NOTES ON SALES

SALES
SALE A nominate contract whereby one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent. NOTES: Delivery and payment in a contract of sale are so interrelated and intertwined with each other that without delivery of the goods there is no corresponding obligation to pay. The two complement each other. It is clear that the two elements cannot be dissociated, for the contract of purchase and sale is essentially a bilateral contract, as it gives rise to reciprocal obligations. (Pio Barretto Sons, Inc. vs. Compania Maritima, 62 SCRA 167). Neither is the delivery of the thing bought nor the payment of the price necessary for the perfection of the contract of sale. Being consensual, it is perfected by mere consent. Contract to sell e&clusive right and privilege to purchase an ob$ect. a bilateral contract whereby the prospective seller, while e&pressly reserving the ownership of the sub$ect property despite delivery thereof to the prospective buyer binds himself to sell the said property e&clusively to the prospective buyer upon fulfilment of the condition agreed upon, that is, full payment of the purchase price. NOTE: Absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fi&ed period, the transaction is an absolute contract of sale and not a contract to sell. ((ignos vs. CA )1*++,) , The contract of sale by itself is not a mode of acquiring ownership. The contact transfers no real rights( it merely causes certain obligations to arise. Contract of Sale
-. Title passes to t-e ./"er upon delivery of the thing sold

Elements:
a.

ssential elements ! those without which, there can be no valid sale" 1. #onsent or meeting of minds 2. A Determinable sub$ect matter 3. %rice certain in money or its equivalent b. Natural elements ! inherent in the contract, and which in the absence of any contrary provision, are deemed to e&ist in the contract" 1. 'arranty against eviction 2. 'arranty against hidden defects c. Accidental elements ! may be present or absent depending on the stipulation of the parties (e.g.: con itions, interest, pena!t", time or p!ace o# pa"ment, etc.)

Contract to Sell
-. +wnership is reserved in the seller and is not to pass until full payment of the purchase price .. 0ull payment is a
positive suspensive condition, the

Characteristics:
1. 2. 3. 4. 5.

%rincipal #onsensual( Bilateral( Nominate( #ommutative( )emptio spei*( 6. +nerous.

.. Non/payment of the price is a negative resolutory condition and the remedy of the seller is to e&act fulfilment or to rescind the contract

In

some

cases,

aleatory

, Aleatory contract" one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. ($%: Sa!e o# s&eepsta'es tic'et)

1. 2endor loses and cannot recover ownership of the thing sold and delivered until the contract of sale is resolved and set aside

failure of which is not a breach ! casual or serious but simply prevents the obligation of the vendor to convey title from having binding force 1. Title remains in the vendor if the vendee does not comply with the condition prece ent of ma3ing payment at the time specified in the contract

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Conditional Sale

Contract to Sell

As to reservation of title to the subject property In both cases the seller may reserve the title to the sub$ect property until fulfillment of the suspensive condition i.e. full payment of the price As to effect of fulfillment of suspensive condition -. 4pon fulfillment of -. 4pon the suspensive fulfillment of the condition, the suspensive contract of sale is condition, which thereby perfected, is the full such that if there had payment of the been previous delivery purchase price, of the sub$ect ownership will property to the buyer, not ownership thereto automatically automatically transfer to the transfers to the buyer although buyer by operation the property may of law without any have been further act by the previously seller. delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. As to effect of sale of the subject property to 3rd persons -. #onstructive 5actual 3nowledge on the part of the .nd buyer of the defect in the seller6s title renders him not a registrant in good faith. 7uch second buyer cannot defeat the first buyer6s title. Ratio" 0ulfilment of the suspensive conditions affects the seller6s title to the property and previous delivery of the property automatically transfers ownership5title to the buyer. -. Third person buying the property despite fulfilment of the suspensive condition cannot be deemed a buyer in bad faith and prospective buyer cannot see3 the relief of reconveyance of property. Exception: If There was no previous sale of the property.

PERFECTI ! F A C !TRACT F "A#E 0$1$RA2 R32$: It is perfected at the moment there is meeting of the minds upon a determinate thing )ob$ect*, and a certain price )consideration*, even if neither is delivered. A choice between rescission and fulfilment, with damages in either case* NOTE: 7ale is a consensual contract( 8ence, delivery and payment are not essential for its perfection $4C$P5I61: 'hen the sale is sub$ect to a suspensive condition by virtue of law or stipulation. , The terms and conditions of payment are merely accidental, not essential elements of the contract of sale e&cept where the partied themselves stipulate that in addition to the sub$ect/matter and the price, they are essential or material to the contract. Requirements for perfection a$ %hen parties are face to face 'hen an offer is accepted without conditions or qualifications NOTES: A conditional acceptance is a counter/offer when negotiated thru phone it is as if it is negotiated face to face b$ %hen contract is thru correspondence or thru tele&ram 'hen the offeror receives or has 3nowledge of the acceptance by the offeree NOTE: If the buyer has already accepted but the seller does not 3now yet of the acceptance, the seller may still withdraw c$ %hen a sale is subject to a suspensive condition 0rom the moment the condition is fulfilled EFFECT OF PRO !SE TREATE" #N"ER ART$ %&'( Ci)il Code: 1. Accepted unilateral promise to sell or *u+ +nly one ma3es the promise, this promise is accepted by the other. $%amp!e" A promises to sell to B, B accepts the promise, but does not in turn promise to buy. does not bind the promissor even if accepted and may be withdrawn anytime. NOTE: %ending notice of its withdrawal, the accepted promise parta3es the nature of an offer to sell which if accepted, results in a perfected contract of sale )Sanc-e7 vs. Rigos 89 SCRA: 6+ *. In other words, if the acceptance is made before withdrawal, it constitutes a binding contract of sale although the option is given without consideration.

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if the promise is supported by a consideration

istinct an separate from the price )option money*, its acceptance will give rise to a perfected contract.

2. ,ilateral promise to *u+ and sell +ne party accepts the other6s promise to buy and the latter, the former6s promise to sell a determinate thing for a price certain it is reciprocally demandable It requires no consideration distinct from the selling price NOTE" this is as good as a perfected sale. No title of dominion is transferred as yet, the parties being given only the right to demand fulfillment or damages. Policitation An unaccepted unilateral promise to buy or sell. ven if accepted by the other party, it does not bind the promissor and maybe withdrawn anytime. This is a mere offer, and has not yet been converted into a contract. PERFECT!ON 'hen is a contract of sale deemed perfected9 A" :;" It is deemed perfected at the moment there is meeting of minds upon the things which is the ob$ect of the contract and upon the price. )Art.-<=>, par.-*

$4C$P5I61S: In order to be enforceable by action, the following must be in writing" 1. 7ale of personal property at a price not less than %>?? 2. 7ale of real property or an interest therein 3. 7ale of property not to be performed within a year from the date thereof 4. @Applicable statuteA requires that the contract of sale be in a certain form NOTE: 7tatute of 0rauds is applicable only to e&ecutory contracts and not to contracts which are totally or partially performed.

