Law on Sales I. Introduction A. Definition of Sales - Art.

1458 The contract of sale is a contract whereby one of the parties obligates himself to deliver something to the other who, in his part, binds himself to pay therefor a sum of money or its equivalent. B. Characteristics of a Contract of Sale 1. Consensual with mere consent 2. Bilateral both parties are bound to fulfill their obligations to each other, reciprocally 3. Onerous conveyed in consideration of the price and vice versa 4. Commutative the thing sold is considered the equivalent of the price and vice versa 5. Nominate given a special name by the Civil Code, Sale 6. Principal it does not depend for its existence and validity upon another contract C. Sale Distinguished from other contracts 1. Donation Art. 1470 Donation is a Gratuitous contract while Sale is an Onerous contract. If the price is simulated or false such as when the vendor really intended to transfer the thing gratuitously, then the sale is void but the contract shall be valid as a donation. 2. Barter Art. 1468 The contract of Barter or Exchange, one of the parties binds himself to give one thing in consideration of the others promise to give a thing. The contract of Sale, the vendor gives a thing in consideration for a price in money. The main difference of the two is the element which is present in Sale but not in Barter is price is certain in money or its equivalent. What if the exchange consists partly in money and partly in another thing? a. Know the intention of the parties involved. It should be either by barter or by sale. b. If the intention cannot be ascertained: 1. Barter= Value of the Thing > Consideration 2. Sale= Value of the Thing </= Consideration 3. Contract of Piece of Work Art. 1467 The Contract of Piece of Work and Contract of Sale is the same with the element of the Object but they only differ with how the Object is attained. In Contract of Sale, the object is of the normal course of business while in Contract of Piece of Work, the thing is manufactured especially for the customer and upon his special order. 4. Dacion en Pago Art. 1245 Dation in Payment, whereby one property is alienated to the creditor in satisfaction of a debt in money. A sale gives rise to the obligation of the seller to transfer ownership and the obligation of the buyer to pay the price. On the other hand, dation in payment extinguishes a preexisting obligation and changes the relationship into a sale, which is already at the executed stage.

5. Agency Art.1466 By the contract of Agency, a person binds himself to render some service or to do something in representation or on behalf of another with the consent of the latter. Contract of Sale Agency to Sell The buyer receives the goods as owner. The agent receives the goods as the goods of the principal who owns the goods. The buyer pays the price. The agent simply accounts the proceeds of the sale he make on the principals behalf. The agent can return to the principal what he had not sold. The agent holds no warranty for he is not personally liable. The agent is bound to the instructions of the principal.

The buyer cannot return the goods sold (general rule). The seller warrants the thing sold. The buyer can deal with the thing sold as he pleases. 6. Contract to Sell Contract of Sale Title passes to the buyer upon the delivery of the thing sold.

Contract to Sell Exclusive right and privilege to purchase ownership is reserved in the seller and is not to pass until the full payment of the purchase price. The vendor has lost and cannot recover the The title remains in the vendor and if the ownership of the thing sold until unless the vendee does not comply with the condition contract of sale itself is resolved and set precedent of making payment at the time aside. specified in the contract. Non-payment of the price is a negative Full payment is a positive suspensive resolutory condition. condition. There can be rescission No sale, there is nothing to rescind. Service cannot be object Service may be object D. Conditional Contract of Sale Distinguished from Contract to Sell II. Essential Requisites A. Consent/ Parties to a Contract of Sale Art. 1489 1. Capacity of Parties Meeting of the Minds As a general rule, all persons whether natural or juridical who can bind themselves by contract have also legal capacity to buy and sell. Our legal age is 18 years old. 2. Absolute Incapacity Included in Absolute Incapacity are those who cannot bind themselves. This includes the insane or demented persons, deaf-mutes who do not know how to write and minors; otherwise, the contract is voidable. Necessaries are those things which are needed for sustenance, dwelling, clothing and medical attendance, in keeping with the financial capacity of the family of the

