) days?
The redhibitory action, based on faults or defects of animals,
must be brought within forty (40) days from the date of their
delivery to the vendee.
What is the action that shall be barred after forty (40) days
from the delivery of the thing sold?
The redhibitory action, based on faults or defects of animals,
shall be barred after forty (40) days from the date of their
delivery to the vendee.
What is the prescriptive period for redhibitory action based
on faults or defects of animals?
The prescriptive period for redhibitory action based on faults
or defects of animals is forty (40) days from the date of their
delivery to the vendee.
When can redhibitory action be exercised?
Redhibitory action can only be exercised with
respect to faults and defects which are determined by law or
by local customs.
Statement No. 1: The redhibitory action, based on faults or
defects of animals, must be brought within forty (40) days
from the date of their delivery to the vendee.
Statement No. 2: Redhibitory action can only be exercised
with respect to faults and defects which are determined by
law or by local customs.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
Which of the following statements is true?
a. The redhibitory action, based on faults or defects of
animals, must be brought within six (6) months from the
date of their delivery to the vendee.
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b. The redhibitory action, based on faults or defects
of animals, must be brought within forty (40) days
from the date of their delivery to the vendee.
c. Redhibitory action can only be exercised with respect to
faults and defects which are stipulated by the parties.
d . The redhibitory action, based on faults or defects of
animals, must be brought within forty (40) days from the
date of payment of the price.
Which of the following statements is not true?
a. The redhibitory action, based on faults or defects
of animals, must be brought within six (6) months
from the date of their delivery to the vendee.
b. The redhibitory action, based on faults or defects of
animals, must be brought within forty (40) days from the
date of their delivery to the vendee.
c. Redhibitory action can only be exercised with respect to
faults and defects which are determined by law.
d. Redhibitory action can only be exercised with respect to
faults and defects which are determined by local customs.
What are the requisites to concur before the vendor is liable
in sale of animals?
The following are the requisites to concur before the vendor is liable in
sale of animals:
1. Existence of the disease at the time of sale.
2. That disease must have been the cause of death.
3. Death of the animal should take place within three days after
purchase.
What is the effect if the animal should die within three days
after its purchase?
If the animal should die within three days after its purchase,
the vendor shall be liable if the disease which cause the death
existed at the time of the contract.
The vendor shall be liable for the death of animal after its
purchase when the following requisites are present. What is
the exception?
a. Existence of the disease at the time of sale.
b. That disease must have been the cause of death.
c. That disease must have been contagious.
d. Death of the animal should take place within three days
after purchase.
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Is the vendor liable if the animal should die after its
purchase?
The vendor shall be liable only if the animal should die
within three days after its purchase and the disease which
causes the death of the animal existed at the time of the
contract.
What is the effect if the sale of the animal is rescinded?
If the sale be rescinded, the animal shall be returned in the
condition in which it was sold and delivered, the vendee
being answerable for any injury due to his negligence, and
not arising from the redhibitory fault or defect.
What is the liability of the vendee if the sale of the animal is
rescinded?
If the sale be rescinded, the vendee shall be answerable for
any injury due to his negligence, and not arising from the redhibitory
fault or defect.
If the sale of animal be rescinded, what is the condition of the
animal when it shall be returned?
If the sale be rescinded, the animal shall be returned in the
condition, in which it was sold and delivered.
Which of the following statements is not true?
a. If the sale be rescinded, the animal shall be returned in the
condition in which it was sold.
b. If the sale be rescinded, the animal shall be returned in the
condition in which it was delivered.
c. If the sale be rescinded, the vendee shall be answerable for
any injury due to his negligence, and not arising from the
redhibitory fault or defect.
d. If the sale be rescinded, the vendee shall not be
answerable for any injury.
What are the remedies of buyer of animals with redhibitory
defects?
The following are the remedies of buyer of animals with
redhibitory defects:
1. withdrawal or rescission (plus damages)
2. proportionate reduction in price (plus damages)
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What is the prescriptive period for the remedies of buyer of
animals with redhibitory defects?
The prescriptive period shall be 40 days from the date of
delivery to the buyer.
What shall govern the form of sale of large cattle?
The form of sale of large cattle shall be governed by special
laws.
OBLIGATIONS OF THE VENDEE
Articles 1582 – 1593
What are the principal obligations of the buyers?
The following are the principal obligations of the buyers:
1. to accept the delivery of the thing sold
2. to pay the price of the sale
On January 5, A sold and delivered his truck, together with
the corresponding certificate of public convenience to B for
the sum of P600,000, payable within sixty (60) days. Two
weeks after the sale, and while the certificate of public
convenience was still in the name of A, it (the certificate) was
revoked by the Public Service Commission through no fault
of A. Upon the expiration of the ^0-day period, A demanded
payment of the price from B. B refused to pay, alleging that
the contract of sale was void for the reason that the
certificate of public convenience which was the main
consideration of the sale no longer existed. Is the contention
of B tenable? Reasons.
Under the circumstances, the contention of B is not tenable.
(a) Firstly, it cannot be correctly contended that the sale is
void, since the consideration actually existed at the time of
the perfection of the sale. The subsequent revocation of the
certificate thru no fault of A is immaterial.
(b) Secondly, what B should have done immediately after the
sale was to take steps to have the Public Service Commission
transfer the certificate to his name. (Serrano v. Miave, et al.,
L-14678, March 31, 1965)
(c) Thirdly, while the Public Service Law requires that the
sale or assignment of a certificate of public convenience,
together with the property used in the operation of the same,
should be approved by the Public Service Commission – for
the protection of the public, still as between A and B, the
contract is efficacious as all the essential requisites of the
contract were present at the time of perfection thereof.
What is the effect of delivery when no time has been fixed for
