CIVIL LAW REVIEWER TABLE of CONTENTS

SALES
Table of Contents

Chapter I. The Contract of Sale ..................269

I. Definition (Art 1458, CC) ...................269
II. Elements ...........................................269
III. Stages ...............................................274
IV. Kinds of Sale .....................................275
V. Form ..................................................276
VI. Sale Distinguished From Other
Contracts....................................................276

Chapter II. Obligations of the Seller and

Buyer .............................................................278
I. Obligations of the Seller ....................278
II. Obligations of the Buyer....................284

Chapter III. Double Sales .............................286

I. General Rule .....................................286
II. Requisites .........................................286
268
III. Rules Governing Sale of Movables,

SALES
Immovables and Unregistered Lands ........286

Chapter IV. Risk of Loss..............................288

I. General Rule .....................................288
II. Exceptions.........................................288

Chapter V. Documents of Title....................289

I. In General .........................................289
II. Negotiable Documents of Title..........289
III. Non-Negotiable Documents of Title ..289

Chapter VI. Remedies of the Seller and Buyer

.......................................................................291
I. General Remedies (Art. 1191, CC) ...291
II. Remedies of the Seller......................291
III. Remedies of the Buyer......................295

Chapter VII. Extinguishment of Sale ..........298

I. In General .........................................298
II. Conventional Redemption.................298
III. Equitable Mortgage ...........................299
IV. Legal Redemption .............................300

Chapter VIII. Philippine Bulk Sales Law (Act

3952) ..............................................................303
I. Purpose .............................................303
II. Coverage...........................................303
III. Duty of Seller.....................................303
IV. Effect of non-compliance...................304
CIVIL LAW REVIEWER Chapter I. The CONTRACT of SALE

Chapter I. The Contract of Sale

SALES TEAM

SALES
Prof. Roberto N. Dio I. DEFINITION
Faculty Editor
II. ELEMENTS
Jaim Mari M. Crisostomo A. CONSENT
Lead Writer B. SUBJECT MATTER
Jessa Mary Ann C. Cedeño C. PRICE
Eva Marie Guttierez III. STAGES
Kristoffer Gabriel L. Madrid A. PREPARATION/NEGOTIATION
Ros Jean Nonato B. PERFECTION
Writers C. CONSUMMATION
IV. KINDS
CIVIL LAW A. ABSOLUTE
Kristine Bongcaron B. CONDITIONAL
Patricia Tobias V. FORM
Subject Editors VI. SALE DISTINGUISHED FROM OTHER
CONTRACTS
ACADEMICS COMMITTEE A. DONATION
Kristine Bongcaron B. BARTER
Michelle Dy C. CONTRACT FOR A PIECE OF WORK
Patrich Leccio D. LEASE OF THINGS
Editors-in-Chief E. AGENCY TO BUY AND SELL
F. DACION EN PAGO
PRINTING & DISTRIBUTION G. CONTRACT TO SELL 269
H. BILATERAL PROMISE TO BUY AND SELL

SALES
Kae Guerrero

DESIGN & LAYOUT

Pat Hernandez I. Definition (Art 1458, CC)
Viktor Fontanilla
Rusell Aragones
Romualdo Menzon Jr. Contract where one of the parties (Seller)
Rania Joya obligates himself to:

LECTURES COMMITTEE  Transfer ownership of and

Michelle Arias  to deliver a determinate thing;
Camille Maranan
and the other (Buyer) to pay a price certain in
Angela Sandalo
Heads money or its equivalent.
Katz Manzano Mary Rose Beley
Sam Nuñez Krizel Malabanan
Arianne Cerezo Marcrese Banaag II. Elements
Volunteers

