value of thing is more value of thing is equal

CH. 1 – CONTRACT OF SALE

than amount of money – or less than amount of
CONTRACT OF SALE – One of the contracting parties
obligates himself to transfer the ownership of and to barter money – sale
deliver a determinate thing, and the other to pay
therefore a price certain in money or its equivalent. A
contract of sale may be absolute or conditional.
Contract for piece of Sale
Contract of Sale Contract to Sell
Absolute Conditional work
Real obligation – Personal obligation –
Goods are to be Contract for delivery of
obligation to give obligation to do
Title passes to the Ownership is reserved in manufactured specially an article which the
buyer upon delivery the seller and will pass to
the buyer only upon full for a customer and upon vendor in the ordinary
payment of the price
Non-payment of the Full payment is a positive special order and not for course of business
price is a negative suspensive condition, the
resolutory condition failure of which is not a the general market manufactures or
breach but prevents the
obligation of the vendor to procures for general
convey title to arise
market (whether on hand
remedies available: remedies available:
1. specific 1. resolution or not)
performance 2. damages
2. rescission Essence is service Essence is object
3. damages
Jurisprudence:
I. ELEMENTS OF A CONTRACT OF SALE
1. Consent 1. Timing test
2. Determinate subject matter
3. Price certain in money or its equivalent under art 1467:

II. STAGES IN LIFE OF CONTRACT OF SALE whether the thing

1. Negotiation transferred would have
2. Perfection
3. Consummation never existed but for the
III. OBLIGATIONS CREATED - 2 sets of real order
obligations to give QuickTime™ and a
TIFF (Uncompressed) 2. Habituality test
decompressor
are needed to see this
picture.
IV. CHARACTERISTICS OF CONTRACT OF if manufacturer
SALE:
1. Nominate engages in activity with
2. Principal
3. Consensual need to employ
4. Bilateral
extraordinary skills and
5. Reciprocal
6. Onerous equipment (Celestino v
7. Commutative
8. Title and not a mode CIR)

V. DISTINGUISHED FROM OTHER 3. Nature of the object

CONTRACTS
Donation Sale test
Gratuitous or onerous Onerous
Formal contract Consensual contract each product’s nature
Governed by law on Governed by law on sale
of execution differs from
donation
the others; products are
Barter Sale not ordinary products of
Consideration: giving of a Consideration: giving of
manufacturer (EEI v CIR)
thing money as payment
Governed by law on sales: species of the genus
sales
If consideration consists party in money
and partly by thing –
look at manifest intention;

If intention is not clear: If intention is not clear: Agency to Sell Sale

Agent not obliged to pay Buyer pays for price of
 for price, merely obliged object - Hypnotic spell
to deliver price received - Where necessaries are those
from buyer. sold and delivered to a minor or other
person without capacity to act, he
Principal remains owner Buyer becomes owner of
must pay a reasonable price therefore
even if object delivered thing; in agency
to agent II. SPOUSES - A spouse may, without the consent
Agent assumes no Seller warrants of the other spouse, enter into sales transactions in
risk/liability as long as the regular pursuit of their profession, vocation, or
trade
within the authority given
May be revoked Not unilaterally revocable Art. 1490. The husband and the wife cannot
unilaterally because sell property to each other, except:
fiduciary and even if (1) When a separation of property
revoked w/o ground was agreed upon in the marriage
Agent not allowed to Seller receives profit settlements; or
(2) When there has been a judicial
profit
separation or property under Article
Personal Contract; Real Contract
191.
Rescission is not
available NOTE: Prohibition likewise applies to common-law
Dation in Payment Sale spouses
Pre-existing credit No pre-existing credit
III. OTHERS - TRUST RELATIONSHIPS
Obligations are Obligations are created 1. Art. 1491 Two groups of parties
extinguished prohibited from acquiring by purchase certain
Debtor’s consideration: Consideration of seller: properties:
extinguishment of the price a. Guardian/Agent/Executors and
debt Consideration of buyer: Administrators
i. Direct or indirect
Creditor’s consideration: acquisition of the object
ii. May be ratified since only private
acquisition of the object wrong is involved
offered in lieu of the b. Public Officers and employees/Officers of the
original credit Court
Less freedom in Greater freedom in i. Cannot be ratified since public
wrong is involved
determining the price determining the price
ii. Requisites for the prohibition to apply to attorneys:
Payment is received by Buyer still has to pay the 1. existence of attorney client
the debtor before the price relationship;
contract is perfected 2. property is the subject matter in litigation;
Lease Sale 3. while in litigation (from filing of complaint to final
Use of thing is for a Obligation to absolutely judgment)
NOTE: Exception to the prohibition against attorneys:
specified period only with transfer ownership of
contingent fee arrangement where the amount of legal
an obligation to return thing fees is based on a value of property involved in
litigation

Consideration is rent Consideration is price Art. 1492. The prohibitions in the two preceding
articles are applicable to sales in legal
Lessor need not be Seller needs to be owner redemption, compromises and renunciations.
owner of thing to transfer III. Legal Status of Contract
ownership 1. Void (case law) – guardian/
executor/public officers / officers of the
court
2. Voidable (civil code) – agent; VALID if
with consent
NOTE: Lease with option to buy: really a contract of CH. 3 - SUBJECT MATTER OF SALE
sale but designated as lease in name only; it is a sale by
installments 1. REQUISITES:
1. Things
CH. 2 - PARTIES TO A CONTRACT OF SALE a. “Possible” - existing, future, and
NOTE: GENERAL RULE - All persons who are contingent
authorized in this Code to obligate themselves may enter i. whether the subject matter is of a type and
into a contract of sale nature that exists or could be made to exist to
allow the seller reasonable certainty of being able
I. MINORS, INSANE AND to comply with his obligations
DEMENTED PERSONS, AND DEAF- b. Licit
MUTES i. not outside the commerce of man
1. Contracts are voidable, subject to annulment or ii. if illicit, contract is void
ratification c. Determinate or determinable
2. Also includes: i. determinate: particularly designated or
- State of drunkenness physically segregated from all others of the same
 class be agreed upon (Marnelego v. Banco Filipino
ii. determinable: Savings and Mortgage Bank)
1. thing is capable of being made determinate
2.without the necessity II. EFFECT OF GROSS INADEQUACY OF PRICE
Of a new. further
contract NOTE: Mere inadequacy of the price does not affect
2. Rights – must be transmissible, except: the validity of the sale, except (1) When there is fraud,
a. future inheritance mistake, or undue influence indicative of a defect in
b. service consent is present, (2)When it shows that the parties
really intended a donation or some other act or
Emptio rei speratae Emptio spei contract.
Sale of an expected thing Sale of a mere hope or
expectancy that the thing III. EFFECT WHERE PRICE IS SIMULATED
will come to existence; 1. The act may be shown to have been in reality a
donation, or some other act or contract
sale of the hope itself 2. If not and neither party had any intention
Sale is subject to the Sale is effective even if whatsoever that the amount will be paid
condition; that the thing the thing does not come (absolutely simulated): the sale is void
will exist; if it does not, into existence, unless it is 3. If there is a real price but what is stated in the
there is no contract a vain hope contract is not the one intended to be paid (only
Uncertainty is with regard The uncertainty is with relatively simulated): the contract of sale is valid
to the quantity and regard to the existence of but subject to reformation
quality of the thing and the thing
not the existence of the Art. 1474. Where the price cannot be determined in
thing accordance with the preceding articles, or in any
Object is a future thing Object is a present thing other manner, the contract is inefficacious.
which is the hope or However, if the thing or any part thereof has been
expectancy delivered to and appropriated by the buyer he must
pay a reasonable price therefore. What is a
NOTE: Quantity of subject matter is not essential for reasonable price is a question of fact dependent on
perfection; must determine nature and quality of the circumstances of each particular case.
subject matter

