Contract of Sale. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing and the other to pay therefore a price certain in money or its equivalent.
Contract of Sale
Title over the property passes to the buyer upon
delivery unless there is a contrary agreement
Non-payment of the purchase price is a negative
resolutory condition, meaning the sale becomes
ineffective upon the happening of such condition
After delivery of the objective, the seller loses
ownership over it. Unless, the contract is set aside,
he cannot recover the object
Contract to Sell
Ownership is retained by the seller whether or not
there is delivery. Ownership passes to the buyer
only upon full payment of the price
The payment in full is a positive suspensive
condition, meaning, if the purchase price is not paid,
the obligation to deliver and to transfer ownership on
the part of the seller does not become effective
Whether there is delivery or not, the seller retains
the ownership of the object. If the seller, due to nonpayment of the price is ousting the buyer from the
property, he (seller) is not rescinding the contract of
sale but is precisely enforcing it.
Contract to Sell
No contract to sale only, a preparatory contract
No delivery yet. No sale yet
No specific performance/rescissionno contract yet
Payment will not complete transaction
SALES
Emptio rei speratae
Sale of a thing having a potential existence
The uncertainty is with regard the quantity and
quality but not with regard the existence of the thing
The contract deals with a future thing
The sale is subject to the condition that the thing
should exist, so that if it does not, there is no
contract for lack of an essential requisite
2
Emptio spei
Sale of a mere hope or expectancy
The uncertainty is with regard the existence of the
thing
The contract deals with a present thingthe hope or
expectancy
The sale produces effects eventhough the thing
itself does not come into existence, since the subject
matter is the hope itself
AGENCY
The agent does not pay for the price. He merely
accounts for the proceeds of the sale.
The agent does not become the owner of the
goods/property delivered to him for sale.
The agent returns the goods/property if he was not
able to sell the same
The agent does not make any warranty as long as
he acts within his authority and in the name of the
principal
The agent must follow the instructions of the
principal
Contract for a Piece of WorkThe article sold is specially manufactured and upon the special order of the customer.
Article is not sold in the ordinary course of business. (See. Concrete Aggregates vs. CTA)
Contract for a piece of work
The thing transferred is one not in existence and w/c
never would have existed but for the order of the
party desiring to acquire it
The services dominate the contract eventhough
there is a sale of goods involved
Contract of Sale
The thing transferred is one which would have
existed and would have been the subject of sale to
some other person, even if the order had not been
given
The primary objective of the contract is a sale of the
manufactured item; it is a sale of goods eventhough
the item is manufactured by labor furnished by the
seller and upon previous order of the customer
Governable by the Statute of Frauds
Money Exchange.
SALES
3
If local currency is exchanged for foreign currencythere is purchase and sale.
If the local currency is exchanged with other denominations of the local currency also, there is barter (Same rule
if Foreign Currency exchanged in the Philippines for another foreign currency)
PRICE
- the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the
price, which was agreed upon by both parties.
SALES
Option Money
It is given as a distinct consideration for an option
contract which gives the buyer a specific period
within which to purchase the thing
It is given at a time when the sale had not yet been
perfected. What had been perfected only is the
option contract
Even if option money is paid by the would-be-buyer
he is not bound to buy the thing
If the buyer decides not to buy the thing, he cannot
recover the option money he paid as consideration
for the contract of option
II. 1504 Applicability. Principle of Res Perit Domino. Vendor bears risk of loss until ownership is transferred by
delivery.
Exceptions: a) Where delivery of goods has been made but ownership is retained by the seller merely to secure
performance of buyers obligation
b) Where actual delivery is delayed through fault of the buyer.
Sale of Goods By Description- where a seller sells a thing as being of a certain kind verbally describing them and the
buyer simply relies on the sellers descriptions of the things, not knowing whether the sellers representations are true or
not.
Sale by Sample- Where the seller warrants that the bulk of goods being sold correspond with the sample or samples
exhibited not only in kind but also in quality and character.
Sale by Description and Sample- Where the seller has to satisfy the requirements in sale by description and sample.