PART!ES TO A CONTRACT OF SALE CAPAC!T4 TO ,#4 OR SELL 0$1$RA2 R32$: All persons who can bind themselves also have legal capacity to buy and sell. $4C$P5I61S: 1. Absolute incapacity )minors, demented persons, imbeciles, deaf and dumb, prodigals, civil interdictees* / party cannot bind themselves in any case. 2. ;elative incapacity ! incapacity e&ists only with reference to certain persons or a certain class of property P#RC.ASE ,4 !NORS: #ontract is generally voidable but in case of necessaries, @where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore. Necessaries are those in Art. .B?.A Relati)e !ncapacit+ A$ .us*and and /ife 5Art$ %&(67: 0enera!!", a sa!e ." one spo/se to anot-er is voi . The husband and wife cannot sell property to each other except: 1. 'hen a separation of property was agreed upon by the spouses 2. 'hen there has been a $udicial separation of property under Article -1< and -1> of the 0amily #ode ,$ !ncapacit+ *+ reason of relation to propert+ 5Art$ %&(%7 The following persons cannot acquire property by purchase, even at a public auction, either in person or through the mediation of another" 58AEP9:O7 1. the 0uardian, with respect to the property of his ward(

CONS#

-: .o/ does the consummation sta0e in a contract of sale ta1e place2 A: It ta3es place by the delivery of the thing together with the payment of the price. -: A and P"S "e)elopment Corp$ executed a contract to sell a parcel of land$ A died /ithout ha)in0 completed the installment on the propert+$ .is heirs then too1 o)er the contract to sell and assumed his o*li0ations *+ pa+in0 the sellin0 price of the lot from their o/n funds3 and completed the pa+ment$ To /hom should the final "eed of A*solute Sale *e executed *+ P"S2 A: 8aving stepped into the shoes of the deceased with respect to the said contract, and being the ones who continued to pay the installments from their own funds, A6s heirs became the lawful owners of the said lot in whose favor the deed of absolute sale should have been e&ecuted by vendor %D7. ((a&son v. Register o# (ee s o# ;/e7on Cit", 0.R. 1o. 12<6<< Sept. 22, 1**+)

AT!ON

FOR AL!T!ES OF CONTRACT OF SALE 0$1$RA2 R32$: 7ale is a consensual contract and is perfected by mere consent.

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2. agents, with respect to the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given( 3. e&ecutor or administrator, with respect to the property of the estate under administration( 4. public officers and employees, with respect to the properties of the government, its political subdivisions, or :+##s, that are entrusted to them( 5. ;udges, $ustices, prosecuting attorneys, cler3s of courts, etc., with respect to the property in custogia legis( and 6. any other person specially disqualified by law. Examples of persons especiall+ disqualified *+ la/: a. Aliens who are disqualified to purchase agricultural lands b. An unpaid seller having a right of lien or having stopped the goods in transitu, who is prohibited from buying the goods either directly or indirectly in the resale of the same, at public or private sale which he may ma3e c. The officer holding the e&ecution, or his deputy. NOTE: 'hile those disqualified under Arts. -<B? and -<B- may not become lessees )Art. -C<C*, still aliens may become lessees even if they cannot buy lands. O,:ECTS OF SALE Requisites: -. T8IN:7" a* determinate or determinable )Arts. -<>D, -<C?* b* lawful )Arts -1<=, -<?B E-,<F c* should not be impossible )Art. -1<D* e.g. must be within the commerce of man .. ;I:8T7 ! must be transmissible &ceptions" /future inheritance / service

.. 7ale is sub$ect to
the condition that the thing will e&ist( if it does not, there is no contract 1. The uncertainty is with regard to the quantity and quality of the thing and not the e&istence of the thing <. +b$ect is a future thing

come to e&istence( Sa!e o# t-e -ope itse!# .. 7ale produces effect even if the thing does not come into e&istence, unless it is a vain hope 1. The uncertainty is with regard to the e&istence of the thing <. +b$ect is a present thing which is the hope or e&pectancy

NOTE: In case of doubt the presumption is in favor of emptio rei speratae which is more in 3eeping with the commutative character of the contract 8oods /hich ma+ *e O*;ect of Sale a. &isting goods ! goods owned or possessed by the seller. b. 0uture goods ! goods to be manufactured, raised or acquired by the seller after the perfection of the contract. NOTES: A sale of future goods is valid only as an e&ecutory contract to be fulfilled by the acquisition and delivery of goods specified. 'hile there can be sale of future property, there can generally be no donation of future property )Artic!e 791 Civi! Co e* 0uture inheritance cannot be sold. A contract of sale or purchase of goods to be delivered at a future time, if entered into without the intention of having any goods pass from one party to another, but with an understanding that at the appointed time, the purchaser is merely to receive or pay the difference between the contract and the mar3et prices, is illegal. 7uch contract falls under the definition of @futuresA in which the parties merely gamble on the rise or fall in prices and is declared null and void by law. )Art. .?-D, N##* )6napa! P-i!. Commo ities, Inc. vs. CA E-BB1F* !nstances /hen the Ci)il Code reco0ni<es sale of thin0s not actuall+ or alread+ o/ned *+ the seller at the time of the sale: -. 7ale of a thing having potential e&istence ) Artic!e 1861* .. 7ale of future goods )Artic!e 1862* 1. #ontract for the delivery at a certain price of an article which the vendor in the ordinary course of

Emptio rei speratae

-. 7ale of an e%pecte t-ing

Emptio spei
-. 7ale of a mere hope or e&pectancy that the thing will

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the business manufactures or procures for the general mar3et, whether the same is on -an at t-e time or not (Artic!e -<C=* Sale
-. Buyer receives the goods as owner

A0enc+ to sell
-. Agent receives the goods as goods of the principal who retains his ownership over them .. Agent e!ivers t-e price &-ic- in t/rn -e got #rom -is ./"er 1. Agent can return the goods in case he is unable to sell the same to a third person <. Agent ma3es no warranty for which he assumes personal liability as long as he acts within his authority and in the name of the seller >. Agent in dealing with the thing received, must act and is bound according to the instructions of the principal

Rules to determine if the contract is one of Sale or Piece of /or1: a. If ordered in the ordinary course of business ! sale b. If manufactured specially for the customer and upon his special order, and not for the mar3et ! piece of wor' "C( #" F T( )*(T+ a* Gassachusetts rule" If specifically done at the order of another, this is a contract for a piece of wor3. )%hilippine application* b* New Hor3 rule" If thing already e&ists/7AI ( if not/'+;J c* nglish rule" If material is more valuable/ 7AI ( if s3ill is more valuable/'+;J

.. Buyer pa"s t-e price 1. Buyer, as a general rule, cannot return the ob$ect sold <. 7eller warrants the thing sold

>. Buyer can deal with the thing sold as he pleases being the owner

,ARTER contract whereby one of the parties binds himself to give one thing in consideration of the otherKs promise to give another thing. NOTE: The only point difference between contract of sale and barter is in the element which is present in sale but not in barter, namely" price certain in mone" or its e=/iva!ent NOTE: If the consideration is partly in mone" and partly in anot-er t-ing, determine" a. The manifest intention of the parties b. If the intent is not clear, apply the following rules" 1. If the thing is more valuable than money ! barter 2. If the money and the thing are of equal value ! sale 3. If the thing is less valuable than money ! sale Sale
-. No pre/e&isting credit .. +bligations are created 1. #onsideration on the part of the seller is the price( on the part of the buyer is the acquisition of the ob$ect

Contract for Piece of =or1

-. The thing transferred is one not in e&istence and which never would have e&isted but for the order of the party desiring to acquire it .. The services dominate the contract even though there is a sale of goods involved

Sale
-. The thing transferred is one which would have e&isted and would have been the sub$ect of sale to some other person, even if the order had not been given .. The primary ob$ective of the contract is a sale of the manufactured item( it is a sale of goods even though the item is manufactured by labor furnished by the seller and upon previous order of the customer 1. 'ithin the 7tatute of 0rauds

"ation in Pa+ment
-. %re/e&isting credit .. +bligations are e&tinguished 1. #onsideration of the debtor is the e&tinguishment of the debt( on the part of the creditor, it is the acquisition of the ob$ect offered in lieu of the original credit <. Iess 0reedom in determining the price

4. :reater freedom
in determining the price

1. Not within the 7tatute of 0rauds

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5. Buyer still has to

pay the price

>.

The payment is received by the debtor before the contract is perfected.

PR!CE The sum stipulated as the equivalent of the thing sold and also every incident ta3en into consideration for the fi&ing of the price, put to the debit of the vendee and agreed to by him.