NOTE: Seller need not be the owner of the subject

matter at the time of perfection: sufficient that he is
the owner at the time of delivery. exception:
foreclosure sale

CH. 4 - PRICE

I. REQUISITES:
1. Real
a. when at the perfection of the
contract of sale, there is every
intention on the buyer to pay the price,
and every expectation on the part of
the seller to receive such price as the
value of the subject matter he
obligates himself to deliver
2. In money or its equivalent
a. consideration for a valid
contract of sale can be the price and
other valuable consideration; at the
very least, a true contract of sale
must have price as part of its
consideration
3. Certain or ascertainable
a. certain: expressed and
agreed in terms of specific pesos
and/or centavos
b. ascertainable:
i. by third persons
ii. by the courts – in cases
where the third person fixes
the price in bad faith or by
mistake
iii. by reference to a definite
day, particular exchange or
market
iv. by reference to another thing
certain
v. but never by one party to the
contract
4. Jurisprudence: Manner of payment must
 4. SITUATIONS IN AN OPTION
CONTRACT:
CH. 5 - FORMATION OF A CONTRACT OF SALE a. with separate consideration
i. option contract is valid
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE ii. offeror can not withdraw
1. Policitacion/Negotiation Stage - offer is offer until after expiry
floated, acceptance is floated but they do not period
meet; the time when parties indicate their iii. ubject to rescission,
interest but no concurrence of offer and damages but not to
acceptance. specific performance
2. Perfection - concurrence of all requisites; because this is not an
meeting of the minds. obligation to give
3. Consummation – parties perform their b. without separate consideration
respective undertakings i. OLD RULE - offer is still valid,
but option contract is void and
II. Policitacion 1. not subject to rescission,
RULES: damages
1. offer is floated prior to acceptance, ii. NEW RULE: Right of first
may be withdrawn at refusal recognized
will by offeror
2. offer floated with a without acceptance, Option Contract Right of First Refusal
period extinguished when Principal contract; Accessory; can not
period has ended and stands on its own stand on its own
maybe withdrawn at will Needs separate Does not need separate
by offeror; right to consideration consideration
withdraw must not be Subject matter and There must be subject
arbitrary otherwise, price must be valid matter but price not
important
liable to damage under
Not conditional Conditional
Art 19, 20, 21 of Civil
Not subject to specific Subject to specific
Code
performance performance
3. offer floated w/ extinguished by
condition happening/non- IV. RIGHT OF FIRST REFUSAL:
happening of condition 1. creates a promise to enter into a contract of sale
4. offer floated without continues to be valid and it has no separate consideration, not
period/without condition depending upon subject to specific performance because there
circumstances of time,
place and person Money given Part of the purchase
5. offer is floated and original offer is as distinct price
there destroyed, there is a consideration for an
is counter-offer new offer; can not go option contract
back to original offer Applies to a sale not Given only when
perfected there is already a
6. offer is floated no authority of offeror
sale
to modify offer
Not required to buy When given, buyer is
7. offer accepted proceed to perfected bound to pay the
absolutely stage balance
is no contractual relationship here and it is not
III. OPTION CONTRACT - a contract an obligation to give (not a real contract)
granting an exclusive right in one person, for 2. New doctrine: may be subject to specific
which he has paid a separate consideration, to
performance.
buy a certain object within an agreed period
1. no presumption of consideration, needs to Equatorial realty Dev’t Inc. v Mayfair Theater, the
be proven right of first refusal is only subject to specific
2. characteristics of Option Contract:
performance insofar as it is attached toa a valid written
a. not the contract of sale by itself,
separate and distinc principal contract (e.g. lease). RFR becomes one of
b. nominate
the considerations in the contract.]
c. principal; but can be attached
to other principal contracts
d. onerous 3. Effect of new doctrine: turned the world of
e. commutative policitacion upside down because while valid
f. unilateral – versus contract of option contract is not subject to specific
sale which is bilateral performance, right of first refusal which does
not even have a separate consideration may be
San Miguel Philippines v Cojuangco consideration in subject to specific performance
an option contract may be anything of value, unlike in
sale where it must be price certain in money 4. Recognizes recovery of damage
based on abuse of rights doctrine
3. how exercised: notice of acceptance
should be communicated to offeror without CH. 6 - PERFECTION OF SALE
actual payment as long as there is delivery
of payment in consummation stage GENERAL RULE: A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price;
consensual contract
Exception: When the sale is subject to a suspensive
condition

I. REQUIREMENTS:
1. When parties are face to face – when
there is absolute acceptance of an offer that is
certain
2. When thru correspondence or
telegram – when the offeror receives or had
knowledge of the acceptance
3. When the sale is subject to a
suspensive condition – from the moment the
condition is fulfilled

NOTES: Qualified acceptance: mere counter-offer

which needs to be absolutely accepted to give rise to
perfected contract of sale
Business ads are mere invitations to make an offer
except when it appears to be otherwise

II. RULES GOVERNING AUCTION SALES:

1. Sales of separate lots by auction
are separate contracts of sale
2. Sale is perfected by the fall of the
hammer
3. Seller has the right to bid at the auction
provided such right was reserved and notice
was given to that effect

III. EARNEST MONEY

1. Money given as part of purchase price
2. Acceptance is the proof that contract of
sale exists
3. Nothing in law prevents parties from
treating earnest money differently
4. Old concept: subject to forfeiture
when BUYER backs out
5. New concept: can not be forfeited –
part of purchase price; must be restored
6. Qualification: if old concept is
stipulated – VALID
7. Presumption of perfection of contract of
sale and such earnest money as part of
purchase price is disputable
Art. 1483. Subject to the provisions of the Statute of
Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by word
of mouth, or partly in writing and partly by word of
mouth, or may be inferred from the conduct of the
parties. (n)
FORM OF SALES
I. Form not important in validity of sale
a. Sale being consensual, may be oral or
written, perfected by mere consent as to
price and subject matter
b. If particular form is required under the statute
of frauds:
i. valid and binding between parties but
not binding to 3rd persons
c. Reason: purposes of convenience only and
not for validity and enforceability; cause of
action is granted to sue and compel other
party to execute the document
II. When form is important for validity;
exception by specific provision of law;
a. Power to sell a piece of land granted to an
agent – otherwise VOID
b. Sale of large cattle; must also be registered
with Municipal treasurer – otherwise VOID
c. Sale of land by non-Christian if not approved
by Governor– VOID
c. A sale of real property or of an interest
therein.
IV. EXCEPTIONS TO COVERAGE OF
STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in
writing and subscribed to by party or his
agent (contains essential terms of the
contract)
2. When there has been partial
performance/execution (seller delivers with intent to
transfer title/receives price)
3. When there has been failure to object to
presentation of evidence (oral)
4. When sales are effected through electronic
commerce
CH. 7 - CONSUMMATION STAGE/PERFORMANCE
STAGE
NOTE: Stage where parties both comply with their
obligation. Nature of diligence required: diligence of a
good father of the family unless other requirement is
stipulated
Consequence: Seller will be guilty of breach if thing is
lost through his fault
I. Delivery of the Thing - Transfer ownership
(tradicion) covers a twin obligations of the seller which
are:
1. to transfer the ownership; and
2. to deliver a determinate thing
PNB vs. Ling, 69 Phil. 611
Delivery of the thing together with the payment of
the price, marks the consummation of the contract of
sale
Norkis Distributor, Inc. vs. CA 195 SCRA 694
The act of delivery must be coupled with the
OPTION MONEY EARNEST MONEY
intention of delivering the thing and putting the buyer
under control
Addison vs. Felix, 38 Phil. 404
The execution of a public instrument is equivalent
to delivery. But to be effective, it is necessary that the
vendor have such control over the thing sold that, at the
moment of sale, its material delivery could have been
made
Different kinds of delivery:
1. Actual or real- when thing sold is placed
in the control and possession of the
buyer
Legal or Constructive- can take several forms and may
be any manner signifying an agreement that the
possession is transferred from the vendor to the vendee.
Different forms of Constructive Delivery -
Constructive delivery has same legal effect as
actual or physical delivery
Ten Forty Realty vs. Cruz, 10 Sept. 2003
Gives rise only to a prima facie presumption of
delivery which is destroyed when actual delivery is not
effected because of a legal impediment
1. Traditio Longa Manu
− Delivery of thing by mere agreement; when
SELLER points to the property without need of
actually delivering
2. Traditio Brevi Manu
− Before contract of sale, the would be buyer
was already in possession of the would be
subject matter of sale (ex: as lessee)
3. Symbolic delivery
− As to movables – ex: delivery of the keys to a
car
4. Constitutum possessarium
− When at the time of the perfection of the
contract of sale, seller had possession of the
subject matter in the concept of owner and
pursuant to the contract, seller continues to hold
physical possession no longer in the concept of
an owner but as a lessee or any other form of
possession other than in the concept of owner.
5. Quasi-tradition
− Delivery of rights, credits or incorporeal
property, made by:
a. Placing titles of ownership in the hands
of the buyer
b. Allowing buyer to make use of rights
6. Tradition by operation of law
IV. WHEN EXECUTION OF PUBLIC INSTRUMENT
DOES NOT PRODUCE THE EFFECTS OF
DELIVERY
1. When there
areisneededstipulationtoseethispicture. to
contrary, execution does not produce effect of
delivery
2. When at the time of execution of instrument,
 subject matter was not subject to control of the seller contract and reject the rest
Subject matter should be within control of seller; ii. reject goods entirely – if indivisible