There are two-fold warranty here: (a) the goods purchased matched with the description and (b) the goods also matched in
kind, quality and character with that of the sample or samples exhibited to the buyer or his representative
RECTO LAW (ART. 1484)
Applicability: Sales of Personal Property in Installments and Leases of Personal Property w/ Option to Buy
SALES
Remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover
two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance
of the price. Any agreement to the contrary shall be void.
The stipulation that the instalments or rents shall not be returned to the vendee or lessee shall be valid as
long as it is not unconscionable. (1486)
ART. 1489.
Two Kinds of Incapacity:
1. Absolute Incapacity- Party cannot bind himself in any case.
2. Relative Incapacity- Certain Persons under certain circumstances cannot buy certain property.
** Minors in contract for necessaries must pay reasonable price.
Necessariesthose things which are needed for sustenance, dwelling, clothing and medical attendance, in keeping with
the financial capacity of the family of the incapacitated person.
ART. 1490. Prohibition against Husband and Wife. Exceptions.
Rationale: PID
rd
a. To avoid Prejudice to 3 Persons
b. To prevent one spouse from unduly influencing the other.
c. To avoid by indirection the violation of the prohibition against donations.
Who may assail illegality?
a. Creditors prior to the sale
b. Heirs of either spouse.
** Either spouse may not assail illegality because they are parties thereto.
** A spouse designated as agent of the other spouse may sell the latters exclusive property.
SALES
Sale on Approval
Subject to suspensive condition
It depends upon the suitability,
quality or character of the goods
Ownership does not immediately
pass to the buyer. It passes only
upon approval or satisfaction of
the buyer duly manifested after
trial
There is no revesting of
ownership because it is retained
by the seller until the sale
becomes absolute
The risk remains in the seller
while the goods are on trial
Art. 1503- RESERVATION OF POSSESSION OR OWNERSHIP BY THE SELLER WHEN SPECIFIC GOODS ARE
SHIPPED.
1. When a contrary intention appears by the terms of the contract.
2. When the goods are shipped, and by the bill of lading(BOL) the goods are deliverable to the seller or his agent, or to the
order of the seller or of his agent.
Exception: Form of bill of lading not conclusive if for security purposes only.
3. When the goods are shipped and by the BOL the goods are deliverable to the order of the buyer or of his agent, but
possession of the BOL is retained by the seller or his agent.
SALES
4. Where bill of lading is sent forward to the buyer with bill of exchange attached and the buyer did not pay the bill of
exchange.
EFFECT OF BUYERS OBTAINING POSSESSION OF BILL OF LADING WITHOUT HONORING THE DRAFT.
** If the BOL provides that the goods are deliverable to the buyer or to the order of the buyer or is indorsed in blank or is
indorsed to the buyer by the consignee named therein, a purchaser in GF for value of the BOL or goods from the buyer
will obtain the ownership in the goods although the BOE has not been honored.
Kinds of Delivery to the Carrier
1. C.I.F. (Cost, Insurance, Freight)signify that the price fixed covers not only the costs of the goods, but the expense of
the freight and the insurance to be paid by the seller
2. F.O.B. (Free on Board)goods are to be delivered free of expense to the buyer to the point where they are F.O.B. The
point of F.O.B. (either at point of shipment or the point of destination) determines when the ownership passes.
*CIF and FOB merely make rules of presumption.
3. C.O.D. (Collect on Delivery)the carrier acts for the seller in collecting the purchase price, which the buyer must pay to
obtain possession of the goods.
ART. 1505. SALE BY A PERSON NOT THE OWNER/WITHOUT AUTHORITY OF OWNER.
General Rule: Buyer acquires no better title to the goods than the seller had.
Exceptions: SOLVAM
1. Where the sale is sanctioned by statutory or judicial authority. (See Art. 559)
2. Where the owner of the goods is by his conduct, precluded from denying the sellers authority to sell.
3. Where the law enables the owner to dispose of the goods as if he were the true owner thereof.
*** Factors Acts (Agency); Recording Laws (PD 1529, RA 4136-Land Transportation and Traffic Code, Revised
Administrative Code); NIL; Warehouse Receipts Law.