MOCK BAR COMMITTEE The case of (Coronel v CA, 1996) enumerates

the 3 elements of a valid contract of sale
Lilibeth Perez
namely:
BAR CANDIDATES WELFARE  Consent
 Subject matter
Dahlia Salamat
 Price
LOGISTICS _______
Charisse Mendoza A. CONSENT
SECRETARIAT COMMITTEE Meeting of minds upon the thing which is the
object of the contract and the price. (Art 1475,
Jill Hernandez CC)
Head
Loraine Mendoza Faye Celso Requisites—
Mary Mendoza Joie Bajo 1. Capacity
Members
2. Offer and acceptance
3. No vitiation
CIVIL LAW REVIEWER
CAPACITY
All persons who have capacity to enter into
obligations may enter into a contract of sale (Art
1489, CC)
Kinds of Incapacity—
1. Absolute Incapacity (MInD-CI) (Art. 1327,
CC)
a. Minors
b. Insane or Demented
c. Deaf-mutes who do not know how to
write
d. Civil Interdiction
e. Judicially-declared Incompetents(Art.
39)
 Prodigals
 Imbeciles
 Absence & presumption of death
 Persons not of unsound mind but by
reason of age, disease, weak mind,
and other similar causes, cannot
take care of themselves and
manage their property without
outside aid (Easy prey for deceit
and exploitation)
2. Relative Incapacity
a. Husband and Wife (Art 1490, CC)—
(Asked in 75, 76, 00, 02, 06)
General Rule: Cannot sell property to
each other
Exceptions:
1. Separation of property in marriage
settlement, OR
2. Judicial separation of property.
b. Alienage (Art. 39, CC)—
Aliens disqualified to purchase
acquire property.
Exception: if acquisition is through
hereditary succession
c. Trusteeship (Art. 39)
3. Specific Incapacity (Art. 1491, CC) (AGE-
PLJ)
a. Agents—
Property whose administration or sale
was entrusted to them
Exception: principal gives consent.
b. Guardian—
Cannot purchase property of person
under his guardianship
Chapter I. The CONTRACT of SALE
Rationale: Guardianship is a trust of the
highest order, and the trustee can not be
allowed to have any inducement o
neglect his ward’s interest. (Phil Trust
Co v Roldan, 1956)
c. Executors and Administrators—
Property of estate under their
administration
d. Public Officers and Employees—
Property of State/any of its
subdivisions/GOCC, the administration
of which was entrusted to them.
e. Lawyers—
Property or rights in litigation in which
they take part because of their
profession
Rationale: Lawyer may have undue
influence over client. Greed may get the 270
better of the sentiments of loyalty and
SALES
disinterestedness. (Valencia v
Cabanting, 1991)
Prohibition is definite and permanent,
cannot be cured by ratification. (Rubias
v Batiller, 1973)
Exceptions: An assignment to a lawyer
by his client of an interest in the property
does not violate Art 1491, where
 A judgment has been rendered and
has become final; and
 In case of contingency fee
arrangements. The interest of the
lawyer maybe annotated as an
adverse claim on the property
or awarded to his client (Director of
Lands v Ababa, 1979)
f. Justices, Judges, prosecuting attorneys,
clerks—
Property or rights in litigation or levied
upon on execution
Rationale: to prevent fraud and to
surround their profession with prestige
Prohibition applies only on sales or
assignment during the pendency of
litigation involving the property.
(Macariola v Asuncion, 1963)
Effects of Incapacity—
1. Absolute Incapacity
 If both parties are incapacitated:
UNENFORCABLE (Art. 1403 (3))
CIVIL LAW REVIEWER
If only 1 party is incapacitated:
VOIDABLE
 -If necessaries are sold and delivered to
an incapacitated person: must pay a
reasonable price therefore. (Art 1489,
CC)
 “Necessaries” – those which are
indispensable for sustenance, dwelling,
clothing, medical attendance, education
and transportation. (Art 194, Family
Code)
2. Relative Incapacity
 Sale between spouses is VOID.
 Rationale: (as provided in the case of
Medina v CIR, 1961)
rd
 To protect 3 persons who may
have contracted with the spouse
 To avoid undue advantage of the
dominant spouse over the weaker
spouse.
 To avoid indirect prohibition against
donations between spouses.
 Such prohibition shall likewise apply to
common law spouses. (Calimlim-
Canulas v Fortun, 1984) BUT if
already sold to a third person who relied
on the title of his immediate seller,
reconveyance to the seller spouse is no
longer available (Cruz v CA, 1997)
3. Specific Incapacity
 Contracts expressly prohibited by law
are void and cannot be ratified. Neither
can the right to set-up the defense of
illegality be waived. (Art. 1409 (7), CC)
 Sales entered into by guardians,
administrators, and agents (specific
incapacities) in violation of Art. 1491
may be ratified by means of and in the
form of a new contract when the cause
of nullity has ceased to exist. Ratification
is valid only from date of execution of
the new contract and does not retroact.
 Those entered into by public
officer/employees, justices and judges,
and lawyers also in violation of Art. 1491
are inexistent and void from the
beginning. (Rubias v Batiller, 1973).
OFFER AND ACCEPTANCE
In General—
 The contract of sale is perfected at the
moment there is meeting of the minds upon
the thing which is the object of the contract
and upon the price.
 From that moment, the parties may
reciprocally demand performance, subject to
Chapter I. The CONTRACT of SALE
the provisions of law governing the form of
contracts. (Art. 1475, CC)
 A private instrument signed by the
defendant reciting that he bought from the
plaintiff a property at a specific address for a
specific price to be paid as soon as a bill of
sale is signed is not a mere draft but a
perfected agreement and hence, obligatory,
even if there was no statement as to area or
price per meter. (Goyena v. Tambunting,
1902)
Form and Offer—
 Offer must be certain as to the object and
price (Art. 1319, CC)
 Business advertisements of things for sale
are not offers but mere invitations to make
an offer
 Exception: If otherwise provided (Art.
1325, CC)