3. he should have capacity to deliver at the time of 2. IMMOVABLES

execution of public instrument when he wants to effect a. Sold per unit or number
actual delivery If the sale should be made with statement of its
4. Such capacity should subsist for a reasonable area, rate at certain price, deliver all that may have been
time after execution of instrument (reasonable stated in the contract if impossible, remedies of buyer:
i. If Less in area:
time depends on circumstances of persons,
places and things) - rescission
- proportional reduction of
V. Delivery of Fruits and Accessions/ price – LACK IN AREA SHLD NOT BE LESS THAN
1/10 OF AREA AGREED UPON
Accessories - Right to fruits and
ii. If Greater in area:
accessions/accessories accrue from time sale is
- accept per stipulation and
perfected but no real right over it until it is delivered
reject the restat contract rate
- Not applicable to judicial sales
VI. Delivery Through Carrier - General Rule: Where
v. Sold for lump sum
the seller is authorized or required to send the goods to
the buyer, delivery to the carrier is delivery to the - When price per unit not indicated
-If area delivered is either greater or lesser – price will
buyer.
Exceptions: a contrary intention appears or implied not be adjusted accordingly
reservation of ownership under pars. 1,2,3 of Art. 1503
VIII. TIME AND PLACE OF DELIVERY
1. FAS – FREE ALONG SIDE - When 1. Follow stipulation in contact, or
goods delivered alongside the ship, 2. Follow usage in trade, or
there is already delivery to the buyer 3. Seller’s place of business or his residence
(twin effects deemed fulfilled) 4. Specific goods – place where the thing is
5. At reasonable hour
2. FOB - FREE ON BOARD - Shipment –
when goods are delivered at ship at
point of shipment; delivery to carrier by IX. EFFECTS OF DELIVERY - General Rule: The
placing goods on vessel is delivery to ownership of the thing sold shall be transferred
buyer to the buyer upon the actual or constructive
− Destination – when goods reach the port even if not delivery thereof.
disembarked yet from the vessel, there is delivery to the Except when the contrary is stipulated such in
buyer the cases of:
1. contract to sell
3. CIF – COST, INSURANCE, FREIGHT 2. sale on acceptance/approval
− When buyer pays for services of carrier – delivery to 3. sale or return
carrier is delivery to buyer; carrier is agent of the buyer
− When buyer pays seller the price – from moment the NOTE: Who Bears Expenses of Delivery? Seller
vessel is at port of destination, there is already delivery
SALE BY DESCRIPTION/SAMPLE
to buyer.
1. Sample – goods must correspond with
See Arts. 1522, 1539, 1540, 1541, 1542, 1543. sample shown
2. Description – goods must correspond with
description or sample
VII. COMPLETENESS OF DELIVERY 1.
MOVABLES
3. Effect if there is no compliance:
RESCISSION may be availed of by
a. delivery of thing plus accessories and accessions in
the condition in which they were upon the perfection of the buyer
the contract including the fruits
b. When the seller delivers to the buyer XI. OBLIGATIONS OF BUYER
a quantity of goods LESS than he 1. Pay the price
contracted to sell, buyer has the option a. Buyer is obligated to pay price
to reject or accept it. according to terms agreed upon
a. When accepts with knowledge that regarding time, place and amount
b. If payment of interest is stipulated –
seller is not going to perform contract in
must pay; if amount of interest not
full, he must pay at price stipulated mentioned – apply legal rate
b. When accepts and consumes before knowledge that c. When buyer defaults – constitutes
buyer will not perform contract in full, liable only for fair breach: subject to specific
value of goods delivered performance/rescission and
c. When seller delivers to the buyer a quantity damages; interest to be paid also
of goods LARGER than he contracted to sell the from default
buyer has the following options:
i. accept per contract and reject the rest 2. Accept delivery of thing sold
ii. accept the whole – pay price stipulated a. Where to accept: at time and place
iii. eject whole if subject matter is indivisible stipulated in the contract; if none
d. When the seller delivers to the buyer the specified – at the time and place of
goods he contracted to sell, MIXED with goods of a delivery goods; there is acceptance
different description not included in the contract, when:
buyer has 2 options: i. He intimates to seller that
i. accept good w/c are in accordance with
he has accepted
 ii. When delivered and does any
act inconsistent with
ownership of seller
iii. Retains without intimating to
seller that he has rejected
3. Sale of Goods on installment
a. Goods must be delivered in full, except
when stipulated
b. When not examined by buyer – not
accepted until examined or at least had
reasonable time to examine
4. Acceptance of goods in general, absent contrary
express stipulation, does not discharge seller from
liability in case of breach of warranties (unless no
notice or failure to give it within reasonable time)
5. When buyer has a right to refuse goods, no need to
return; shall be considered as depositary; unless
there is stipulation to the contrary
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership
shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there
is good faith. (1473)
DOUBLE SALE
General Rule : FIRST IN TIME, PRIORITY IN RIGHT
When does it apply: when not all requisites embodied
in 1544 concur.
I. REQUISITES FOR DOUBLE SALES TO
EXIST: (VOCS)
1. Two or more sales transactions must
constitute valid sales;
2. Two or more sales transactions must pertain
to the same object or subject matter;
3. Two or more buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
4. Two or more buyers must each have
bought from the very same seller.
Consolidated Rural Bank (Cagayan Valley_ vs. CA
[Jan. 17, 2005]
If not all the elements are present for Art. 1544
to aply, the priniciple of prior tempore, potior jure or
simply “he who is first in time is preferred in right” should
apply. Undisputably, he is a purchaser in good faith
because at the time he bought the real property, there
was still no sale to as a second vendee.
II. RULES ACCORDING TO 1544:
1. MOVABLE
a. Owner is first to posses in good
faith
2. IMMOVABLE
a. First to register in good faith
b. No inscription, first to possess in
good faith
c. No inscription and no
possession in good faith – Person who
presents oldest title in good faith
d. Good Faith - one who buys
property without notice that another
person has a right or interest in such
property; one who has paid price before
notice that another has claim or interest
III. LIS PENDENS – notice that subject matter is in
litigation
IV. ADVERSE CLAIM – notice that somebody is
claiming better right
V. POSSESSION B
 oth actual or constructive
VI. REGISTRATION: any entry made in the books of the
registry, including both registration in its ordinary
and strict sense, and cancellation, annotation,
and even marginal notes. It is the entry made in
the registry which records solemnly and
permanently the right of ownership and other real
rights.
1. registered under Torrens system 1544
applies
2. not registered under the Torrens system
1544 still applies
Jurisprudence
if 2nd sale is a judicial sale (by way of levy on
execution), buyer merely steps into the shoes of the
judgment debtor. Outside of such situation – must apply
to conflicting sales over the same unregistered parcel of
land
If sale 1 occurs when land is not yet registered
and sale 2 is done when land is already registered –
apply FIRST IN TIME, PRIORITY IN RIGHT
Gabriel v. Mabanta, et al. [2003]
Good faith must concur with registration. To be
entitled to priority, the second purchaser must not only
establish prior recording of his deed, but must have
acted in good faith.
CONDITION
1. Effect of Non-Fulfillment of Condition
The other party may
a. refuse to proceed with the contract
b. proceed with the contract, waiving the
performance of the condition
If the condition is in the nature of a promise that it
should happen, the non-performance of such
condition may be treated by the other party as
breach of warranty.
2. Effect if buyer has already sold the goods
General Rule: The unpaid seller’s right to lien or
stoppage in transitu remains even if buyer has sold the
goods
Exception:
o When the seller has given consent thereto, or
o When the buyer is a purchaser in good faith for
value of a negotiable document of title.
NEGOTIABLE DOCUMENTS OF TITLE
See Article 1636
 1. Not creation of law but by merchants to allow them to d. Negotiation is enjoined
deal with merchandise without having to physically
carry them around NEGOTIATIo
2. Pertains to specific type of movables only : GOODS N ASSIGNMENT
a. Documents of title serve two (2) functions:
i. evidence of existence and transferor/hold acquire acquires title to goods
er s against
possession of goods
title to goods transferor
described therein
ii. medium by which seller is able to bailee has direct acquires right to notify
transfer possession of goods obligation bailee so
to holder as if directly that he acquires obligation
3.A document of title which states that the goods dealt of