4. Where the seller has a voidable title which has not been avoided at the time of the sale.
5. Where seller subsequently acquires title.
6. Where the sale is sold at merchants stores, fairs or markets.
ART. 1506. SALE BY ONE HAVING A VOIDABLE TITLE-BUYER ACQUIRES GOOD TITLE.
1. Bought before the title of seller has been avoided.
2. in GF for value
3. without notice of the sellers defect of title.
ART. 1507. DOCUMENTS OF TITLE.
Document of Title of Goodsincludes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the
delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, or
authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by
delivery, goods represented by such document.
Nature and function:
1. Receipts of, or orders upon, a bailee of goods represented.
2. Evidence of transfer of title and possession of goods and contract between the parties.
SALES
SALES
C. DELIVERY OF GOODS AT THE POSSESSION OF THIRD PERSONS. Seller is relieved if 3 person acknowledges to
be the bailee of the buyer.
D. Demand or tender of delivery effective if made at a reasonable hour.
E. Seller bears the expenses incidental to putting goods in deliverable state.
ART. 1522
A. DELIVERY OF GOODS LESS THAN THE QUANTITY CONTRACTED.
1. Buyer may reject.
2. Buyer may accept by paying:
a. price at the contract rate if he knew that no more were to be delivered
b. fair value (reasonable market value) of the goods if he did not know that the seller is going to be guilty of breach of
contract.
B. DELIVERY OF GOODS MORE THAN QUANTITY CONTRACTED
1. Accept and reject excess.
2. Accept all- Liable for all of them.
C. DELIVERY OF GOODS MIXED WITH OTHERS
1. Accept in accordance with the contract and reject the rest.
2. Accept all.
** If goods are indivisible the buyer may reject the whole of the goods.
** Rules may be controlled by usage or agreement.
ART. 1523. DELIVERY OF GOODS TO THE CARRIER is DELIVERY TO THE BUYER- Exceptions: 1503 (1) (2) (3) and
when Contrary intention appears.
Sellers duty after delivery to carrier.
1. To enter on behalf of buyer into such contract reasonable under the circumstances. (If seller omits this buyer may decline
to treat delivery to carrier, delivery to him, if goods were lost/damaged)
2. To give notice to buyer regarding necessity to insure goods while in transit if under circumstances it is usual to insure.
(risk during transit is borne by him if he fails)
ART. 1524. NO DUTY TO DELIVER IF VENDEE HAS NOT PAID OR NO PERIOD FOR PAYMENT FIXED IN THE
CONTRACT.
ART. 1525. UNPAID SELLER.
1. When the whole of the price has not been paid or tendered.
2. When a BOE or other Negotiable Instrument has been received as conditional payment but was dishonored or the buyer
became insolvent.
Seller- includes agent of the seller to whom the BOL has been indorsed; or a consignor or agent who has himself paid or
is directly responsible for the price.
SALES
10
Article 1536Right to Withhold delivery of thing sold by the vendor in case the vendee lose the right to make use of the
term, as provided in Art. 1198: (IFIVA)
1. When after the obligation has been contracted vendee becomes insolvent, unless he gives a guaranty or security
for the price
2. When he does not furnish to the vendor the guaranties or securities which he has promised
3. When by his own acts he has impaired said guaranties or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory
4. When the vendee violates any undertaking, in consideration of which the vendor agreed to the period
5. When the vendee attempts to abscond
Article 1537Vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they
were upon the perfection of the contract. All fruits pertain to vendee from the day on which the contract was perfected.
Article 1538Loss, Deterioration or Improvement of Object before its delivery governed by Article 1189.
1. If the thing is lost w/o the fault of the seller, the obligation shall be extinguished
SALES
11
2. If the thing is lost through the fault of the seller, he shall be obliged to pay damages; it is understood that the thing
is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be
recovered.