 Advertisements for bidders are simply
invitations to make proposals (Asked in 80) 271
 Advertiser not bound to accept the
SALES
highest or lowest bid
 Exception: Unless the contrary appears
(Art. 1326, CC)
Form of Acceptance—
 unconditional
 Qualified acceptance = counter-offer (Art.
1319, CC)
 May be express or implied (Art. 1320, CC)
 Acceptance must be in accordance with the
terms and conditions of the offer. There is
no meeting of the minds if the offer lapsed
even though the offeree later on was willing
to accept the terms and conditions of the
offer. (Beaumont vs. Prieto, 1916)
MUST NOT BE VITIATED
 A contract where consent is given through
mistake, violence, intimidation, undue
influence, or fraud is voidable. (Art. 1330,
1390 (2), CC)
 There is fraud where through insidious
words or machinations of one of contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to. (Art. 1338, CC)
_______
B. SUBJECT MATTER
Requisites—
1. Licit
2. Existing, future or contingent
3. Determinate or determinable
CIVIL LAW REVIEWER
MUST BE LICIT (ART. 1459)
The thing is licit when—
1. Within the commerce of man (Art 1347, CC)
Example of properties that are not within the
commerce of man:
a. Those belonging to the State or its
political subdivisions intended for public
use or public service. (Art 420, CC).
b. Church
c. Narcotics or dangerous drugs except
upon prescription (RA 6425, the
dangerous drugs act of 1972)
2. Rights are also licit when not intransmissible
(Art 1347, CC)
Sale of future inheritance is void. (Art. 1347,
CC)—
1. The rights to succession are transmitted
from the moment of the death of the
decedent (Art. 777, CC). Thus, one cannot
sell or promise to sell what he expects to
inherit from a living person. (Rivero v.
Serrano, 1950)
2. -Heir may sell his hereditary rights (which
have accrued).
When the subject matter is illicit, the contract of
sale is void (Art. 1409 (7))
EXISTING, FUTURE, CONTINGENT
The goods which form the subject of a
contract of sale may be either—
1. existing goods owned or possessed by the
seller;
2. goods to be manufactured, raised, acquired
by the seller, also called “future goods”;
3. whose acquisition of the seller depends
upon a contingency which may or may not
happen. (Art 1462, CC)
4. Things having potential existence may be
the object of a contract of sale. (Art 1461,
CC)
Sale of MERE hope or Sale of VAIN hope or
expectancy expectancy
Valid BUT subject to Void
condition that the thing
will come into existence Example: Sale of a
falsified raffle ticket
Example: “Next catch” of which will never win.
a fisherman.
Emptio Rei Speratei Emptio Spei
Valid Void
Parties make the Parties intend
contract depend upon contract to exist at all
the existence of a thing, events
 If the thing does not  Buyer will have to pay
Chapter I. The CONTRACT of SALE
come into existence: the price even if the
contract is considered as thing does not actually
not made and there is no came into existence
obligation to pay the
price
In case of doubt the presumption is in favor of
emptio rei speratae since it is more in keeping with
the commutative character of the contract.
DETERMINATE OR DETERMINABLE
 A thing is determinate when it is particularly
designated or physically segregated from all
others of the same class. (Art 1460, CC)
 A thing is determinable when it is capable
of being made determinate at the time
the contract was entered into without the
necessity of a new or further agreement
between the parties. (Art 1460, CC)
 Failure to state the exact location of the land
does not make the subject matter
indeterminate, so long as it can be located.
(Camacho v C,A 2007)
 The fact that the exact area of subject land 272
in the contract of sale is subject to the result
SALES
of a survey does not render the subject
matter indeterminate. (Heirs of Juan San
Andres v. Rodriguez (2000))
Particular Kinds—
1. Future Goods
Sale of future goods or those goods which
are to be manufactured, raised, or acquired
by seller after the perfection of the sale is
valid (Art 1462, CC). “Future goods” are
those capable of future existence.
2. Sale of Undivided Interest or Share
a. Sole owner of a thing may sell an
undivided interest therein. (Art
1463,CC) Ex., a fraction (½ or half) or
percentage (50%), or “my share in the
property.”
b. The sale of an undivided share in a
specific mass of fungible goods makes
the buyer a co-owner of the entire mass
in proportion to the amount he bought.
(Art 1464,CC)
c. Co-owner cannot sell more than his
share (Yturralde v CA, 1972) (Asked
in 01, 02)
3. Sale of Things in Litigation
a. Sale of things under litigation entered
into by defendant, without the approval
of the litigants or the court is
rescissible. (Art 1381 (4))
the b. NO RESCISSION where the thing is
rd
legally in the possession of 3 persons
who did not act in bad faith (Art 1385
(2))
CIVIL LAW REVIEWER
4. Things Subject to Resolutory Condition
Sale of things subject to a resolutory
condition, i.e. things acquired under legal or
conventional right of redemption, or subject
to reserva troncal, may be the object of a
contract of sale. (Asked in 99) (Art 1465,
CC)
5. Quantity of Subject Matter not determinate
The fact that the quantity is not determinate
shall not be an obstacle to the existence of
the contract provided it is possible to
determine the same, without the need of
new contract. (Art. 1349, CC)
_______
C. PRICE
Requisites (Ce-MoRe)—
1. Certain or ascertainable at the time of
perfection
2. In Money or its equivalent
3. Real
CERTAIN OR ASCERTAINABLE AT THE TIME
OF PERFECTION
Price considered certain in the following
cases—
1. Fixed by agreement of the parties
a. Fixing of price cannot be left to
discretion of one of the parties
b. BUT if such is accepted by the other,
sale is perfected. (Art 1473, CC)
2. Determination is left to the judgment of a
specified person