-. If the third person refuses or cannot fi& the price, the contract shall become ineffective, unless the parties subsequently agree upon the price .. If the third person is prevented from fi&ing the price by the fault of the seller or buyer, the party not in fault may obtain redress against the party in fault Effect of 8ross !nadequac+ of Price: %$ >oluntar+ sales 0$1$RA2 R32$: Gere inadequacy of the not affect validity of the sale. A valuable consideration, however nominal, if given or stipulated in good the absence of fraud, sufficient.(Ro CA, 2<7 SCRA 99:) 0uture inheritance cannot be sold.

price does small or faith is, in rig/e7 vs.

Requisites:

1. #ertainty or ascertainable at the time of perfection 2. ;eal, not fictitious 3. In some cases, must not be grossly inferior to the value of the thing sold. 4. %aid in money or its equivalent

Certaint+ It is not necessary that the certainty of the price be actual or determined at the time of the e&ecution of the contract. The price is certain in the following cases" -. If the parties have fi&ed or agreed upon a definite amount( NOTE: The fi&ing of the price can never be left to the discretion of one of the contracting parties. 8owever if the price fi&ed by one of the parties is accepted by the other, the sale is perfected. .. If it be certain with reference to another thing certain 1. If the determination of the price is left to the $udgment of a specified person or persons even before such determination <. In the cases provided under Art. -<=. N##

$4C$P5I61S: a. 'here low price indicates vice of consent, sale may be annulled( or contract is presumed to be an equitable mortgage b. 'here the price is so low as to be @shoc3ing to conscienceA, sale may be set aside.
?$ !n)oluntar+ or Forced sales 0$1$RA2 R32$: Gere inadequacy of the price is not a sufficient ground for the cancellation of the sale if property is real.

$4C$P5I61S: a. 'here the price is so low as to be shoc3ing to the moral conscience, $udicial sale of personal property will be set aside b. In the event of a resale, a better price can be obtained
NOTE: The validity of the sale is not necessarily affected where the law gives to the owner the right to redeem, upon the theory that the lesser the price, the easier it is for the owner to effect redemption. Effect /here price is simulated 1. I# it is s-o&n to -ave .een in rea!it" a onation or some ot-er act or contract The sale is void but the act or contract may be valid as a donation 2. I# not The contract is void and ine&istent Effect of Failure to determine price: 1. >-ere contract e%ec/tor" The contract is inefficacious

Effect /hen the price is fixed *+ the third person desi0nated: 0$1$RA2 R32$: %rice fi&ed by a third person designated by the parties is binding upon them. $4C$P5I61S: -. 'hen the third person acts in bad faith or by mista3e .. 'hen the third person disregards the specific instructions or the procedure mar3ed out by the parties Effect /hen the price is not fixed *+ the third person desi0nated:

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2. >-ere t-e t-ing -as .een e!ivere to an appropriate ." t-e ./"er The buyer must pay a reasonable price therefore Reasona*le price @ generally the mar3et price at the time and place fi&ed by the contract or by law for the delivery of the goods TRANSFER OF O=NERS.!P 0$1$RA2 R32$: 'hile a contract of sale is consensual, ownership of the thing sold is acquired only upon its delivery, actual or constructive, to the buyer. ((a/s vs. Sps. (e 2eon, 16 ?/ne 2<<:) This is true even if the purchase has been made on credit. %ayment of the purchase price is not essential to the transfer of ownership, as long as the property sold has been delivered. (Sampag/ita Pict/res, Inc vs. ?a!&in or Man/#act/rers, Inc. *: SCRA 82<) Nonpayment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing chec3s. ($(CA P/.!is-ing an (istri./ting Corp. vs. Santos, 1+8 SCRA 618)

Option contract A contract granting a privilege in one person, for which he has paid a consideration, which gives him the right to buy certain merchandise, at anytime within the agreed period, at a fi&ed price. An option without consideration is void and the effect is the same as if there was no option @ 8owever, in Sanc-e7 vs. Rigos (1*72 *, even though the option was not supported by a consideration, the moment it was accepted, a perfected contract of sale resulted, applying Art. -1.< of the N##. In view of the ruling of the 7upreme #ourt, the only importance of the consideration for an option is that the option cannot be withdrawn by the grantor after acceptance. , In an option to buy, the party who has an option may validly and effectively e&ercise his right by merely notifying the owner of the former6s decision to buy and e&pressing his readiness to pay the stipulated price. Ri0ht of First Refusal It is a right of first priority all things and conditions being equal( there should be identity of the terms and conditions to be offered to the optionee and all other prospective buyers, with optionee to en$oy the right of first priority. A deed of sale e&ecuted in favor of a third party who cannot be deemed a purchaser in good faith, and which is in violation of the of the right of first refusal granted to the optionee is N+T voidable under the 7tatute of 0rauds, such contract is valid B4T rescissible under Article -1D? to -1D-)1* of the New #ivil #ode ) 0/7man Boca!ing A Co. vs. BonnavieB Riviera Ci!ipina, Inc vs. CA et.a!. 0R 1o. 117:99, Apri! 9, 2<<2*. The basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. +nly after the optionee fails to e&ercise its right of first priority under the same terms and within the period contemplated could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the optionee )Parana=/e Dings $nterprises, Inc. vs. CA 0R 1o. 1119:+, Ce.r/ar" 26, 1**7* The lessee6s right of first option to buy the leased property in case of its sale is but a part of the bigger right to lease the said property from the lessor. The option was given to the lessee because she was the lessee of the sub$ect property. It was a component of the consideration of the lease. The option was by no means an independent right which can be

$4C$P5I61S: -. Contrar" stip/!ation or Pactum reservati dominii )contractual reservation of title* ! a stipulation, usually in sales by installment, whereby, despite delivery of the property sold, ownership remains with the seller until full payment of the price is made. 2. Contract to se!! 1. Contract o# ins/rance ! a perfected contract of sale, even without delivery, vests in the vendee an equitable title, an e&isting interest over the goods sufficient to be the sub$ect of insurance
R#LES 8O>ERN!N8 A#CT!ON SALES -. 7ales of separate lots by auction are separate contracts of sale. .. 7ale is perfected by the fall of the hammer 1. 7eller has the right to bid in the auction, provided" a* such right was reserved b* notice was given that the sale was sub$ect to a right to bid on behalf of the seller c* right is not prohibited by law or by stipulation <. Advertisements for bidders are simply invitations to ma3e proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.

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e&ercised by the lessee. If the lessee is barred by the contract from assigning her right to lease the sub$ect property to any other party, the lessee is similarly barred to assign her first option to buy the leased property to another. ) Banga"an et.a! vs. CA an 2im 0R 1o.12:9+1, A/g/st 2*, 1**7 * Earnest mone+ ! or @A;;A7A is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. It is considered as" a* part of the purchase price b* proof of perfection of the contract ,It shall be deducted from the total price. Earnest mone+
-. Title passes to the buyer upon delivery of the thing sold .. In case of non/payment, an action for specific performance or for rescission can be filed by the in$ured party 1. %art of the purchase price <. 'hen given, the buyer is bound to pay the balance >. :iven when there is already a sale

seller is guilty of fraud, negligence, default or violation of contractual terms 3. ob$ect sold is generic )Civi! Co e o# t-e P-i!ippines, Paras* NOTE: This view conforms with Ganresa6s view. Buyer would have been the one to profit from the thing had it not been lost or destroyed. 2. Contrary view+ 'here the ownership is transferred by delivery, as in our code, the application of the a&iom res perit omino, imposes the ris3 of loss upon the vendor( hence, if the thing is lost by fortuitous event before delivery, the vendor suffers the loss and cannot recover the price from the vendee )Commentaries an ?/rispr/ ence on t-e Civi! Co e o# t-e P-i!ippines, 5o!entino* d. The thing is lost after delivery" Buyer bears the loss. Luestion" If one does not comply, the other need not pay9 Answer" True. But this only applies when the seller is able to deliver but does not.

