B. OBJECT OF THE CONTRACT
patria postestas, marital authority, status, capacity of
1. REQUISITES
ART. 1459: The thing must be licit and the vendor must have a right to transfer the ownership
thereof at the time it is delivered. (n)
ART. 1347: All things which are not outside the commerce of men, including future things,
may be the object of a contract. All rights which are not intransmissible may also be the
object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized
by law.
All services which are not contrary to law, morals, good customs, public order or public policy
may likewise be the object of a contract. (1271a)
ART. 1306: The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy. (1255a)
Cf. ART. 1409: The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract
cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be
waived.
What may be the Objects of Contracts
1. All things not outside the commerce of man
Including future things do not belong to the obligor at the time the contract is
made; they may be made, raised or acquired by the obligor after the perfection of
the contract
o Conditional subject to the coming into existence of the thing
o Aleatory one of the parties bears the risk of the thing never coming into
existence
Outside the commerce of man all kinds of things and interests whose
alienation or free exchange is restricted by law or stipulation, which parties cannot
modify at will
o Services which imply an absolute submission by those who render them,
sacrificing their liberty, independence or own beliefs or disregarding in any
manner the equality and dignity of persons e.g. perpetual servitude or slavery
o Personal rights e.g.
persons, honorary titles
o Public offices, inherent attributes of the public authority, political rights of
individuals e.g. right of suffrage
o Property while they pertain to the public dominion; belonging to the State or
its political subdivisions intended for public use or public service or for the
development of national wealth
o Churches
o Sacred things e.g. air and sea
o BUT public property when no longer intended for public use or service form
part of the patrimonial property of the State
2. All rights not intransmissible
3. All services not contrary to law, morals, good customs, public order or public policy
E.g. of things prohibited by law
o Narcotics or dangerous drugs
o Wild bird or mammal, rare wild plants protected by law
o Tubli or other poisonous plants or fruits
o Dynamited fish or other aquatic animals
o Gunpowder, dynamite, explosive or blasting supplies, firearms or ammunitions
ART. 1411: When the nullity proceeds from the illegality of the cause or object of the
contract, and the act constitutes a criminal offense, both parties being in pari delicto, they
shall have no action against each other, and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall
be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may
claim what he has given, and shall not be bound to comply with his promise. (1305)
ART. 1416: When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designated for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or delivered.
a. LICIT
The subject matter of a contract of sale must be licit (ART. 1459). A thing is licit and may be
the object of a contract when it is not outside the commerce of men, and includes all rights
which are not intransmissible (ART. 1347).
a) The sale of narcotics or dangerous drugs except upon prescription, or any wild bird or
mammal, or rare wild plants protected by law or of tubli or other poisonous plants or fruits,
dynamited fish or other aquatic animals, gunpowder, dynamite, explosives or blasting
supplies, firearms or ammunitions are prohibited by law therefore are illicit.
TINA REYES | 2004-10531| SALES | SANCHEZ | 14
 b) Properties belonging to the State or its political subdivision which are intended for public ART. 777: The rights to the succession are transmitted from the moment of the death of the
use or public service or for the development of natural wealth are outside the commerce of decedent. (657a)
man.
2. DETERMINATE
c) Churches are also outside the commerce of man. ART. 1460: A thing is determinate when it is:
1. Particularly designated or physically segregated from all others of
d) But public property when no longer intended for public use or service form part of the the same class
patrimonial property of the State and therefore can be leased or sold. 2. At the time of the contract is entered into, the thing is capable of
being made determinate without the necessity of a new or further
Cf. ART. 420: The following things are property of public dominion: agreement between the parties

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges Determinate v. determinable: a thing is determinate if it can be physically segregated,
constructed by the State, banks, shores, roadsteads, and others of similar character; particularly designated; capable of being made determinate without need of another
agreement. It is determinable if it is capable of being determined via another agreement.
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (339a) CASES
MELIZA v CITY OF ILOILO: Determinate v Determinable
ART. 422: Property of public dominion, when no longer intended for public use or for public
The requirement of the law that a sale must have for its object a determinate thing, is
service, shall form part of the patrimonial property of the State. (341a)
fulfilled as long as, at the time the contract is entered into, the object of the sale is capable
of being made determinate without the necessity of a new or further agreement between
ART. 424: for public use, in the provinces, cities, and municipalities, consist of the provincial
the parties
roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and
public works for public service paid for by said provinces, cities, or municipalities.
GAITE v FONACIER:
The subject-matter of the sale is, therefore, a determinate object, the mass, and not the
All other property possessed by any of them is patrimonial and shall be governed by this
actual number of units or tons contained therein, so that all that was required of the
Code, without prejudice to the provisions of special laws. (344a)
seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass,
notwithstanding that the quantity delivered is less than the amount estimated by them
CASE
Any condition that a buyer would NOT receive the subject matter of the contract, is VOID
MARTINES v CA: Lands of Public Dominion intended for public use are outside the
and will not constitute a valid contract of sale, although it may be some other contract.
commerce of men
Navigable public stream converted into fish ponds, registered under the Torrens system.
ATILANO v ATILANO:
Sold successively to different persons
Mistake as to the name of the Lots (A and B)
The right of reversion to the State does not prescribe as rivers are outside the commerce of
The true contract of sale is intangible or properly a legal concept.
man.
The deed of sale is merely an evidence of the contract. And when the deed fails to cover
the real contract or the true meeting of the minds of the parties, then the deed must give
b. PROHIBITIONS
way to the real contract of the parties.
ART. 1347: All things which are not outside the commerce of men, including future things,
may be the object of a contract. All rights which are not intransmissible may also be the
3. NATURE OF OBJECT
object of contracts.
a) Law prohibits sale of future inheritance. The rights to succession are transmitted from the
No contract may be entered into upon future inheritance except in cases expressly authorized moment of the death of the decedent so one cannot sell or promise to sell what he expects
by law. to inherit from a living person. But the law allows an heir to sell his interests in an inheritance

All services which are not contrary to law, morals, good customs, public order or public policy b) The object of the contract of sale must be licit, meaning within the commerce of man, and
may likewise be the object of a contract. (1271a) determinate. Determinate has been expanded to cover generic things, future things and
things in potential existence.

TINA REYES | 2004-10531| SALES | SANCHEZ | 15

c) Things subject to a resolutory condition may be the object of the contract of sale.(Article depend on the specific properties despite the fact that it earlier formed part of a single
1465) piece of property.
There was no necessary unity of ownership for lumping the parcels together for evaluation
a. FUTURE GOODS
ART. 1461: Things having a potential existence may be the object of the contract of sale. ONAPAL PHIL. COMMODITIES, INC. v CA:
The pacto de retro sale executed by MARGARITA expressly stipulates that she only sold all
The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that her rights, interests and participation in the subject land
the thing will come into existence. MARGARITA therefore, could not, for she had no right to, sell the entire lot, since it was
registered "in the name of Francisco Yturralde married to Margarita Yturralde."
The sale of a vain hope or expectancy is void. (n) Said lot is the conjugal property of FRANCISCO and MARGARITA. Hence, what she validly
disposed of under the aforesaid pacto de retro sale to ISABELO was only her conjugal share
SALE OF THING HAVING POTENTIAL SALE OF A HOPE in the lot plus her successional right as heir in the conjugal share of her deceased husband.
EXISTENCE (mere hope of expectancy; hope itself) Consequently, the vendee a retro, ISABELO, cannot legally petition for the consolidation
(expected thing) of his ownership over the entire lot
Emptio rei sperati Emptio spei
Sale is subject to the condition that the thing Sale produces effect even if the thing does b. DIVIDED INTEREST OF SHARE
will exist, if it does not, there is no contract not come into existence, unless it is a vain ART. 1463: The sole owner of a thing may sell an undivided interest therein. (n)
hope
Uncertainty is with regard the quality and Uncertainty is with regard the existence of ART. 1464: In the case of fungible goods, there may be a sale of an undivided share of a
quantity of the thing the thing specific mass, though the seller purports to sell and the buyer to buy a definite number,
The object is a future thing The object is a present thing weight or measure of the goods in the mass, and though the number, weight or measure of
the goods in the mass is undetermined. By such a sale the buyer becomes owner in common
ART. 1462: of such a share of the mass as the number, weight or measure bought bears to the number,
The goods which form the subject of a contract of sale may be either weight or measure of the mass. If the mass contains less than the number, weight or measure
1. Existing goods owned or possessed by the seller bought, the buyer becomes the owner of the whole mass and the seller is bound to make
2. Goods to be manufactured, raised, or acquired by the good the deficiency from goods
seller after the perfection of the contract of sale
Future goods CASE
YTURRALDE v CA:
There may be a contract of sale of goods, whose acquisition by the seller depends upon a A co-owner cannot sell more than his share.
contingency which may or may not happen. aleatory Thus, where the surviving spouse sold the conjugal property under a pacto de retro and
failed to redeem it, the vendee a retro acquired only the share of the vendor in the
FUTURE GOODS are those still to be : conjugal property, and not the entire property.
Manufactured
Raised (e.g. young animals) c. THINGS IN LITIGATION
ART. 1381: The following contracts are rescissible:
Acquired by the seller after perfection of the contract (e.g. land which seller expects
to buy)
(4) Those which refer to things under litigation if they have been entered into by the
Things whose acquisition depends upon a contingency which may or may not
defendant without the knowledge and approval of the litigants or of competent judicial
happen
authority
CASES
ART. 1385: (2) Neither shall rescission take place when the things which are the object of the
REPUBLIC v LICAHAUCO:
contract are legally in the possession of third persons who did not act in bad faith.
The hacienda, being already partitioned, is now owned by several owners distinct and
separate from the others. Because of this, the valuation of the subject properties should
1) Sales of things under litigation entered into by defendants without the knowledge &
approval of the litigants or of the court are rescissible.
TINA REYES | 2004-10531| SALES | SANCHEZ | 16
2) However, rescission cannot take place when the things are legally in the possession of 3 rd
persons who did not act in bad faith (& without knowledge of defect)
3) In an action affecting the title or the right of possession of real property, the plaintiff may
record in the office of the Registrar of Deeds of the Province which the property is
situated, a notice of the pendency of the action.
4) From the moment of the filing of such notice, 3 rd persons are charged with notice of the
litigation & take the property subject to the outcome of the litigation. (Baviera and De
Leon)
CASE
ATKINS KROLL & CO. v DOMINGO:
The filing of the lis pendens was intended to affect third persons with notice of the claim.
But it will be remembered that the efforts of S. Domingo to get his claim recognized in
those proceedings completely failed of effect. For this reason the lis pendens must be
considered to have lost its efficacy.
The effect of notice by lis pendens is, of course, to charge the stranger with notice of the
particular litigation referred to in the notice, and, if the notice is effective, the stranger who
acquires the property affected by the lis pendens takes subject to the eventuality of the
litigation.
But when the adverse right fails in such litigation, the lis pendens becomes innocuous.
d. THINGS SUBJECT OF CONDITIONS
ART. 1465: Things subject to a resolutory condition may be the object of the contract of sale.
(n)
ART: 1608: The vendor may bring his action against every possessor whose right is derived
from the vendee, even if in the second contract no mention should have been made of the
right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land
Registration Law with respect to third persons. (1510)
E.g. of thing subject to resolutory condition:
o Legal or conventional right of redemption
o Subject to reserva troncal
CASE
ARSENAL v IAC:
A contract which purports of alienate, transfer, convey or encumber any homestead within
the prohibitory period of five years from the date of the issuance of the patent is void from
its execution.
C. CAUSE OR CONSIDERATION
ART. 1352: Contracts without cause, or with unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.
(1275a)
ART. 1353: The statement of a false cause in contracts shall render them void, if it should not
be proved that they were founded upon another cause which is true and lawful.
ART. 1471: If the price is simulated, the sale is void, but the act may be shown to have been
in reality a donation or some other act or contract.
Cf. ART. 1409: The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract
cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be
waived.
ART. 1411: When the nullity proceeds from the illegality of the cause or object of the
contract and the act constitutes a criminal offense, both parties being in pari delicto, they
shall have no action against each other and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall
be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may
claim what he has given and shall not be bound to comply with his promise.
IN PARI DELICTO RULE (for illegal cause or object)
1. BOTH are in pari delicto
No action against each other
BOTH will be prosecuted
RPC provision relative to the disposal of effects/instruments of a
crime shall apply
2. ONLY ONE is guilty
INNOCENT PARTY may claim what he has given
INNOCENT PARTY not bound to comply with his promise
ART. 1416: When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designated for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or delivered.
1. False Price there is a true price but it was not written down or stipulated in the contract.
There was a consideration although it was not found in the contract (Real consideration
not stated)
TINA REYES | 2004-10531| SALES | SANCHEZ | 17
2. Simulated Price There was no price paid. The parties merely said there was a price and
created their own price (no consideration but stated)
CASES
MAPALO v MAPALO: without Cause or Consideration = VOID
A contract of purchase and sale is null and void and produces no effect whatsoever where
the same is without cause or consideration
That the purchase price which appears thereon as paid has in fact never been paid by the
purchaser to the vendor
MORALES DEV. CO. v CA: NO CONSIDERATION v FALSE CONSIDERATION
Aside from the false consideration of P500, there was NO REAL CONSIDERATION.
Therefore, the contract is one with NO CONSIDERATION and not merely one that states a
false consideration
It is VOID and its inexistence is permanent and incurable and cannot be the subject of
prescription.
PANGILINAN v CA:
RONGAVILLA v CA:
1. FORM OF CONSIDERATION
Price should be payable in money or its equivalent (e.g. letters of credit) otherwise
it may be considered barter or an innominate contract.
If price is life annuity or obligation to support, the contract is not sale because the
price is a prestation which cannot be certain.
ART. 1468:
If consideration is partly in money and partly in another thing (determination of sales or
barter)
A. Transaction to be characterized by manifest intention of parties
B. Value of thing > money or equivalent BARTER
C. Value of thing = money or equivalent SALE
D. Value of thing < money or equivalent SALE
ART. 1638: By a contract of barter or exchange, one of the parties binds himself to give one
thing in consideration of the others promise to give another thing.
ART. 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of
a debt in money, shall be governed by the law of sales.
There is a novation of the contract of loan into a contract of sale when creditor
agrees to accept a thing in payment of the debt.
If thing given in payment turns out to belong to another, creditors remedy
governed by law on sales not on loan.
1. The price should be in money or its equivalent (e.g. letters of credit & other
negotiable instruments). Otherwise, the transaction might be barter or an
innominate contract.
2. Property given to the creditor in satisfaction of a debt in money with the PRICE PAID
IN ADVANCE is a sale.
3. Fixing of the price is more or less arrived at with ample contractual freedom than
the value of the thing given in dation.
DATION IN PAYMENT SALE
Presupposes a prior existing credit & Obligations are created from the perfection
extinguishes the obligation of the contract
CASES
REPUBLIC v PHIL. RESOURCES DEV.:
Although Art. 1458 of the new Civil Code provides that price . . . is always paid in terms of
money and the supposed payment being in kind it is no payment at all,"
Yet the same article provides that the purchaser may pay "a price certain in money or its
equivalent" which means that payment of the price need not be money.
ONG v ONG: The court ruled that P1.00 consideration does not automatically make Reyes
and Abellas purchasers in bad faith.
An inadequacy of the monetary consideration does not render a deed of sale inexistent, for
the assignor's liberality may be sufficient cause for a valid contract so long as it has an
object, a cause, and consent.
The court also recognized the Anglo-Saxon practice of stating that the consideration given
is the sum of P1.00, although the actual consideration may have been much more
(If the price if FALSE, the contract of sale is VALID but subject to REFORMATION)
BAGNAS v CA:
Upon the consideration alone that the apparent gross, not to say enormous, disproportion
between the stipulated price (in each deed) of P1.00 plus unspecified and un-quantified
services
Indisputably valuable real estate allegedly sold worth at least P10,500.00 going only by
assessments for tax purposes
It is well-known, are notoriously low indicators of actual value plainly and
unquestionably demonstrates that they state a false and fictitious consideration, and no
other true and lawful cause having been shown, the Court finds both said deeds, insofar as
they purport to be sales, not merely voidable, but void ab initio.
2. ADEQUACY OF PRICE
ART. 1355: Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue influence.
ART. 1470:
TINA REYES | 2004-10531| SALES | SANCHEZ | 18
Gross inadequacy of price does not affect a contract of sale, except as it may indicate: ART. 1473: The fixing of the price can never be left to the discretion of one of the contracting
a defect in consent, OR parties. However, if the price fixed by one of the parties is accepted by the other, the sale is
that the parties really intended a donation or some other perfected. (1449a)
act or contract
o not applicable when the seller is given the ART. 1474: Where the price cannot be determined in accordance to the preceding articles,
right to redeem or in any other manner, the contract is inefficacious. However, if the thing or any part thereof
has been delivered to and appropriated by the buyer, he must pay a reasonable price
CASES therefor. What is a reasonable price is a question of fact dependent on the circumstances of
LAPERAL v ROGERO: each particular case.