referred to therein will be delivered to the bearer, with him bailee to hold goods for him
or to the order of any person named in such
document SALE BY NON-OWNER OR BY ONE HAVING
4. Negotiable by delivery or indorsement VOIDABLE TITLE
See Articles 1475, 1477, 1505, 1506
TYPES
1. NEGOTIABLE I. SALE BY NON-OWNER
a. deliver to bearer (negotiation by mere 1. PERFECTION STAGE
delivery) a. Sale by owner – VALID
b. deliver to specific person or his order b. Sale by non-owner – VALID;
(negotiation by endorsement + delivery) c. Reason why both sales are valid:
i. even if face of instrument says NON- ownership is necessary only at time
NEGOTIABLE, it is still NEGOTIABLE; when transfer title to goods; at
limiting words does not destroy perfection stage, no obligation on
negotiability part of seller to transfer ownership
ii. If order instrument and no endorsement d. Law on estoppel further bolsters it:
was made – equivalent to assignment title passes by operation of law to
grantee when person who is not
2. NON-NEGOTIABLE owner of the goods sold delivers it
and later on acquires title thereto
e. Sincealid,actionto annul isimproper; there is
EFFECTS OF UNAUTHORIZED NEGOTIATION already a perfected contract
The validity of the negotiation of a negotiable document 2. CONSUMMATION STAGE
is not impaired by the fact that negotiation was done in a. Contract of sale is valid because it
breach of duty or that the owner of the document was has passed perfected stage, despite
deprived of the same by loss, theft, accident, fraud, seller not being the owner or seller
mistake if the person to whom the document is delivered having no authority to sell
is in good faith and without notice of the said
irregularities. b. What is void is the transfer of
title/ ownership did not pass
Important Considerations c. Effect: buyer acquired no better
right than transferor
1. Negotiation gives better right than assignment
d. Legal effect: CAVEAT EMPTOR
– BUYER BEWARE
2. Assignee takes document with defects of the
e. Sale of co-owner of whole
assignor
property
3. Obligation of bailee – bailee is immediately
or definite portion
bound to the document GENERAL RULE:
Warranties on Negotiation i. co-owner sells whole property prior to
partition – sale of property itself is void
1. the document is genuine
but valid as to his spiritual share
2. he has legal right to negotiate or transfer it
ii. co-owner sells definite portion to
3. he has knowledge of no fact which would impair
the validity or worth of the document partition – sale is void as to other co-
4. he has right to transfer title to goods and goods owner but valid as to his spiritual share
if the buyer would have still bought such
are merchantable/fit
spiritual share had he known that the
definite portion sold would not be
Rules of Levy/Garnishment of Goods Covered acquired by him.
by Documents of Title
2. NON NEGOTIABLE: II. EXCEPTIONS TO THE RULE ON THE
a. Notification is operative act to transfer EFFECT OF SALE OF A DEFINITE PORTION
title/possession of goods in favor OBY A CO-OWNER
assignee 1. Subject matter is indivisible in nature
b. Before notification – can still be or by intent;
garnished 2. Sale of a particular portion of a property
is with consent of other co-owners;
3. NEGOTIABLE: 3. Co-owner sells 1 of 2 commonly-owned
a. Can not be levied or garnished when lands and does not turn over ½ of the proceeds,
documents are already with purchaser in other co-owner, by law and equity, has exclusive
good faith, unless: claim over remaining land.
b. Document is first surrendered
c. Document is pounded by court
 III. RULES ON LEGAL EFFECTS OF SALE BY A NON- compelled
OWNER
GENERAL RULE: Sale by non-owner, buyer acquires 3. AFTER PERFECTION BUT BEFORE
no better title than seller had. DELIVERY
EXCEPTIONS: o Loss – confused state
1. Owner by his conduct is o Paras: BUYER
precluded from denying seller’s authority o Tolentino: SELLER
(ESTOPPEL) o Deterioration and fruits - Buyer
2. Contrary is provided for in bears loss;
recording laws (PD 1529)
3. Sale is made under statutory 4. AFTER DELIVERY
power o Res perit domino
of sale or under order of a o Delivery extinguishes ownership vis-
court of competent jurisdiction a-vis the seller and creates a new
4. Sale is made in a merchant’s one in favor of the buyer
store in accordance with code of
commerce and special laws REMEDIES OF PARTIES FOR BREACH OF
IV. SALE BY SELLER WITH VOIDABLE TITLE CONTRACT OF SALE
1. PERFECTION STAGE See Articles 1594-1596. 1484-1486, 1592
a. Valid sale – buyer acquires title of goods
SUBJECT MATTER: MOVABLES (IN GENERAL)
2. CONSUMMATION STAGE
a. Valid sale – if title has not yet been avoided, Remedies of Unpaid Seller
buyer buys goods under following GENERAL RULE: Any man may not take law in his own
condition: hands, must seek remedy through courts
o in good faith o EXCEPTION:
for value − DOCTRINE OF SELF HELP −
o without notice of seller’s defect of title SPECIAL REMEDIES
Requisites:
1. Subject matter – goods
V. TITLE AS TO MOVABLE PROPERTIES 2. Seller is unpaid – not completely
GENERAL RULE: Possession is equivalent to title paid
Requisites: Possession of movable and Good or received negotiable instrument
Faith under a condition and condition has
been breached by reason of
VII. EXCEPTIONS: dishonor
1. Owner lost movable – owner can recover w/o 3. Physical possession is with seller
reimbursing price
2. Owner is unlawfully deprived – owner can The following are the special remedies of unpaid seller
recover w/o reimbursing price 1. possessory lien
2. stoppage in transitu
VIII, EXCEPTIONS TO THE EXCEPTIONS: 3. special right of re-sale
− movable is bought at public sale – owner can 4. special right to rescind
only recover after reimbursing price
− acquired in good faith and for value from NOTE: Hierarchical Application - only when unpaid seller
auction has exercised possessory lien or stoppage in transitu
can the seller proceed with his other special rights of
resale or to rescind.
LOSS, DETERIORATION, FRUITS and OTHER
BENEFITS I. Possessory Lien
See Articles 1493 and 1494 1. Seller not bound to deliver if buyer has
not paid him the price
Legal consequences from point of perfection are the
same in both legal systems: upon perfection of an
2. Right to retain; cannot be availed when seller
unconditional contract of sale involving specific or
does not have custody
determinate subject matter, the risk of loss deterioration
3. Exercisable only in following circumstances:
and the benefits of fruits and improvements, were fro the
a. goods sold without stipulation as to credit
account of the buyer.
b. goods sold on credit but term of credit has
expired
WHO BEARS RISK OF LOSS/ DETERIORATION/ c. buyer becomes insolvent
FRUITS: d. When part of goods delivered, may still
1. BEFORE PERFECTION exercise right on goods undelivered
a. Res perit domino
Instances when possessory lien lost:
b. Owner is seller so seller bears risk of
loss 1. seller delivers goods to carrier for
transmission to buyer without reserving
2. AT PERFECTION ownership in goods or right to possess them
o Res perit domino
2. buyer or his agent lawfully obtains
o Contract is merely inefficacious
possession of goods
because loss of the subject matter
3. waiver
does not affect the validity of the
4. loses lien when he parts with goods (still has
sale stoppage in transitu)
o Seller cannot anymore comply with 5. notice by seller to buyer not essential
obligation so buyer cannot anymore be
II. Stoppage In Transitu several partial payments in small
− Goods are in transit amount
− Requisites when goods are in transit 4. Rationale of the law: Buyer is lulled
1. From the time goods are delivered to into thinking that he could afford because of
carrier for purpose of transmission to small amounts per installment and at the
buyer same time remedy abuse of commercial
2. Goods rejected by buyer and carrier houses
continues to possess them 5. Nature of remedies: alternative and not
cumulative
When goods no longer in transit 6. Coverage: sale and financing
1. Reached point of destination transaction and contracts of lease with
2. Before reaching destination, buyer obtains option to purchase
delivery of the goods 7. Action : Judicial and Extrajudicial
3. Goods are supposed to have been delivered to
buyer but carrier refused o Specific Performance
4. Shown by seller that buyer is insolvent (failure to If already chose specific performance, can no longer
pay when debts become due ) choose other remedies Except: after choosing, it has
become impossible, rescission may be pursued
How is right exercised
1. Obtain actual possession of goods Rescission
2. Give notice of claim to carrier / bailee in When chosen, there is correlative obligation to restitute
possession thereof - But stipulation that installments paid are
3. Notice by seller to buyer is not required; forfeited are valid if not
notice to carrier is essential unconscionable
III. Special Right to Resell the Goods - Deemed chosen when:
1. goods are perishable o Notice of rescission is
2. stipulated the right of resale in case buyer sent
defaults in payment o Takes possession of subject matter of sale
3. buyer in default for unreasonable time o Files action for rescission
4. notice by seller to buyer not essential Barring effect on recovery of balance