a. If unable or unwilling: Sale is
inefficacious UNLESS parties
subsequently agree about the price.
b. If in bad faith/by mistake: Courts may fix
price
rd
c. If 3 person is prevented from fixing
price by fault of seller or buyer: Innocent
party may avail of remedies.
3. It be so in reference to another thing, or
when the price fixed is that which the thing
have on a definite day, or in a particular
exchange or market, OR when the amount
fixed is above or below the price on such
day, exchange or market. (Art 1472, CC)
If price cannot be determined (Asked in 76)—
1. Sale is inefficacious (Art. 1474, CC)
Chapter I. The CONTRACT of SALE
2. But if thing or part thereof has been
delivered and appropriated by the buyer, he
must pay a reasonable price therefore.
a. What is reasonable price? A question
of fact dependent on circumstances.
(Art 1474, CC)
b. In the case of Philippine Free Press v
CA (2005), the court held that the price
was reasonable based on factual
determination predicated on offered
evidence (Company’s Balance
Sheet showed the book value or fair
market value of its shares)
IN MONEY OR ITS EQUIVALENT
 Example of “equivalent”: Letters of credit
 If price is partly in money and partly in
another thing: Determine manifest intention
of the parties to see whether it was barter or
sale. (Art 1468,CC) 273
 If intention does not clearly appear, it shall
SALES
be considered a barter if the value of the
thing exceed the amount of money or its
equivalent.(Art 1468,CC)
REAL
Meaning of Real—
When buyer has an intention to pay and the
seller has an expectation to receive the price
1. If simulated: Sale is VOID; BUT act may be
shown to have been a donation or some
other act or contract. (Art 1471, CC)
2. In Labagala vs. Santiago (2001), Petitioner
admittedly did not pay any centavo for the
property. Hence, the sale is void.
If Price is false (real consideration is not the
same as that stated in the contract)—
1. Sale is void
2. UNLESS proved to be founded on another
true and lawful price (Art 1353, CC)
_______
Gross Inadequacy of Price—
1. General Rule: Does not affect a contract of
sale. (Art 1470,CC)
 The stipulation in a contract of sale
which states that the consideration is
“P1 and other valuable considerations”
does not make the contract void. Gross
inadequacy of price does not affect the
contract of sale except that it may
indicate a defect in consent. (Bagnas v.
C.A., 1989)
CIVIL LAW REVIEWER
2. Exceptions:
a. It may indicate a defect in consent such
as fraud, mistake, or undue influence
b. It may indicate that the contract was in
reality a donation or some other act or
contract
c. Inadequacy would make the contract of
sale rescissible where a contract was
entered into by the guardian of a ward or
a representative of an absentee, without
the court’s approval, and the owner
suffers lesion by more than ¼ of the
value of the thing sold. (Art 1381 (1) (2),
CC)
Manner of Payment—
Disagreement on the manner of payment is
tantamount to a failure to agree on the price.
(Toyota Shaw vs. CA, 1995)
III. Stages
A. Negotiation/Preparation
From the time the parties indicate interest in the
contract up to the time said contract is perfected
1. Offer
a. General Rule: Offer may be withdrawn
at any time without even communicating
such withdrawal to the interested buyer.
b. Exception: When the offerer has
allowed the offeree a certain period to
accept, the offer may be withdrawn at
any time before acceptance by
communicating such withdrawal. (Art
1324, CC)
c. Exception to the exception: Cannot be
withdrawn within the period if offer is
founded upon a consideration. (Art 1324
and 1479, CC)
2. Option Contract (Asked in 75, 77, 80, 93,
02)
a. Definition
 An accepted unilateral promise to
buy or sell supported by a
consideration distinct from the price
(Art 1479, CC)
 An optional contract is a privilege
existing in one person, for which he
had paid a consideration, which
gives him the right to buy, for
example, certain merchandise or
certain specified property, if he
chooses, at any time within the
Chapter I. The CONTRACT of SALE
agreed period, at a fixed price. (De
la Cavada vs. Diaz, 1918)
 An option is not of itself a purchase,
but merely secures the privilege to
buy.
 A consideration for an optional
contract is just as important as the
consideration for any other kind of
contract. If there was no
consideration for the option, then it
cannot be enforced any more that
any other contract where no
consideration exists. (Baviera)
b. Difference from Sale:
SALE OPTION CONTRACT
Bilateral Unilateral: gives a right to buy
or to sell, but imposes no
obligation on the part of the
option-holder, aside from the
consideration for the offer
Sale of property Sale of right to purchase
274
SALES
c. Right of first refusal (Asked in 93, 96,
98, 02, 08)
 As to enforceability
 Equatorial Realty Development
vs. Mayfair, (1996): If the right to
the first offer is embodied in the
contract, it should be executed
according to the terms
stipulated. The right should be
enforced according to the law
on contracts and not on the
panoramic and indefinite rule on
human relations. This juridical
relation is not amorphous nor is
it merely preparatory.
 When the grantee fails to exercise
the right
 Paranaque Kings vs. CA,
(1997): Only after the grantee
st
fails to exercise its right of 1
priority under the same terms
and conditions within the period
agreed upon, could the grantor
validly offer to sell the property
rd
to a 3 person under the same
terms as offered to the grantee.
 As to the effects of the violation
of the right
 Rosencor Devt. Corp. Vs.
Inquing (2001): A sale made in
violation of a right of first refusal
is valid but rescissible, and
may be the subject of an action
for specific performance.
 However, before the sale to the
rd
3 person may be rescinded, he
CIVIL LAW REVIEWER Chapter I. The CONTRACT of SALE