incapacitated person. Necessaries may be the object even one party falls under Absolute Incapacity (without intervention of guardian or parent) but should be of reasonable price. The sale of real estate effected by minors who have already passed the ages of puberty and adolescence and are now adult, when they pretended to have already reached their majority, while in fact they have not, is valid. They are not excused to the liability. 3. Relative Incapacity Art. 1490 Husband and wife cannot sell property to each other, except: a. When a separation of property (pre-nup) was agreed upon in the marriage settlement b. There has been a judicial separation of property. Also, the spouses are prohibited from making donations to each other except for moderate gifts. WHO MAY QUESTION THE SALE? a. The heirs of spouse, as well as creditors at the time of the transfer, but not who became such only after the transaction. b. The government especially to taxation. 4. Special Disqualifications Art. 1491 a. The guardian- property of those under his guardianship b. Agents- the property entrusted to them unless the principal had given consent c. Executors and Administrators- the property of the estate under administration d. Public officers and employees- property of the State. e. Justices, judges, prosecuting attorneys, clerks of both inferior and superior court and other officers and employees connected with the administration of justice- the property currently under litigation. f. Aliens- private agricultural lands g. Unpaid seller- directly or indirectly the goods in the resale of the same at a public or private sale which he may make. h. Officer conducting an execution sale of property to enforce a court judgment rendered against the owner-the property mentioned Note: a-c : if the sale is made, it should be voidable because it is only private interest. d-f: if the sale is made, it is void because it is in public interest. B. Subject Matter Maybe Things or Rights 1. Requisites a. Licit- legal, void otherwise Illicit per se (of its nature) Illicit per accidens (law declared it illegal) b. Determinate- Specific Particularly designated or physically segregated from all others of the same class. The object should be determinate at the perfection.

c. Existing at the time of delivery a. Existing goods- goods owned possessed by the seller b. Future goods- goods to be manufactured, raised, or acquired which is valid only on executory contract. c. Fungible goods- depreciable goods. d. Things having a potential existence C. Price Consideration/Cause 1. Meaning of Price Price certain in money or its equivalent such as a check or a promissory note, or the assumption by the buyer of the mortgage debt of the seller. 2. Requisites of a Valid Price Art. 1469-1474 a. Real not simulated, otherwise void (Art. 1471) but valid if donation or other contract b. Certain determinable at perfection (Art. 1469) otherwise inefficacious. No sale if price is not certain Considered certain when: i. Parties have fixed or agreed upon a definite amount ii. With reference to another thing certain (Art. 1472) Fungible things have a certain price at a definite day. iii. Price determination by a third party. c. Money or its Equivalent Not a true contract if price is consists of service. 3. How price is Determined a. By a third party (Art. 1469) Fixed by third party but acts in bad faith or mistake court may fix Fixed by third party but disregards instructions arbitrary price Refuse or cannot fix ineffective subsequently agree upon price Prevented by fault of either party party not in fault may rescind, or demand for fulfillment, which is fixed by court. Both with damages. b. By reference to another thing certain (Art. 1472) c. By both parties If the price fixed by one and accepted by another, the sale is perfected. Price should not be left to the discretion of only one party. 4. Inadequacy of Price (Art. 1470) Gross Inadequacy of price in voluntary sales does not affect a contract of sale except there is a defect in consent, or that the parties intended a donation or other contract. If there is a defect, it may be annulled. Gross Inadequacy of price in involuntary sales is not sufficient to cancel an execution sale. If the price is so inadequate as to shock the conscience of the Court, it will be set aside. 5. When no price Agreed

When there is no agreed price, the contract is inefficacious. If the delivery has been made, the buyer must pay a reasonable price which is usually the market price. 6. Earnest Money vs. Option Money - Art. 1479 and 1482 Earnest Money Option Money Money given to bind the bargain. Money given to give right to buy Partial payment of the purchase price A distinct consideration for an Option contract Given only when there is a sale Applies to a sale not yet perfected Proof of perfection of the contract May become Earnest Money if parties agreed

III. Formation/Stages of a Contract of Sale A. Preparatory Art. 1479 1. Offer Promise a. Unilateral Promise not binding and may be withdrawn at any time 1. An accepted unilateral promise to sell in which the promisee (acceptor) elects to buy 2. An accepted unilateral promise to buy in which the promisee(acceptor) elects to sell b. Bilateral Promise reciprocally demandable, and its concurrence is binding. 1. A bilateral promise to buy and sell reciprocally accepted in which either of the parties chooses to exact fulfillment An unaccepted Unilateral Promise is called Politicitation and is not binding. 2. Option Contract Art. 1479 Art. 1479 2nd par. An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. An unaccepted or unexercised contractual offer which states the terms and conditions on which the owner is willing to sell the thing or property, if the holder elects to accept them within the time given 3. Right of First Refusal Applicable only to Option Contracts Requirement of enforceable Right of First Refusal: only rights of first refusal embodied in a written contract, such as those attached to a contract of lease, give rise to enforceable rights. Effect of sellers violation of Right of First Refusal: the contract of sale entered into by seller in violation of right of first refusal is rescissible.