why special? there are things which seller cannot do in 3. Foreclosure

ordinary sale: i. Barring effect on recovery of balance
ii. Extent of barring effect: purchase
1. ownership is with buyer but seller can sell price
goods iii. Exception: mortgagor refuses to
2. title accorded to buyer is deliver property to effect
foreclosure, recover also expenses
destroyed even without court
incurred in attorneys fees, etc.
intervention (Perverse Buyer-Mortgagor)

IV. Special Right to Rescind IMMOVABLES (IN GENERAL)

1. Expressly stipulated
2. Buyer is in default for unreasonable time Remedies of Seller
3. Notice needed to be given by seller to buyer Anticipatory breach
1. Seller has reasonable grounds to fear loss of
why special? – ownership of goods already with buyer immovable sold and its price, sue for
but seller may still rescind; ownership is destroyed even RESCISSION
without court intervention but in ordinary sale, need to 2. Non–payment of price, sue for RESCISSION
go to court to destroy transfer of ownership
Remedies of Buyer
Remedies of Buyer 1. In case of subdivision or condo projects, suspend
When Seller fails to deliver, buyer may seek SPECIFIC payment.
PERFORMANCE WITHOUT GIVING SELLER OPTION 2. If real estate developer fails to comply with
TO RETAIN GOODS ON PAYMENT OF DAMAGES obligation according to approved plan:
- RESCIND
- SUSPEND PAYMENT UNTIL SELLER
SALE OF MOVABLES ON INSTALLMENT COMPLIES
IMMOVABLES (BY INSTALLMENT)
Remedies of Unpaid Seller (1484)
Article 1592 – Applies only to contract of sale
1. Exact fulfillment should the buyer fail to pay.
2. Cancel the sale if buyer fails to pay 2 or more I. Maceda Law
installments.
1. applies to COS and CTS and Financing
3. Foreclose on chattel mortgage if buyer fails to
2. Coverage: REAL ESTATE – defined
pay 2 or more installments space vs. CONDO – not defined space (w/
common areas)
Incidents:
3. Excluded:
1. If buyer chooses foreclosure, no further
a. Industrial
action against buyer to recover any unpaid
b. Commercial
balance of the price
c. Sale to tenants under agrarian
2. When is the law applicable? Sale on
laws
movables by installment
o Sale on installment: payment by
 Rights Granted to Buyers:
o Buyer paid at least 2 years installment
1. Pay without interest the balance within
grace period of 1 month for every year of
installment payment
2. Grace to be exercised once every 5
years
3. When no payment - cancelled; buyer
entitled to 50% of what he has paid + if after
5 years of installments, 5% for every year
but not to exceed 90% of total payments
made
4. Cancellation to be effected 30 days from
notice and upon payment of cash surrender
value
o Buyer paid less than 2 years installment
1. 1st Grace period is 60 days from date
installment became due
2. 2nd grace period of 30 days from notice
of cancellation/demand for rescission
buyer can still pay within the 30 day
period
with interest
No payment after 30 day period, can
cancel.
Purpose of law - Protect buyers in installments
against oppressive conditions
Notice needed - waiver thereof if oppressive
Applies to contracts even before law was
enacted
− Stipulation to contrary is void
Other rights:
o Sell rights to another
o Reinstate contract by updating
during
grace period and before actual cancellation
• Deed of Sale to be done by notarial act
c. applies to judicial sale; judgment debtor responsible
for eviction unless otherwise decreed in judgment
d. vendor not liable for eviction if adverse
possession had been commenced
before sale but prescriptive period is
completed after transfer
e. Rights of buyer when deprived of
only part of the subject matter but would not have
bought such part if not in relation for the whole:
1. Rescission
2. Mutual restitution
3. warranty against encumbrances (non-
apparent)
o Requisites:
a. immovable sold is encumbered
with non–apparent burden or
servitude not mentioned in the
agreement
b. nature of non–apparent servitude
or burden is such that it must be
presumed that the buyer would not have
acquired it had he been aware thereof
c. when breach of warranty exist: buyer
may ask for rescission of indemnity
d. warranty not applicable when non–
apparent burden or servitude is
recorded in the Registry of Property –
unless there is express warranty that
the thing is free from all burdens and
encumbrances
4. warranty against hidden defects
o SELLER does not warrant
patent
defect; caveat emptor
o Except when hidden
1. subject matter may be movable or
immovable
2. nature of hidden defect is such that
it should render the subject matter
unfit for the use of which it
was intended or should diminish
3. had the buyer been aware, he would
not have acquired it or would have
given a lower price
a. when defect is visible or even if not visible but
buyer is an expert by reason of his trade or
profession, seller is not liable
b. obligation of seller for breach depends on whether
he has knowledge of such defect or not
c. seller is aware – seller should return price and
refund expenses of contract with damages
d. seller is not aware - seller should return price
and interest and refund expenses ( no damages)
e. buyer may elect between withdrawing from
contract or demanding proportionate reduction
of price with damages in either case
f. applicable to judicial sale except that judgment
debtor not liable for damages
g. action to prescribe 6 months from delivery of
subject matter
5. defects on animals
a. even in the case of professional inspection but
hidden defect is of such nature that expert
knowledge is not sufficient to discover it - defect
shall be considered as REDHIBITORY
b. if vet fails to discover through ignorance or bad
faith he is liable for damages
c. sale of animals on teams (2 or more)
- when only one is defective, only one is
redhibited and not the others
- exception: when it appears buyer would not
have purchased the team without the
defective one
- apply to sale of other things
d. animals at fair or public auction
- no warranty against hidden defects
e. sale of animals with contagious disease is void
f. sale of unfit animals
- void if use / service for which they are
acquired has been stated in the contract
and they are found to be unfit therefor
o prescription of action:40 days from date of
delivery to buyer
o if sale is rescinded, animals to be returned in
same condition when they were acquired; buyer
shall answer for injury / loss due to his fault
- buyer may elect between withdrawing from
sale and demanding proportionate reduction
of price with damages in either case
Specific Implied Warranties in the Sale of Goods
Warranty as to fitness and quality; requisites:
1. Buyer makes known to seller the particular
purpose for which goods are acquired and it
appears that the buyer relied on the seller’s skill
or judgment
2. Goods are bought by description from seller who
deals in goods of that description
3. in case of sale of specified article under its patent
 or trade name, no warranty unless there is a
stipulation to the contrary
4. measure of damage: difference between value of
goods at time of delivery and value they would
have had if they had answered to the warranty
Sale of Goods by sample
If seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from defect
rendering them unmerchantable which would not be
apparent on reasonable examination of the sample
− Effects of Waiver
o Waiver in Warranty against eviction