payment of the price?
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If the seller has delivered but no time has been fixed for the
payment of the price, the seller may require the payment to
be made at anytime after delivery. The buyer here has the
duty to pay the price immediately upon the demand. (Ocejo
v. Int. Bank, 37 Phil. 631)
What is the effect of deviations from the provisions of the
contract of sale?
If the seller is forced to deviate from the provision of the
contract, but the purchaser consents or agrees to such
deviations, the purchaser should still pay the price. ( Engel v.
Velasco & Co., 47 Phil. 15)
Statement No. 1: The vendee is bound to accept delivery and
to pay the price of the thing sold at the time and place of
stipulated in the contract.
Statement No. 2: If the time and place should not have been
stipulated, the payments must be made at the time and place
of the delivery of the thing sold.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
A sold to B the former’s horse for P5,000. No date is fixed by
the parties for the performance of their respective
obligations. The obligation of A is
a. to deliver the horse immediately as there is a perfected
contract
b. to deliver the horse upon payment by B of P5,000
c. to deliver the horse upon within a reasonable time of two
months from the contract date
d. to rescind the contract as there is no time fixed for the
delivery and payment
Where and when must payment be made in the absence of
any stipulation?
If the time and place should not have been stipulated, the
payment must be made at the time and place of the delivery
of the thing sold. (Art. 1583)
What is the obligation of the vendee when the thing is sold to
him?
The vendee is bound to accept delivery and to pay the price
of the thing sold at the time and place stipulated in the
contract.(Art. 1583)
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Why is there no delivery if payment is made in installments?
The reason is because performance must generally be
complete. (Art. 1583)
Is the buyer of goods bound to accept delivery thereof by
installments?
No, he is not bound to accept delivery thereof by
installments unless otherwise stipulated.
What is the effect in case when there is a separate price for
each installment and there is a breach thereof by any of the
parties?
Breach in any installment affects the whole contract. The
injured party may sue for breach of entire contract. (Art.
1583)
What is the rule in the case of installment deliveries and
there is a separate price for each installment?
If the breach affects the whole contract, the injured party
may sue for breach of entire contract when seller makes
defective or incomplete deliveries; or buyer wrongfully
neglects or refuses to accept delivery; or buyer fails to pay
any installment. If breach is severable, only claim for
compensation for particular breach may be allowed. (Art.
1583)
What is the effect when the goods are delivered to the buyer
without him having previously examined them?
Where goods are delivered to the buyer, which he has not
previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of
examining them for the purpose of ascertaining whether they
are in conformity with the contract if there is no stipulation
to the contrary. (Art. 1583)
In what instance/s is the buyer is deemed to have accepted
the goods which he has not previously examined?
Where goods are delivered to the buyer, which he has not
previously examined, he is deemed to have accepted them if
he has had a reasonable opportunity of examining them for
the purpose of ascertaining whether they are in conformity
with the contract if there is no stipulation to the contrary.
(Art. 1584)
Is the seller bound to afford the buyer a reasonable
opportunity to inspect the goods for the purpose of
ascertaining whether they are in conformity with the
contract?
Yes, when the seller tenders delivery of goods to
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the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the
purpose of ascertaining whether they are in conformity with
the contract, unless otherwise agreed. (Art. 1584)
What are the buyer’s rights in relation to the examination of
goods?
Upon ACCEPTANCE, the buyer may assent to
become owner of the specific goods when delivery of them is
offered to the buyer.
Upon EXAMINATION , examination is a condition
precedent to transfer ownership. (Art. 1584)
Is the vendor bound to offer the thing for examination before
delivery without the request of the vendee?
Examination before delivery should be made by request.
Vendor is not bound to offer the thing for examination
before delivery without the request of the vendee. (Art. 1584)
When is the thing considered accepted?
When the thing is delivered, the thing is
considered accepted if the vendee has examined it or has
reasonable opportunity to examine it. (Art. 1584)
What is the rule in case of COD (collect on delivery)?
The buyer is not entitled to examine until payment is made,
EXCEPT when there is an agreement or that the usage of
trade permits the same. In COD, goods are not to be
delivered by the carrier to the buyer unless the latter pays.
(Art. 1584)
When does the buyer have the right to examine?
Generally, the buyer is entitled to examine the goods prior to
delivery. This is true even if the goods are shipped “free on
board”.
In what instances does the buyer have no right to examine?
The buyer has a right to examine if there is a stipulation to
this effect and when the goods are delivered C.O.D- unless
there is an agreement or usage of trade permitting such
examination.
When is there acceptance of the goods?
There are three ways of acceptance of goods:
a.) express acceptance of goods
b.) when buyer does an act which only an owner can do
c.) failure to return after reasonable lapse of time (Art. 1585)
When a buyer accepted goods despite delay and also
promised later on to pay, may the buyer subsequently ask for
damages on account of delay?
No, the buyer is stopped because of the acceptance without
reservation at the time of acceptance. (Art. 1585)
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What are the modes of manifesting acceptance?
The modes of manifesting acceptance are:
1. EXPRESS ACCEPTANCE – the buyer intimates to the
seller that he accepts the thing
2. IMPLIED ACCEPTANCE – may be either of the following:
a. Buyer does an act inconsistent with the seller’s
ownership; or
b. Buyer’s retention of goods without intimating
rejection after the lapse of reasonable time.
Does acceptance of the goods by the buyer discharge the
seller from liability in damages or other legal remedy for
breach of any promise or warranty in the contract of sale?
No, acceptance is not a bar to action for damages. However,
notice must be given to the seller within a reasonable time.
(Art. 1586)
When is the buyer’s refusal to accept justified?
He is justified in refusing to accept when the risk of loss is
still with the seller. (Art. 1586)
In a contract of sale is the buyer is liable as a depositary?
Buyer is not liable as DEPOSITARY unless he voluntarily
constitutes himself as such.
What are the effects if the buyer justifiably refuses to accept
the delivery?
The buyer has no duty to return the goods to the seller. Mere