3. When the thing deteriorates w/o the fault of the seller, the impairment is to be borne by the buyer
4. If it deteriorates through the fault of the seller, the buyer may choose b/w rescission or fulfilment with indemnity in
either case
5. If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the buyer
6. If it is improved at the expense of the seller, he shall have no other right than that granted to the usufructuary
Article 1539What delivery includes? It includes the placing in the control of the vendee all that is stated in the contract in
conformity with the following rules:
a. Sale OF REAL ESTATE by unit of measure or number: The vendor must deliver all that may have been stated in
the contract. If it is not possible to deliver all, the vendee may choose between:
LACKING/SMALLER AREA OR NUMBER
1. Proportional reduction of the price or
2. Rescission of the contract provided the lack in area is at least 1/10 of the area stated in the contract
The above rules are applicable also in case there is no lack in area but the quality is not the same as
specified in the contract. Rescission shall take place only if inferior value of the thing sold exceeds 1/10 of
the price.
But if the vendee would not have bought the immovable had he known of its smaller area or inferior quality
he may rescind the sale.
SALES
12
1. When the earlier transaction is a pacto de retro sale of an unregistered land and the subsequent conveyance is a
donation of the land in favor of another by the vendor a retro. The vendee a retro has the better right over the donee. The
donor had nothing more to donate because of failure to repurchase the property.
2. Where one of the deeds of sale is a forgery.
3. Where one sale is absolute and the other is a pacto de retro where the period to redeem has not yet expired.
4. Where one of the sales is subject to a suspensive condition which condition was not complied with and the other is an
absolute sale. Even if the conditional sale was made prior to the absolute sale.
5. Where one transaction is a sale and the other a mortgage
6. Where one claim is based on prescription and the other is on sale
7. Where the subject land is not registered under PD 1529
8. In a contract to sell, there being no previous sale of the property.
Affirmation of the value of the thing or statement of the sellers opinion is not warranty, unless the seller made
such affirmation or statement as an expert and it was relied upon by the buyer.
Implied WarrantyIt is inherent in a contract of sale and presumed to exist although nothing has been mentioned about it.
Implied Warranties in Contracts of Sale (1547)
1. Implied warranty as to the right of the seller to sell at the time when ownership has to pass. (Warranty against eviction)
2. Implied warranty against hidden defects or faults or charge or encumbrances unknown to the buyer
3. Implied warranty as to fitness and merchantability
4. Warranty against encumbrances or non-apparent servitudes (1560)
Cases where implied warranty is not applicable
1. Sale made by a sheriff, auctioneer, mortgagee, pledge or other person professing to sell by virtue of authority in fact or
law (1547) (The judgment debtor is responsible here for eviction)
2. Sale under as is and where isthis carries no warranty as to the quality or workable condition of the goods and the
buyer takes them as they are. However, such condition does not include those that could not be discovered by a physical
examination of the goods sold.
3. Sale of second hand articles does not carry any warranty as to the condition, adaptation, fitness or suitability for
purposes for which they have been purchased.
4. Sale of property sold at public auction for tax delinquency. There is no warranty on the part of the State as to the title of
the owner.
WARRANTY AGAINST EVICTIONThe 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.
EvictionA judicial process by virtue of which the vendee is deprived of the ownership of the whole or part of the thing he
purchased by final judgment or by an act imputable to the vendor.
Elements (DVJ-SW)
1. Vendee is deprived in whole or in part of the thing purchased
2. The deprivation is by virtue of a final judgment (1557)
3. The judgment 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 (1558)
5. No waiver of warranty by the vendee
Failure of the vendee to appeal does not relieve vendor from responsibility [1549]
SALES
13
If Property is sold for non-payment of taxes due and not made known to the vendee before the sale, vendor is
liable for eviction (1551)
Judgment debtor is responsible for eviction in judicial sales unless otherwise decreed in judgment (1552)
Any stipulation exempting vendor from responsibility for eviction is void if he acted in bad faith (1553)
Applicability: A part of the thing sold of such importance was lost because of eviction, that the vendee would not
have bought it w/o said part.
Same rules apply to a case where two or more things are jointly sold for a lump sum or for separate price for
each, when the vendee would not have bought one w/o the other.
Warranty is not applicable if non-apparent servitude is recorded in the Registry of Property, unless there is an
express warranty that the thing is free from all burdens and encumbrances.