4. Mutual Promise to Buy and Sell Bilateral promise B. Perfection Art 1475-Art. 1476 The contract of sale being consensual, it is perfected without the necessity of any other circumstances. From the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price the reciprocal obligations of the parties arise. What if the buyer failed to pay the stipulated price? Failure to do so, the only thing to do is for the seller to either demand payment or rescind with damages. C. Formalities of the Contract Art 1483 A contract may be entered into in any form provided that the essential requisites for its validity are present (Art. 1356). Under the Statute of Frauds the following contracts must be in writing, otherwise they cannot be enforced in court litigation: 1. Sale of personal property at a price not less than P500.00 2. Sale of real property or an interest therein regardless of the price involved; and 3. Sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the price involved. The Statute of Frauds is applicable only to executory contracts. That is no performance has yet been made and not to contracts which are totally or partially performed.

IV. Transfer of Ownership A. Manner of Transfer Art.1477-1478, Art. 1495-1496 The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery, unless otherwise stipulated in the contract that the ownership shall not pass until full payment. B. When Delivery does not Transfer Title Art 1481, Art. 1502-1503 Sale by description and/or sample: In sale by description and/or sample, the sale may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample. If the sale be by sample as well as by description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description. 1. Sale on Approval, Trial or Satisfaction Sale on Return Sale on Trial or Approval Subject to a resolutory condition Subject to suspensive condition Depends on the will of the buyer Depends on the quality of the goods The ownership passes to the buyer on delivery The ownership remains in the seller until the and subsequent return of the goods reverts buyer signifies his approval to the seller

the ownership in the seller The risk of loss is in the buyer The risk of loss is in the seller 2. When Sale is Not Valid When sale is not valid, the delivery does not transfer the ownership of the goods.

3. When the Seller is Not the Owner Art. 1505 Sale is a derivative mode of acquiring ownership and the buyer gets only such rights as the seller had. The above rule has the following exceptions: a. If the owner of the goods authorized the seller, the buyer acquires a valid title of the goods. b. Where the law enables the apparent owner to dispose of the goods as if he were the true owner thereof. c. Where the sale is sanctioned by statutory or judicial authority d. Where the sale is made at merchants stores, fairs or markets e. Where the seller has a voidable title which has not been avoided at the time of sale. (Art. 1506) f. Where the seller subsequently acquires the title 4. Sale by the Person having Voidable Title Art. 1506 If the seller has only a voidable title to the goods, the buyer acquires the good title to the goods provided he buys them; a. Before the title of the seller has been avoided b. In good faith for value c. Without notice of the sellers defect of the title Where loss has happened, which must fall on one of two innocent persons, it should be borne by him who is the occasion of the loss. C. Kinds of Delivery Art. 1497- 1501 Delivery/Traditio is one of the principal obligations of the vendor. It is an indispensable requisite for the transfer of ownership which under our law cannot be effected by mere consent. But to transfer ownership, the act delivery must be made with intention of delivering the thing sold. Ways of Effecting a Delivery 1. By actual or real delivery The thing is placed physically (hand to hand) in the control and possession of the vendee. The passing of the title is still subject to the contract 2. By constructive or legal delivery a. Execution of public instrument

One which is acknowledged before a notary public or any official authorized to administer oath, by the person who executed the same b. Traditio symbolica The parties make use of a token symbol to represent the thing delivered. E.g. key of a house or a car