- himself to reacquire the property sold
Parties may increase or diminish implied
warranty against eviction; but effect depends
on good faith or bad faith on the part of the
seller.
1. Seller in bad faith and there is
waiver against eviction – null and
void
2. buyer without knowledge of a
particular risk, made general
renunciation of warranty – not
waiver but merely limits liability of
seller in case of eviction (pay value
of subject matter at time of eviction)
3. buyer with knowledge of risk of
eviction assumed its consequences
and made a waiver – vendor not
liable (applicable only to waiver of
warranty against eviction)
4. waiver to a specific case of eviction
- wipes out warranty as to that
specific risk but not as to eviction
caused by other reasons.
Waiver against Hidden Defects
1. If there has TIFFbeen()astipulation exempting
seller from hidden defects
2. If seller not aware of hidden defects – loss of the
thing due to such defect will not make seller liable
3. If seller aware – waiver is in bad faith, thus seller
still liable
Buyer’s Option in Case of Breach of Warranty
1. Accept goods and set up breach of
warranty by way of recoupment in diminution or
extinction of the price.
2. Accept goods and maintain action
against seller for damages
3. Refuse to accept goods and maintain
action against seller for damages
4. Rescind contract of sale and refuse to
receive goods/return them when already received.
When rescission by buyer not allowed:
1. if the buyer accepted the goods knowing the breach of
warranty WITHOUT protest
2. if he fails to notify the seller within a reasonable
time of his election to rescind
3. if he fails to return or offer to return the goods in
substantially as good condition as they were in at the
time of the transfer of ownership to him
EXTINGUISHMENT
See Arts. 1600 -1623
I. Grounds (same grounds whereby
obligations in general are extinguished)
1. payment or performance
2. loss of the subject matter
3. condonation or remission
4. confusion or merger of rights of creditor
and debtor
5. compensation
6. novation
7. annulment
8. rescission
9. fulfillment of a resolutory condition
10. prescription
Conventional redemption
1. only extinguishes obligations pertaining to
contract of sale, not extinguish contract
itself; only applies to contract of sale
2. The right which the vendor reserves to
provided he returns to the vendee:
a. the price of the sale,
b. expenses of contract,
c. other legitimate payments,
d. he necessary and useful expenses
made on the thing sold
e. and fulfills other stipulations which may
have been agreed upon
3. The right is exercised only be seller in
whom right is recognized in the contract or
by any person to whom right was
transferred; must be in the same contract
Legal redemption
1. Only applies to contracts of sale.
2. The right to be subrogated upon the same
terms and conditions stipulated in the
contract, in the place of one who acquires
the thing by (1) purchase OR
(2) by dation in payment OR (3) by
other transaction whereby ownership is
transmitted by onerous title.
3. Types of Legal Redemption: a.
among co-heirs
i. any of the heirs sell his
hereditary rights to stranger
before partition
ii. any of the co-heirs may be
subrogated to the rights of the
purchaser by redeeming said
hereditary right: reimburse buyer of
the price of the sale
iii. co-heirs has 1 month from
receipt of notice in writing
b. among co-owners
i. any or all rdof co-owners sells their
shares to 3 person
ii. any co-owner may exercise right of
redemption by paying reasonable
price of property to the buyer
iii. if 2 or more co-owners desire to
exercise right of redemption, they
may only do so in proportion to the
share they respectively have in thing
owned in common
c. among adjoining owners
i. rural land
a. where piece of rural land has an
area not exceeding 1 hectare, adjoining owner has right
to redeem unless grantee does not own a rural land
b. if two or more adjacent lot
owners desire to exercise right to redeem, owner of
adjoining lot with smaller
area shall be preferred
c. if two or more adjacent lit
owners desire to exercise
right to redeem and both
have same lot area, one
who
first requested shall be
 granted
ii. urban land
a. when piece of land is small and cannot
be used for any practical purpose
and bought merely for speculation,
owner of adjoining land can redeem
b. 2 or more owners of
adjoining lot desire to exercise right
to redeem, owner whose intended
use is best justified shall be
preferred.
d. sale of credit in litigation
i. when a credit or other incorporeal right
in litigation is sold, debtor shall have a
right to extinguish it by reimbursing the
assignee for the price the latter paid
therefor plus judicial costs, interest
ii. debtor may exercise right within
30 days from the date assignee demands payment from
him
4. Other Instances When Right of Legal
Redemption is Granted
a. Redemption of homesteads
b. Public Land Act
c. Land acquired under free patent
homestead subject to repurchase by wife,
legal heirs within 5 years from date of
conveyance granted by law, need not be
stipulated
5. Redemption in tax sales
a. in case of tax delinquency/failure to pay
tax assessments, property is foreclosed
b. delinquent payer has 1 year from date of sale
to redeem by paying to the revenue District
Officer the amount of tax delinquencies, and
interest or purchase price.
6. Redemption by judgment debtor - 1 year from
date of registration of certificate of sale to
redeem by paying purchaser at public auction
with interest
7. Redemption in extrajudicial foreclosure - 1 year
from date of sale and registration
8. Redemption in judicial foreclosure of mortgage -
no right to redeem is granted to debtor mortgagor
except when mortgagee is bank of a banking
institution 90 days after finality of judgment
9. When Period of Redemption Begins to Run -
Right of legal pre-emption of redemption shall be
exercised within 30 days from notice by the seller
10. How exercised - tender of payment is not
necessary; offer to redeem is enough.
a. There is no prescribed form for an offer
to redeem to be properly effected.
Hence, it can either be through a
formal tender with consignation of the
redemption price within the prescribed
period. What is paramount is the
availment of the fixed and definite
period within which to exercise the
right of legal redemption.
b. deeds of sale are not to be recorded in
Register of Deeds unless
accompanied by affidavit of seller that
he has given notice to all possible
redemptioners
NOTE: Written notice under Art. 1623 is mandatory for
the right of redemption to commence (PSC vs. Sps.
Valencia, 19 Aug. 2003). Thus, the General Rule is that
actual knowledge notwithstanding, written notice is still
required Except when actual knowledge is acquired by
co-heirs living in same land
with purchaser, or co-owner was middleman in sale to
3rd party.
Etcuban vs. CA, et. al. 148 SCRA 507 – Art. 1623
does not prescribe any distinctive method for notifying
the redemptioner
IV. Option to Purchase - Right to repurchase the
thing sold granted to the vendor in a
separate instrument from the deed of sale
V. Equitable Mortgage
Cachola vs. CA, 208 SCRA 496
One which lacks the proper formalities,
form of words, or other requisites prescribed by law for
a mortgage, but shows the
intention of the parties to make the property subject
of the contract as security for a debt and contains