Prescription of actions for rescission of damages: W/in 1 year from the execution of contract
If what was chosen was rescission but was not filed w/in 1 year, vendee may still sue for damages w/in one year
from the discovery of burden or servitude.
SALES
14
There is no warranty as to fitness for particular purpose in a contract of sale of a specified article under its patent
or other trade name unless there is a contrary stipulation. (1563)
A warranty as to quality or fitness for a particular purpose may be attached to a contract by usage or trade in
place of execution. (1564)
Merchantability of goods in sale by sample is implied. Defect should not be apparent on reasonable examination
of the sample for the vendor to be liable (1565)
Vendor is liable eventhough not aware of hidden defects, unless there is a contrary stipulation and he is in good
faith (1566)
Caveat VenditorLet the Seller Beware Vendor is liable eventhough not aware of hidden defects
Caveat EmptorLet the Buyer Beware Requires the purchaser to be aware of the supposed title of the vendor and
one who buys without checking the vendors title takes all the risks and losses consequent to such failure.
Loss of Thing Sold w/ Hidden defects through fortuitous event or vendees fault (1569)
* Vendee may demand price paid less value of the thing at the time of loss plus damages if vendor acted in bad faith.
Warranties against hidden defects, merchantability and fitness are applicable to judicial sales but judgment
debtor is not liable for damages, because the latter is only forced to sell and therefore did not take part in the
conduct of the sale and determination of price which precludes possibility of bad faith (1570)
Prescription of Actions: 6 Months from delivery of thing (1571)
SALES
15
SALES
16
Purpose of Notice: To insulate the seller from belated claims of defects and to allow him to make urgent investigation
on the validity of claims.
Article 1587. Effects of Justifiable refusal to accept delivery by the buyer
1. Buyer has no duty to return the goods to the seller but must notify the seller of his refusal to accept the goods. (Risk
of Loss here is on the seller)
2. Buyer may voluntarily constitute himself as depositary of the goods, but he will be liable for damages if he does not
fulfil the duties of a depositary as required by law. (Risk of loss is on the buyer)
Article 1588. Effect of Unjustifiable Refusal to accept goods by the buyer: Title or ownership passes to him from the
time goods were placed at his disposal.
Exceptions: a. If there is contrary agreement
b. If the seller reserves ownership as security for payment of the price [1503 & 1523]
Article 1589. When vendee is bound to pay interest (period b/w date of delivery and date of payment) after delivery:
a. if the parties stipulated
b. if the thing sold and delivered produces fruits or income
c. if the vendee is in default, from the time demand is made upon him either juidicially or extra-judicially.
Article 1590. When can the vendee suspend payment of the price (total or remaining)?
1. If he is disturbed in his possession or ownership of the thing brought
2. If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or
foreclosure of mortgage.
Length of suspension: While the danger or disturbance exists.
Situations where vendee cannot suspend payment despite presence of disturbance
(SSS-TP)
1.
When the vendor has given security for the return of the price
2.
When the parties have stipulated
3.
When the vendor has succeeded in eliminating the danger or disturbance
4.
If disturbance is mere act of trespass
5.
If vendee has fully paid the price
**Other causes for suspension: non-compliance by vendor of certain conditions; warranty of eviction
Article 1591. Immediate rescission in sale of immovables, if the vendor has reasonable ground to fear the loss of the
immovable.
** Vendor however has the alternative of compelling specific performance if the ground to fear loss does not exist.
Article 1592. Exception to the general rule on rescission in case of sale of immovables.
General Rule on Rescission: The court may fix the period of payment when there is just cause.
Exception: Court is not allowed to grant a new period. Once there is a judicial demand by notarial act received by the
vendee, the court may not grant him a new term. The reason is that the vendee already enjoyed the advantage of paying
beyond the time originally fixed in the contract, during the time when no demand for rescission either judicially or extrajudicially has taken place.