notification to seller of refusal will suffice but the buyer may
make himself a voluntary depositary-in which case he must
safely take care of them in the meantime.(Art. 1587)
What is the effect if the buyer unjustifiably refuses to accept
the delivery?
Title passes to the buyer the moment it is placed at his
disposal.
What is the exception to the rule that title passes to the buyer
when he unjustifiably refuses to accept delivery?
The exception is when there is a contrary stipulation or when
the seller reserves the ownership as a sort of security for the
payment of the price. (Art. 1588)
When is the vendee liable for interest on the price?
The vendee is liable for interest on the price in the following
cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or
income; and
(3) Should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price. (Art.
1589)
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When is the buyer said to be in default with regards to legal
interest?
If the buyer fails to give the money after the
contract is notarized, although he had previously promised
to do so, there is default with liability for legal interest. (Art.
1589)
If it has been stipulated that vendee shall owe interest, is
demand still necessary?
No demand is needed. Fruits or income is
sufficient to warrant the payment of interest. (Art. 1589)
Should it have been so stipulated that the vendee shall owe
interest for the period between the delivery of the thing and
the payment of the price, must the stipulation be in writing?
The stipulation on interest may be oral. Interest
which must be in writing refers only to loan.
When may the buyer suspend the payment of the price?
The buyer may suspend payment of the price when:
a) there is well-grounded fear
b) the fear is because of:
1. a vindicatory action or action to recover
2. foreclosure of mortgage (Art. 1590)
When may the vendee suspend the payment of the price?
The vendee may suspend the payment of the price in the
following cases:
1) Should he be disturbed in the possession or
ownership of the thing sold; or
2) Should he have reasonable grounds to fear
such disturbance by a vindicatory action or by
a foreclosure of mortgage. (Art. 1590)
SS sold and delivered to BB a parcel of land for 2 Million
pesos payable within 30 days from the date of contract. Soon
after the sale, XX claims ownership over the land by virtue of
a prescriptive title. May BB suspend the payment of the
price?
Yes, B may suspend the payment of the price
because of a reasonable fear that an action reinvidicatoria
will be brought against him. It is not necessary that the
vindicatory action has already been brought: reasonable fear
thereof is sufficient.(Art. 1590)
What are the exceptions to the right of a vendee to suspend
payment of the price?
The exceptions are:
1) Should there be a stipulation to that effect;
2) Should the vendor give security for the return of the price;
3) Should the vendor have caused the disturbance or danger to
cease; or
4) Should the disturbance consist of only of a mere act of
trespass. (Art. 1590)
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A sold a parcel of land to B. Thereafter, C filed a suit against
A and B for quieting of title. During pendency, may B
suspend payment?
Yes. B has reasonable ground to fear that his
possession or ownership would be disturbed by a vindicatory
action. (Art. 1590)
Suppose in the problem aforementioned, C only claims for a
part of the land. May there be suspension of payment?
Yes, B may still suspend payment for the entire amount.
Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, may the vendee
recover what has already been paid?
No, the vendee may retain only the price that has
not been paid to the vendor. He is not entitled to recover
what has already been paid.
May the seller immediately sue for the rescission of the sale?
The seller must have reasonable grounds to fear
the loss of the immovable property and the loss of the price.
(Art. 1591)
What are the requisites in order for the vendor to rescind
sale of immovable property or in cases of anticipatory
breach?
The REQUISITES are :
(a) There is delivery of immovable property
(b) Vendee has not paid the price
(c) Vendor has reasonable ground to fear the:
a. LOSS of PROPERTY; AND
b. LOSS of PRICE
What is the rule if in the previous question neither ground
exists?
The provisions of Article 1191 shall apply. The article says:
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of damages
in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period. This is
understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.
A and B entered into a contract of sale whereby A bound
himself to deliver a parcel of land through a public document
on1 July 2010, and B bound himself to pay on 31 December
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2010. B did not pay A on 31 December 2010. What is/are the
remedy/ies of A?
A may choose between fulfillment and rescission of the
obligation with payment of damages in either case on the
ground that B does not comply with what is incumbent upon
him (Article 1191). Should there be a reasonable ground to
fear the loss of property sold and its price, A may
immediately sue for rescission of the sale. (Article 1591)
A and B entered into a contract of sale whereby A bound
himself to deliver a parcel of land through a public document
on 1 July 2010, and B bound himself to pay on 31 December
2010. A real estate mortgage was constituted on the property,
having A as the mortgagee. B did not pay A on 31 December
2010. May A rescind the sale?
No. Upon the constitution of Real estate mortgage, the
contract has been changed into one of payment of a loan.
On July 1, AA sold BB a piece of land, payment and delivery
to be made on July 15. It was stipulated that should payment
not be made on July 15, the contract would automatically be
rescinded. On July 20, can BB still pay?
Yes, as long as there has been no judicial or notarial
demand for the rescission of the contract. But if, for example
on July 18, AA had made a notarial demand for such a
rescission then BB will not be allowed o pay anymore, and
the court may not grant him a new term. (Art. 1592)
What is the demand needed for the rescission of the contract
after expiration of the term agreed upon?
The demand is not for the payment f the price inasmuch
as the seller precisely desires to rescind the contract. It is,
therefore a demand for rescission; the term having expired,
the seller does not want to continue with the contract. (Art.
1592)
May the vendee still pay even if there is no judicial or
notarial demand?
Yes, the vendee may still pay when there is no judicial or
notarial demand Offer to pay is sufficient to defeat vendor’s
prerogative. (Art. 1592)
Is the vendor’s right to rescind absolute?
No, the vendor’s right to rescind is not absolute. Art. 1191,
par. 3 provides that the court may grant vendee a new term.
However, if there is already a demand, the court may no
longer fix a term.
In what instances may the vendee no longer pay the price
after the expiration of the time agreed upon although no
demand has yet been made upon him by suit or notarial act?
The vendee may no longer pay the price in the following
instances:
1. Sale on installment of real estate (Caridad Estates vs
Santero)– governed by Maceda Law
53