must have been actually or Option Money vs. Earnest Money (Limson vs.
constructively aware of the Ca, 2001)—
st
right of 1 refusal at the time
he bought it. OPTION MONEY EARNEST MONEY
 The sanction for the Separate and distinct Part of purchase price
enforcement of the right of first consideration from the (Art 1482, CC)
refusal against third persons is purchase price
based on Art. 19 of NCC, as no Given when sale is not Given only when there
yet perfected is already a sale
real right was created on the
When given, the would- When given, the buyer
property. be-buyer is not required is bound to pay the
to buy, but may even balance
 Difference from sale: forfeit it depending on
the terms of the option
ST
SALE RIGHT OF 1 REFUSAL Grantee of option is still Buyer manifests his
Bilateral Unilateral undecided whether or earnest desire to buy
Price and other Price and other terms are yet to not to buy or sell the the property
terms of payment be agreed upon property (Baviera)
are certain _______
the thing to be sold must be determinate
C. Consummation
 Distinction from Option Contract
ST
Begins when the parties perform their respective 275
OPTION RIGHT OF 1 REFUSAL undertakings under the sale. It culminates in the

SALES
CONTRACT extinguishment of the sale. (See obligations of
Separate No need for a separate seller and buyer, Chapter II)
consideration is consideration
necessary
Grantee has the No right to buy or sell, only a
st
right to buy or sell right to match the 1 offer to IV. Kinds of Sale
buy should the grantor decide (Asked in 97, 00)
to sell
A. Absolute Sale
_______
Sale is not subject to any condition
B. Perfection
whatsoever; title passes to the buyer upon
(Asked in ’88 and ’91)
delivery of thing sold
When Perfected—
B. Conditional Sale
1. Contract of sale is a consensual contract,
Contract is subject to certain conditions
hence perfected at the moment of the
(usually the payment of the purchase price);
meeting of the minds of the parties as to the
title will only pass once the conditions have
object of the contract and the price. (Art
been fulfilled
1475,CC)
2. It is the proof of all the essential elements of
In some cases, the Court makes finer
the contract of sale, and not the mere giving
distinctions between a conditional sale and a
of earnest money, which establishes the
contract to sell:
existence of a perfected sale. (Platinum
a. Contract to sell- The fulfilment of the
Plans Phils. vs. Cucueco, 2006)
suspensive condition, which is the full
payment of the price, will not
Effect of Perfection—
automatically transfer ownership to the
From the moment of the perfection of the
buyer although the property may have
contract of sale, the parties may reciprocally
been previously delivered to him.
demand performance, subject to the provisions
b. Conditional Sale: The fulfilment of the
of the Statute of Frauds. (Art 1475,CC)
suspensive condition renders the sale
absolute and affects the seller’s title
Earnest Money—
thereto such that if there was previous
Definition- paid in advance of the purchase
delivery of the property, the seller’s
price agreed upon by the parties in a contract of
ownership or title the property is
sale, given by the buyer to the seller, to bind the
automatically transferred to the buyer.
latter to the bargain. (Asked in 93, 02)
(Ursal vs. CA, 2005)
CIVIL LAW REVIEWER Chapter I. The CONTRACT of SALE