DE LEON v SALVADOR:
BUENAVENTURA v CA:
3. DEFINITENESS AND CERTAINTY
ART. 1469: In order that a price may be considered certain, it shall be sufficient that it be so:
1. With reference to another thing certain
2. Determination thereof be left to the judgment of specified person/s
(1) Should such 3rd person/s acted in bad faith or by mistake
courts may fix the price
(2) Where such 3rd person/s prevented from fixing the price or
terms by fault of the seller or the buyer party not in fault
may have such remedies (for fraud) against the party in fault
as allowed the seller or the buyer as the case may be
ART. 1470: Gross inadequacy of price does not affect a contract of sale, except as it may
indicate a defect in the consent, or that the parties really intended a donation or some other
act or contract. (n)
ART. 1471: If the price is simulated, the sale is void, but the act may be shown to have been
in reality a:
1. Donation; or
2. Some other act or contract
ART. 1472: The price of securities, grain, liquids and other things shall also be considered
certain, when the price fixed is that which the thing sold would have
On a definite day
Particular exchange or market
An amount is fixed above or below the price on such day
or in such exchange or market
Provided said amount be certain
1. A contract of sale is null & void and produces no effect whatsoever if the same is
without cause or consideration or that the price which appears to have been paid
has in fact never been paid.
2. The existence of a contract is permanent & incurable.
3. The statement of a false cause in contracts shall render them void if it should not be
proven that were founded upon another cause which is true & lawful (1471, 1353)
4. If the price is simulated, the sale is void but the act may be shown to have been in
reality a donation, or some other act or contract (1471)
CASES
ROBLES v LIZARRAGA HERMANOS:
NAVARRO v SUGAR PRODUCERS CORP.
When the manner of payment of purchase price is discussed after acceptance,
acceptance did not produce a binding and enforceable contract of sale.
There was no complete meeting of the minds
III. OBLIGATIONS OF THE VENDOR/SELLER
A. OBLIGATION TO TRANSFER/DELIVER
1. IN GENERAL
ART. 1477: The ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee. (n)
Ownership of thing shall transfer to the vendee upon the ACTUAL or
CONSTRUCTIVE DELIVERY of the thing sold.
OR: any manner signifying an agreement that possession is transferred from vendor
to vendee (Art. 1496)

TINA REYES | 2004-10531| SALES | SANCHEZ | 19

 a. Contract of sale constitutes a RIGHT to TRANSFER or ACQUISITION of Ownership passes to the buyer upon Title to the goods remain with the seller
OWNERSHIP the delivery of the thing but he may although it has already been delivered to the
b. Delivery is the method of accomplishing this right revest it buyer (Vallarta v CA)

CASES c. EXECUTION SALES

ASSET PRIVATIZATION TRUST v TJ ENTERPRISES: ART. 1478: The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price. EXPRESS RESERVATION

PHIL. SUBURBAN DEV. CORP. v AUDITOR GENERAL:
When there is no symbolic delivery of the object even after the execution of the public
instrument when the intention of the parties is otherwise for example:
a. Certain date is fixed for the purchaser to take possession
b. In case of sale by installment, stipulated that until last payment is paid,
title to property remains with the vendor
c. Vendor reserves the right to use and enjoy property until gathering of the
pending crops
Vendor has no control over the goods at the moment of sale hence material delivery could
not have been made
2. EXCEPTIONS
a. SALE ON RETURN
ART. 1502: When goods are delivered to the buyer on sale or return to give the buyer an
option to return the goods instead of paying the price, the ownership passes to the buyer 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.
(n)
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.
ART. 1503: When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer. IMPLIED RESERVATION
i. Ownership of the thing shall not pass until the price is fully paid
ii. Seller may reserve the right of possession or ownership in the goods until
certain conditions have been fulfilled
CASES
VALLARTA v CA:
When the sale of a movable is a sale on acceptance, no contract of sale existed at the
time of the delivery of the subject matter, and consequently, ownership could not have
been transferred to the buyer although he took possession thereof.
Delivery or tradition, as a mode of acquiring ownership, must be un consequence of a
contract.
INDUSTRIAL TEXTILE MANUFACTURING CO. v LPI ENTERPRISES, INC.:
For a sale to be considered and construed as a sale or return or sale on approval, there
must be clear agreement to either of such effect, otherwise, the provisions of Art. 1502,
governing such sales cannot be invoked be either party to the contract.
Must be in writing.
MENDOZA v DAVID:
RUDOLF LIETZ, INC. v CA:

b. SALE ON APPROVAL 3. MANNER OF TRANSFER

SALE OR RETURN
Buyer has the right to return the thing
within the time fixed in the agreement
or within a reasonable time as long as
the things condition has not
substantially changed
ART. 1477: The ownership of the thing sold shall be transferred to the vendee upon the
SALE ON APPROVAL actual or constructive delivery thereof.
Buyer gets the thing sold on trial and signifies his
acceptance or refusal within a certain period ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee. (n)
TINA REYES | 2004-10531| SALES | SANCHEZ | 20
ART. 1497: The thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee.
CASES
OBANA v CA:
KUENZIE & STREIFF v MACKE & CHANDLER:
The ownership of personal property cannot be transferred to the prejudice of third persons
except by delivery of the property itself;
And that a sale without delivery gives the would-be purchaser no rights in said property
except those of a creditor
OCEJO PEREZ & CO. v INTERNATIONAL BANK:
Delivery produces its natural effects in law, the principal and most important of which
being the conveyance of ownership, without prejudice to the right of the seller to claim the
payment of the price.
4. KINDS OF DELIVERY
ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee. (n)
a. REAL OR ACTUAL DELIVERY
ART. 1497: The thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee.
Delivered when placed in the control and possession of the vendee; conveyance of
ownership without prejudice to the right of vendor to claim payment of the price
CASES
BEAN v CADWALLER:
Actual manual delivery of an article sold is not essential to the passing of the title thereto
(art 1450, Civil Code) unless made so by the terms of the contract or by an understanding
of the parties.
The parties to the contract may agree when and on what conditions the property in the
subject of the contract was passed to the prospective owner
ALFREDO v BORRAS: Perfected and Consummated Contract of Sale
Alfredo mortgaged to DBP (7K) Borras paid loan and balance to Alfredos (15K)
DBP gave Borras copy of OCT; Carmen Alfredo issued a receipt for the received balance (8K)
A re-sold property on the basis of a copy of the title obtained judicially; claims sale with B
not valid under the Statutes of Fraud because it was oral
Contract of Sale
1. Perfected
a. consent
b. object land
c. price 15K
2. Consummated
- Physical delivery of subject land transfer of ownership
Even if orally entered into Receipt = note/memo of the sale
Under SOF, only voidable and may be ratified when Godofredo A introduced B to
tenants of land
Redounded on the conjugal partnership (Art. 161)
b. CONSTRUCTIVE DELIVERY
i. SYMBOLIC DELIVERY/DELIVERY BY PUBLIC
INSTRUMENT
ART. 1498: When the sale is made through a public instrument, the execution thereof shall
be equivalent to delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot be clearly inferred.
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.
When sale is made through a public instrument, the EXECUTION thereof shall be
equivalent to delivery IF from the deed the contrary does not appear
o operates as formal/symbolic delivery
o authorizes buyer to use such document as proof of ownership
Symbolic delivery may produce the effect of tradition if vendor have had such
control over the thing sold that at the moment of the sale, its material delivery
could have been made
GENERAL RULE: he who purchases through a public instrument should be deemed a
possessor in fact and this presumption should give way before proof to the
contrary
A person must be in ACTUAL POSSESSION to be able to transfer CONSTRUCTIVE
POSSESSION through public instrument
REQUISITES OF CONSTRUCTIVE DELIVERY BEFORE OWNERSHIP MAY BE TRANSMITTED
Seller must have control over the thing, otherwise how can he put another in control.
Fiction yields to reality, he cannot transfer constructive possession if there is legal
impediment to actual possession.
Buyer must be put under control.
Intention to deliver the thing for purposes of ownership.
CASES
FLORENDO v FOZ:
It is the material delivery of the property sold which the defendant must make in
compliance with the contract, inasmuch as the formal delivery de jure was made,
according to the provisions of article 1462, 2nd paragraph, of the same code:
o When the sale should be made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is
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 the object of the contract; if in said instrument the contrary does not
appear or may be clearly inferred.
As the contrary does not appear nor is to be inferred from the public instrument executed
by the defendant, its execution was really a formal or symbolical delivery of the property
sold and authorized the plaintiff to use the tile of ownership as proof that he was
thenceforth the owner of the property
MASALLO v CESAR:
As Matea Crispino admits, however, that she did not have possession of the land when she
executed and delivered her deed to plaintiff, the mere execution and delivery of the deed
did not constitute a delivery of possession
AVILES v ARCEGA:
ALLIANCE TOBACCO v PVTA:
ASSET PRIVITIZATION TRUST v TJ ENTERPRISES:
DY, JR. v CA
Brother bought from brother a tractor which was the subject of a mortgage and at the
time of the execution of the deed of absolute sale, the tractor was in the possession of the
mortgagee.
Judgment for the brother-buyer.
The mortgagor who gave the property as security under a chattel mortgage did not part
with the ownership over the same. He had a right to sell it although he was under the
obligation to secure the written consent of the mortgagor.
ADDISON v FELIX
It is the duty of the seller to deliver the thing sold, and that symbolic delivery by the
execution of a public instrument is equivalent to actual delivery only when the thing sold is
subject to the control of the seller, so that at the moment of sale, its material delivery
could have been made.
The moment of sale: = consummation
CHUA v CA
ii. TRADITIO LONGA MANU (LONG HAND)
ART. 1498: When the sale is made through a public instrument, the execution thereof shall
be equivalent to delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot be clearly inferred.
ART. 1499: The delivery of a 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.
Traditio Longa Manu delivery takes place when the thing is placed in the sight of the
purchaser so that he can take possession of it at pleasure
CASES
BOARD OF LIQUIDATORS v FLORO:
SANTOS v SANTOS
iii. TRADITION BREVI MANU (SHORT HAND)
ART. 1499: The delivery of a 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.
Traditio Brevi Manu delivery of movable property takes place when the vendee had the
thing already in his possession before the sale took place, not as owner but as lessee,
borrower or depositary.
CASES
ABUAN v GARCIA
HEIRS OF PEDRO ESCANLAR v CA
The September 15, 1978 sale of rights, interests and participation as to 1/2 portion pro
indiviso of the two subject lots is a contract of sale for the following reasons:
o First, private respondents as sellers did not reserve unto themselves the
ownership of the property until full payment of the unpaid balance of
P225,000.00.
o Second, there is no stipulation giving the sellers the right to unilaterally
rescind the contract the moment the buyer fails to pay within the fixed
period.
Prior to the sale, petitioners were in possession of the subject property as lessees.
Upon sale to them of the rights, interests and participation as to the 1/2 portion pro
indiviso, they remained in possession, not in concept of lessees anymore but as owners
now through symbolic delivery known as traditio brevi manu.
Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the
vendee upon actual or constructive delivery thereof
iv. TRADITIO CONSTITUTUM POSSESSORIUM
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ART. 1500: There may also be tradition constitutum possessorium. (n)
In traditio constitutum possessorium, the vendor remains in possession of the
property sold, by virtue of a lease agreement with the vendee.
Vendee became as lessor, the legal possessor while the vendor is in material
possession of the property in the name and representation of the vendee.
CASES
BAUTISTA v SIOSON
Even if the vendor sells the property again to another, the second purchaser cannot
acquire ownership as he bought the property from a mere tenant.
In a case which frequently occurs, where the vendor, on the same date on which the deed
of sale is executed, by means of a constitutum possessorium agreement converts himself
into a tenant or lessee of the property that he sold, and continues in possession thereof as
such tenant, the purchaser who acquired the property through delivery or symbolic
tradition, with all the consequent effects of a deed of conveyance, is deemed to be in
possession thereof by the express will of the contracting parties, and therefore, it must be
recognized that, through such constitutum possessorium agreement, the purchaser, who
by that covenant becomes the lessor, is in lawful possession of the leased property, and
that the vendor, by the same covenant, converted himself into the lessee and is in material
possession of the leased property in the name and representation of the purchaser, its
lawful owner.
AMIGO v TEVES
A provision in the deed of sale granting the seller a right to lease the subject matter of the
sale is VALID.
Common in contracts of sale of land with pacto de retro; may be considered as a means of
delivery or tradition by constitutum possessorium.
c. DELIVERY TO A COMMON CARRIER
ART. 1523: Where, in pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer
or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods
to the buyer, except in the case provided for in Article 1503, first, second and third
paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier
on behalf of the buyer as may be reasonable, having regard to the nature of the goods and
the other circumstances of the case. If the seller omit so to do, and the goods are lost or
damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under
circumstances in which the seller knows or ought to know that it is usual to insure, the seller
must give such notice to the buyer as may enable him to insure them during their transit,
and, if the seller fails to do so, the goods shall be deemed to be at his risk during such transit.
ART. 1503: When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or
his agent, or to the order of the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill of lading, the ownership would
have passed to the buyer on shipment of the goods, the seller's property in the goods shall be
deemed to be only for the purpose of securing performance by the buyer of his obligations
under the contract.
Where goods are shipped, and by the bill of lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent,
the seller thereby reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of exchange
and bill of lading together to the buyer to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. If,
however, the bill of lading provides that the goods are deliverable to the buyer or to the order
of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one
who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain
the ownership in the goods, although the bill of exchange has not been honored, provided
that such purchaser has received delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the facts making the transfer wrongful.
GENERAL RULE: Delivery of goods to carrier is considered delivery to the buyer, and
hence, title passed to the buyer at the point of shipment
EXCEPTION: Seller may reserve title by the form of the bill of lading with intent to
remain the owner for all purposes and not merely for the sole purpose of securing
payment, or unless contrary intent appears in the contract of sale
a. Terms, f.o.b.; c.i.f.; f.a.s.
f.o.b. - free on board means that the seller bears
expenses of transportation up to the f.o.b. point.
c.i.f. - cost, insurance, freight signifies that the price
quoted includes the costs of the goods, insurance, and
freight charges on the goods up to the place of destination;
paid by seller
f.a.s. free alongside means that the seller bears the
expenses of transportation until he delivers the goods
alongside a vessel at a named post.
TINA REYES | 2004-10531| SALES | SANCHEZ | 23
 These terms may be used only in connection with fixing the price and will not be
construed as fixing the place of delivery to the buyer
Best indication of the intention of parties as to the place of delivery is the manner
and place of payment agreed upon by the parties
o Where price is payable upon proof of shipment, then the buyer agrees to
accept delivery at the point of shipment
o Where the price is payable only upon arrival of the goods at the point of
destination, then that is the place of delivery to the buyer
CASE
BEN MEYER v YANGCO:
Shipping terms were c.i.f. Manila on goods coming from New York
If the contract is silent as to the person or mode by which the goods are to be sent,
delivery by the vendee to a common carrier, in the usual and ordinary course of business,
transfers the property to the vendee.
Both the terms c.i.f. and f.o.b. merely make rules of presumption which yield to proof of
contrary intention.
d. EFFECT OF BILLS OF LADING ON TRANSFER OF OWNERSHIP
ART. 1503:
Ownership is retained: The seller may consign the goods to himself or to his agent
and thus prevent title from passing to the buyer until the latter pays the price
Mere possession is retained: The seller may consign the goods to the order of the
buyer on the latters agent but by retaining the bill of lading, he thereby prevents
the buyer from obtaining the goods from the carrier until price is paid
5. DOUBLE SALE
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.
RULES OF PREFERENCE
1) Registrant in good faith
2) Possessor in good faith (If there was no registration OR registration was done in
bad faith)
No distinction between actual or constructive
POSSESSOR IN GOOD FAITH one who is not aware that there exists in
his title or mode of acquisition any flaw which invalidates it; no
knowledge of facts which should have put him upon such inquiry or
investigation as might be necessary to acquaint him with the defects in
the title of his vendor
GOOD FAITH consists in an honest intention to abstain from taking any
unconscientious advantage of another
Good faith of second buyer must continue until his contract ripens into
ownership by tradition or recording.
REGISTERED LANDS purchaser is not required to do more than rely on
the certificate of the title issued in the name of his vendor, he need not
trace its origin to prior certificates of title
Art 1544 (on double sales) not applicable to execution sales because the
purchaser at such sales is substituted to or acquires only whatever rights,
titles or interests the judgment debtor may have over the property as of
the time of the levy (e.g. right of redemption).
3) Person with the oldest title in good faith
UNREGISTERED LANDS
Art 1544 is also applicable to unregistered lands under Act 3444: registration of
instruments is without prejudice to a third party with a better right mere registration
of sale in ones favor does not give him any right over the land if the vendor was not the
owner of the land
As to matters which took place before the first recorded transfer of the land, one must
conduct his own investigation because registration was without prejudice to a third
party with a better right.
Not applicable to unregistered lands under Act 496: prior unrecorded sale cannot
prejudice execution sales, if no 3rd party claim was presented before the execution sale
took place
RULES IN THE APPLICATION OF ARTICLE 1544:
(1) Knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first registers in good faith the second sale;
and
(2) Knowledge gained by the second buyer of the first sale defeats his rights even if he
is first to register, since such knowledge taints his registration with bad faith.
Differently put, the act of registration by the second buyer must be coupled with
good faith, meaning, the registrant must have no knowledge of the defect or lack of
title of his vendor or must not have been aware of facts which should put him upon
such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor.
ART. 526 and ART. 527:
POSSESSOR IN GOOD FAITH: one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.
TINA REYES | 2004-10531| SALES | SANCHEZ | 24
 o good faith is always presumed; burden of proof is on person
alleging bad faith
o good faith of second buyer must continue until his contract
ripens into ownership by tradition or recording
o as to Torrens title: it is enough that purchaser examines the
latest certificate of title issued in the name of his vendor and he need not trace
its origin to prior certificates of title
CASES
LEUNG YEE v FL STRONG MACHINERY INC.
Ownership is transferred not by contract but by tradition or delivery. Nowhere in the Civil
Code is it provided that the execution of a Deed of Sale is a conclusive presumption of
delivery of possession of a piece of real estate.
The execution of a public instrument gives rise only to a prima facie presumption of
delivery.
Such presumption is destroyed when the delivery is not effected because of a legal
impediment. Such constructive or symbolic delivery, being merely presumptive, was
deemed negated by the failure of the vendee to take actual possession of the land sold.
RURAL BANK OF STA. IGNACIA, INC. v DIMALUTAC

CARUMBA v CA OCCENA v ESPONILLA

Distinguished the applicability of Art. 1544 depending on whether the land is registered
under the Torrens system or is unregistered land.
Registration under the Torrens system was previously governed by Act. No. 496, but now PANGADUAN v SPOUSES OCUMA
governed by PD 1529.
On the other hand, annotation of transactions affecting unregistered land was governed by
Act. No. 3344, but now also governed by PD 1529. NAAWAN COMMUNITY RURAL BANK, INC. v CA
1544 granting priority to the buyer who registers in good faith over the other who takes It is a well-known rule in this jurisdiction that persons dealing with registered land have
possession in good faith is INAPPLICABLE to UNREGISTERED LAND because the purchase of the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the
the unregistered land at a sheriffs execution sale only steps in the shoes of the judgment- need to inquire further, except when the party concerned has actual knowledge of facts
debtor, and merely acquires the latters interest in the property sold as of the time the and circumstances that would impel a reasonably cautious man to make such inquiry.
property was levied upon.
NAVAL v CA
REMALANTE v TIBE

CARBONELL v CA
MATHAY v CA 1st buyers good faith subsisted and continued to exist when she recorded her adverse
claim prior to the registration of the 2nd buyers deed of sale.
Nor did the good faith cease when 1 found out about the subsequent sale to 2.
QUIJADA v CA
TANGLAO v PARUNGAO
Good faith is essential, being the basic premise of the preferential rights granted to the
DIAZ-DUARTE v ONG person claiming ownership of the immovable.
A buyer of real property in possession of persons other than the seller must be wary and
should investigate the rights of those in possession, for without such inquiry the buyer can
PO LAM v CA hardly be regarded as a buyer in good faith and cannot have any right over the property.

CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC. v CA

REPUBLIC v DE GUZMAN

SLDC v CA
TEN FORTY REALTY & DEV. CORP. v CRUZ The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted
that sale is not a mode, but merely a title.
TINA REYES | 2004-10531| SALES | SANCHEZ | 25
 Sale by itself does not transfer or affect ownership; the most that sale does is to create
the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
CHENG v GENATO
buyer does not bear the risk of loss until the goods are delivered, actually or constructively.
6. RISK OF LOSS
ART. 1504: Unless otherwise agreed, the goods remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the
buyer the goods are at the buyer's risk whether actual delivery has been made or not, except
that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery;
(2) Where actual delivery has been delayed through the fault of either the buyer or seller the
goods are at the risk of the party in fault. (n)
ART. 1452: If two or more persons agree to purchase property and by common consent the
legal title is taken in the name of one of them for the benefit of all, a trust is created by force
of law in favor of the others in proportion to the interest of each.
ART. 1189: When the conditions have been imposed with the intention of suspending the
efficacy of an obligation to give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is
understood that the thing is lost when it perishes, or goes out of commerce, or disappears in
such a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be
borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the
rescission of the obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that
granted to the usufructuary. (1122)
ART. 1538: In case of loss, deterioration or improvement of the thing before its delivery, the
rules in Article 1189 shall be observed, the vendor being considered the debtor. (n)
When loss occurs after perfection but before delivery, the seller bears the risk of loss. The
This is because the rule is a combination of the common-law rule that the owner bears the
risk of loss (res perit domino), and the Roman law requiring delivery to transfer ownership.
GENERAL RULES:
1. The risk of loss shall be borne by the owner.
2. Ownership is transferred upon delivery.
EXCEPTIONS:
1. Contrary stipulation
2. Security title
3. Delay through the fault of the buyer or the seller at the risk of the party at fault
CASES
SUN BROS. APPLIANCES, INC. v PEREZ:
The law allows an agreement which stipulates that (1) where goods are sold and delivered
to the buyer, the title is to remain in the seller until full payment, [but] (2) the loss or
destruction of the property while in the possession of the buyer before payment, does not
relieve him from the obligation to pay the price; in which case, the buyer suffers the loss.
The reasons for its validity are: First, the absolute and unconditional nature of the vendees
promise to pay for the goods. Second, the vendor has fully performed his contract and the
vendee received what he bargained for. Third, the policy of providing an incentive to care
properly for the goods, which is under the control and dominion of the vendee.
LAWYERS COOPERATIVE PUBLISHING CO. v TABORA
Despite the loss of the books in a fire, the risk of loss would be borne by the buyer
although he was not the owner yet. This is because the stipulation ownership shall only be
transferred upon full payment was agreed merely to secure the performance by the buyer
of his obligation. Moreover, in the contract, it was agreed that loss or damage to the books
after delivery to the buyer shall be borne by the buyer.
While under the rule, an obligor should be exempt from liability when the loss occurs in a
fortuitous event, this cannot be used by the buyer as a defense to exempt himself from
paying. His obligation does not pertain to the delivery of the subject matter, but to the
payment of the purchase price. The ability to pay in money or legal tender is never lost
through a fortuitous event.
7. DOCUMENTS OF TITLE
ART. 1636: Document of title a document used in the ordinary course of business in the sale
or transfer of goods, as proof of the possession or control of the goods, or authorizing or
purporting to authorize the possessor of the document to transfer or receive, either by
endorsement or by delivery, goods represented by such document.
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The functions of documents of title are (1) Evidence of the possession or control of the goods
described therein (2) Medium of transferring title and possession over the goods described
therein without having to effect actual delivery thereof (Villanueva)
ART. 1507: Negotiable document of title a document of title in which it is stated that the
goods referred to therein will be delivered to the bearer, or to the order of any person named
in such document.
ART. 1508: A negotiable document of title may be negotiated by delivery:
(1) Whereby the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the bearer; or
(2) Whereby the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the order of a specified person, and such person
or a subsequent endorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or
where a negotiable document of title has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any specified person, and in such case the document shall
thereafter be negotiated only by the endorsement of such endorsee. (n)
ART. 1509: A negotiable document of title may be negotiated by the endorsement of the
person to whose order the goods are by the terms of the document deliverable. Such
endorsement may be in blank, to bearer or to a specified person. If indorsed to a specified
person, it may be again negotiated by the endorsement of such person in blank, to bearer or
to another specified person. Subsequent negotiations may be made in like manner. (n)
TERMS OF THE DOCUMENT HOW NEGOTIATED
Goods are deliverable to bearer By delivery of the document to
Endorsed in blank by the person to whose order the another
goods were deliverable
Goods are deliverable to the order of a specified person By indorsement of such person
ART. 1516: A person who for value negotiates or transfers a document of title by
endorsement or delivery, including one who assigns for value a claim secured by a document
of title unless a contrary intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the
document; and
(4) That he has a right to transfer the title to the goods and that the goods are merchantable
or fit for a particular purpose, whenever such warranties would have been implied if the
contract of the parties had been to transfer without a document of title the goods
represented thereby. (n)
ART. 1517: The endorsement of a document of title shall not make the endorser liable for any
failure on the part of the bailee who issued the document or previous endorsers thereof to
fulfill their respective obligations. (n)
A person who negotiates a document of title warrants:
1. the genuineness and validity of the document;
2. his right to negotiate it; and,
3. all the warranties of a vendor of goods.
But he does not warrant that:
1. the common carrier will fulfill its obligation to the deliver the goods; or
2. the previous indorsers will fulfill their obligation.
ART. 1519: If goods are delivered to a bailee by the owner or by a person whose act in
conveying the title to them to a purchaser in good faith for value would bind the owner and a
negotiable document of title is issued for them they cannot thereafter, while in possession of
such bailee, be attached by garnishment or otherwise or be levied under an execution unless
the document be first surrendered to the bailee or its negotiation enjoined. The bailee shall
in no case be compelled to deliver up the actual possession of the goods until the document
is surrendered to him or impounded by the court. (n)
ART. 1520: A creditor whose debtor is the owner of a negotiable document of title shall be
entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in
attaching such document or in satisfying the claim by means thereof as is allowed at law or in
equity in regard to property which cannot readily be attached or levied upon by ordinary legal
process. (n)
Goods in the hands of the carrier covered by a negotiable document cannot be attached or
levied upon, UNLESS:
1. the document be first surrendered to the carrier; or
2. impounded by the court; or
3. its negotiation be enjoined.
Rationale for the rule:
A negotiable document of title represents the goods; hence it is not allowable for a carrier to
deliver the goods without the surrender of the bill of lading to them, or for the law to allow
attachment on the goods.
ART. 1514 (3): A person to whom a document of title has been transferred, but not
negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the
terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires the right to notify the bailee
who issued the document of the transfer thereof, and thereby to acquire the direct obligation
TINA REYES | 2004-10531| SALES | SANCHEZ | 27
of such bailee to hold possession of the goods for him according to the terms of the
document.
Prior to the notification to such bailee by the transferor or transferee of a non-negotiable
document of title, the title of the transferee to the goods and the right to acquire the
obligation of such bailee may be defeated by the levy of an attachment of execution upon the
goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a
subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor.
(n)
ART. 1515: Where a negotiable document of title is transferred for value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right
against the transferor to compel him to endorse the document unless a contrary intention
appears. The negotiation shall take effect as of the time when the endorsement is actually
made. (n)
The law makes a distinction between negotiation [negotiable document of title] and
transfer [non-negotiable document of title].
Transfer:
- the assignment of rights of the consignee of a non-negotiable document of title to
another
- where an order document of title was sold or assigned, without indorsement
The transferee does not acquire a better title than his transferor [unlike in a negotiable
document of title, where the buyer may acquire a better title].
8. UNPAID SELLER
ART. 1525: The seller of goods is deemed to be an unpaid seller within the meaning of this
Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or otherwise.
In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of
lading has been indorsed, or a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the position of a seller. (n)
a) Unpaid seller if the whole price has not been paid or tendered, or when the
check received as conditional payment was dishonored by non-payment or
insolvency of the buyer.
b) Seller includes the agent of the seller to whom the bill of lading was endorsed,
or the consignor or agent who had paid the price or is responsible for the price, or
any other person who is in the position of a seller.
ART. 1526: Subject to the provisions of this Title, notwithstanding that the ownership in the
goods may have passed to the buyer, the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has
parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of withholding delivery similar to and coextensive with
his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)
a) If ownership over the goods had not yet passed to the buyer: the seller, as owner,
could retain the goods or resell them to another, without prejudice to his liability
for damages for any breach of contract committed by him.
b) If ownership had passed to the buyer but the goods are still in the possession of
the seller or are in transit to the buyer: the unpaid seller could withhold delivery or
stop the goods in transit should the buyer become insolvent. As a consequence of
his lien over the goods, the unpaid seller could resell the goods to another or
resume ownership over them, without court order, and may still used the buyer for
damages
LIEN
ART. 1527: Subject to the provisions of this Title, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them until payment or tender of the
price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as to credit;
(2) Where the goods have been sold on credit, but the term of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in possession of the goods
as agent or bailee for the buyer. (n)
ART. 1528: Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show an intent to waive the lien or right of retention. (n)
TINA REYES | 2004-10531| SALES | SANCHEZ | 28
ART. 1529: The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the ownership in the goods or the right to the possession
thereof;
(2) When the buyer or his agent lawfully obtains possession of the goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he
has obtained judgment or decree for the price of the goods. (n)
a) The unpaid sellers lien implies that he has a right to retain possession
of the goods until payment or tender of the whole price, unless he
agreed to sell on credit.
b) If the unpaid seller agrees to sell on credit, he may refuse to deliver
them if the buyer becomes insolvent, or if the term of the credit had
expired and the price has not been paid.
c) Loss of lien: the unpaid seller losses his lien when:
1. he delivers the goods to the carrier or
other bailee, consigning them to the buyer under a straight
or non-negotiable bill of lading, or
2. when the goods were delivered to the
buyer, or
3. when he waived his lien.
d) It is not lost on the remainder of the goods when only partial delivery
was made, unless such was intended to operate as symbolical delivery
of the whole. The lien is not lost by the mere fact that the seller had
already obtained judgment for the price.
e) Revival of lien: the unpaid sellers lien is revived if the goods are
returned by the buyer in wrongful repudiation of the contract.
STOPPAGE IN TRANSITU
ART. 1530: Subject to the provisions of this Title, when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted with the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume possession of the goods at any time
while they are in transit, and he will then become entitled to the same rights in regard to the
goods as he would have had if he had never parted with the possession. (n)
ART. 1531: Goods are in transit within the meaning of the preceding article:
(1) From the time when they are delivered to a carrier by land, water, or air, or other bailee
for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee;
(2) If the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back.
Goods are no longer in transit within the meaning of the preceding article:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at
the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds the goods on his behalf and continues
in possession of them as bailee for the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it
is a question depending on the circumstances of the particular case, whether they are in the
possession of the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in transitu, unless such part delivery has been under
such circumstances as to show an agreement with the buyer to give up possession of the
whole of the goods. (n)
ART. 1532: The unpaid seller may exercise his right of stoppage in transitu either by obtaining
actual possession of the goods or by giving notice of his claim to the carrier or other bailee in
whose possession the goods are. Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter case the notice, to be effectual, must
be given at such time and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in
possession of the goods, he must redeliver the goods to, or according to the directions of, the
seller. The expenses of such delivery must be borne by the seller. If, however, a negotiable
document of title representing the goods has been issued by the carrier or other bailee, he
shall not obliged to deliver or justified in delivering the goods to the seller unless such
document is first surrendered for cancellation. (n)
ART. 1535: Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage
in transitu is not affected by any sale, or other disposition of the goods which the buyer may
have made, unless the seller has assented thereto.
TINA REYES | 2004-10531| SALES | SANCHEZ | 29