Option mone+
-. +wnership is reserved to the seller and is not to pass until full payment .. In case of non/payment, there can be action for specific performance

1. Goney given as a distinct consideration for an option contract <. The would/be buyer is not required to buy >. Applies to a sale not yet perfected

EFFECT OF LOSS AT T.E T! E OF SALE: a. Thing entirely lost at the time of perfection" #ontract is void and ine&istent b. Thing only partially lost" 2endee may elect between withdrawing from the contract or demanding the remaining part, paying its proportionate price Sale *+ description A sale where a seller sells things as being of a certain 3ind, buyer merely relying on the seller6s representations or descriptions. There is warranty that the thing sold corresponds to the representations or descriptions. Sale *+ sample A sale where a small quantity of a commodity is e&hibited by the seller as a fair specimen of the bul3, which is not present and as to which there is no opportunity to inspect or e&amine. NOTE: The mere e&hibition of the sample does not necessarily ma3e it a sale by sample. This e&hibition must have been the sole basis or inducement of the sale. There is warranty that the bul3 of the commodity will correspond in 3ind, quality, and character with the sample e&hibited.

R#LES ON R!SA OF LOSS AN" "ETER!ORAT!ON: a. The thing sold is lost before perfection: 7eller bears the loss. b. The thing sold is lost at the time of perfection" #ontract is void or ine&istent. c. The thing sold is lost after perfection, but before delivery"

0$1$RA2 R32$: 'ho bears the ris3 of loss is governed by the stip/!ations in t-e contract !n the a*sence of an+ stipulation: First view+ Buyer bears the loss as an e&ception to the rule of res perit omino. $4C$P5I61S: 1. when ob$ect sold consists of fungible goods for a price fi&ed according to weight, number or measure

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NOTE" In a sale by sample and by description, there is a two/fold warranty. R!8.TS OF ,#4ER: -* ;eturn the thing and recover the money paid, or .* ;etain the thing and sue for the breach of warranty.

O,L!8AT!ONS OF T.E >EN"OR: )'%D/TT* 1. Transfer ownership (cannot .e &aive ) 2. "eliver the thing sold (cannot .e &aive ) 3. =arrant against eviction and against hidden defects (can .e &aive or mo i#ie since &arrant" is not an essentia! e!ement o# t-e contract o# sa!e) 4. Ta3e care of the thing, pending delivery, with proper diligence )Artic!e 116:* 5. Pay for the e&penses of the deed of sale, unless there is stipulation to the contrary "EL!>ER4 Is a mode of acquiring ownership, as a consequence of certain contracts such as sale, by virtue of which, actually or constructively, the ob$ect is placed in the control and possession of the vendee.

c. tra itio !onga man/ ! seller pointing out to the buyer the things which are transferred, which at the time must be in sight. d. tra itio .revi man/ ! buyer simply continues in possession of the thing but under title of ownership. e. tra itio constit/t/m possessori/m ! seller continues in possession but under a different title other than ownership. 3. Luasi/tradition ! delivery of rights, credits or incorporeal property, made by" a. placing titles of ownership in the hands of buyer b. allowing buyer to ma3e use of rights 4. Tradition by operation of law Constructi)e deli)er+ requires three thin0s *efore o/nership ma+ *e transferred: -. The seller must have control over the thing .. The buyer must be put under control 1. There must be the intention to deliver the thing for purposes of ownership =hen is the )endor not *ound to deli)er the thin0 sold: -. If the vendee has not paid him the price .. If no period for payment has been fi&ed in the contract 1. ven if a period for payment has been fi&ed in the contract, if the vendee has lost the right to ma3e use of the same. Sale or return %roperty is sold, but the buyer, who becomes the owner of the property on delivery, has the option to return the same to the seller instead of paying the price. NOTES: It is a 3ind of sale with a condition subsequent. The buyer must comply with the e&press or implied conditions attached to the return privilege( otherwise, the sale becomes absolute. Buyer, being the owner, bears the ris3 of loss Sale on trial3 appro)al3 or satisfaction A contract in the nature of an option to purchase if the goods prove to be satisfactory, the approval of the buyer being a condition precedent.

Delivery of the thing together with the

payment of the price, mar3s the consummation of the contract of sale)%NB vs. Iing, CB %hil. C--* In all forms of delivery, it is necessary that the act of delivery be coupled with the intention of delivering the thing. The act without the intention is insufficient. (1or'is (istri./tor, Inc. vs. CA, 1*9 SCRA 6*8)

Ainds:

1. Actual or real ! placing the thing under the control and possession of the buyer. 2. Iegal or constructive ! delivery is represented by other signs or acts indicative thereof a. delivery by the e%ec/tion o# a p/.!ic instr/ment. NOTE: :ives rise only to a prima facie presumption of delivery which is destroyed when actual delivery is not effected because of a legal impediment (5en Cort" Rea!t" vs. Cr/7, 1< Sept. 2<<:) b. tra itio s"m.o!ica / to effect delivery, the parties ma3e use of a to3en or symbol to represent the thing delivered

Rules:

-. title remains in the seller

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.. ris3 of loss remains with seller e&cept when the buyer is at fault or has agreed to bear the loss 1. buyer must give goods a trial, e&cept where it is evident that it cannot perform the wor3 <. period within which buyer must signify his acceptance runs only when all the parts essential for the operation of the ob$ect have been delivered. >. if it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid, but the third person must be in good faith. If refusal to accept is not $ustified, seller may still sue. C. :enerally, the sale and delivery to a buyer who is an e&pert on the ob$ect purchased is not a sale on approval, trial, or satisfaction. Sale or return
-. 7ub$ect to a resolutory condition .. Depends entirely on the will of the buyer 1. +wnership passes to the buyer on delivery and subsequent return reverts ownership in the seller <. ;is3 of loss or in$ury rests upon the buyer

Sale on Trial
-. 7ub$ect to a suspensive condition .. Depends on the character or quality of the goods 1. +wnership remains in the seller until buyer signifies his approval or acceptance to the seller <. ;is3 of loss remains with the seller

0$1$RA2 R32$: Buyer acquires no title even if in good faith and for value under the ma&im !emo dat -uid non habet )@Hou cannot give what you do not haveA*. $4C$P5I61S: )7G ;27* 1. +wner is estopped or precluded by his conduct 2. 'hen sale is made by the registered owner or apparent owner in accordance with recording or registration laws 3. 7ales sanctioned by $udicial or statutory authority 4. %urchases in a merchantKs store, fairs or mar3ets 5. 'hen a person who is not the owner sells and delivers a thing, subsequently acquires title thereto )Art. -<1<* 6. 'hen the seller has a )oidable title which has not been avoided at the time of the sale )Art. ->?C* , @4nlawful deprivationA is no longer limited to a criminal act. There is 4nlawful Deprivation where there is no valid transmission of ownership.
Place of deli)er+ of 0oods 1. >-ere t-ere is an agreement, place of delivery is that agreed upon 2. >-ere t-ere is no agreement , place of delivery determined by usage of trade 3. >-ere t-ere is no agreement an no preva!ent /sage, place of delivery is the seller6s place 4. In an" ot-er case, place of delivery is the seller6s residence 5. In case o# speci#ic goo s , which to the 3nowledge of the parties at the time the contract was made were in some other place, that place is the place of delivery, in the absence of agreement or usage of trade to the contrary Time of deli)er+ of 0oods 1. 7tipulated time 2. In the absence thereof, within a reasonable time PA4 ENT OF T.E P#RC.ASE PR!CE 0$1$RA2 R32$: The seller is not bound to deliver the thing sold unless the purchase price has been paid. $4C$P5I61: The seller is bound to deliver even if the price has not been paid, if a period of payment has been fi&ed. Sale of Real Propert+ *+ #nit ntire area stated in the contract must be delivered