2. Mere promise to sell real estate / Conditional sale– there
can be no rescission in contract to sell
3. Cases under RA 6552 (RA 6552 recognizes the vendor’s
right to cancel unqualifiedly in case of industrial lots,
commercial buildings, etc. with a refund of certain
percentages of payments made on account of cancelled
contract)
Does Article 1592 apply to a promise to sell?
No, it does not apply to a promise to sell. Article 1592
speaks only of the rescission of contracts of sale of real
property and does not apply to contracts to sell real property
on installments. (Roque vs. Lapuz, March 31, 1980)
AA failed to pay the price of a parcel of land within the
agreed period. BB cancelled the contract before the period to
pay arrived. Is AA guilty of failure to pay the price of land
within the period agreed upon?
No, Article 1592 contemplates of a situation where the
buyer who fails to pay the price at the time agreed upon, may
still pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon
him either judicially or by a notarial act.
What are the rights of the vendor where automatic rescission
of sale of movable property is stipulated?
Vendor can rescind the contract as a matter of right if the
vendee does not:
(a) Accept; or
(b) Pay unless credit period for payment is stipulated. (Art.
1593)
ACTIONS FOR BREACH OF CONTRACT
OF SALE OF GOODS
Articles 1594 – 1599
What actions are available to the seller in case of breach of
contract of sale of goods?
His remedies are:
1.Action for the price / Specific performance (Art. 1595)
(a) when the ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the goods according to the
terms of the contract;
(b) when price is payable on certain day, irrespective of delivery or
transfer of title, and the buyer wrongfully neglects or; refuses to pay
[BUT: it is a defense to such action that seller has manifested an
inability or lack of interest to perform his obligation before judgment]
(c) if goods cannot readily be resold for a reasonable price, although
transfer of ownership has not passed– seller may offer to deliver the
goods to the buyer; if buyer refuses to receive, seller may notify the
buyer that he holds the goods as bailee for the buyer. Thereafter, the
seller may treat the goods as buyer’s and may maintain an action for
the price.
When may a seller institute an Action for Damages in case of
breach of contract of sale of goods?
A seller may institute an action for damages when buyer
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wrongfully neglects or refuses to ACCEPT and PAY for the
goods.
The measure of damages should be the estimated loss
directly and naturally resulting in the ordinary course of
events from the buyer’s breach.
When may a seller rescind in case of breach of contract of
sale of goods?
When there is no delivery of goods yet the seller may
totally rescind by giving notice of his election to do so to the
buyer if:
(1) Buyer has repudiated the contract of sale;
(2) Buyer has manifested his inability to perform obligations;
or
(3) Buyer committed a breach (Art. 1597)
What is the measure of damages when there is an available
market?
The MEASURE OF DAMAGES (WHEN THERE IS
AVAILABLE MARKET) should be the difference between the
contract price and the market or current price at the time the
goods ought to have been accepted, or at the time of refusal
to accept when there is no time fixed.
The seller and the buyer agreed that payment and delivery
would be made on July 15, at the buyer’s house. What is the
consequence if f the buyer does not appear on said day, or
having appeared, he should not have tendered the prices at
the same time?
The sale can be considered as automatically rescinded.
SS sold BB a piano. What is SS's remedy if B wrongfully
refuses to accept and pay for the goods?
SS may bring an action against him for damages for non-
acceptance. (Art. 1596)
What is the measure of damages where the buyer wrongfully
neglects or refuses to accept and pay for the goods ?
The measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events from the
buyer's breach of contract. (Art. 1596)
What actions are available to the seller of the goods?
His remedies are:
1. Maintain an action for damages.
2. Hold the goods as bailee for the buyer and bring an action
for the price.
3. Ask for the resolution of the contract for failure of the
buyer to fulfill his obligations.
Is there such thing as an automatic rescission?
Yes, but such rescission requires notice thereof to the buyer.
What are the instances when seller may totally rescind the
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contract of sale?
The buyer may totally rescind the contract where the goods
have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his
inability to perform his obligations thereunder, or has
committed a breach thereof.
How does Technical Rescission take place?
Technical rescission takes place when the seller may totally
rescind by giving notice of his election to do so to the buyer
provided there is no delivery of goods yet. (Art. 1597)
What is the remedy of the buyer in case the seller has broken
a contract to deliver a specific or ascertained goods?
Where the seller has broken a contract to deliver specific or
ascertained goods, a court may, on the application of the
buyer, direct that the contract shall be performed
specifically, without giving the seller the option of retaining
the goods on payment of damages. The judgment or decree
may be unconditional, or upon such terms and conditions as
to damages, payment of the price and otherwise, as the court
may deem just. (Art. 1598 NCC)
What is the remedy of the buyer when there is a breach of
warranty by the seller?
Where there is a breach of warranty by the seller, the buyer may, at his
election:
(1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or
extinction of the price;
(2) Accept or keep the goods and maintain an action against
the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot
rescind the sale if he knew of the breach of warranty when he
accepted the goods without protest, or if he fails to notify the
seller within a reasonable time of the election to rescind, or if
he fails to return or to offer to return the goods to the seller
in substantially as good condition as they were in at the time
the ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the
buyer from returning or offering to return the goods to the
seller and rescinding the sale.
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Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon returning
or offering to return the goods. If the price or any part
thereof has already been paid, the seller shall be liable to
repay so much thereof as has been paid, concurrently with
the return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to
do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to
hold the goods as bailee for the seller, but subject to a lien to
secure payment of any portion of the price which has been
paid, and with the remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1526.
(5) In the case of breach of warranty of quality, such loss, in
the absence of special circumstances showing
proximate damage of a greater amount, is the difference
between the value of the goods at the time of delivery to
the buyer and the value they would have had if they had
answered to the warranty. (Art. 1599 NCC)
Can the buyer exercise all the remedies granted to him under
Article 1599?
No, under Article 1599, the law provides when the buyer has
claimed and been granted a remedy in anyone of those
enumerated, no other remedy can thereafter be granted,
without prejudice to the provisions of the second paragraph
of Article 1191.
Can the buyer rescind the sale if the goods have been
delivered?
Where the goods have been delivered to the buyer, he cannot
rescind the sale if he knew of the breach of warranty when he
accepted the goods without protest, or if he fails to notify the
seller within a reasonable time of the election to rescind, or if
he fails to return or to offer to return the goods to the seller
in substantially as good condition as they were in at the time
the ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the
buyer from returning or offering to return the goods to the
seller and rescinding the sale. (Art. 1599 NCC)
When the buyer is entitled to rescind the sales and elects to
do so, is he still liable for the price of the thing delivered?
Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon returning
or offering to return the goods. If the price or any part
thereof has already been paid, the seller shall be liable to
repay so much thereof as has been paid, concurrently with
the return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the price. .