*Art. 1592 Not applicable in:
1. Sales by instalments where parties have laid down the procedure to be followed in the event the vendee failed to
fulfill his obligation
2. A mere promise to sell where the title remains with the vendor until full payment of the price.
Article 1593. Automatic Rescission of sale of movables. Conditions for applicability:
1. if the vendee upon the expiration of the period fixed for the delivery of the thing purchased, refused to receive it w/o
justifiable cause
2. if he failed to pay the price unless granted a longer period w/in w/c to pay.
Reason why judicial or notarial act not required: Personal things do not generally keep a stable price in the market, any
delay in their disposal may prejudice the vendor.
Actions for breach of contract of sale of goods
Article 1594. Actions available to vendor when there is breach of contract of sale on the part of the vendee: (PDR)
1.
Action for payment of the price of the goods [1595]
2.
Action for damages due to wrongful neglect and refusal to accept and pay for the goods [1596]
3.
Action for rescission if buyer has repudiated the contract or has manifested his inability to perform his obligation
[1597]
SALES
17
Article 1595. Action for collection of price, available in the following cases: (OPR)
1. When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the price
according to the terms of the contract
2. When the price is payable irrespective of delivery or transfer of title, on a certain day and the buyer wrongfully neglects
or refuses to pay such price.
Defense of Buyer: He may establish the fact that the seller has at anytime before judgment, manifested his inability
not to comply with the contract
3. When the goods cannot readily be resold for a reasonable price and the buyer refuses to receive the goods when offered
for delivery except when 1596 par. 4 is applicable (there is notice of stopping the contract), with notification that the seller is
holding them as bailee for the buyer
Article 1596. Damages for non-acceptance of goods.
Measure of damages:
1. As a rule: estimated loss directly and naturally resulting in the ordinary course of events from the buyers breach (no
available market)
2. When there is available market: difference between contract price and market or current price at the time when the
goods ought to have been accepted or if not time has been fixed at the time of refusal (If there are special circumstances
establishing proximate damages of a different amount than the difference described then liability is based on the
proximate damages) Proximate Damages: refer to damages other than unrealized profits
* Repudiation of the contract or notice of stopping the contract, such as in the case of a sale where goods are to
be manufactured. Buyer here shall be liable for the cost of:
1. labor performed
2. expenses for materials used before receiving the notice of repudiation for stoppage
3. unrealized profits
Article 1597. When seller may rescind contract in case there is no delivery yet
1. When buyer repudiated the contract
2. When the buyer has manifested his inability to perform his obligations
3. When the buyer has committed a breach of the contract
* Notice must be given to the buyer to totally rescind the contract.
Article 1598. Remedy of buyer in Contract to deliver specific goods: Specific Performance w/o giving the seller option
to retain the goods on payment of damages.
Article 1599. Remedies of buyer when seller commits breach of warranty.
1. Recoupmentwhereby the buyer accepts the goods but he sets up against the seller the reduction or extinction of the
purchase price.
2. Action for damageswhereby the buyer may (a) accept the goods but w/ damages or (b) refuse to accept the goods
for the breach of warranty but also with damages.
3. Rescissionwhereby the buyer seeks the cancellation of the sale and as a consequence there will be restoration on
both sides.
**Situations when buyer cannot choose or elect rescission (KNR)
1. If he knows of the breach of warranty when he accepted the goods w/o protest
2. If he fails to notify the seller w/in a reasonable time of the election to rescind
3. If he fails to return or offer to return the goods to the seller in substantially the same condition as they were at the time
the ownership was transferred to him.
Extinguishment of Sales
Art. 1600- Causes for Extinguishing Sales
1. Ordinary Causescauses which extinguish ordinary contracts such as:
a. Payment
b. Loss of the things
c. Novation
d. Merger of rights of creditor and debtor
e. Rescission
f. Fulfillment of resolutory condition
g. Prescription
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MORTGAGE
Failure of mortgagor to pay his obligations on time
does not deprive him of his interest in the property
Mortgagee must foreclose if he wants to secure a
perfect title
Mortgagor may redeem before foreclosure and even
after, w/in one year from registration of the sale in
extra-judicial foreclosure. In judicial foreclosure
redemption may be made before confirmation of the
sale by the court.