c. Traditio longa manu This tradition is applicable to movable and immovable objects. There should be a consent or agreement of both parties that the vendor transferred the title of the goods to the vendee, if the thing cannot be transferred to the possession of the vendee at the time of the sale. d. Traditio brevi manu This tradition is applicable to movable objects. The vendee has already the possession of the thing sold, therefore, there is no need for the vendee to deliver it to the vendor and the latter will deliver it back too. E.g Financial leases e. Traditio constitutum possessorium This tradition is applicable to movable and immovable objects. This is the opposite of traditio brevi manu. The vendor continues the possession of the object but not as an owner. e.g Leaseback f. Quasi-traditio The delivery of incorporeal things or rights is effected by: 1. By the execution of a public instrument 2. When the above mode of delivery is not applicable, by placing the titles of ownership in the possession of the vendee, or 3. By allowing the vendee to use his rights as a new owner with the consent of the vendor g. Delivery through Carrier Delivery of goods to a carrier for the purpose of transmission to the buyer is deemed delivery to the buyer, unless the contrary appears 1. FAS (Free Alongside) Sales The seller pays all charges and is subject to risk until the goods are placed alongside the vessel. 2. COD (Collect on Delivery) The carrier acts for the seller to collect the purchasing price. The buyer must pay for the goods before he can obtain possession. 3. FOB ( Free on Board) Sales The seller bears all expenses until the goods are to be FOB. FOB Shippong Point buyer. FOB Destination - Seller 4. CIF (Costs, Insurance and Freight) Sales

The price covers not only the costs of the goods but also the expenses for freight and insurance to be paid by the seller. 3. By delivery in any other manner signifying an agreement that the possession is transferred to the vendee.

D. Double Sales Art. 1544 If the same property is sold by the vendor to different vendees, the conflicting rights of said vendees shall be solved in accordance with the following rules: 1. If the property is movable, the first vendee who acquires the possession in good faith is the owner. 2. If the property is immovable, the ownership will belong to: a. The vendee who first registers the sale in good faith in Registry of Deeds b. In the absence of registration, the vendee who takes first possession in good faith c. In the absence of both, the vendee who presents the oldest title in good faith.

V. Risk of Loss A. General Rule Art. 1504 As a general rule, if the thing is lost by fortuitous event, the risk is borne by the owner of the thing at the time of the loss (res perit domino) with the exception of the following: 1. If the seller reserves the ownership in order to secure that the buyer will pay, the ownership is considered the owner, therefore the buyer bears the risk. 2. If the actual delivery has been delayed through the fault of either party, the party in fault bears the loss. B. When Loss Occurred Before Perfection The seller bears the risk C. When Loss Occurred at the Time of Perfection Art. 1493-1494 1. If the object is entirely lost at the time of perfection, the contract shall be without effect. 2. If the object is only partially lost at the time of perfection, the buyer may choose between: a. Withdrawing from the contract b. Demand the remaining part and pay its proportionate price 3. In case of specific goods, and without the knowledge of the seller, the goods have perished or have materially deteriorated in quality, the buyer may treat the sale as either: a. Avoided b. If the sale is divisible, valid in all existing goods and as binding the buyer to pay the agreed price for such existing goods. D. When Loss Occurred After Perfection but Before Delivery

The goods remain at sellers risk until the ownership is transferred to the buyer, but if already transferred, the goods, are at the buyers risk whether actual delivery has been made or not. For the risk of deterioration, fruits and improvements, the buyer bears it not because of the delivery but because of the perfection of the contract. For Fungible things, the risk is imputed to the buyer if the goods have been weighed, counted, or measured, and delivered, unless the delivery is delayed. E. When Ownership is Transferred The buyer bears the risk.

VI. Documents of Title A. Definition Art. 1636, Art. 1507-1520 Document of title to goods includes any of the following: 1. Bill of lading the owner of goods wants to bail his goods to a warehouseman. The warehouse man, known as the bailee, issues the bill of lading to the owner, who is the bailor. 2. Dock warrant given by dock owners to an importer of goods. 3. Warehouse receipt deposited with warehouseman, saying that he is undertaking to hold and deliver the goods. 4. Quedan - warehouse receipt usually for sugar received by a warehouseman. 5. Order for the delivery of goods 6. Any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of goods. B. Purpose of Documents of Title 1. Evidence of possession or control of goods described in the document 2. Medium of transferring title and possession of the goods without having to effect actual delivery of such goods C. Negotiable Documents of Title Those by the terms of which the bailee undertakes to deliver the goods to the bearer and those by the terms of which the bailee undertakes to deliver the goods to the order of a specified person. May be negotiated: 1. By Delivery alone it is negotiable by delivery of the goods are deliverable to the bearer(the one who holds the DOT/holder), or when it is indorsed in blank ( there is no written name of the person the goods are to be delivered). Specially indorsed becomes to order document (there is a specified name of a person the goods are to be delivered). 2. By Indorsement the holder who is the indorser may indorse the DOT either, in blank or to bearer, the document becomes negotiable by delivery, or to a specified person, the document may be again negotiated by the