(Art. 1599 NCC)
What is the remedy of the buyer in case he is entitled to
rescind the sale and elects to do but the seller refuses to
accept an offer of the buyer to return the goods?
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Where the buyer is entitled to rescind the sale and elects to
do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to
hold the goods as bailee for the seller, but subject to a lien to
secure payment of any portion of the price which has been
paid, and with the remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1526. (Art. 1599 NCC)
How can you determine loss in case of breach of warranty of
quality in the absence of special circumstances showing
proximate damage of greater amount?
In the case of breach of warranty of quality, such loss, in the
absence of special circumstances showing proximate damage
of a greater amount, is the difference between the value of
the goods at the time of delivery to the buyer and the value
they would have had if they had answered to the warranty.
(Art. 1599 NCC)
EXTINGUISHMENT OF SALE
Articles 1600 -1623
How can sales are extinguished?
Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this
Title, and by conventional or legal redemption. (Art. 1600
NCC)
When does conventional redemption take place?
Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon. (Art.
1601 NCC)
What is the obligation of the vendor to the vendee in case of
conventional redemption?
The vendor is obligated to return the price delivered as well
as the expenses of the contract and necessary and useful
expenses made on the thing.
Is it necessary that the right to repurchase be reserved in the
same instrument of sale? Why?
Yes, the right to repurchase must be reserved in the same
deed of sale. If it is reserved in a separate instrument, then
the document is not a sale with right to repurchase. The
same is merely a promise to sell which is discretionary on the
part of the vendee a retro. ( Sy vs. CA, 131 SCRA 116).
What is the effect of reserving the right to repurchase in a
separate instrument instead of reserving it in the same
instrument?
If it is reserved in a separate instrument, then the document
is not a sale with right to repurchase. The same is merely a
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promise to sell which is discretionary on the part of the part
of the vendee a retro. ( Sy vs. CA, 131 SCRA 116).
The contract of sale with right to repurchase provided that
the repurchase price shall be P 14,000.00 plus all costs of
money equivalent to 30%, real estate and documentary
stamps, and other incidental expenses. The question is
whether the amount to be paid in case of repurchase is
limited to those under Art. 1616, NCC.
As a rule, yes, unless otherwise agreed upon. In fact, Art
1601, NCC provides:
“Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon.”
It is clear, therefore, that the provisions of Art. 1601 require
petitioner to “comply with xxx the other stipulations” agreed
upon.
May a check be tendered when the vendor a retro exercise
the right to repurchase? Why?
Yes, because the exercise of the right to repurchase is a right
not an obligation. The tender of a check is sufficient to
compel redemption, but it is not in itself a payment that
relieves the redemptioner from his liability to pay the
redemption price. (Fortunato, et al. vs. CA, et al., G. R. no.
78566, April 25, 1991).
When is a contract deemed to be an equitable mortgage?
The contract shall be presumed to be an equitable mortgage,
in any of the following cases:
(1) When the price of a sale with right to
repurchase is unusually inadequate;
(2) When the vendor remains in possession as
lessee or otherwise;
(3) When upon or after the expiration of the right
to repurchase another instrument extending the
period of redemption is granted or an agreement
granting a new period is executed;
(4) When the purchaser retains for himself a part
of the purchase price;
(5) When the vendor binds himself to pay the taxes
on the thing sold;
(6) In any other case where it may be fairly
inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt
or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the
usury laws. (Art. 1602 NCC)
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A contract of sale over a parcel of land was entered into by
and between the parties for only P80,000.00. It was being
questioned, as the intention was one of equitable mortgage.
It was found out that the payments amounted to
P120,000.00, but evidence was shown that the amount of P
80,000.00 was placed in the contract to reduce the
documentary stamps, transfer tax, etc.
Is the conveyance one of sale or merely a security for the
payment of a loan?
It is one of sale. The presumption of equitable mortgage will
apply only if it is clearly shown that the consideration was
unusually inadequate such that the mind revolts at it and
such that a reasonable man would neither directly nor
indirectly be likely to consent to it. ( Vda. De Alvarez vs. CA,
et al., G.R. no. 110970, March 16, 1994, 49 scad 663)
When can a contract be a presumption that a
contract of sale is one of equitable mortgage?
They are:
1. The parties must have entered into a contract
denominated as a contract of sale;
2. The intention of the parties was to secure an
existing debt by way of mortgage. (Lustan vs. CA, et al., G.R.
no. 111924, January 27, 1997, 78 scad 351).
X and Y entered into a contract of sale with right to
repurchase over a parcel of land. Despite the sale, X, the
seller, retained possession. The contract also provides for a
monthly escalation of the repurchase price. What is the
nature of the contract? Why?
It is an equitable mortgage. In Bundalian vs. CA, 129 SCRA
645, it was said that an equitable mortgage exists where
vendors are given the right to possess property pending
redemption. In the same case, the SC said that monthly
escalation of repurchase price indicates a loan transaction
secured by an equitable mortgage.
How can you a construe a contract purporting to be a sale
with a right to repurchase?
In case of doubt, a contract purporting to be a sale with right
to repurchase shall be construed as an equitable mortgage.
(Art. 1603 NCC)
What rule shall apply to a contract purporting to be an
absolute sale?
The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale. (Art. 1604 NCC)
What is the effect of the execution of contract extending a
contract of sale with right to repurchase?
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The extension can be construed as indicative of an equitable
mortgage. (Claravall vs. CA, 190 SCRA 439).
What is the remedy of the vendor in cases referred to in
Articles 1602 and 1604?
In the cases referred to in Articles 1602 and 1604, the
apparent vendor may ask for the reformation of the
instrument. (Art. 1605 NCC)
Within what period should the vendor a retro repurchase
the property?
The right referred to in Article 1601, in the absence of an
express agreement, shall last four years from the date of the
contract. Should there be an agreement the period cannot
exceed ten years. (Art. 1606 NCC)
Should there be an agreement regarding the period of right
to repurchase, what is the maximum period allowed by law?
Should there be an agreement, the period cannot exceed ten
years. (Art. 1606 NCC)
What is the essence of a sale with right to repurchase?
Explain
The essence of a sale with right to repurchase is that title
and ownership of the property sold are immediately vested
in the vendee a retro subject to the resolutory condition of
repurchase by the vendor a retro within the period
stipulated. Failure to perform said resolutory condition vests
upon the vendee by operation of law absolute title or
ownership over the property sold.
Failure of the vendee a retro to consolidate ownership does
not impair such title, for the method prescribed under
article 1607 is merely for the purpose of registration of the
consolidated title.
Can the vendor still exercise the right to repurchase after a
finality of a judgment declaring the contract one with right to
repurchase?
Yes, the law provides that the vendor may still exercise the
right to repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis that the
contract was a true sale with right to repurchase. (Art. 1606
NCC)
Under article 1606, NCC, the vendor may still exercise the
right to repurchase within 30 days from the finality of a
judgment declaring the contract one with right to
repurchase. How does this apply?
The rule applies where the party denies that the sale is one
with right to repurchase, not in those cases where the
contract is conclusively a sale with right to repurchase.
( Adorable vs. Inacala, 103 Phil. 481)
57
 SALES