V. Form VI. Sale Distinguished From Other

Contracts
General rule: No form required as to validity
since sale is perfected by consent of the parties. A. DONATION

The sale may be (Art.1483,CC): SALE DONATION

1. Written Onerous Gratuitous
2. Oral Perfected by mere Must comply with the
3. Partly written and partly oral consent formalities required by
4. Inferred from the conduct of the parties law. (Art 745, CC)

Exceptions: When the price of the contract of sale is

1. Statute of Frauds (Art,1403 (2),CC) simulated, the sale may be void but the act may
a. Contract or some memorandum thereof be shown to have been in reality a donation or
must be in writing and subscribed by some other contract. (Art.1471.CC)
the party or his agent, otherwise
contract is unenforceable. Unless B. BARTER
ratified by failure to object to oral
evidence or acceptance of benefits SALE BARTER
under the contract Consideration is price Consideration is
in money or its another thing
b. What are under the Statute of Frauds:
equivalent 276
 Sale of goods, chattels, or things in

action at a price not less than P500
 Sale not to be performed within 1
year
 Sale of real property or an interest
therein (Art 1358, CC)
c. Applies only to executory contracts, not
to contracts either totally or partially
performed. (Iñigo v. Estate of Maloto,
1967)
2. Sale of realty by an agent
Agent’s authority must be in writing,
otherwise the sale is void (Art.1874, CC)
3. Sale of large cattle
To be valid, transfer of large cattle must be
registered with the municipal treasurer
(Sec.529, Revised Administrative Code)
Electronic Commerce Act (RA 8792)
1. Electronic documents have the legal effect,
validity or enforceability of any other
document or legal writing
2. As long as electronic document maintains its
integrity and reliability and is capable of
being displayed to the person to whom it is
to be presented, containing the electronic
signature of the person sending it. (Sec 7, 8
of RA 8792)
SALES
Barter is a contract where one of the parties
binds himself to give one thing in consideration
of the other’s promise to give another thing
(Art.1638, CC)
If consideration consists partly in money and
partly in another thing, the intention of the
parties determines whether the contract is one of
sale or barter:
 If manifest intention is not clear: Barter
when the value of thing is more than the
amount of money or its equivalent,
otherwise, sale. (Art.1468)
C. CONTRACT FOR A PIECE OF WORK
SALE CONTRACT FOR A
PIECE OF WORK
Goods are manufactured Goods are manufactured
or procured in the for customer upon his
ordinary course of special order
business
For the general market, Specifically for customer
whether on hand or not
The fact that the object were made by the seller
only when customers placed their orders, does
not alter the nature of the contract of sale, for it
only accepted such orders as called for the
employment of such materials as it ordinarily
manufactured or was in a position habitually to
manufacture such. (Celestino Co & Co vs.
Collector, 1956)

When each product or system executed is

always UNIQUE and could not mass-produce
the product because of its very nature, such is a
CIVIL LAW REVIEWER Chapter I. The CONTRACT of SALE

contract for a piece of work. (Commissioner vs. SALE BILATERAL PROMISE TO BUY
Engineering Equipment and Supply Co., AND SELL
1975) Consideration Consideration is the promise
Buyer: thing made by the other (Baviera)
D. LEASE OF THINGS Seller: price
Title passes to No transfer of title
the buyer
SALE DACION EN PAGO
No pre-existing debt Pre-existing debt
Creates an obligation Extinguishes the
obligation (mode of
payment)
Price is more freely Price is value of the thing
agreed upon, fixed by the given
parties

There is a novation of the contract of loan into a

contract of sale when the creditor agrees to
accept a thing in payment of the debt. Hence, if
the thing given in payment turns out to belong to
another, the creditor’s remedy should be
governed by the law on sales, not loan.
(Baviera)
277
E. CONTRACT TO SELL

SALES
(Asked in 97, 01, 03)

Contract of Sale Contract to Sell

Ownership is transferred Ownership is only
upon delivery transferred upon full
payment of price
Non-payment is a Full payment is a positive
resolutory condition suspensive condition,
hence non payment
would not give rise to the
obligation to transfer
ownership
Conditional Contract of Contract to sell
Sale
Sale is already perfected No perfected sale yet
A subsequent buyer is A subsequent buyer is
presumed to be a buyer presumed to be a buyer
in bad faith in good faith

NOTE: Contract to Sell is an executory contract,

while a Contract of Sale is a consummated
contract.