indorsement of such person in blank, to bearer, or to another specified person. Delivery alone is not sufficient IF a DOT is to order or to bearer, is marked, non-negotiable, it has no effect and the DOT continues to be negotiable. Rights of the person to whom the document has been negotiated 1. Title to the goods 2. Title to the goods as the person to whose order the goods were to be delivered 3. The direct obligation of the bailee issuing the document to hold possession for him as if such bailee contracted directly with him. D. Non-Negotiable Documents of Title Those by the terms of which goods covered are deliverable to a specified person. It cannot be negotiated. Its mode of transfer is only through Assignment. Rights of Person to whom Document has been Transferred 1. The title of the goods as against the transferor 2. The right to notify the bailee of the transfer 3. The right to acquire the obligation of the bailee to old the goods for him The right of the transferee is not absolute and is subject to the agreement with the transferor. Rights of Third Person to Goods where Document has been Transferred 1. The bailee is not bound to the transferee 2. If the DOT is negotiable, the goods cannot be attached or be levied unless the DOT be first surrendered to the bailee or its negotiation was instructed. E. Warranties of Seller of Documents of Title The person who transfers or negotiates a DOT by indorsement or by delivery warrants that: a. The document is genuine b. He has legal right to negotiate or transfer it c. He has no knowledge of fact which would impair the validity or worth of the document d. He has a right to transfer the title to the goods e. The goods are merchantable or fit for particular purpose OTHERWISE, that person will be liable. F. Rules on Levy/ Garnishment of Goods 1. Non-Negotiable DOT IF the transferee does not notify the bailee of the transfer, the right over the goods may be defeated by the levy of an attachment of execution upon the goods by: 1. Creditor of the transferor

2. The transferor notify the bailee 3. Subsequent purchaser from the transferors sale of the goods. 2. Negotiable DOT The goods covered by a negotiable document of title and while in possession of the bailee cannot be levied unless the DOT be first surrendered to the bailee or its negotiation enjoined.

VII. Remedies of the Unpaid Seller A. Definition of an Unpaid Seller Art. 1525 A seller is deemed to be an unpaid seller when: 1. The whole price has not been paid or tendered. 2. When a bill of exchange or other negotiable instrument has been received as conditional payment and has been broken by reason of dishonor of the instrument, the insolvency of the buyer, or otherwise. B. Remedies of an Unpaid Seller Art. 1526-1535 1. Possessory Lien The general rule (Art. 1524), the vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract. Whether or not the ownership in the goods may have passed to the buyer, the unpaid seller may retain the goods for the price while he is in possession of them which is exercisable only in the following: a. Sale without stipulation as to credit The buyer is bound to pay without receiving yet the goods. If there is no stipulation as to credit, the seller is entitled to have first the full payment before transfer. b. Expiration of term of credit The buyer is entitled to possession to the goods without paying the price but if he fails to exercise his right until the term of credit has expired, and the price becomes due, he loses the right. c. Insolvency of the buyer If one party to a bilateral contract is incapacitated from performing his part, the other party is excused from performing his part. The unpaid loses his Possessory Lien in the following: a. Delivery to agent or bailee of buyer

After delivery, has no lien upon the goods b. Possession by buyer or his agent The buyer has no possession necessary for the lien unless the goods was wrongfully taken without the sellers consent c. Waiver of the lien The seller loses his lien if they have agreement to surrender it 2. Stoppage In Transitu If the seller has already parted with the possession of the goods, he may resume possession of the goods while they are in transit, when the buyer becomes insolvent. It is exercised either by actual possession or by giving notice to the carrier or other bailee in possession. Requisites for the exercise of right of Stoppage in Transitu a. The seller must be unpaid b. The buyer must be insolvent c. The goods must be in transit d. The seller must exercise Stoppage In transit e. The seller must surrender the negotiable instrument of title, if any, issued f. The seller must bear the expenses of delivery of the goods after the exercise of the right When the Goods are In Transit a. After delivery to a carrier or other bailee, and before the buyer or his agent takes delivery of them b. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them When the Goods are No Longer In Transit a. After delivery to the buyer or his agent b. If the buyer or his agent obtains the possession at a point before the destination originally fixed. c. If the carrier or the bailee acknowledges to hold the goods on behalf of the buyer d. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer EFFECTS OF SALE OF GOODS SUBJECT TO LIEN OR STOPPAGE IN TRANSITU 1. Where the goods not covered by negotiable documents of title When the unpaid seller is in possession of the goods, a purchaser from the original buyer can acquire only the rights attributable to the original buyer.