If, however, a negotiable document of title has been issued for goods, no seller's lien or right
of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom
such document has been negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of the seller's claim to a
lien or right of stoppage in transitu. (n)
a. Old common law remedy which is an extension of the lien for the price
and entitles the unpaid seller to resume possession of the goods while
they are in transit before the goods come in possession of the vendee if
the later is or becomes insolvent.
b. Goods are considered to be in transit from the time they are delivered to
a carrier or other bailee by the seller for the purpose of transmission to
the buyer, until the buyer or his agent takes delivery of them from the
carrier. To terminate the transit by delivery to a middleman, it must be
delivery to keep, not to transport.
c. Goods are still considered to be in transit even if they reached their
ultimate destination when the buyer rejects them and they remain in the
possession of the carrier.
d. Goods are no longer in transit if the buyer or his agent obtained delivery
of the goods even before they reached their ultimate destination, or
when the goods arrived at the ultimate destination but the carrier or
other bailee wrongfully refuses to deliver the goods to the buyer or his
agent, or when the carrier, upon arrival of the goods at the ultimate
destination, enters into a new contract with the buyer or his agent.
e. If there was partial delivery of the goods to the buyer, the remainder of
the goods may be stopped in transitu, unless such part delivery has been
made under such circumstances as to show an agreement with the buyer
to give up possession of the whole. Where the buyer has taken some
portion of the whole mass which was then susceptible of possession,
there is constructive possession of the whole.
f. Sale of goods in transit: the unpaid sellers 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.
1 Where a negotiable document of title has been issued for the
goods, no sellers lien or right of stoppage in transitu cannot
defeat the rights of any purchaser for value in good faith to
whom such document has been negotiated.
2 Where the document of title is a straight bill of lading, the
sellers right of stoppage will not be cut off as the transferee
acquires no greater or added rights than his transferor.
Right of Stoppage; How Exercised-The unpaid seller may exercise his right by
1. obtaining actual possession of the goods or
2. by giving notice of his claim to the carrier or other bailee in whose possession the goods
are.
When notice of stoppage in transit is given to the carrier, the latte must redeliver the goods
to, or according to the directions of, the seller. If however, a negotiable document of title
representing the goods has been issued by the carrier, the latter shall not be obliged to
deliver the goods unless such document is first surrendered for cancellation.
RESALE
ART. 1533: Where the goods are of perishable nature, or where the seller expressly reserves
the right of resale in case the buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable time, an unpaid seller having a right
of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter
be liable to the original buyer upon the contract of sale or for any profit made by such resale,
but may recover from the buyer damages for any loss occasioned by the breach of the
contract of sale.
Where a resale is made, as authorized in this article, the buyer acquires a good title as against
the original buyer.
It is not essential to the validity of resale that notice of an intention to resell the goods be
given by the seller to the original buyer. But where the right to resell is not based on the
perishable nature of the goods or upon an express provision of the contract of sale, the giving
or failure to give such notice shall be relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the time and place of such resale
should be given by the seller to the original buyer.
The seller is bound to exercise reasonable care and judgment in making a resale, and subject
to this requirement may make a resale either by public or private sale. He cannot, however,
directly or indirectly buy the goods. (n)
a) When the goods are of perishable nature, or where the seller expressly reserves
the right of resale in case the buyer should default in payment, or where the buyer
has been in default for an unreasonable length of time, the unpaid seller, having a
right of lien or having stopped the goods in transitu, may resell the goods and
recover from the buyer damages for breach of contract.
TINA REYES | 2004-10531| SALES | SANCHEZ | 30
 b) The resale may be in a public or private sale, but the seller cannot buy them CASES
directly or indirectly. The seller is entitled to any profit he may make out of the BACHRACH MOTOR v MENDOZA
resale.

c) In case he sells them at a loss, he is entitled to recover the difference from the KATIGBAK v CA
original buyer. It is not essential to the validity of a resale that previous notice of an If a purchases fails to take delivery and pay the purchase price of the subject matter of the
intention to resell or notice of the time and place or resale be given to the original contract, the vendor, without need of first rescinding the contract judicially, is entitled to
buyer. resell the same, and if he is obliged to sell it for less than the contract price, the buyer is
liable for the difference.
d) Damages recoverable: Whether the action is for damages or to recover loss from
a resale, the purpose is to compensate the seller for loss for breach of contract. B. WARRANTIES
Thus, if the purchaser fails to take delivery and pay the price, the vendor, without
need of first rescinding the contract judicially, is entitled to resell, and if obliged to CASES
sell for less than the contract price, the buyer is liable for the difference. LAFORTEZA v MACHUCA
denominated as Contract to Sell
e) Due diligence must be exercised to secure the highest price obtainable in the a. no express reservation of title
best available market. The burden of showing it was exercised is on the vendor. b. no stipulation that non-payment would make it unenforceable
COS: elements are all present
RESCISSION a. Consent
ART. 1534: An unpaid seller having the right of lien or having stopped the goods in transitu, b. Determinate subject-matter: house and lot
may rescind the transfer of title and resume the ownership in the goods, where he expressly c. Price: 600K balance to be paid upon issuance of a new certificate of title
reserved the right to do so in case the buyer should make default, or where the buyer has PERFECTED:
been in default in the payment of the price for an unreasonable time. The seller shall not a. earnest money paid
thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer b. 6month period only a condition for the payment
damages for any loss occasioned by the breach of the contract. c. non-payment of rent if partition took longer than 6m = Machuca was already owner
NOT RESCINDED (by Lafortezas)
The transfer of title shall not be held to have been rescinded by an unpaid seller until he has a. no notarial/judicial rescission
manifested by notice to the buyer or by some other overt act an intention to rescind. It is not b. no stipulation of automatic rescission
necessary that such overt act should be communicated to the buyer, but the giving or failure *Letter from Lafortezas saying they were rescinding the contract given 5days after Machuca
to give notice to the buyer of the intention to rescind shall be relevant in any issue involving offered to pay
the question whether the buyer had been in default for an unreasonable time before the *Right to ask for rescission vested on Machuca; he was ready to comply with his obligation
right of rescission was asserted. (n) when the Lafortezas were not.

a) An unpaid seller having the right of lien or having stopped the goods in transitu
may rescind the transfer of title and resume ownership in the goods where he
expressly reserved the right to do so in case the buyer defaults, or where the buyer
has been in default in payment of the price for an unreasonable time. The transfer
of title shall not be held to have been rescinded by the unpaid seller until he
manifests by notice to the buyer or by some overt act an intention to rescind. After
rescinding the transfer of title, the seller may still recover damages from the buyer
for breach of contract.
POWER COMMERCIAL AND INDUSTRIAL CORP. v CA
1. EXPRESS WARRANTIES
Warranty where one party promised that the contingency or some act fixed by the contract
shall be performed, like a promise that the goods are of a certain kind and character or that
certain state of facts would exist, the promise constitutes a warranty, and failure of which
gives rise to an action for its breach.

As used in Art. 1534, the term rescind is equivalent to return of the title over the Breach: the buyer may
undelivered goods to the seller and the right to recover damages for loss due to 1. accept goods + maintain an action for damages
breach of contract. 2. accept goods + set up breach of warranty as a recoupment in diminution/
extinction of price
TINA REYES | 2004-10531| SALES | SANCHEZ | 31
 3. refuse to accept goods and maintain action for damages b) Opinion/dealers talk an affirmation of the value of the thing or any statement
4. rescind + refuse to accept goods; or return (or offer to return) goods + recover price of the sellers opinion shall not be construed as a warranty, unless the seller made
paid such an affirmation as an expert and it was relied upon by the buyer

ART. 1545: Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract or he
may waive performance of the condition. If the other party has promised that the condition
should happen or be performed, such first mentioned party may also treat the
nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the
seller of his obligation to deliver the same as described and as warranted expressly or by
implication in the contract of sale as a condition of the obligation of the buyer to perform his
promise to accept and pay for the thing. (n)
Condition an uncertain event or contingency fixed by parties, the existence or happening of
which was necessary to the efficacy of the contract, and failure of which permits the injured
party to treat the contract as at an end, but creates no right of action. Where a condition is
not performed, the buyer may refuse to proceed with the contract, or accept the goods and
waive performance of the condition.
Distinctions according to Villanueva (Law on Sales , 2004)
Test: whether the vendor assumes to assert a fact of which the buyer is ignorant, in which
case it is a warranty, or whether it is merely an expression of an opinion or judgment on the
part of the seller on a matter of which the seller has no special knowledge and on which the
buyer may be expected also to have an opinion or exercise his judgment.
In good condition v. Excellent quality the first relates to the quantity, kind or
condition of the goods sold, it is an affirmation of fact or promise, and not a mere
expression of an opinion; the second is not an express warranty and the purchaser
must rely on the implied warranty that the goods are merchantable; mere
expression of an opinion.
CASES
PHIL. MANUF. CO. v GO JUCCO
An intention to deceive or mislead the other party to his prejudice is an essential element
of fraud.
Concealment of facts does not necessarily amount to false representation, unless there
was an active misstatement of fact or a partial statement of fact, such that withholding of
that which is not stated makes that which is stated absolutely false.

Condition Warranty FILINVEST CREDIT CORP. v CA

Generally goes into the root of the existence
of the obligation
Must be stipulated by the parties in order to
form part of an obligation
May attach itself either to obligation of seller
to deliver possession or transfer ownership
over subject matter of sale
Goes into the performance of such obligation,
and in fact may constitute an obligation in
itself
May form part of obligation by contract or
provision of law, without parties having
agreed thereto
Whether express or implied, relates to
subject matter itself or to the obligations of
the seller as to the subject matter of the sale
A provision in a contract of lease with option to purchase (which is treated as a sale of
movable on installments) that the buyer-lessee absolutely releases the lessor from any
liability whatsoever as to any and all matters in relation to warranty in accordance with the
provisions hereinafter stipulated, was an EXPRESS WAIVER OF WARRANTY AGAINST
HIDDEN DEFECTS if favor of the seller-lessor which absolved the seller-lessor from any
liability arising from any defect or deficiency of the machinery they bought.
HARRISON MOTOR CO. v NAVARRO

GUINHAWA v PEOPLE
ART. 1546: Any affirmation of fact or any promise by the seller relating to the thing is an

express warranty if the natural tendency of such affirmation or promise is to induce the buyer
to purchase the same, and if the buyer purchase the thing relying thereon. No affirmation of
2. IMPLIED WARRANTIES
the value of the thing, nor any statement purporting to be a statement of the seller's opinion
only, shall be construed as a warranty, unless the seller made such affirmation or statement a. WARRANTY IN CASE OF EVICTION
as an expert and it was relied upon by the buyer. (n) Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the
sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the
a) Warranty an affirmation of fact or any promise by seller relating to the thing thing purchased.
which has a natural tendency to induce the buyer to purchase the same, relying on The vendor shall answer for the eviction even though nothing has been said in the contract
such promise of affirmation on the subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of
the vendor. (1475a)
TINA REYES | 2004-10531| SALES | SANCHEZ | 32