!nstances /here Seller is still the O/ner despite "eli)er+: -. 7ale on trial, approval or satisfaction .. #ontrary intention appears by the term of the contract( 1. Implied reservation of ownership )Article ->?1* a. If under the bill of lading, the goods are deliverable to seller or agent or their order( b. If the bill of lading, although stating that the goods are to be delivered to the buyer or his agent, is 3ept by the seller or his agent( a. 'hen the buyer, although the goods are deliverable to order of buyer, and although the bill of lading is given to him, does not honor the bill of e&change sent along with it. Transfer of o/nership /here 0oods sold deli)ered to carrier 8eneral Rule: Delivery to the carrier is deemed to be delivery to the buyer Exception: 'here the right of possession or ownership of specific goods sold is reserved SALE OF 8OO"S ,4 A NON9O=NER

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'hen entire area could not be delivered, vendee

Purchaser in 8ood Faith ! one who buys the

property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property (Ee!oso vs. CA). ;egistration requires actual recording( if the property was never really registered as when the registrar forgot to do so although he has been handed the document, there is no registration. %ossession is either actual or constructive since the law made no distinction )Sanc-e7 vs. Ramos 8< P-i!618* %ossession in Art.-><< includes not only material but also symbolic possession (5en Cort" Rea!t" vs. Cr/7, 1< Sept. 2<<:.) Title means title because of sale, and not any other title or mode of acquiring property )2ic-a/co vs. Bereng/er :* P-i! 682* Fernan e7 vs. Datig.a' ;ule" 'hen the property sold on e&ecution is registered under Torrens, registration is the operative act that gives validity to the transfer or creates a lien on the land, and a purchaser on e&ecution sale is not required to go behind the registry to determine the conditions of the property. &ception" 'here the purchaser had 3nowledge, prior to or at the time of the levy, of such previous lien or encumbrance, his 3nowledge is equivalent to registration.

may" -. nforce the contract with the corresponding decrease in price .. ;escind the sale" a. If the lac3 in area is at least -5-? than that stated or stipulated b. If the deficiency in quality specified in the contract e&ceeds -5-? of the price agreed upon c. If the vendee would not have bought the immovable had he 3nown of its smaller area of inferior quality irrespective of the e&tent of lac3 of area or quality

Sale for a Lump Sum .A Cuerpo Cierto/ 2endor is obligated to deliver all the land included within the boundaries, regardless of whether the real area should be greater or smaller +rdinarily, there can be no rescission or reduction or increase whether the area be greater or lesser, unless there is gross mista3e. NOTE: The #ivil #ode presumes that the purchaser had in mind a particular piece of land and that he ascertained its area and quality before the contract of sale was perfected. If he did not do so, or if having done so he made no ob$ection and consented to the transaction, he can blame no one but himself )5eran vs. Ei!!an/eva Ei/ a e Riosa 96 P-i! 677*. 'hat is important is the delivery of all the land included in the boundaries. "O#,LE SALE 5Art$ %B&&7 Requisites: 2+#7 1. two or more transactions must constitute )alid sales( 2. they must pertain e&actly to the same ob$ect or sub$ect matter( 3. they must be bought from the same or immediate seller( AND 4. two or more buyers who are at odds over the rightful ownership of the sub$ect matter must represent conflicting interests. Rules of preference: -. %ersonal %roperty a. first possessor in good faith .. ;eal %roperty a. first registrant in good faith b. first possessor in good faith c. person with oldest title in good faith NOTES:

CON"!T!ON Effect of Non9fulfillment of Condition -. If the obligation of either party is sub$ect to any condition and such condition is not fulfilled, such party may either" a. refuse to proceed with the contract b. proceed with the contract , waiving the performance of the condition. .. If the condition is in the nature of a promise that it should happen, the non/performance of such condition may be treated by the other party as breach of warranty. NOTE: A distinction must be made between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. The failure to comply with the first condition would prevent the $uridical relation itself from coming into e&istence, while failure to comply with the second merely gives the option either to refuse or proceed with the sale or to waive the condition.

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The mere fact that the second contract of sale

was perfected in good faith is not sufficient if, before title passes, the second vendee acquires 3nowledge of the first transaction. The good faith or innocence of the posterior vendee needs to continue until his contract ripens into ownership by tradition or registration. (Pa!anca vs. (ir. 6# 2an s, 86 PFI2 18*)

There is no implied warranty as to the condition, adaptation, fitness or suitability or the quality of an article sold as a second/hand article. But such articles might be sold under such circumstances as to raise an implied warranty. , A certification issued by a vendor that a second/ hand machine was in A/- condition is an e&press warranty binding on the vendor. (Mo!es vs. IAC )1*+*,) A$ =arrant+ a0ainst e)iction 'arranty in which the seller guarantees that he has the right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.

EFFECT !F ,#4ER .AS ALREA"4 SOL" T.E 8OO"S: :eneral ;ule" The unpaid seller6s right to lien or stoppage in transitu remains even if buyer has sold the goods. &cept" -* 'hen the seller has given consent thereto, or .* 'hen the buyer is a purchaser in good faith for value of a negotiable document of title. =ARRANT4 a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or underta3es to insure that certain facts are or shall be as he then represents.

Elements:

1. vendee is deprived, in whole or in part, of the thing purchased( 2. the deprivation is by virtue of a final $udgment( 3. the $udgment is based on a prior right to the sale or an act imputable to the vendor( 4. the vendor was summoned in the suit for eviction at the instance of the vendee( AND 5. no waiver of warranty by the vendee.

>endorDs lia*ilit+ shall consist of:

Jinds"

-. ECPRESS ! any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same and if the buyer purchases the thing relying thereon NOTE: A mere e&pression of opinion, no matter how positively asserted, does not import a warranty unless the seller is an e&pert and his opinion was relied upon by the buyer. 2. ! PL!E" / that which the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective o# an" intention o# t-e se!!er to create it. a. 'arranty against eviction b. 'arranty against hidden defects c. 'arranty as to 0itness and Gerchantability NOTE: An implied warranty is a natural, not an essential element of a contract, and is deemed incorporated in the contract of sale. It may however, be waived or modified by e&press stipulation. ((e 2eon)

1. Total eviction+ )2I# D* a. >alue of the thing at the time of eviction( b. !ncome or fruits if he has been ordered to deliver them to the party who won the suit( c. Costs of the suit( d. E&penses of the contract( AN" e. "amages and interests if the sale was in bad faith. 2. Partial eviction+ a. to enforce vendor6s liability for eviction )2I# D*( OR b. to demand rescission of contract.

Luestion" 'hy is rescission not a remedy in case of total eviction9 Answer" ;escission contemplates that the one demanding it is able to return whatever he has received under the contract. 7ince the vendee can no longer restore the sub$ect/matter of the sale to the vendor, rescission cannot be carried out. , The suit for the breach can be directed only against the immediate seller, not sellers of the seller unless such sellers had promised to warrant in favor of later buyers or unless the immediate seller has e&pressly

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assigned to the buyer his own right to sue his own seller. NOTE: The disturbance referred to in the case of eviction is a disturbance in law which requires that a person go to the courts of $ustice claiming the thing sold, or part thereof and invo3ing reasons. Gere trespass in fact does not give rise to the application of the doctrine of eviction.

<. vendee must give Notice of the defect to the vendor within a reasonable time( >. action for rescission or reduction of price must be brought within the proper Period )within C mos. from delivery of the thing or <? days from date of delivery in case of animals*( and C. no =aiver of the warranty.

2endor6s liability is waivable but any stipulation

e&empting the vendor from the obligation to answer for eviction shall be void if he acted in bad faith. Ainds of =ai)er: a. Consciente ! voluntarily made by the vendee without the 3nowledge and assumption of the ris3s of eviction NOTE: vendor shall pay only the value which the thing sold had at the time of eviction b. Intencionada ! made by the vendee with 3nowledge of the ris3s of eviction and assumption of its consequences EFFECT: vendor not liable NOTE: very waiver is presumed to be consciente. To consider it intencionada, it must be accompanied by some circumstance which reveals the vendor6s 3nowledge of the ris3s of eviction and his intention to submit to such consequences.