2. Where the goods covered by negotiable documents of title The sellers lien cannot prevail against the rights of the buyer for value in good faith, to whom the document has been indorsed.

3. Special Right to Resell Goods The unpaid seller may exercise the right to resell only when he has either a right of lien or right to stop the goods in transit and under any of the three following cases: a. Where the goods are perishable in nature b. Where the right to resell is expressly reserved, in case the buyer should make a default c. Where the buyer delays in the payment of the price for an unreasonable time The seller is not liable for any profit made by such resale; but if he sells for less than the price, he has a right to sue for the balance against the original buyer. The seller is not bound to give notice of his intention to resell and of the time and place where the resale is to be held. 4. Special Right to Rescind The seller may exercise the right to rescind only if he has either a right if lien or a right to stop the goods in transitu and under either of the two situations: a. Where the right to rescind is expressly reserved in case the buyer should make a default b. Where the buyer delays in the payment of the price for an unreasonable time The seller is not liable to the buyer but the latter may be made liable to the seller for damages for the delay in payment for an unreasonable time. The seller may manifest notice to the buyer for his intention to rescind but communication of such is not necessary. 5. Recto Law (Art. 1484) The vendor of a personal property payable in installments may exercise any of the following: Exercise Remedies Elect fulfillment upon failure to pay May still recover the unpaid balance

Cancel the sale upon failure to pay two or more installments Foreclose the chattel mortgage upon failure to pay two or more installments

The vendee can demand the return of the payments made unless there is a stipulation of forfeiture The vendor has no further acts against the vendee for the recovery of the price and any agreement on it is void

VIII. Performance of Contract A. Delivery of Thing Sold Art. 1521-1524 Place of Delivery of Goods Sold a. In the agreement b. If no agreement, usage or trade c. Sellers place of business d. Sellers residence e. In case of specific goods, which is in some other place, that place is the place of delivery Time of Delivery of Goods Sold a. If no time is fixed in the contract, reasonable time b. If the contract provides a fixed time for performance, c. Where the contract does not specify the time for delivery Delivery of Goods in Possession of a Third Person The person holding the goods must acknowledge being the bailee for the buyer. 1. Sale of Movables Art. 1480, 1537 IF Quantity<Contracted to Sell , the buyer may reject or if accepted or retain goods, knowing the seller will not deliver the goods in full, buyer must pay for the goods at the contract rate or fair value if he do not know. IF Quantity>Contracted to Sell, the buyer may accept goods in contract and reject excess. If buyer accepts the whole, pay the whole price. If indivisible, reject the whole goods. IF Goods are MIXED, may accept the goods in contract and reject the rest. May accept if desired. If goods are indivisible, reject whole goods. IF Goods are in third party, that party must acknowledge that he holds the goods in buyers behalf in order for the seller to fulfill his obligation, otherwise, not. IF Sale of Specific Mass, the object is the mass not the units, quantity delivered may be less than parties estimate. 2. Sale of Immovables Art. 1538-1543 Sold per unit or number, the seller is obliged to deliver to the buyer all that may have been stated in contract. If not possible, the buyer may choose between: a. Proportional reduction of price b. Rescission