On January 02, 1980, A and B entered into a contract
whereby A sold to B a parcel of land for and in consideration
of P 10,000.00 with A reserving to himself the right to
repurchase the same. Because they were friends, no period
was agreed upon for the repurchase of the property.
Until when must A exercise his right of repurchase?
was agreed upon for the repurchase of the property. If A fails
to redeem the property within the allowable period, what
would you advise B to do for his better protection?
I would advise B to consolidate his ownership and file a
petition in court for the registration of the consolidated
ownership with notice to A. (Art. 1607 NCC)

A must exercise the right to repurchase within four (4) years

Can the vendor bring his action against every possessor
from the execution of the contract because there was no
whose right is derived from the vendee even if in the second
contract providing for the period to repurchase. (Art. 1606
contract no mention should have been made of the right to
NCC)
repurchase?

Yes, The vendor may bring his action against every possessor
X sold a parcel of land to Y a retro providing that X should
whose right is derived from the vendee, even if in the second
exercise the right within two years from the execution of the
contract no mention should have been made of the right to
contract. One month after the expiration of the period, X
repurchase, without prejudice to the provisions of the
filed a suit to compel Y to resell the parcel of land. The RTC
Mortgage Law and the Land Registration Law with respect to
of Manila ruled in favor of X holding that the contract is a
third persons. (Art. 1608 NCC)
sale with right repurchase; hence, X was allowed to
repurchase within 30 days from the finality of the decision. Y
appealed. If you were the ponente on appeal, how would you
What is the effect of legal redemption with respect to the
decide the case? Explain.
vendee?
I would reverse the decision of the lower court. The right to
The vendee is subrogated to the vendor’s rights and actions.
repurchase has already expired. To allow the vendor a retro
(Art. 1608 NCC)
to exercise the right to repurchase would set a naught a pacto
de retro or resurrect an expired right of repurchase by simply
instituting an action to reform the contract. It would thus be
made a tool to spawn, protect, and even reward fraud and
bad faith, a situation never contemplated by law. ( Felimen When can the creditor make use of the right of redemption
vs. Orias, G.R. No. L- 33182, December 18, 1987). against the vendee?

The creditors of the vendor cannot make use of the right of

What is the effect of failure of the vendor to comply with the
provisions of Art. 1616 in case of consolidation of ownership
in the vendee with respect to real property?
In case of real property, the consolidation of ownership in
the vendee by virtue of the failure of the vendor to comply
with the provisions of article 1616 shall not be recorded in
the Registry of Property without a judicial order, after the
vendor has been duly heard. (Art. 1607 NCC)
The seller a retro failed to redeem within the period agreed
upon, hence, the buyer a retro filed a petition for registration
of the consolidation of ownership, but did not name the
respondents.
What is the effect of the failure to redeem and to name and
notify the respondents? Explain.
In case of failure to redeem, there shall be consolidation of
ownership in the vendee a retro. Consolidation is a matter of
law. ( Art 1607, NCC; BAyquen vs. Balaoro, L- 28161, August
13, 1986). Such failure results in the loss of the right to
repurchase. ( Cruz vs. Leis, et al., G.R. No. 125233, March
09, 2000)
Registration of the consolidated ownership requires a
judicial order after the vendor shall have been notified.
On January 02, 1980, A and B entered into a contract
whereby A sold to B a parcel of land for and in consideration
of P 10,000.00 with A reserving to himself the right to
repurchase the same. Because they were friends, no period
redemption against the vendee, until after they have
exhausted the property of the vendor. (Art. 1610 NCC)
In a sale with a right to repurchase, can the vendee compel
the vendor to redeem the whole property?
In a sale with a right to repurchase, the vendee of a part of an
undivided immovable who acquires the whole thereof in the
case of article 498, may compel the vendor to redeem the
whole property, if the latter wishes to make use of the right
of redemption. (Art. 1611 NCC)
If several persons, jointly and in the same contract, should
sell an undivided immovable with a right of repurchase, can
anyone of them exercise this right for more than their
respective share?
No, If several persons, jointly and in the same contract,
should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more
than his respective share. (Art. 1612NCC)
Can the heirs of the person who sold an immovable redeem
more than what they may have acquired?
No, The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case each of
the latter may only redeem the part which he may have
acquired. (Art. 1612 NCC)