Art. 1549. The vendee need not appeal from the decision in order that the vendor may
become liable for eviction. (n)
Art. 1550. When adverse possession had been commenced before the sale but the
prescriptive period is completed after the transfer, the vendor shall not be liable for eviction.
(n)
Art. 1551. If the property is sold for nonpayment of taxes due and not made known to the
vendee before the sale, the vendor is liable for eviction. (n)
Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is
otherwise decreed in the judgment. (n)
Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction
shall be void, if he acted in bad faith. (1476)
Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction
should take place, the vendor shall only pay the value which the thing sold had at the time of
the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction
and assumed its consequences, the vendor shall not be liable. (1477)
Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this
point, in case eviction occurs, the vendee shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the eviction, be it greater
or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit
against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit
brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.
(1478)
Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such
importance, in relation to the whole, that he would not have bought it without said part, he
may demand the rescission of the contract; but with the obligation to return the thing
without other encumbrances that those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the vendor's liability for eviction.
The same rule shall be observed when two or more things have been jointly sold for a lump
sum, or for a separate price for each of them, if it should clearly appear that the vendee
would not have purchased one without the other. (1479a)
Art. 1557. The warranty cannot be enforced until a final judgment has been rendered,
whereby the vendee loses the thing acquired or a part thereof. (1480)
Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is
summoned in the suit for eviction at the instance of the vendee. (1481a)
Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for
answering the complaint, that the vendor be made a co-defendant. (1482a)
Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or
servitude, not mentioned in the agreement, of such a nature that it must be presumed that
the vendee would not have acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the appropriate indemnity. Neither right
can be exercised if the non-apparent burden or servitude is recorded in the Registry of
Property, unless there is an express warranty that the thing is free from all burdens and
encumbrances.
Within one year, to be computed from the execution of the deed, the vendee may bring the
action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages within an equal period, to
be counted from the date on which he discovered the burden or servitude. (1483a)
CASES
MENDOZA v CAPARROS
POWER COMMERCIAL AND INDUSTRIAL CORP. v CA
b. WARRANTY AGAINST HIDDEN DEFECTS
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the
thing sold may have, should they render it unfit for the use for which it is intended, or should
they diminish its fitness for such use to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price for it; but said
vendor shall not be answerable for patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by reason of his trade or profession,
should have known them. (1484a)
Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or
fitness of the goods, as follows:
TINA REYES | 2004-10531| SALES | SANCHEZ | 33
(1) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are acquired, and it appears that the buyer relies on the seller's
skill or judgment (whether he be the grower or manufacturer or not), there is an implied
warranty that the goods shall be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in goods of that
description (whether he be the grower or manufacturer or not), there is an implied warranty
that the goods shall be of merchantable quality. (n)
Art. 1563. In the case of contract of sale of a specified article under its patent or other trade
name, there is no warranty as to its fitness for any particular purpose, unless there is a
stipulation to the contrary. (n)
Art. 1564. An implied warranty or condition as to the quality or fitness for a particular
purpose may be annexed by the usage of trade. (n)
Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that
kind, there is an implied warranty that the goods shall be free from any defect rendering
them unmerchantable which would not be apparent on reasonable examination of the
sample. (n)
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not
aware of the hidden faults or defects in the thing sold. (1485)
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect
between withdrawing from the contract and demanding a proportionate reduction of the
price, with damages in either case. (1486a)
Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor
was aware of them, he shall bear the loss, and shall be obliged to return the price and refund
the expenses of the contract, with damages. If he was not aware of them, he shall only return
the price and interest thereon, and reimburse the expenses of the contract which the vendee
might have paid. (1487a)
Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter
be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the
vendor the price which he paid, less the value which the thing had when it was lost.
If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)
Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except
that the judgment debtor shall not be liable for damages. (1489a)
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred
after six months, from the delivery of the thing sold. (1490)
WARRANTIES IN SALE OF ANIMALS
Art. 1572. 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 that of the others; unless it should appear that the vendee would not have purchased the
sound animal or animals without the defective one.
The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate
price has been fixed for each one of the animals composing the same. (1491)
Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in
like manner be applicable to the sale of other things. (1492)
Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public
auctions, or of live stock sold as condemned. (1493a)
Art. 1575. The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are
acquired has been stated in the contract, and they are found to be unfit therefor. (1494a)
Art. 1576. If the hidden defect of animals, even in case a professional inspection has been
made, should be of such a nature that expert knowledge is not sufficient to discover it, the
defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he
shall be liable for damages. (1495)
Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought
within forty days from the date of their delivery to the vendee.
This action can only be exercised with respect to faults and defects which are determined by
law or by local customs. (1496a)
Art. 1578. 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. (1497a)
Art. 1579. 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. (1498)
Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right
mentioned in article 1567; but he must make use thereof within the same period which has
been fixed for the exercise of the redhibitory action. (1499)
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Art. 1581. The form of sale of large cattle shall be governed by special laws. (n)
CONSUMER ACT: RA 7394
Art. 68. Additional Provisions on Warranties. - In addition to the Civil Code provisions on sale
with warranties, the following provisions shall govern the sale of consumer products with
warranty:
(a) Terms of express warranty. - Any seller or manufacturer who gives an express warranty
shall:
(4) State what the warrantor will do in the event of a defect, malfunction of failure
to conform to the written warranty and at whose expense;
CASES
ENGINEERING MACHINERY CORP. v CA
CASTLE v GUTIERREZ HERMANOS
PACIFIC COMMERCIAL CORP. v ERMITA MARKET AND COLD STORES
NUTRIMIX FEEDS CORP. v CA
IV. OBLIGATIONS OF THE VENDEEE/BUYER
A. OBLIGATION TO ACCEPT DELIVERY
a) Generally, payment and delivery of the thing sold are concurrent acts, in consonance
with the rule in reciprocal obligations. Agreement of the parties determines whether it is
for the buyer to take possession of the goods or for the seller to send them to the buyer.
Absent stipulation to the contrary, the ff. rules shall be observed:
1. the buyer should take delivery of the goods from the sellers place of business
if he has one, and if none, his residence.
2. In case of sale of specific goods which, at the time of the sale, are known to
the parties to be in ANOTHER PLACE, the buyer should take delivery from such
place.
3. DEMAND or TENDER of PAYMENT shall be made at a reasonable hour. Where
by agreement, the seller is bound to send the goods to the buyer, he is bound
to send them within the time agreed upon, or if no time was fixed, within a
reasonable time. REASONABLE TIME for delivery is determined by the
circumstances attending the particular transaction
4. Where the goods at the time of the sale are in the possession of a THIRD
PERSON, there is NO delivery UNLESS and UNTIL such their person
ACKNOWLEDGES to the buyer that the holds the goods on the latters behalf.
5. EXPENSES of placing the goods in a DELIVERABLE STATE shall be borne by the
SELLER unless otherwise stipulated.
6. If the sale involves a specific thing, the vendor is bound to deliver the thing
sold and its accessions and accessories in the condition in which they were
upon the perfection of the contract.
7. All of the fruits of the thing shall pertain to the vendee from the time of the
perfection of the contract but he does not acquire a real right over it until they
are delivered to him.
8. The vendee has the obligation to pay the expenses incurred by the vendor in
the production, gathering and preservation of the fruits.
When time is of essence
Time is of the essence of the contract whenever the intention of the parties is clear that
performance of its terms shall be accomplished exactly at the stipulated day or implied from
the nature of the contract itself, the subject matter or the circumstances under which the
contract is made
ART. 1524: The seller of goods is deemed to be an unpaid seller within the meaning of this
Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or otherwise.
In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of
lading has been indorsed, or a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the position of a seller. (n)
ART. 1169: xxx In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfills his obligation, delay by the other begins. (1100a)
ART. 1521: Whether it is for the buyer to take possession of the goods or of the seller to send
them to the buyer is a question depending in each case on the contract, express or implied,
between the parties. Apart from any such contract, express or implied, or usage of trade to
the contrary, the place of delivery is the seller's place of business if he has one, and if not his
residence; but in case of a contract of sale of specific goods, which to the knowledge of the
TINA REYES | 2004-10531| SALES | SANCHEZ | 35
parties when the contract or the sale was made were in some other place, then that place is
the place of delivery.
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time
for sending them is fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges
to the buyer that he holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the goods into a
deliverable state must be borne by the seller. (n)
NOT BOUND TO DELIVER
cf. ART. 1536: The vendor is not bound to deliver the thing sold in case the vendee should
lose the right to make use of the terms as provided in Article 1198. (1467a)
ART. 1198: The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a
guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised;
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed
to the period;
(5) When the debtor attempts to abscond. (1129a)
The vendor is not bound to deliver the thing sold in case the vendee should lose the right to
make use of the stipulated term in the following cases:
1. When the vendee becomes insolvent
2. When the vendee does not furnish the guaranties or securities he has promised
3. When the guaranties or securities given were impaired through the vendees acts or
were lost or destroyed through a fortuitous event, unless he gives new equally
satisfactory guaranties or securities
4. When the vendee violates any condition for which he was granted the term
5. When the vendee attempts to abscond
NOTE: Art. 1467 has been replaced by Art. 1198 which provides that the vendee shall lose the
benefit of the term when, after the obligation has been contracted, he becomes insolvent,
unless he gives a guaranty or security. Insolvency under this article cannot be understood
in the sense of a judicially declared insolvency or suspension of payments, because the
debtor cannot give a security or guaranty in such case. The doctrine therefore in Visayan
Distributors v Flores interpreting insolvency in Art 1467 old CC as something which must be
judicially declared or something which involves suspension of payments, no longer holds.
DELIVERY OF WRONG QUANTITY
ART. 1522:
a) GENERAL RULE: The buyer is not bound to accept delivery of a quantity of goods more or
less than that agreed upon or to accept goods which are of a description different from that
agreed upon. EXCEPTION: There is usage of trade, special stipulation or course of dealing to
the contrary.
REMEDIES:
1. Where the seller delivers a quantity less than that agreed upon, the buyer may
reject them. If the buyer accepts or retains that goods delivered, knowing the
inability of the seller to deliver the rest, the buyer is bound to pay for them at the
contract rate. If the buyer has used or disposed of the goods before knowing the
inability of the seller to deliver the rest, the buyer shall pay not more than the fair
value of the goods. (NOTE: fair value means the price of the goods in the open
market.)
2. If the quantity delivered is more than that agreed upon, the buyer may reject the
excess, unless the subject matter is indivisible, in which case, the buyer may reject
the whole.
3. Where the seller delivers the goods mixed with goods of a different description not
included in the contract, the buyer may accept the goods which are in accordance
with the contract, and reject the rest, unless the subject matter is indivisible, in
which case, the buyer may reject the whole.
b) Delivery by the seller of only a part of an entire contract would itself be an indication that
he might not intend to fully perform. PRESUMPTION: Buyer knows that the seller might
intend to not fully perform, if said purchaser accepts a partial delivery on an entire contract,
absent any statement to the contrary. (The law applies peculiarly to installment and divisible
contracts.)
RIGHT OF INSPECTION
ART. 1584:
The buyer is entitled to examine the goods to decide whether he will become the owner, and
until the examination is completed or waived, he is under NO obligation to accept them. He
may however waive this right by simply refusing to inspect the goods, taking them as they are
or by any other similar act.
MANIFESTATION OF ACCEPTANCE
ART. 1585:
The buyer is deemed to have accepted the goods when:
1. he intimates to the seller that the has accepted them
2. the goods have been delivered to him and he does any act in relation to them which is
inconsistent with the ownership of the seller
TINA REYES | 2004-10531| SALES | SANCHEZ | 36
 3. after the lapse of a reasonable time, he retains the goods without intimating to the
seller that he has rejected them.
Exercise of acts of ownership over the goods is a manifestation of acceptance, such as making
use of them as owner, making alterations in the goods or subjecting it to the process of
manufacture. EXCEPTION: Buyers right to make a test of goods, but only if necessary, to
enable him to determine whether to accept or reject the goods.
BREACH OF WARRANTY
ART. 1586:
a) The purpose of the notice of breach of warranty is to PROTECT the seller against
belated damage claims which would prevent the seller from making an adequate
and proper investigation of his alleged liability.
b) Acceptance of delivery means an ASSENT to become OWNER of the goods on the
part of the buyer, but not an assent that the goods fulfill the description and terms
of the contract.
ART. 1587: Unless otherwise agreed, where goods are delivered to the buyer, and he refuses
to accept them, having the right so to do, he is not bound to return them to the seller, but it
is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily
constitutes himself a depositary thereof, he shall be liable as such. (n)
ART. 1588: If there is no stipulation as specified in the first paragraph of article 1523, when
the buyer's refusal to accept the goods is without just cause, the title thereto passes to him
from the moment they are placed at his disposal. (n)
a) Unless otherwise agreed, when the goods are delivered to the buyer and he has
a right to refuse to accept them, he need not return them. It is sufficient that the
buyer notifies the seller that he refuses to accept the goods, and thereafter, the
former becomes the depository of the rejected goods.
b) However, where title already passed to the buyer and there was a breach of
warranty, the buyer may RESCIND the contract by returning or offering to return the
goods to the seller and recover the price which had been paid.
CASES
REPUBLIC v LITTON
Court ruled for plaintiff.
It was shown that the goods were intended for election purposes, and the purchase order
provided that the stipulated delivery period shall not be exceeded.
AZARRAGA v GAY
B. OBLIGATION TO PAY THE PRICE
ART. 1582: The vendee is bound to accept delivery and to pay the price of the thing sold at
the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be made at the time
and place of the delivery of the thing sold. (1500a)
ART. 1589: The vendee shall owe interest for the period between the delivery of the thing
and the payment of the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment
of the price. (1501a)
The buyer shall owe interest on the price from the time the thing is delivered up to the time
of payment if there is stipulation requiring interests, or even if there is none, if the thing
delivered produces fruits or income, or if the buyer incurs in default from the time of judicial
or extra-judicial demand for payment.
SUSPENSION OF PAYMENT
ART. 1590: Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory
action or a foreclosure of mortgage, he may suspend the payment of the price until the
vendor has caused the disturbance or danger to cease, unless the latter gives security for the
return of the price in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of trespass shall
not authorize the suspension of the payment of the price. (1502a)
a) disturbance or threat of disturbance must come through a vindicatory action
or foreclosure of mortgage, and not through a mere threat or claim of a third
person.
b) If the third person claims a servitude on the thing sold, the remedy of the buyer
is to demand rescission of the contract or payment of the proper indemnity.
c) In order that the buyer may have a right to suspend payment, it is absolutely
necessary that the cause of disturbance or danger be based on a fact arising before
the sale or if it arose after the sale, the cause is imputable to the vendor or his
successor in interest.
SALE OF REAL PROPERTY
ART. 1592: In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new term. (1504a)
TINA REYES | 2004-10531| SALES | SANCHEZ | 37
ART. 1593: With respect to movable property, the rescission of the sale shall of right take
place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for
the delivery of the thing, should not have appeared to receive it, or, having appeared, he
should not have tendered the price at the same time, unless a longer period has been
stipulated for its payment. (1505)
EFFECT OF NON-PAYMENT
cf. ART. 1191:
In absolute sales of real property, even if there is a stipulation providing for ipso jure
rescission, in case of default in payment, the law requires the seller to demand the resolution
of the contract from the buyer judicially or by a notarial act, before such stipulation could be
given effect. Otherwise, the buyer could still pay the price EVEN after the expiration of the
period to pay.
CASES
ARRA REALTY CORP. v GUARANTEED DEV. CORP. AND INSURANCE AGENCY
DELTA MOTOR SALES CORP. v NIU KIM DUAN
LUZON BROKERAGE v MARITIME BUILDING
If Art. 1592 is applicable to a sale contract, the filing of a cross-claim in court may be
constituted as a judicial demand for rescission that satisfies the requirement of said article.
Art. 1592 has no application to a contract to sell
BARENG v CA
The vendee had a right to suspend payment from the time he was informed of the co-
owners claim.
But such right ceased from the time a compromise was reached between the co-owners
whereby the vendor agreed to give to the co-owner two-thirds of whatever he could
collect from the buyer.
After the compromise, when the vendor brought an action against the buyer to collect the
balance, said buyer owed interests on the amount from the time of the filing of the
complaint.
LIU v LOY
NORTHERN MOTORS v SAPINOSO
RECTO LAW: SALES OF MOVABLES ON INSTALLMENTS
ART. 1484: In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void. (1454-A-a)
ART. 1485: The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-A-a)
ART. 1486: In the case referred to in two preceding articles, a stipulation that the installments
or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same
may not be unconscionable under the circumstances. (n)
CASES
LEVY v GERVACIO
Art 1454 is aimed at sales where the price is payable in several installments.
A cash payment (in sales with two installments) cannot be considered as a payment in
installments, and even if it can be so considered, still the law does not apply, for it requires
nonpayment of two or more installments in order that its provisions may be invoked.
In this case, only one installment was unpaid.
When the seller assigns his credit to another person, the latter may likewise avail of the
remedies under Art 1484 (assuming case is one of sale of movables on installment).
If the remedy chosen is rescission, a stipulation in the contract that the installments paid
shall not be returned to the vendee is valid insofar as the same may not be unconscionable
under the circumstances.
TAJANGLANGIT v SOUTHERN MOTORS
It is true that there was a chattel mortgage on the goods sold, but Southern Motors
elected to sue the note exclusively to exact fulfillment of the obligation to pay.
It had the right to select among the three remedies established in Art 1484. In choosing to
sue on the note, it was not thereby limited to the proceeds of the sale, on execution, of the
mortgaged good.
RIDAD v FILIPINAS INVESTMENT
Seller precluded from further extrajudicially foreclosing the additional security put up by
the buyer himself.
What Art 1484 (3) prohibits is further action against the purchaser to recover any unpaid
balance of the price; and although this Court has construed the word action to mean
any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be
enabled to exact recovery of the supposed unsatisfied balance of the purchase price from
the purchaser or his privy, there is no occasion at this stage to apply the restrictive
provision of the said article because there has not yet been a foreclosure sale resulting in a
deficiency.
The payment of the sum of P1,250 of Sapinoso was a voluntary act on his part and did not
result from a further action instituted by Northern Motors.
BORBON II v SERVICEWIDE SPECIALISTS INC.
TINA REYES | 2004-10531| SALES | SANCHEZ | 38
 When the seller assigns his credit to another person, the latter is likewise bound by the
same law.
Accordingly, when the assignee forecloses on the mortgage, there can be no further
recovery of the deficiency, and the seller-mortgagee is deemed to have renounced any
right thereto.
ELISCO TOOL MANUFACTURING CORP. v CA
PCI LEASING AND FINANCE INC. v GIRAFFE-X CREATIVE IMAGING INC.
RA 6552 (1972): MACEDA LAW
CASES
RILLO v CA
VALLARAO v CA
ACTIVE REALTY & DEVELOPMENT CORP. v DAROYA
FABRIGAS v SAN FRANCISCO DEL MONTE
JESTRA DEV. AND MANGEMENT CORP v PACIFICO
V. BREACH
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. (1124)
ART. 1192: In case both parties have committed a breach of the obligation, the liability of the
first infractor shall be equitably tempered by the courts. If it cannot be determined which of
the parties first violated the contract, the same shall be deemed extinguished, and each shall
bear his own damages. (n)
ART. 1595. Where, under a contract of sale, the ownership of the goods has passed to the
buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of
the contract of sale, the seller may maintain an action against him for the price of the goods.
Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery
or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller
may maintain an action for the price although the ownership in the goods has not passed. But
it shall be a defense to such an action that the seller at any time before the judgment in such
action has manifested an inability to perform the contract of sale on his part or an intention
not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be resold for a
reasonable price, and if the provisions of article 1596, fourth paragraph, are not applicable,
the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive
them, may notify the buyer that the goods are thereafter held by the seller as bailee for the
buyer. Thereafter the seller may treat the goods as the buyer's and may maintain an action
for the price. (n)
ART. 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods,
the seller may maintain an action against him for damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally resulting in the ordinary
course of events from the buyer's breach of contract.
Where there is an available market for the goods in question, the measure of damages is, in
the absence of special circumstances showing proximate damage of a different amount, the
difference between the contract price and the market or current price at the time or times
when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at
the time of the refusal to accept.
If, while labor or expense of material amount is necessary on the part of the seller to enable
him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or
notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for
labor performed or expenses made before receiving notice of the buyer's repudiation or
countermand. The profit the seller would have made if the contract or the sale had been fully
performed shall be considered in awarding the damages. (n)
ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his inability to perform his obligations
thereunder, or has committed a breach thereof, the seller may totally rescind the contract of
sale by giving notice of his election so to do to the buyer. (n)
TINA REYES | 2004-10531| SALES | SANCHEZ | 39