Remedies of the >endee:

=.ERE ! O>A,LE SOL" ENC# ,ERE" =!T. NON9 APPARENT ,#R"EN %$ Ri0ht of )endee a* recission, or b* indemnity ?$ =hen ri0ht cannot *e exercised: a* if the burden or servitude is apparent b* if the non/apparent burden or servitude is registered c* if vendee had 3nowledge of the encumbrance, whether it is registered or not E$ =hen action must *e *rou0ht / within +N H A; from the e&ecution of the deed of sale ,$ =arrant+ a0ainst hidden defects 'arranty in which the seller guarantees that the thing sold is free from any hidden faults or defects or any charge or encumbrance not declared or 3nown to the buyer.

a. Accion re -i.itoria )rescission* b. Accion =/anti minoris )reduction of the price* NOTES: 8idden faults or defects pertain only to those that ma3e the ob$ect unfit for the use for which it was intended at t-e time o# t-e sa!e. This warranty in 7ales is applicable in Iease ) Gap vs. 5iao=/i 1:P-i!8::* Effect of loss of thin0 on account of hidden defects: 1. If vendor was aware of hidden defects, he shall bear the loss and vendee shall have the right to recover" 5PE"7 a. the price paid b. e&penses of the contract c. damages 2. If vendor was not aware, he shall be obliged to return" )%I * a. price paid b. interest thereon c. e&penses of the contract if paid by the vendee Effect if the cause of loss /as not the hidden defect If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a )-* fortuitous event +; ).* through the fault of the vendee" the vendee may demand of the vendor the price which he paid less the value of the thing at the time of its loss. NOTE: the difference between the price paid and the value of the thing at the time of its loss represents the damage suffered by the vendee and the amount which the vendor enriched himself at the e&pense of the vendee If the vendor acted in bad faith" vendor shall pay damages to the vendee C$ !mplied =arranties of -ualit+ =arrant+ of Fitness 'arranty in which the seller guarantees that the thing sold is reasonably fit for the 3nown

Elements: )78 N%'*

-. defect must be Serious or important( .. it must be .idden( 1. it must E&ist at the time of the sale(

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particular purpose for which it was acquired by the buyer

0$1$RA2 R32$: There is no implied warranty as to the quality or fitness for any particular purpose of goods under a contract of sale $4C$P5I61S: 1. 'here the buyer, e&pressly or by implication manifests to the seller the particular purpose for which the goods are required 2. 'here the buyer relies upon the seller6s s3ill or $udgment
=arrant+ of erchanta*ilit+ 'arranty in which the seller guarantees, where the goods were bought by description, that they are reasonably fit for the general purpose for which they are sold It requires identity between &-at is escri.e in t-e contract AND &-at is ten ere , in the sense that the latter is of such quality to have some value !nstances /here implied /arranties are inapplica*le: 1. As is and where is sale / vendor ma3es no warranty as to the quality or wor3able condition of the goods, and that the vendee ta3es them in the condition in which they are found and from the place where they are located. 2. 7ale of second/hand articles 3. 7ale by virtue of authority in fact or law Caveat 0enditor 5FLet the seller *e/areG7: the vendor is liable to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. Caveat Emptor 5FLet the *u+er *e/areG7: requires the purchaser to be aware of the supposed title of the vendor and one who buys without chec3ing the vendor6s title ta3es all the ris3s and losses consequent to such failure. R#LES !N CASE OF SALE OF AN! ALS -. 'hen two or more animals have been sold at the same time and the redhibitory defect is in one, or some of them but not in all, the general rule is that the redhibition will not affect the others without it. It is immaterial whether the price has been fi&ed for a lump sum for all the animals or for a separate price for each. .. No warranty against hidden defects of animals sold at fairs or at public auctions, or of livestoc3 sold as condemned. This is based on the assumption that

the defects must have been clearly 3nown to the buyer. 1. 7ale of animals shall be void when" a* animals sold are suffering from contagious disease b* if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor <. Iimitation of the action" <? days from the date of their delivery to the vendee >. 2endor shall be liable if the animal should die within 1 days after its purchase if the disease which caused the death e&isted at the time of the contract O,L!8AT!ONS OF T.E >EN"EE: A$ Principal O*li0ations: -. To accept delivery .. To pay the price of the thing sold in legal tender unless another mode has been agreed upon NOTE: A grace period granted the vendee in case of failure to pay the amount5s due is a right not an obligation. The grace period must not be li3ened to an obligation, the non/payment of which, under Article --CB of the #ivil #ode, would still generally require $udicial or e&tra/$udicial demand before @defaultA can be said to arise )Bric'to&n (evHt Corp vs. Amor 5ierra (evHt Corp. 97SCRA8:7* ,$ Other O*li0ations -. To ta3e care of the goods without the obligation to return, where the goods are delivered to the buyer and he rightfully refuses to accept NOTES: The buyer in such a case is in the position of a bailee who has had goods thrust upon him without his assent. 8e has the obligation to ta3e reasonable care of the goods but nothing more can be demanded of him. The goods in the buyer6s possession under these circumstances are at the seller6s ris3 .. To be liable as a depositary if he voluntarily constituted himself as such 1. To pay interest for the period between delivery of the thing and the payment of the price in the following cases" a. 7hould it have been stipulated b. 7hould the thing sold and delivered produce fruits or income c. 7hould he be in default, from the time of $udicial or e&tra/$udicial demand for the payment of the price Pertinent Rules: -. The vendor is not required to deliver the thing sold until the price is paid nor the vendee to pay

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.. 1. <.

>.

the price before the thing is delivered in the absence of an agreement to the contrary ) Artic!e 1928*. If stipulated, the vendee is bound to accept delivery and to pay the price at the time and place designated( If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to pay at the time and place of delivery In the absence of stipulation as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected )Artic!e 1291* If only the time for delivery has been fi&ed in the contract, the vendee is required to pay even before the thing is delivered to him( if only the time for payment has been fi&ed, the vendee is entitled to delivery even before the price is paid by him )Artic!e 1928*

2. If he has well/grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of mortgage NOTES: If the thing sold is in the possession of the vendee and the price is already in the hands of the vendor, the sale is a consummated contract and Article ->B? is no longer applicable. Article ->B?, presupposes that the price or any part thereof has not yet been paid and the contract is not yet consummated. 4nder Article ->B?, the vendee has no cause of action for rescission before final $udgement, otherwise the vendor might become a victim of machinations between the vendee and the third person Disturbance must be in possession and ownership of the thing acquired If the disturbance is caused by the e&istence of non/apparent servitude, the remedy of the buyer is rescission, not suspension of payment. =hen )endee cannot suspend pa+ment of the price e)en if there is distur*ance in the possession or o/nership of the thin0 sold: -. if the vendor gives security for the return of the price in a proper case .. if it has been stipulated that notwithstanding any such contingency, the vendee must ma3e payment )see Artic!e 198+ par.:* 1. if the vendor has caused the disturbance or danger to cease <. if the disturbance is a mere act of trespass >. if the vendee has fully paid the price RE A$ -. .. 1. ,$ -. .. E"!ES FOR ,REAC. OF CONTRACT Remedies of the seller Action for payment of the price )Art. ->B>* Action for damages for non/acceptance of the goods )Art. ->BC* Action for rescission )Art. ->B=* Remedies of the *u+er Action for specific performance )Art. ->BD* Action for rescission or damages for breach of warranty )Art ->BB*