F. BILATERAL PROMISE TO BUY AND

SELL
(Asked in 80, 91)

A promise to buy and sell a determinate thing for

a price certain is reciprocally demandable. (Art
479, CC)

Like a sale, the thing must be determinate and

the price certain.
CIVIL LAW REVIEWER
Chapter II. Obligations of the Seller and
Buyer
I. OBLIGATIONS OF THE SELLER
A. TO TRANSFER OWNERSHIP
B. TO WARRANT AGAINST EVICTION AND
HIDDEN DEFECTS
C. TO PRESERVE THE THING
D. TO PAY FOR THE EXPENSES FOR THE
EXECUTION AND REGISTRATION OF
THE DEED OF SALE
II. OBLIGATIONS OF THE BUYER
A. TO ACCEPT DELIVERY
B. TO PAY THE PRICE OF THE THING SOLD
I. Obligations of the Seller
Obligations of the Seller (TWPP)—
1. Transfer ownership
2. Warrant against eviction and hidden defects
3. Preserve the thing
4. Pay for the expensed for the execution and
registration of the deed of sale
A. To transfer ownership
(Asked in 84, 98, 99, 03)
Obligation to transfer ownership and to deliver is
really implied in every contract of sale (Arts.
1458-1459)
Transfer of ownership requires delivery (Art.
1495)
General Concepts—
1. Delivery comprises 2 obligations in Art.
1495:
a. Actual duty to deliver
b. Transfer of ownership – can only be
accomplished via delivery
2. What to Deliver
a. Thing sold (Art. 1495)
b. Fruits (Art. 1164 & 1537)
c. Accessions and accessories (Art. 1166
& 1537)
 Improvements by seller at his
expense grants him a usufructuary
right.
 No indemnification
 But he may remove it to the extent
that there is no damage (Art. 1538)
3. Where to Deliver
a. A hierarchy is followed (STOR):
 Stipulation
 Usage of trade
 Seller’s place of business (office)
Chapter II. OBLIGATIONS of the SELLER and BUYER
 Seller’s residence
b. In case of specific goods, which the
parties knew to be at some other place
when the contract was perfected, that
place is the place of delivery
c. If goods are at the time of sale
possessed by a third person, then there
is no delivery until he acknowledges to
the buyer that he holds the goods for
buyer.
4. When to Deliver
Absent a stipulation as to time, delivery must
be made within a reasonable time; demand
or tender of delivery shall be made at a
reasonable hour.
Ways of Effecting Delivery—
1. Actual Delivery
a. When deemed made: when the thing 278
sold is placed in the control and
SALES
possession of the vendee (Art. 1497)
b. Not always essential to passing of title
(Art. 1475)
c. Parties may agree when and on what
conditions the ownership in the subject
of the contract shall pass to the buyer
(example: Art 1478 where ownership will
only pass after full payment of the price)
2. Constructive Delivery
a. Execution of public instrument (Art
1498, par. 1)
 General rule: produces the same
legal effects of actual delivery.
 Exceptions:
 The intention of the parties is
otherwise.
 At the time of execution, the
subject matter was not subject
to the control of the seller which
must subsist for a reasonable
length of time after execution.
(Pasagui v Villablanca, 68
SCRA 18)
 “Control” over thing sold must be
such that seller is capable of
physically transferring it to buyer
b. Symbolic Delivery
 Delivery of keys of the place or
depositary where the movable is
stored or kept. (Art 1498, CC)
 Unless otherwise agreed, when
symbolic delivery has been made,
the seller is not obliged to remove
tenants to place the buyer in actual
CIVIL LAW REVIEWER
possession of the property as he
has already complied with his
obligation to transfer ownership of
and deliver the thing sold. (Power
Commercial and Industrial Corp.
v. CA, 1997; Sabio v. The
International Corporate Bank,
Inc., 2001)
c. Tradition Longa Manu (Long Hand)
 Delivery of thing by mere
agreement.
 Example: Seller points to the
property without actually transferring
physical possession thereof.
 When an employer assigned all its
rights and title to all surplus property
salvaged by the contractor, tradition
longa manu takes place. Delivery is
upon the moment a thing is
salvaged. (Board of Liquidators v.
Floro, 1960)
d. Tradition Brevi Manu (Short Hand)
MOVABLE is delivered when the buyer
had the thing already in his possession
before the sale took place, not as owner
but as lessee, borrower, or depositary.
e. Tradition Constitutum Possessorium
Seller continues to be in possession of
the property sold, by virtue of a lease
contract agreement with the vendee.
f. Delivery to a Common Carrier
 General Rule: Delivery to the
courier or carrier tantamount to
delivery to buyer.
 Exceptions
 Seller reserved title by the form
of the bill of lading, with intent to
remain the owner, not merely for
the purpose of securing
payment, OR
 Contrary intent appears in the
contract (i.e. seller is required to
deliver goods to buyer at the
point of destination)
 F.O.B.: “Free on Board”
When seller bears the expenses
of transportation up to the
F.O.B. point.
 C.I.F.: “Cost, Insurance,
Freight”
Price quoted includes the costs
of the goods, insurance, and
freight charges on the goods up
to the point of destination.
Chapter II. OBLIGATIONS of the SELLER and BUYER
 F.A.S.: “Free Alongside”