nothing impossible contrary to law.
1. A contract with right to repurchase is deemed
to be an equitable mortgage if the following
requisites concur (IPERTI):
a. price of sale with right to repurchase is unusually
inadequate
b. seller remains in possession as lessee or
otherwise upon or after expiration of right to
repurchase, another instrument extending the
period of redemption or granting new period is
executed
c. buyer retains for himself a part of the purchase
price
d. seller binds himself to pay taxes on thing sold
e. real intention of parties is to secure
the payment of debt or
performance
of other
obligation
NOTE: In case of doubt – in determining whether it is an
equitable mortgage or a sale a retro, the sale shall be
construed as an equitable mortgage.
2. What to Look for in Determining
Nature of Contract
a. language of the contract
b. conduct of parties – to reveal real
intent
3. Remedy available to vendor: ask
for reformation of contract
4. Rationale behind provision on
Equitable Mortgage:
a. Circumvention of usury law
b. Circumvention of prohibition against
pactum commissorium – creditor cannot appropriate the
things given by way of pledge or mortgage; remedy
here is foreclosure. The real intention of parties is that
the pretended purchase price is money loaned and to
secure payment of the loan, sale with pacto de retro is
drawn up
5. Period of Redemption
 a. No period agreed upon – 4 years
from date of contract
b. Period agreed upon – should not
exceed 10 years; if it exceeded, valid only for the first 10
years.
c. When period to redeem has expired
and there has been a previous suit on the nature of the
contract – seller still has 30 days from final judgment on
the basis that contract was a sale with pacto de retro:
d. Rationale: no redemption due to
erroneous belief that it is equitable mortgage which can
be extinguished by paying the loan.
e. This refers to cases involving a
transaction where one of the parties
contests or denies that the true
agreement is one of sale with the right
to repurchase; not to cases where the
transaction is conclusively a pacto de
retro sale.
f. Example: Where a buyer a retro
honestly believed that he entered
merely into an equitable mortgage, not
a pacto de retro transaction, and
because of such belief he had not
redeemed within the proper period.
NOTE: When period has expired and seller allowed the
period of redemption to expire – seller is at fault for not
having exercised his rights so should not be granted a
new period
Paez vs. Magno
Tender of payment is SUFFICIENT to compel
redemption, but is not in itself a payment that relieves
the vendor from his liability to pay the redemption price
VI. Effect when There is No Redemption Made
1. jurisprudence before the NCC: buyer a
retro automatically acquires full
ownership
2. under present art 1607: there must be
judicial order before ownership of real
property is consolidated in the buyer a
retro
VII. How is Redemption Effected
1. Seller a retro must first pay the following:
a. the price of the thing sold
b. expenses of the contract and other
legitimate payments made by reason of the sale
c. necessary and useful expenses made
on the thing sold
d. Valid tender of payment is sufficient
e. Mere sending of notice without valid
tender is insufficient
Failure to pay useful and unnecessary
expenses entitles vendee to retain land
unless actual reimbursement is made
VIII. In Case of Multi-Parties
When an undivided thing is sold because co- owners
cannot agree that it be allotted to one of them – vendee
a retro
Paez vs. Magno
Tender of payment is SUFFICIENT to compel
redemption, but is not in itself a payment that relieves
the vendor from his liability to pay the redemption price
VI. Effect when There is No Redemption Made
3. jurisprudence before the NCC: buyer a
retro automatically acquires full
ownership
4. under present art 1607: there must be
judicial order before ownership of real
property is consolidated in the buyer a
retro
VII. How is Redemption Effected
2. Seller a retro must first pay the following:
a. the price of the thing sold
b. expenses of the contract and
other legitimate payments made by reason of
the sale
c. necessary and useful expenses made on the
thing sold
d. Valid tender of payment is sufficient
e. Mere sending of notice without valid
tender is insufficient
Failure to pay useful and unnecessary expenses
entitles vendee to retain land unless actual
reimbursement is made
f. Failure to pay useful and
unnecessary expenses entitles
vendee to retain land unless actual
reimbursement is made
VIII. In Case of Multi-Parties
1. When an undivided thing is sold because
co- owners cannot agree that it be
allotted to one of them – vendee a retro
may compel the vendor to redeem the
whole thing
2. When an undivided thing is sold by coowners
/ co-heirs, vendors a retro may
only exercise his right over his respective
share; vendee a retro may demand that
they must come to an agreement first
and may not be compelled to consent to
a partial redemption
3. When rights of co-owners over an
undivided thing is sold as regards to their
own share – vendee retro cannot compel
one to redeem the whole property
4. Should one of the co-heirs/co-owners
succeed in redeeming the property –
such vendor a retro shall be considered
as trustee with respect to the share of
the other co-owners/co-heirs.
IX. Fruits
1. what controls is the stipulation between
parties as regards the fruits; if none:
a. at time of execution of the sale a
retro there are visible or growing
fruits – there shall be no pro-rating
at time of redemption if no
indemnity was paid by the vendee a
retro
b. at time of execution sale a retro
there be no fruits but there are fruits
at time of redemption – pro-rated
between vendor a retro and vendee
a retro giving the vendee a retro a
part corresponding to the time he
possessed the land.
PRE-EMPTION REDEMPTION
1. Arises before sale Arises after sale
2. No rescission
because no sale exists
yet
There can be rescission
of the original sale
 3. The action is directed by the assignee
against prospective
seller VI. Warranties of the assignor of credit
Action is directed against 1. NO warranty against hidden defect -
Buyer N/A because intangibles has no
physical existence
ASSIGNMENT 2. He warrants the existence and legality of
See Arts . 1624 – 1634 credit - there is warranty except when
I. ASSIGNMENT: The owner of a credit expressly sold as a doubtful account
transfers to another his rights and actions in a. NO warranty as to the solvency of
consideration of a price certain in money or its debtor unless it is expressly
equivalent stipulated OR unless the insolvency
was already existing and of public
1. transfers the right to collect the full value of knowledge at the time of the
the credit, even if he paid a price less than assignment
such value b.warranty shall last for 1 year only
c. one who assigns inheritance right w/o
2. transfers all the accessory rights (e.g.
enumerating rights shall be
guaranty, mortgage, pledge, preference)
answerable for his character as an
3. debtor can set up against the assignee all
heir
the defenses he could have set up against
d.one who sells whole of certain rights for
the assignor a lump sum, shall be answerable for
II. What Makes Assignment Different From legitimacy of the whole in general but
Species Sale? not for each of the various parts