ART. 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a
court may, on the application of the buyer, direct that the contract shall be performed
specifically, without giving the seller the option of retaining the goods on payment of
damages. The judgment or decree may be unconditional, or upon such terms and conditions
as to damages, payment of the price and otherwise, as the court may deem just. (n)
ART. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages for the
breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages for the
breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already
been received, return them or offer to return them to the seller and recover the price or any
part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no other
remedy can thereafter be granted, without prejudice to the provisions of the second
paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of
the breach of warranty when he accepted the goods without protest, or if he fails to notify
the seller within a reasonable time of the election to rescind, or if he fails to return or to offer
to return the goods to the seller in substantially as good condition as they were in at the time
the ownership was transferred to the buyer. But if deterioration or injury of the goods is due
to the breach or warranty, such deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to
be liable for the price upon returning or offering to return the goods. If the price or
any part thereof has already been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller
refuses to accept an offer of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien
to secure payment of any portion of the price which has been paid, and with the
remedies for the enforcement of such lien allowed to an unpaid seller by Article
1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference between the
value of the goods at the time of delivery to the buyer and the value they would have had if
they had answered to the warranty. (n)
ART. 1571: Actions arising from the provisions of the preceding ten articles shall be barred
after six months, from the delivery of the thing sold. (1490)
ART. 1484: In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the
vendee's failure to pay cover two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void. (1454-A-a)
ART. 1576. If the hidden defect of animals, even in case a professional inspection has been
made, should be of such a nature that expert knowledge is not sufficient to discover it, the
defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he
shall be liable for damages. (1495)
ART. 1628: The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was
prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for the expenses
specified in No. 1 of Article 1616.
The vendor in bad faith shall always be answerable for the payment of all expenses, and for
damages. (1529)
ART. 1629. In case the assignor in good faith should have made himself responsible for the
solvency of the debtor, and the contracting parties should not have agreed upon the duration
of the liability, it shall last for one year only, from the time of the assignment if the period had
already expired.
If the credit should be payable within a term or period which has not yet expired, the liability
shall cease one year after the maturity. (1530a)
ART. 1630. One who sells an inheritance without enumerating the things of which it is
composed, shall only be answerable for his character as an heir. (1531)
ART. 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall
comply by answering for the legitimacy of the whole in general; but he shall not be obliged to
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warrant each of the various parts of which it may be composed, except in the case of eviction
from the whole or the part of greater value. (1532a)
ART. 1632. Should the vendor have profited by some of the fruits or received anything from
the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated.
(1533)
ART. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have
paid for the debts of and charges on the estate and satisfy the credits he may have against
the same, unless there is an agreement to the contrary. (1534)
CASES
SONG FO & CO. v HAWAIIAN PHIL CO.
LUNETA MOTOR CO. v SALVADOR
IFC v RAMIREZ
UMC v DY HIAN
FILINVEST CREDIT CORP. v CA
SUPERCARS MANAGEMENT & DEV. CORP. v FLORES
VI. EXTINGUISHMENT
Art. 1600. Sales are extinguished by the same causes as all other obligations, by those stated
in the preceding articles of this Title, and by conventional or legal redemption. (1506)
CONVENTIONAL REDEMPTION
ART. 1601. 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. (1507)
Conventional redemption the vendor reserves the right to repurchase the thing sold,
with the obligation of returning the price of the sale the expenses of the contract, the
necessary and useful expenses made on the thing, and other payments made by reason
of the sale.
Equitable mortgage one which, although lacking in some formality or other requisites
demanded by a statute, nevertheless reveals the intention of the parties to charge real
property as a security for debt, and contains nothing impossible or contrary to law
Badges of an equitable mortgage
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee
as rent or otherwise shall be considered as interest which shall be subject to the usury laws.
(n)
A contract shall be construed as an equitable mortgage when any of the circumstance in
Art. 1602 is present.
Reason for the rule: To curtail the practice of creditors in making their agreement
of mortgage appear in the form of a sale with pacto de retro, in order to circumvent
the prohibition of pactum commissorium in pledge and mortgage (Art. 2208. The
creditor cannot appropriate the things given by way of pledge or mortgage, or
dispose of them. Any stipulation to the contrary is null and void) [because in
making it appear a pacto de retro sale, the creditors can do away with foreclosure
proceedings]
Remedy: reformation of the instrument [must be brought within 10 years]
1) If the agreement is construed to be an equitable mortgage, any money or other
benefit received as rents, shall be considered as interest.
2) Where the agreement is upheld as a pacto de retro sale, the vendor may still exercise
the right within 30 days from the time the judgment becomes final.
Right of redemption Option to buy
Not a separate contract, but merely part of a Principal contract and may be created
main contract of sale; cannot exist unless independent of another contract
reserved at the time of the perfection of the
main contract of sale
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Need not have separate consideration in Must have a consideration separate and right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land
order to be valid and effective distinct from purchase price Registration Law with respect to third persons. (1510)
May not be beyond the 10 year period May be beyond the 10 year period
Requires tender of payment of amount May be exercised by notice ART. 1609. The vendee is subrogated to the vendor's rights and actions. (1511)
required by law, including consignment
thereof if tender cannot be made effectively Exercise of the right to redeem
a) A vendor must manifest his right to redeem in writing. This must be accompanied
with an actual or simultaneous tender of payment of the redemption price.
Art. 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall
Redemption price includes the amount of the sale, the expenses of the
be construed as an equitable mortgage. (n)
contract and other legitimate payments made by the vendee by reason of
such sale, and the necessary and useful expenses made on the thing by
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an
the vendee.
absolute sale. (n)
b) It is only when the vendee flatly refused that tender of payment is not necessary.
Consignation of the redemption price in court is not necessary to preserve the
Art. 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for
right. In the absence of the vendee a retro, the right may be exercised by filing a
the reformation of the instrument. (n)
suit against him and consigning the amount in court.
PERIOD OF REDEMPTION
The exercise of redemption is not limited only to the total redemption price
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall
enumerated in Art 1616 of the CC, since said legal provision is not restrictive nor
last four years from the date of the contract.
exclusive. It includes other stipulations which may have been agreed upon
(Villanueva citing Solid Homes v. CA, 275 SCRA 267)
Should there be an agreement, the period cannot exceed ten years.
ART. 1610. The creditors of the vendor cannot make use of the right of redemption against
However, the vendor may still exercise the right to repurchase within thirty days from the
the vendee, until after they have exhausted the property of the vendor. (1512)
time final judgment was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase. (1508a)
ART. 1611. In a sale with a right to repurchase, the vendee of a part of an undivided
immovable who acquires the whole thereof in the case of article 498, may compel the vendor
GENERAL RULE: Period starts running at the date of the execution of the contract.
to redeem the whole property, if the latter wishes to make use of the right of redemption.
EXCEPTION: when there is a suspensive condition.
(1513)
NO PERIOD AGREED UPON: 4 years
ART. 1612. If several persons, jointly and in the same contract, should sell an undivided
PERIOD AGREED UPON: The period is binding and it may also be extended, as long as it does
immovable with a right of repurchase, none of them may exercise this right for more than his
not exceed 10 years. Reason for limitation: A pacto de retro is a suspension of title and it is
respective share.
against public interest to permit such uncertainty to continue for a long time.
The same rule shall apply if the person who sold an immovable alone has left several heirs, in
Art. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of
which case each of the latter may only redeem the part which he may have acquired. (1514)
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. (n)
ART. 1613. In the case of the preceding article, the vendee may demand of all the vendors or
co-heirs that they come to an agreement upon the purchase of the whole thing sold; and
a) The ownership of the vendee becomes absolute and irrevocable by operation of
should they fail to do so, the vendee cannot be compelled to consent to a partial redemption.
law.
(1515)
b) The vendee is not entitled to recover damages by virtue of non-redemption,
a) Who may redeem
notwithstanding a stipulation in the contract for payment of damages.
1.Vendor
2. His heirs or assigns
ART. 1608. The vendor may bring his action against every possessor whose right is derived
3. His agent
from the vendee, even if in the second contract no mention should have been made of the
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b) The creditors of the vendor cannot make use of the right of redemption against the
vendee, until after they have exhausted the property of the vendor.
c) If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more
than his respective share. The same rule shall apply if the person who sold an
immovable alone has left several heirs.
d) When the co-owners of an indivisible immovable, in order to end the co-ownership,
sold their interests absolutely to the same person who previously bought the share of a
co-owner subject to a right of redemption, the latter can be compelled to redeem the
whole property.
ART. 1614. Each one of the co-owners of an undivided immovable who may have sold his
share separately, may independently exercise the right of repurchase as regards his own
share, and the vendee cannot compel him to redeem the whole property. (1516)
ART. 1615. If the vendee should leave several heirs, the action for redemption cannot be
brought against each of them except for his own share, whether the thing be undivided, or it
has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the
heirs, the action for redemption may be instituted against him for the whole. (1517)
From whom to redeem
1. Vendee a retro
2. His heirs or assigns
3. His agent
ART. 1616. The vendor cannot avail himself of the right of repurchase without returning to
the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the
sale;
(2) The necessary and useful expenses made on the thing sold. (1518)
ART. 1617. If at the time of the execution of the sale there should be on the land, visible or
growing fruits, there shall be no reimbursement for or prorating of those existing at the time
of redemption, if no indemnity was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of
redemption, they shall be prorated between the redemptioner and the vendee, giving the
latter the part corresponding to the time he possessed the land in the last year, counted from
the anniversary of the date of the sale. (1519a)
ART. 1618. The vendor who recovers the thing sold shall receive it free from all charges or
mortgages constituted by the vendee, but he shall respect the leases which the latter may
have executed in good faith, and in accordance with the custom of the place where the land
is situated. (1520)
a) The vendor can eject a lessee only after the expiration of the period of lease or of
the period for redemption.
b) The vendor a retro is entitled to the return of the thing with damages for the use
and occupation if the same.
LEGAL REDEMPTION
right to be subrogated, upon the same terms and conditions stipulated in the contract, in
the place of one who acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title.
ART. 1619. Legal redemption is the right to be subrogated, upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by onerous
title. (1521a)
REDEMPTION AMONG CO-OWNERS
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of
all the other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do
so in proportion to the share they may respectively have in the thing owned in common.
(1522a)
a) When the right may be exercised: when a share of a co-owner is sold to a third
person, who is a stranger.
b) Thrust of the law: to reduce the number of co-owners until the community is done
away with.
c) When the right is not available
1) Where the share of the co-owner is sold to another co-owner
2) Where the share of a co-owner was merely mortgaged
d) Should two or more co-owners desire to exercise the right, they may only do so in
proportion to the share they may respectively have in the thing owned in common.
RURAL LANDS
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ART. 1621. The owners of adjoining lands shall also have the right of redemption when a
piece of rural land, the area of which does not exceed one hectare, is alienated, unless the b) Thrust of the law: to discourage speculation in real estate and aggravate the
grantee does not own any rural land. housing problem.