=a+s of acceptin0 0oods: 1. &press acceptance 2. Implied acceptance a. 'hen buyer oes an act &-ic- on!" an o&ner can o, b. 0ailure to return goods after reasonable lapse of time NOTES: The retention of goods is strong evidence that the buyer has accepted ownership of the goods. Delivery and acceptance are two separate and distinct acts of different parties "eli)er+ is an act of the vendor and one of the vendor6s obligations( vendee has nothing to do with the act of delivery by the vendor Acceptance is an obligation of the vendee( acceptance cannot be regarded as a condition to complete delivery( seller must comply with the obligation to deliver although there is no acceptance yet by the buyer Acceptance by the buyer may precede actual delivery( there may be actual receipt without acceptance and there may be acceptance without receipt 4nless otherwise agreed upon, acceptance of the goods by the buyer does not discharge the seller from liability for damages or other legal remedy li3e for breach of any promise or warranty =hen )endee ma+ suspend pa+ment of the price: 1. If he is disturbed in the possession or ownership of the thing bought

A$ RE E"!ES OF T.E SELLER FOR ,REAC. OF CONTRACT I! CA"E F 1 0A2#E" %$ Ordinar+ Remedies a. Govables in :eneral ! 0ailure of the vendee to appear to receive delivery or, having appeared, failure to tender the price at the

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same time, /n!ess, a longer period for its payment has been stipulated action to rescind the sale )Art. ->B1* b. 7ale of :oods ! action for the price )Art. ->B>* action for damages )Art. ->BC* ?$ #npaid Seller T+pes: a. The seller of the goods who has not been paid or to whom the price has not been tendered b. The seller of the goods, in case a bill of e&change or other negotiable instrument has been received as conditional payment, AND the condition on which it was received has been bro3en by reason of the dishonor of the instrument, insolvency of the buyer or otherwise. Remedies: 1. %ossessory lien over the goods 2. ;ight of stoppage in transit/ after he has parted with the possession of the goods and the buyer becomes insolvent 3. 7pecial ;ight of resale 4. 7pecial ;ight to rescind the sale 5. Action for the price 6. Action for damages E$ Article %&H& or Recto La/ Reme ies o# ven or in sa!e o# persona! propert" ." insta!!ments Requisites: 1. #ontract of sale 2. %ersonal property 3. %ayable in installments 4. In the case of the second and third remedies, that there has been a failure to pay two or more installments NOTE: Apply li3ewise to contracts purporting to be leases of personal property with option to buy Art$ %&H& does not appl+ to a sale: 1. %ayable on straight terms )partly in cash and partly in one term* 2. +f ;eal property Remedies: 1. 7pecific performance upon vendee6s failure to pay NOTE: Does not bar full recovery for $udgment secured may be e&ecuted on all personal and real properties of the buyer which are not e&empt from e&ecution (Pa!ma v. CA.) 2. ;escission of the sale if vendee shall have failed to pay two or more installments NOTES:

Nature of the remedy ! which requires mutual

restitution ! bars further action on the purchase price (1onato vs. IAC.) 0$1$RA2 R32$: cancellation of sale requires mutual restitution, that is all partial payments of price or rents must be returned $4C$P5I61S: 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 circumstan/ces )Artic!e 18+6*. 3. 0oreclosure of the chattel mortgage on the thing sold if vendee shall have failed to pay two or more installments. In this case, there shall be no further action against the purchaser to recover unpaid balance of the price. NOTES: 0urther recovery barred only from the time of actual sale at public auction conducted pursuant to foreclosure (Macon ra" vs. 5an.) +ther chattels given as security cannot be foreclosed if they are not sub$ect of the installment sale )Ri a vs. Ci!ipinas investment an Cinance Corp. 0R :*+<6, ?an. 2+, 1*+:* If the vendor assigns his right to a financing company, the latter may be regarded as a collecting agency of the vendor and cannot therefore recover any deficiency from the vendee (Ia"as vs. 2/neta Motors Co.) 'hen the vendor assigns his credit to another person, the latter is li3ewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency and the vendor/mortgagee is deemed to have renounced any right thereto ) Bor.on II vs. Service&i e Specia!ist, Inc. 29+SCRA69+* NOTE: 8owever, Article -<D<)1* does N+T bar one to whom the vendor has assigne on &it- a reco/rse .asis his credit against the vendee from reco)erin0 from the )endor the assi0ned credit in full although the vendor may have no right of recovery against the vendee for the deficiency ) Ci!ipinas Invest. A Cinance Corp. vs. Eit/g, ?r. 2+SCRA69+ * NOTE: ;emedies are alternati)e and exclusi)e

I! CA"E F I11 0A2#E"

%$ Ordinar+ Remedies a. In case of anticipatory breach ! rescission )Artic!e 19*1* b. 0ailure to pay the purchase price !

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rescission upon $udicial or notarial

demand for rescission )Artic!e 19*2* the vendee may pay, even after the e&piration of the period, as long as no demand for rescission has been made upon him NOTE: Article ->B. does not apply to" -* 7ale on instalment of real estate .* #ontract to sell 1* #onditional sale <* #ases covered by ;A C>>." ;ealty Installment buyer protection act

account during the grace period and before actual cancellation of the contract <. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. 2$ If 2uyer has paid less than 3 years of installments -. The seller shall give the buyer a grace period of N+T less than C? days from the date the installment became due. If the buyer fails to pay the installments due at the e&piration of the grace period, the seller may cancel the contract after 1? days from receipt by the buyer of the notice of cancellation or the demand for rescission of contract by a notarial act. .. "ame !o$ 3 and 4 para&raph A above NOTE: Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made Remedies of #npaid Seller I. Possessor+ Lien =hen ma+ *e exercised: -. 'here the goods have been sold without any stipulation as to credit .. 'hen the goods have been sold on credit, but the term of credit has e&pired 1. 'here the buyer becomes insolvent =hen lost: -. Delivery of the goods to a carrier or bailee for the purpose of transmission to the buyer without reserving ownership or right of possession .. 'hen the buyer lawfully obtains possession of the goods 1. By waiver of the lien NOTE: %ossessory lien is lost after the seller loses possession but his lien as an unpaid seller remains( hence he is still an unpaid creditor with respect to the price of specific goods sold. 8is preference can only be defeated by the governments claim to the specific ta& on the goods themselves ) Arts. 2287 an 2281*. NOTE: The bringing of an action to recover the purchase price is not one of the ways of losing the possessory lien. An unpaid seller does not lose his lien by reason that he has obtained a money $udgement or decree for the price of goods ) Art. 192*, !ast paragrap-*.

?$ R$A$ No$ IBB? or aceda La/ An Act to %rovide %rotection to buyers of ;eal state on Installment %ayments Iaw governing sale or financing of real estate on installment payments Requisites: -. transactions or contracts involving the sale +; financing of real estate on installment payments, including residential condominium apartments( and .. buyer defaults in payment of succeeding installments.

Ri0hts of the *u+er:

A$ If 2uyer has paid at least two .3/ years of installments -. The buyer must pay, &it-o/t a itiona! interest, the unpaid installments due within the total grace period earned by him. There shall be one )-* month grace period for every one )-* year of installment payments made NOTE: This right shall be e&ercised by the buyer +NIH once in every > years of the life of the contract AND its e&tensions. .. Actual cancellation can only ta3e place after 1? days from receipt by the buyer of the notice of cancellation +; demand for rescission by a notarial act AND upon full payment of the cash surrender value to the buyer (6!"mpia Fo/sing vs. Panasiatic, 16 ?an/ar" 2<<:.) NOTE: The seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to >?M of the total payments made. After five )>* years of installments, there shall be an additional >M every year but not to e&ceed B?M of the total payments made 1. The buyer shall have the rig-t to se!! -is rig-ts or assign the same to another person +; to reinstate t-e contract by updating the