1. If the lack in area is at least 1/10 that the stated or stipulated 2. If the deficiency in the quality specified in the contract exceeds 1/10 of the price agreed upon 3. If the vendee would not have bought the immovable had he known of its smaller area or inferior quality irrespective of the extent of the lack in area or quality If there is a greater area in the immovable stated in the contract, may accept the area in contract and reject the rest or accept the whole and pay. Sold for LUMP SUM, there shall be no increase or decrease of the price even there is a greater area than that stated in contract. If lesser, it will be reduced according to the rate. (contract area/larger area) The choice of rescission of the contract or proportionate reduction of price must be brought within six months counted from the day of delivery. B. Inspection and Acceptance Art. 1582-1588 1. Inspection/Examination (Art. 1584) The right of examination is thus a condition precedent to the transfer of ownership unless there is a stipulation to the contrary. If delivered COD, the buyer is not entitled to inspect before payment. If not COD, buyer is allowed. a. Right of Examination The right of examination is not absolute. The examination is only upon request and should be made within reasonable of time to avoid undue delay to seller. If seller refuses, the buyer may rescind or recover the payment he already paid. b. Waiver of Right to Examine Before Payment The waiver need not be in express terms. c. Sale by Installment (Art. 1583) The buyer is not bound to receive delivery of the goods in installment. He is entitled to the delivery of all the goods at the same time and, it may be added, is bound to receive delivery of all the goods at the same time. He has no right to pay the price in installment. Neither can he be required to make partial payments unless installment is in the agreement. 2. Acceptance (Art 1585) Acceptance is assent to become owner of the specific goods when delivery of them is offered to the buyer. a. Refusal of Acceptance of Goods (Art. 1587) If the buyer refuses to accept the goods, having the right to do so, he is not bound to return the goods to the seller but should notify the seller that he refuses to accept. However, if he voluntary constitutes him as a depositary (bailee), he shall be liable. b. Where the Buyers Refusal to Accept Justified

Duty to buyer to take care of goods without obligation to return Duty of seller to take delivery of goods Sellers risk of loss Right of buyer to resell goods should the seller fails to notify the take of delivery, the buyer may resell the goods. c. Effect of Buyers Wrongful Refusal to Accept The title passes to the buyer together with the risk of loss from the moment the goods are placed in his disposal. C. Payment of Price Art 1589-1593 1. Liability of Vendee for Interest Where Payment Made After Delivery The thing sold was delivered first followed by payment of the price after the lapse of a certain period of time. The vendee is liable to pay interest from the delivery of the thing until the payment of the price. a. Interest Is Expressly Stipulated If the parties failed to stipulate, the rate is the legal rate (12%) b. Fruits Or Income Received By Vendee From Thing Sold 1. The thing sold has been delivered 2. That it produces fruit or income. The contract of sale must be bilateral. c. Vendee Guilty Of Default If the vendee incurs in delay in the payment of agreed price, the interest is due from the time of judicial or extrajudicial demand by the vendor for the payment of price. This demand by the vendor is the starting point for the commencement of default or delay on the part of the vendee. 2. When Vendee Can Suspend Payment Of Price (Art. 1590) a. If he is disturbed in the possession or ownership of the thing bought b. If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of mortgage 3. When Vendee Cannot Suspend Payment Of Price (Art. 1590) a. If the vendor gives security for the return of the price in a proper case b. If it has been stipulated that despite any such contingency, the vendee must make payment c. If the vendor has caused the disturbance or danger to cease d. If the disturbance is a mere act of trespass There is a mere act of trespass when the third person claims no right whatever. The vendee has a direct action against the intruder. e. If the vendee has fully paid the price

a. b. c. d.

4. When Vendor May Rescind Sale of Immovable Property (Art. 1591) When the vendor has good reason to fear the loss of the property and its price, he may sue for the rescission of the sale. If the seller has not paid the price and makes the property perish, the vendor may sue for rescission. 5. Where Automatic Rescission Of Sale Of Immovable Property Stipulated (Art. 1592) There is no existing provision in our laws authorizing the automatic rescission of contracts for nonpayment of the purchase price. Before the demand for rescission of the seller, the buyer may still pay the price. 6. Right to Rescind Not Absolute (Art. 1592) The right to rescind is not absolute and the court may extend the period for payment. If there was already a demand for rescission, the court may not grant him a new term.

7. When Article 1592 not Applicable (Art. 1592) The vendee is not allowed to pay the price after the expiration agreed even though theres no demand for rescission. a. To sales on installment of real property in which the parties have laid down the procedure to be followed in the event the vendee failed to fulfill his obligation b. To a mere promise to sell (executory contract to sell) where the title remains with the vendor until full payment of the price. 8. Where The Automatic Rescission of Sale of Movable Property Stipulated In the case of personal property, which has not yet been delivered, the vendor may rescind the contract if the vendee, without any valid cause, does not a. Accept delivery b. Pay the price unless a credit period for its payment has been stipulated Still, the vendor must take action in order to indicate his intention to rescind. The reason behind this is that, personal properties are not capable of maintaining a stable price in the market. But this is not true in real properties which are more or less stable in the market. Demand for rescission of real property before being entitled to rescind will not incur damage to the vendor.