This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, c) When the right is not available: When the urban land is transferred under an
roads and other apparent servitudes for the benefit of other estates. exchange of properties [because there is no resale]

If two or more adjoining owners desire to exercise the right of redemption at the same time, d) When two or more owners of adjoining lands wish to exercise the right of pre-
the owner of the adjoining land of smaller area shall be preferred; and should both lands emption or redemption, the owner whose intended use of the land in question
have the same area, the one who first requested the redemption. (1523a) appears best justified shall be preferred.

a) When the right may be exercised: when a piece of rural land not exceeding 1 ha., is ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within
alienated [unless the grantee does not own any rural land] thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case
may be. The deed of sale shall not be recorded in the Registry of Property, unless
b) Thrust of the law accompanied by an affidavit of the vendor that he has given written notice thereof to all
1. to prevent the rural land not exceeding 1 ha. from passing into the hands of a possible redemptioners.
person other than the adjacent owners who can make use of the alienated property
for the development of their own lands The right of redemption of co-owners excludes that of adjoining owners. (1524a)
2. to consolidate scattered small agricultural lands under one ownership
Laches seems to be a special exception to notice rule under Art 1623. (Villanueva
c) When the right is not available citing Alonzo v. IAC)
o Adjacent lands which are separated by brooks, drains, ravines, roads and other
apparent servitudes for the benefit of other estates [because owners cannot cf. ART. 1231: Obligations are extinguished:
be said to be adjoining owners anymore] (1) By payment or performance:
(2) By the loss of the thing due:
d) If two or more adjoining owners desire to exercise the right of redemption at the (3) By the condonation or remission of the debt;
same time, the owner of the adjoining land of smaller area shall be preferred; and (4) By the confusion or merger of the rights of creditor and debtor;
should both lands have the same area, the one who first requested the redemption. (5) By compensation;
(6) By novation.
URBAN LANDS
ART. 1622. Whenever a piece of urban land which is so small and so situated that a major Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a
portion thereof cannot be used for any practical purpose within a reasonable time, having resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)
been bought merely for speculation, is about to be re-sold, the owner of any adjoining land
has a right of pre-emption at a reasonable price. CASES
RIVERO v CA
If the re-sale has been perfected, the owner of the adjoining land shall have a right of
redemption, also at a reasonable price.
DIAZ v CA
When two or more owners of adjoining lands wish to exercise the right of pre-emption or
redemption, the owner whose intended use of the land in question appears best justified
shall be preferred. (n) GERARDINO v CA

a) When the right may be exercised: when a piece of urban land which is so small
and so situated that a major portion thereof cannot be used for any practical VILLASON v MEDEL
purpose within a reasonable time, having been bought merely for speculation, is
about to be resold

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DOROMAL v CA
Although written notice is given to the co-owner, the 30-day redemption period does not
begin to run from the receipt of such notice, because the transaction covered in the notice
did not pertain to a perfected contract of sale, and must be accompanied by the actual
execution and delivery of the deed of sale.
SANTOS v CA
URACA v CA
ROBERTS v PAPIO
MISTERIO v CEBU STATE COLLEGE OF SCIENCE & TECHNOLOGY
FRANCISCO v BOISER
VII. ASSIGNMENT OF CREDIT
Art. 1624. An assignment of creditors and other incorporeal rights shall be perfected in
accordance with the provisions of Article 1475. (n)
Art. 1625. An assignment of a credit, right or action shall produce no effect as against third
person, unless it appears in a public instrument, or the instrument is recorded in the Registry
of Property in case the assignment involves real property. (1526)
Art. 1626. The debtor who, before having knowledge of the assignment, pays his creditor
shall be released from the obligation. (1527)
Art. 1627. The assignment of a credit includes all the accessory rights, such as a guaranty,
mortgage, pledge or preference. (1528)
Art. 1628. The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was
prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for the expenses
specified in No. 1 of Article 1616.
The vendor in bad faith shall always be answerable for the payment of all expenses, and for
damages. (1529)
Art. 1629. In case the assignor in good faith should have made himself responsible for the
solvency of the debtor, and the contracting parties should not have agreed upon the duration
of the liability, it shall last for one year only, from the time of the assignment if the period had
already expired.
If the credit should be payable within a term or period which has not yet expired, the liability
shall cease one year after the maturity. (1530a)
Art. 1630. One who sells an inheritance without enumerating the things of which it is
composed, shall only be answerable for his character as an heir. (1531)
Art. 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall
comply by answering for the legitimacy of the whole in general; but he shall not be obliged to
warrant each of the various parts of which it may be composed, except in the case of eviction
from the whole or the part of greater value. (1532a)
Art. 1632. Should the vendor have profited by some of the fruits or received anything from
the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated.
(1533)
Art. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have
paid for the debts of and charges on the estate and satisfy the credits he may have against
the same, unless there is an agreement to the contrary. (1534)
Art. 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a
right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the
judicial costs incurred by him, and the interest on the price from the day on which the same
was paid.
A credit or other incorporeal right shall be considered in litigation from the time the
complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands
payment from him. (1535)
Art. 1635. From the provisions of the preceding article shall be excepted the assignments or
sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to the right in litigation
assigned. (1536)
CASES
LO v KJS ECO FORMWORK SYSTEM PHIL. INC.
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NYCO SALES CORP. v BA FINANCE

LICAROS v GATMAITAN

LEDONIO v CAPITOL DEV. CORP.

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