VII. Breach of Warranty: Liabilities of the

1. Technical term but basically a sale assignor of credit for violation of his
2. Sale of credits and other incorporeal warranties
things 1. Assignor in good faith
a.Liability is limited to price received,
III. Effects of Assignment expenses of the contract and other
1. lack of knowledge or consent of debtor legitimate payments made by reason
not essential for validity but has legal of the assessment
effects 2. Assignor in bad faith
2. assignment of rights made w/o a.Liable ALSO for (expenses of contract
knowledge of debtor – debtor may set up and other legitimate payments plus
against assignee the useful and necessary expenses)
compensation w/c would pertain to him damages
against assignor of all credits prior to
assignment and of later ones until he had VIII. Assignment of Credit or Incorporeal Right in
knowledge of the Litigation - Requisites:
assignment 1. There must be a sale or assignment of
3. debtor has consented to assignment – credit
cannot set up 2. There must be a pending litigation
4. compensation unless assignor was 3. The debtor must pay the
notified by debtor that he reserved his assignee:
right to the compensation
5. debtor has knowledge but no consent - a. price paid by him AND
may still set up compensation of debts b. judicial costs incurred by him AND
previous to assignment but not the c. interest on the price from the date of
subsequent ones. payment
4. The right must be exercised by the debtor
IV. Transfer of Ownership within 30 days from the date the assignee
1. by tradition and not by perfection demands (judicially or extre-judicially)
2. by execution of public instrument payment from him
because intangibles cannot be
physically transferred NOTE: Presumption: buyer’s purpose is speculation
3. Without necessity of delivering the and; law would rather benefit the debtor of such credits
document evidencing the credit. rather than the one who merely speculates for profit.
4. This rule does not apply to. negotiable
documents and documents of title which NOTE: When credit or incorporeal right in litigation is
are governed by special laws. assigned or sold, debtor has a right to extinguish it by
reimbursing the assignee for the price the buyer paid
V. Effect of payment of debtor after plus interest
assignment of credit
1. Before Notice of the Assignment IX. Right to redeem by debtor not available in the
following instances (not considered
a. Payment to the original speculative
creditor is valid and debtor shall be 1. assignment of credit / incorporeal right to
released from his obligation co-heir or co-owner; the law does not
2. After Notice favor co-ownership
a. Payment to the original 2. assignment to creditor in payment for
creditor is not valid as against the his credit
assignee a. presumption is that the assignment
b. He may be made to pay again is above suspicion; assignment is in
 the form of dacion en pago, thus
perfectly legal
3. assignment to possessor of tenement
or piece of land which is subject
to the right in litigation assigned
a. purpose is to presumably
preserve the tenement
BULK SALES LAW
I. Purpose: Protect creditor of merchant stores.
II. When sale or transfer in bulk? - Any sale,
transfer, mortgage, or assignment
1. of goods other than in ordinary course of
business
2. of all or substantially all of business
3. of all or substantially all of fixtures and
equipments
III. Should cover only merchants because
creditors cannot get adequate security because
goods are sold ordinarily in course of business
IV. When sale or transfer NOT covered by Bulk Sales
Law:
1. If the transfer is in the ordinary course of
trade and the regular prosecution of the
business of the vendor
2. If it is made by one who produces and
delivers a written waiver of the provisions of
the Bulk Sales Law from its creditors
3. If it is made by an executor,
administrator, receiver, assignee in
insolvency, or public officer, acting under
judicial process (Section 8); and
4. If it refers to properties exempt from
attachment or execution (ROC, Rule 39,
Sec. 12)
V. Protection accorded to creditors by Bulk
Sales Law:
1. It requires the vendor,
mortgagor,
transferor, or assignor to deliver to the
vendee, mortgagee, or to his or its agent
or representative a sworn written
statement of names and addresses of all
creditors to whom said vendor, etc. may
have been indebted together with the
amount due or to be due (Section 3)
2. It requires the vendor, mortgagor,
transferor, or assignor, at least 10 days
before the sale, transfer, mortgage,
assignment to make a full detailed
inventory showing the quantity and the
cost of the price, terms and conditions of
the sale, etc. (Sec. 5)
VI. Duty of seller to perform the following
when transaction is within the coverage
of law
1. make sworn statement of listing of
creditors
2. delivery of sworn statement to buyer
3. apply the proceeds pro-rata to claims of
creditors shown in verified statement
4. written advance disclosure to creditors
VII. Effects of False Statements in the
Schedule of Creditors
1. Without knowledge of buyer
a. If the statement is fair upon its face and
the buyer has no knowledge of its
incorrectness and nothing to put him on
inquiry about it, he will be protected in
its purchase
b. The remedy of the creditor is not against
the goods but to prosecute the seller
criminally
2. With knowledge or imputed knowledge of
buyer
a. The vendee accepts it at his peril
b. The sale is valid only as between the
vendor and the vendee but void
against the creditors
3. With names of certain creditors without
notice are omitted from the list
a. The sale is VOID as to such creditors,
whether the omission was fraudulent or
not.
4. With respect to an innocent purchaser
for value from the original purchaser
a. An IPV from the original purchaser is
protected
However if the circumstances are such as to bind the
subsequent purchaser with constructive notice that the
sale to the vendor (original purchaser) was fraudulent,
the property will be liable in his hands to creditors of the
original vendor
VIII. Effects of violation of Law on Transfer
1. As between parties
a. The Bulk Sales Law does NOT in any
way affect the validity of the transfer as
between the intermediate parties
thereto
b. A sale not in compliance with the Bulk
Sales Law is valid against all persons
other than creditors
2. As against creditors
a. A purchaser in violation of the law
acquires no right in the property
purchased as against the creditors of
the seller
b. His status is that of a trustee or receiver
for the benefit of the creditors of the
seller; as such, he is responsible for
the disposition of the property
IX. Remedies available to creditors
1. The proper remedy is one against the
goods to subject them to the payment of
the debt, such as execution, attachment,
garnishment, or by a proceeding in equity
2. An ordinary action against the purchaser to
obtain money judgment will NOT lie, unless
the purchaser has sold or otherwise
disposed of, or dealt with the property, so
as to become personally liable to the
creditors for value of it.
X. Effects of Non-Compliance
Failure to On On Seller
Transaction
Prepare and deliver Fraudulent and Criminal
sworn listing of void Liability
creditors
Apply proceeds pro- Fraudulent and Criminal
rata to listed creditors void Liability
Make advance written Not void No Criminal
disclosure of Liability
transactions to
creditors
Register sworn Not void No Criminal
statement with DTI Liability
Include or omit names Void Criminal
of creditors and Liability
correct amount due in
the statement
Sale for no Void Criminal
consideration Liability