Mortgagee cannot alienate property
Mortgagee does not automatically become owner,
there must be foreclosure sale first
Mortgagee is not entitled to reimbursement for
improvements he made
SALES
19
SALES
20
Art. 1620A co-owner of a thing may exercise the right of redemption when the shares of all the other co-owners or any
rd
of them are sold to a 3 person. If the price of alienation is grossly excessive, redemptioner shall pay only a reasonable
price.
--If two or more co-owners desire to exercise right of redemption they may only do so in proportion to their share.
Art. 1621Redemption by adjacent owner of rural lands. Requisites: (RATSO)
1. The adjacent lands involved must be rural land.
2. The rural land alienated and to be redeemed must not exceed one hectare in area
3. The alienation must be made in favor of a third person, not in favor of another adjacent owner
4. The two lands involved must not be separated by brooks, drains, ravines, roads and other servitudes for the benefit of
other estates.
5. The vendee or grantee must already be an owner of a rural land. If he does not own any, redemption is not allowed.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the one with a smaller area
shall be preferred. If both have same area, the one who first requested.
Art. 1622Applicability: Piece of Urban Land which is so small and so situated that a major portion cannot be used for
any practical purpose w/in a reasonable time, having bought merely for speculation and is about to resold.
*Speculationmeans buying or selling with expectation of profiting by a rise and fall in price.
Rights recognized by Article 1622.
1. Right of Pre-emptionthe right of an adjacent owner to purchase the property before it is sold to a third person or
rd
before the projected sale to a 3 person is consummated.
2. Right of Redemptionthe right of an adjacent owner to redeem the property after the sale had been perfected
and consummated.
Pre-emption
Arises before sale
No Rescission because no sale as yet exists
The action is directed against the prospective seller
Redemption
Arises after sale
There can be rescission of the original sale
Action is directed against the buyer
* Preference when two or more owners of adjoining lands wish to exercise the right of redemption or pre-emption: To the
owner whose intended use is best justified.
Art. 1623Period of Legal Pre-emption or Redemption.
Must be exercised within 30 days from the notice in writing by the prospective vendor.
The deed of sale executed by the vendor is not registered if not accompanied by an affidavit that he has
given the required written notice.
The right of redemption of co-owners is superior to the right of adjoining owners.
Instances of Legal Redemption under the Civil Code (CHURC)
1. Sale of a co-owner of his share to a stranger (1620)
2. Sale of an heir of his hereditary rights to a stranger (1088)
3. Sale of adjacent small urban lands bought merely for speculation (1622)
4. Sale of adjacent rural land not exceeding one hectare (1621)
5. When a credit or other incorporeal right in litigation is sold (1634)
Instances of Legal Redemption under special laws (THEJA)
1. Redemption in tax sales
2. Redemption of homesteads
3. A right of redemption in cases of extra-judicial foreclosures
4. An equity of redemption in cases of judicial foreclosures
5. Redemption by an agricultural tenant of land sold by the landowner
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of Creditan agreement whereby credits, rights or actions pertaining to a person (called assignor) are
transferred by him to another (called assignee) either onerously or gratuitously who acquires the power to enforce the same
against the debtors.
Nature of Assignment of Credits and other incorporeal rights: Has all the elements of a contract of sale: (1) consent (2)
Object which is the credit, right , action assigned and (3) consideration which is the price paid for the assignment, or
liberality of the assignor if the assignment is gratuitous.
Assignment of Credits
SALES
21
Object
Property
Subject obligated
Ownership when transferred
Consideration
Obligation is extinguished
Assignment of Credits
The alienation of credits or rights,
need not be in satisfaction of
debtors debt
Credits, incorporeal rights or
rights of action
Obligation is not extinguished
Consent of debtor is not necessary for the assignment. He is therefore released from the obligation if he pays the
creditor before having knowledge of the assignment (1626)
Scope of Assignment: All accessory rights, such as guaranty, mortgage, pledge or preference (1627)
SALES
22
When is credit or right in litigation? From the time the complaint concerning the same is answered.
Prescriptive Period: 30 days from the date the assignee demands payment from debtor