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II. Stoppa0e of 0oods in transitu Requisites: -. 7eller must be unpaid .. Buyer must be insolvent 1. :oods must be in transit <. 7eller must either" a. actually ta3e possession of the goods sold +; b. give notice of his claim to the carrier or other person in possession >. 7eller must surrender the negotiable document of title, if any, issued by the carrier or bailee C. 7eller must bear the e&penses of delivery of the goods after the e&ercise of the right 8OO"S ARE CONS!"ERE" !N TRANS!T#: -. after delivery to a carrier or other bailee and before the buyer or his agent ta3es delivery of them( and .. If the goods are re$ected by the buyer, and the carrier or other bailee continues in possession of them 8OO"S ARE NO LON8ER CONS!"ERE" !N TRANS!T#: -. after delivery to the buyer or his agent in that behalf( .. if the buyer or his agent obtains possession of the goods at a point before the destination originally fi&ed( 1. if the carrier or the bailee ac3nowledges to hold the goods on behalf of the buyer( and <. if the carrier or bailee wrongfully refuses to deliver the goods to the buyer

transit/ AND under ANH of the following conditions" -. 'here the goods are perishable in nature .. 'here the right to resell is e&pressly reserved in case the buyer should ma3e a default 1. 'here the buyer delays in the payment of the price for an unreasonable time IV. Rescission T+pes: -. Specia! Rig-t to Rescin 3n er Art. 19:8 ! If the seller has either the right of lien +; a right to stop the goods in transit/ AND under either of . situations" a. 'here the right to rescind on default has been e&pressly reserved b. 'here the buyer has been in default for an unreasonable time 2. 3n er Art. 19*7 (Jtec-nica! rescissionK) V. Action for the price =hen ma+ *e exercised: -. 'here the ownership has passed to the buyer AND he wrongfully neglects +; refuses to pay for the price .. 'here the price is payable on a day certain AND he wrongfully neglects +; refuses to pay for the price, irrespective of the delivery or transfer of title 1. 'here the goods cannot readily be resold for a reasonable price AND the buyer wrongfully refuses to accept them even before the ownership of the goods has passed, if Article ->BC is inapplicable. VI. Action for dama0es =hen ma+ *e exercised: -. In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold )Art. ->BC par.-* .. In an e&ecutory contract, where the ownership in the goods has not passed, and the seller cannot maintain an action to recover the price )Art ->B>* 1. If the goods are not yet identified at the time of the contract or subsequently ,$ RE E"!ES OF T.E ,#4ER FOR ,REAC. OF CONTRACT %$ Action for specific performance 5Art$ %B(H7 'here the seller has bro3en the contract to deliver specific or ascertained goods The $udgment or decree may be unconditional, or upon such terms and conditions as to damages,

Effects of the exercise of the ri0ht

-. The goods are no longer in transit. .. The contract of carriage ends( instead the carrier now becomes a mere bailee, and will be liable as such. 1. The carrier should not deliver anymore to the buyer or the latter6s agent( otherwise he will clearly be liable for damages. <. The carrier must redeliver to, or according to the directions of the seller. =A4S OF ECERC!S!N8 T.E R!8.T TO STOP: -. By ta3ing actual possession of the goods .. By giving notice of his claim to the carrier or bailee III. Special Ri0ht of Resale Gay be e&ercised only when the unpaid seller has either a right of lien +; has stopped the goods in

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payment of the price and otherwise as the court may deem $ust ?$ Remedies of *u+er for *reach of /arrant+ *+ seller 5Art$ %B((7: 1. Recoupment ! accept the goods and set up the seller6s breach to reduce or e&tinguish the price 2. Accept the goods and maintain an action for damages for breach of warranty 3. ;efuse to accept the goods and maintain an action for damages for breach of warranty 4. ;escind the contract by returning or offering the return of the goods, and recover the price of any part thereof NOTE: These are alternative remedies. =hen rescission *+ *u+er not allo/ed: -. if the buyer accepted the goods 3nowing of the breach of warranty without protest .. if he fails to notify the seller within a reasonable time of his election to rescind 1. if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him ECT!N8#!S. ENT OF SALE 1. 7ame causes as in all other obligations 2. #onventional ;edemption 3. Iegal ;edemption CON>ENT!ONAL RE"E PT!ON The right which the vendor reserves to himself, to reacquire the property sold provided he returns to the vendee" c. the price of the sale( d. e&penses of the contract( e. any other legitimate payments made therefore and( f. the necessary and useful e&penses made on the thing sold( and g. fulfills other stipulations which may have been agreed upon. A sale /ith con)entional redemption is deemed to *e an e-uitable mort&a&e in an+ of the follo/in0 cases: )I% ;T+D* -. 4nusually !nadequate purchase price( .. Possession by the vendor remains, as lessee or otherwise( 1. E&tension of redemption period after e&piration( <. Retention by the vendee of part of the purchase price( >. 2endor binds himself to pay the Ta&es of the thing sold(

C. Any Other case where the parties really intended that the transaction should secure the payment of a debt or the performance of any obligation( or =. 'hen there is "oubt as to whether contract is contract of sale with right of repurchase or an equitable mortgage. Equita*le ort0a0e +ne which lac3s the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to ma3e the property sub$ect of the contract as security for a debt and contains nothing impossible or contrary to law )Cac-o!a vs. CA 2<+SCRA8*6* , 'hen can there be presumption as to quitable Gortgage9 -* %arties must have entered into a contract denominated as a contract of sale .* The intention of the parties was to secure an e&isting debt by way of mortgage NOTE: In the cases referred to in Arts. -C?. and -C?<, the apparent vendor may as3 for the reformation of the instrument. ;emedy of ;eformation" To correct the instrument so as to ma3e it e&press the true intent of the parties. Redemption Period a. if there is an agreement" period agreed upon cannot e&ceed -? years b. if no agreement as to the period" < years from the date of the contract c. the vendor who fails to repurchase the property within the period agreed upon may, however, e&ercise the right to repurchase within 1? days 0;+G the time final $udgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with right to repurchase( not to cases where the transaction is conclusively a pacto de retro sale. &ample" 'here a buyer a retro honestly believed that he entered merely into an quitable Gortgage, not a pacto de retro transaction, and because of such belief he had not redeemed within the proper period. N+T " Tender of payment is sufficient to compel redemption, but is not in itself a payment that relieves the vendor from his liability to pay the redemption price (Pae7 vs. Magno.)

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LE8AL RE"E PT!ON 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 )1* by any other transaction whereby ownership is transferred by onerous title. Gay be effected against movables or immovables. It must be e&ercised within thirty )1?* days from the notice in writing by the vendor.N NOTE: 'ritten notice under Article -C.1 is mandator+ for the right of redemption to commence (PSC vs. Sps. Ea!encia 1* A/g/st 2<<:.) ,AS!S OF LE8AL RE"E PT!ON: Not on any proprietary right, which after the sale of the property on e&ecution, leaves the $udgment debtor and vests in the purchaser, but on a bare statutory privilege to be e&ercised only by the persons named in the statute.

4. ;edemption in ta& sales 5. ;edemption by an agricultural tenant of land sold by the landowner

Tender of payment is not necessary( offer to

redeem is enough. PRE9E PT!ON
-. arises before sale .. no rescission because no sale as yet e&ists 1. the action is directed against the prospective seller

RE"E PT!ON
-. arises after sale .. there can be rescission of the original sale 1. action is directed against the buyer

!nstances of le0al redemption: A$ #nder the Ci)il Code 5le0al redemption7: 1. 7ale of a co/owner of his share to a stranger )Artic!e 162<* 2. 'hen a credit or other incorporeal right in litigation is sold )Artic!e 16:8* 3. 7ale of an heir of his hereditary rights to a stranger )Artic!e 1<++* 4. 7ale of ad$acent rural lands not e&ceeding one hectare )Artic!e 1621* 5. 7ale of ad$acent small urban lands bought merely for speculation )Artic!e 1622* ,$ #nder special la/s: 1. An equity of redemption in cases of $udicial foreclosures 2. A right of redemption in cases of e&tra/ $udicial foreclosures 3. ;edemption of homesteads

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