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Can a vendee compel a co-owner to redeem the whole of the
property sold?
A vendee cannot compel the co-owner to redeem the whole
property sold because each one of the co-owner may
independently exercise the right repurchase.
May a co-owner exercise his right to repurchase
independently from the co-owner?
Yes, he may exercise his right to repurchase independently as
regards his own share.
Can an action of redemption be bought against all the heirs
of the vendee should he leave several heirs?
No, the redemption should pertain only to each share of the
heir.
Can the vender avail the right of repurchase without
returning the price of the sale?
No, the vender must return the amount of the price to avail
the right to repurchase as well as the expenses on the
contract and the necessary expenses made.
What is a legal redemption?
It is the right to be subrogated upon the terms and
conditions stipulated in the contract in one who acquires the
thing by purchase or dation in payment or other transaction
whereby ownership is transferred by onerous title.
Can a co-owner of a thing exercise the right of redemption in
case the shares of the other co-owner are sold to third
person?
Yes, a co-owner may exercise the right to redemption in case
the share of other co-owner are sold to third person.
When is the right of legal redemption be exercised?
It must be exercised within 30 days from notice in writing
by the prospective vendor or by the vendor as the case
maybe.
ASSIGNMENT OF CREDITS
AND OTHER INCORPOREAL RIGHTS
Articles 1624 -1635
When is assignment of credit deemed perfected?
It is deemed perfected from the moment there is meeting of
the minds between the parties.
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
Is an assignment of credit in a private document binding?
An assignment of credit to be binding must appear in a
public instrument.
Is a debtor be released from his obligation should he pays his
creditor before knowledge of assignment of credit?
Yes a debtor is released from obligation should he pay his
creditor before knowledge of assignment of credit.
What does the assignment of credit includes?
It includes all the accessory rights such as guarantee
mortgage, pledge or preference.
Can an action for redemption be enforced against all the heir
in case the inheritance has been divided and the thing sold
has been awarded to one of the heirs?
The action for redemption may be instituted only to the heir
where the thing sold is awarded.
Is the vendor who recovers the thing sold be liable from all
charges and mortgages constituted by the vendee?
The vendor shall be free from all charges and mortgages
constituted by the vendee.
What is the extent of the co-owners’ right of redemption in
case both wants to redeem the property co-owned?
They can only do so to the extent of the share they own in the
co-owned property.
Is the assignment of credit that involves real property
requires to be binding registration with the registry of
property?
Yes, it must be registered with the registry of property to be
binding.
Is mortgage and pledge included in the assignment of credit?
The assignment of credit includes all accessory rights such as
mortgages and pledges.
What are the kinds of warranties in the assignment of credit?
The following are the kinds of warranties:
1) The existence and legality of credit;
2) The solvency of the debtor.
Distinguish between the liabilities of the seller in food faith
and the seller in bad faith.
The vendor in good faith shall be liable for the price received
and for the expenses of the contract and any other legitimate
payments made by reason of the sale, and the necessary and
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useful expenses made on the thing sold; while, the vendor in
bad faith shall be answerable for the payment of all expenses
and for damages.
Alt owes Ben. Ben assigns the credit to Cozy. Ben is in good
faith. But Alt is insolvent. Is Ben liable?
No, unless it was so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
Suppose the credit really did not exist anymore at the time of
assignment. Is Ben still liable?
Yes, unless the credit was sold as doubtful, such as a credit in
litigation.
What does the creditor warrants when he assigns his credit?
The creditor warrants only the existence and legality of the
credit at the perfection of the contract.
D owes C P10,000.00 which represents the purchase price of
a car bought by D. C assigns the credit to T. If at the time of
the assignment, the credit has already prescribed or has
already been paid and its nullity is subsequently declared, is
C liable to T?
Yes because C warrants the existence and legality of the
credit.
What are the rules on the duration of the warranty for the
debtor’s solvency?
The following are the rules on the duration of the warranty
for the debtor’s solvency:
1) Within the time agreed upon;
2) If no time was agreed upon-
a) One year from assignment if debt was already
due.
b) One year from maturity if debt was not yet due.
If the assignor acted in bad faith, are the rules on the
duration of the warranty for the debtor’s solvency
applicable?
No, article 1629 on the duration of assignor’s liability does
not apply if the assignor acted in bad faith.
D owes C P10,000.00 payable on May 10,2010.C assigns his
credit to T with C making himself responsible for the
solvency of D for one year from May 10,2010, When shall the
guaranty of debtor’s solvency last?
The guaranty of C’s liability for the solvency of D shall last
within one year as agreed upon between C and T.
What if there is no stipulation and the assignment is made on
June 22, 2010. What is the duration of the assignor’s
liability?
The liability is limited to one year from assignment.
Civil Law Review Project
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SALES
R owes S. S assigns the credit to L. S is in good faith. It was
agreed that S would be responsible for R’s solvency. The
party did not agree on the duration of the liability. If the debt
was due June 22, 2010 and the assignment was made July 10,
2010, until when is the guaranty?
Until July 10, 2011. The law says, “one year from the time of
the assignment” if the period has already expired.
What if the debt was due June 22, 2010 and the assignment
was made May 10, 2010, is the one year counted from the
time of assignment?
No. The one year will be counted from the time when the
debt becomes due. Hence, the liability shall cease one year
after the maturity, which is on June 22, 2011.
What is the rule as to the sale of an enumerated list of future
inheritance?
As a rule, the sale of an enumerated list of future inheritance
is prohibited.
Can an heir sell his share of the common estate even prior to
judicial approval of the partition?
Yes. As a matter of fact, the part of an estate assigned to an
heir by the will of the deceased can be sold by such heir even
before the partition of the estate is approved by the court.
Indeed there is no legal provision which prohibit such heir
from selling to a stranger his share of the common estate.
Is the sale of future inheritance without specification of the
properties, valid?
Yes. If the future inheritance is sold without specification of
the properties, this would only be a sale of future hereditary
rights, and hence, permissible.
In the sale of an inheritance, what does the seller warrants?
The seller of an inheritance warrants only the facts of his
heirship but he does not warrant the objects which makes up
his inheritance.
What is the liability of a seller of an inheritance?
One who sells an inheritance without enumerating the things
of which it is composed, shall only be answerable for his
character as an heir.
X and Y are the heirs of the estate left by Z. Before partition
and without specifying his definite share in the inheritance,
X sold his share to B for P100,000.00. If upon partition, X’s
share is onlyP75,000.00, is he liable to B for his balance?
No. In this case, X only warrants the fact that he is an heir of
Z. He is not liable for B should his share after partition be
less than P100,000.00
What is the subject matter in the sale of the whole of certain
rights, rents, or products for a lump sum?
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The subject matter is the totality of such rights, rents, or
products.
What does the vendor warrants in the sale of such rights,
rents, or products?
The vendor warrants only the legitimacy of the whole and
not the various parts of which it may be composed.
Is there an exception to the rule that the vendor is not liable
for eviction of each of the various parts of the rights, rents,
or products?
Yes and that is if the eviction involves the whole or the part
of greater value.
S is a partner in a partnership. He sells all his interest to B
for a lump sum of P150,000.00.Upon dissolution of the
partnership, B received the share of S in its assets consisting
of P50,000, some office equipment, and a car. Subsequently,
the car was recovered by C, a creditor of the partnership. Is S
liable to B?
No, S is not liable to B because S does not warrant each of
the various parts of his interest in the partnership but only
the legitimacy of his rights as partner taken as a whole.
In the above-stated case, what if the value of the car exceeds
P75,000.00. Is S liable to B?
Yes. S will be liable because B is evicted from the part of
greater value.
Are the fruits of an inheritance included in the sale?
Yes, unless otherwise stipulated, the fruits of an inheritance
are included in the sale.
What are the rules with regard to the obligation of the
vendor regarding the fruits of an inheritance?
The following are the rules regarding the obligation of the
vendor as to the fruits of an inheritance:
1) If the vendor merely received the fruits he must deliver them
to the vendee.
2) If the fruits were consumed by the vendor, he must
reimburse the vendee.
3) If the fruits were sold by the vendor, he is obliged to deliver
the price to the vendee.
What is the rule as to the liability of the vendor for anything
received from the inheritance sold?
The liability of the vendor for anything received
from the inheritance sold is subject to any contrary
agreement.
What is the obligation of the vendee after the vendor has paid
for the debts and charges of the estate?
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
The vendee is required to reimburse the vendor for all that
the latter may have paid for the debts and charges on the
estate and satisfy the credits he may have against the same.
Is an agreement between the vendor and the vendee that the
latter may not reimburse the former, valid?
Yes, because the liability of the vendee for the debts and
charges is subject to any agreement to the contrary.
In what instance is Article 1634 applicable?
Article 1634 applies only to a claim in litigation, the meaning
of which is not a claim open to litigation but one which is
actually litigated, that is to say, disputed or contested which
happens only after an answer is interposed in a suit.
(Robinson vs. Garry, 8 Phil. 275)
In what contract does Article 1634 applies to?
Article 1634 applies only in the case of sale. Hence, it does
not apply to a barter or a donation.
Can a credit or other incorporeal right sold in litigation, be
redeemed?
Yes, a credi
redeemed by the debtor.
What kind of redemption does the debtor exercise when he
redeems a credit or other incorporeal right sold in litigation?
When the debtor redeems a credit or other incorporeal right
sold in litigation he is exercising his right of legal
redemption.
What are the requisites before the right of legal redemption
can be exercised?
The following are the requisites before the right of legal redemption
can be exercised:
1) There must be a sale or assignment of a credit;
2) There must be a pending litigation at the time of the
assignment. The complaint by the assignor must have
been filed, and answered by the debtor before the sale
of the credit;
3) The debtor must pay the assignee of all his expenses
required by law;
4) The right must be exercised by the debtor within 30
days from the date the assignee demands payment from
him.
What are the expenses that the debtor must pay the assignee
when the former exercises his right of legal redemption?
The debtor must pay the assignee:
1)The price paid by him;
2)The judicial costs incurred by him; and
3)The interest on the price from the date of payment.
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X sues Y to recover a credit of P1M. Pending litigation, X sells
the credit to a 3rd party A for P300,000.00. Can Y redeem the
credit from A?
Yes, Y may redeem the credit from A by paying A the sum of
P300,000.00
Within what period should Y exercise his right of legal
redemption?
Within 30 days from the time A demands payment of the
P1M.
What is the purpose of the law in granting the right of legal
redemption to the debtor?
The purpose of the law in granting the right of redemption to
the debtor is equity and to avoid the purchase by a 3rd person
of credits in litigation merely for speculation.
When is a credit or other incorporeal right be considered in
litigation?
A credit or other incorporeal right shall be considered in
litigation from the complaint concerning the same is answered.
Can the debtor exercise the right of redemption even if the
credit was sold not in litigation?
No. The debtor cannot redeem if the credit is not in litigation
when the same is sold.
What are the instances when legal redemption is denied?
When the assignment or sale was made to:
1) A co-debtor or co-owner of the right assigned;
2) A creditor in payment of his credit;
3) A possessor of a tenement or piece of land which is
subject to the right in litigation assigned.
Why does the law prohibit redemption of the sale made to co-
heir or co-owner?
The law prohibit redemption of the sale made to co-heir or
co-owner because the law does not favor co-ownership or
pro-indivision.
Give an example when the debtor is prohibited from
redeeming the property conveyed to a co-heir or co-owner.
D is indebted to B and C in the amount of P50,000.00. For
failure to pay his debt, B sues D. If B transfers his credit to C
during the pendency of the litigation, D cannot redeem.
What is the reason of the law in not allowing the debtor to
exercise his right of redemption when the assignment or sale
was made to a creditor?
The reason is that there is a lawful basis for the assignment
as the assignee cannot be considered as a vendee of a right in
litigation and as a speculator.
Civil Law Review Project
Obligations to Quasi Contracts IV-A
SALES
What is the reason for the exception of the right of the debtor
to exercise redemption in case of assignment of credit?
The reason for the exception is that the assignee is moved by
a desire to preserve the property and not to speculate at the
expense of the debtor.
Give an example of the 3rd exception.
An example is where a vendee (assignee) of a property
subject to a mortgage acquires the mortgage credit of the
assignor (mortgage-creditor) against the vendor (mortage-
debtor).
D owes P P50,000.00. Which is secured by a mortgage on a
land owned by D. If D sells the land to C and P assigns his
credit in litigation to D against B to C, is D entitled to
redeem?
No, D is not entitled to redeem. A debtor cannot redeem the
assignmentmade to the possessor of a tenement or piece of
land which is subject to the right in litigation assigned.
GENERAL PROVISIONS
Articles 1636 – 1637
What does the “document of title to goods” include?
Document of title to goods include any bill of lading, dock
warrant, quedan, or warehouse receipt or order for the
delivery of goods or any other document used in the ordinary
course of business in the sale or transfer of goods, as proof of
the possession or control of the goods, as authorizing or
purporting to authorize the possessor of the document to
transfer or receive either by indorsement or by delivery,
goods represented by such document.
What does the term “goods” include?
“Goods” includes all chattels personal but not things in
action or money of legal tender in the Philippines. The term
includes growing fruits or crops.
What is an “order”?
“Order” relating to documents of title means an order by
indorsement on the documents.
What does “quality of goods” include?
“Quality of goods” includes their state or condition.
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 SALES

What is meant by “specific goods”

“Specific goods” means goods identified and agreed upon at

the time a contract of sale is made.

What constitute value?

An antecedent or pre-existing claim, whether for money or

not, constitutes “value” where goods or documents of title
are taken either in satisfaction thereof or as a security
thereof.

When is a person insolvent?

A person is insolvent if he has ceased to pay his debts in the

ordinary course of business or cannot pay his debts as they
become due, whether insolvency proceedings have been
commenced or not.

When are goods in a “deliverable state”

Goods are in a “deliverable state” when they are in such a

state that the buyer would, under the contract, be bound to
take delivery of them.

What is a thing or chose in action?

A “thing or chose in action” is any claim or right which may

be pleaded in a suit at law, such as claim of reparation for a
tort (civil wrong) or right guaranteed under certain types of
contract.

What is legal tender?

Legal tender is that currency which a debtor can legally

compel a creditor to accept in payment of a debt in money
when tendered by the debtor in the right amount.

What laws govern the registration of document or title

pertaining to immovable property?

Immovable property is subject to the rule laid down by the

Mortgage Law and the Land Registration Law.

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