Seller bears the expenses of
transportation until he delivers
the goods alongside a vessel at
a named port.
Completeness of Delivery—
1. When may the seller refuse to deliver:
a. No payment yet or no period for
payment has been fixed in the contract
(Art.1524);
b. The buyer loses the right to make use
of the term, as when:
 He becomes insolvent UNLESS he
gives a guaranty or security for the
debt;
 He does not does not furnish the
seller the guaranties or securities he
promised;
 He impairs the guaranties or
securities or they disappear 279
fortuitously UNLESS he immediately
SALES
gives new ones equally satisfactory;
 He violates any undertaking, in
consideration of which the seller
agreed to the period;
 He attempts to abscond. (Art.1536)
2. Rules on Sales of Goods
a. When Quantity less than expected
 Buyer may reject all
 Buyer accepts with knowledge of
seller’s inability to deliver the rest –
buyer pays at contract price
 Buyer has used or disposed prior to
knowing seller’s inability to deliver
the rest – buyer pays fair value
b. Quantity more than expected
 If divisible, buyer may reject excess
 If indivisible, buyer may reject all
c. Quality different or different goods
 If divisible, buyer may accept the
goods compliant with contract and
reject those that are not
 If indivisible, buyer may reject all
(Art. 1522)
d. Sale of specific mass of goods
In the sale of fungibles where the
measure or weight has not been
agreed upon nor is there a fixed rate
based upon a measurement, the
subject matter of the sale is a
determinate object – the specific
mass; seller is merely required to
deliver such mass even if actual
quantity falls short of parties’
estimate (Art. 1480)
CIVIL LAW REVIEWER
e. Delivery by installments
 By default, buyer is not bound to
accept delivery of goods by
instalments
 In a contract of delivery by
installment to be paid for via
installment as well, delay or breach
may not necessarily mean breach of
the entire contract; depending on
the circumstances, breach may be
severable and the aggrieved party
is entitled to damages and not
rescission. (Art. 1583)
3. Rules on Sales of Immovables
a. Sale at a fixed rate per unit of measure
 Seller bound to deliver entire land
 If the area is less than that stated,
buyer may rescind or demand a
proportionate reduction in price
 If a part of the land is not of the
quality stated in the contract, buyer
may rescind or demand
proportionate reduction in price
 Buyer may only avail of rescission if
the area deficiency is 10% or more
of total area or if the inferior value of
the part of the land exceeds 10% of
the price agreed upon. (Art. 1539)
 If the area turns out to be greater
than that stated, buyer may accept
area included and reject the excess
or accept all and pay
proportionate increase in price (Art.
1540)
b. Sale for lump sum
 Follows the same rule as the sale of
a specific mass which is explained
above
 There is no change in price even if
area or number turns out to be
greater or lesser than that stated
(Art. 1542)
 Exception: when the excess or
deficiency is no longer reasonable;
in Asian v Jalandoni, 1923, 644 sq
m was found to be unreasonable.
 Exception to the exception: when
buyer expressly assumes risk on
actual area of the land. (Garcia v
Veloso, 1941)
 If the price per unit or measure is
not provided for in the contract, then
the rules of lump sum sale should
prevail. (Sta. Ana v Hernandez,
1966)
Chapter II. OBLIGATIONS of the SELLER and BUYER
Effect of Delivery—
1. Delivery, generally, results in transfer of
ownership from seller to buyer.
2. As such, it also transfers the risk of loss of
the thing sold to the buyer.
3. Acceptance is not a condition for the
completeness of delivery; even with such
refusal of acceptance, delivery will be
deemed completed and produce its legal
effects.
4. By default, expenses of and incidental to
putting the goods into a deliverable state
must be borne by seller. (Art. 1521)
When delivery does not transfer title—
1. Sale on approval, trial, or satisfaction
General Rule: Title remains with the seller
Exceptions:
a. Buyer signifies his approval or
acceptance to the seller or does any 280
a other act adopting the transaction
SALES
b. Retains the goods without giving notice
of rejection after the time fixed has
expired, if no time has been fixed, after
the expiration of a reasonable time (Art
1502, CC)
Difference between sale on approval and
sale on return
a Sale on Approval Sale on Return
Ownership does not pass Ownership passes upon
upon delivery delivery, but buyer may revest
ownership in the seller by
returning or tendering the
goods within the time fixed in
the contract
Depends on the character Depends on the will of the
or quality of goods buyer
Subject to a suspensive Subject to a resolutory
condition condition
Risk of loss remains with Risk of loss remains with the
the seller buyer
2. Express Reservation
If it was stipulated that ownership in the
thing shall not pass to the purchaser until he
has fully paid the price. (Art 1478, CC)
3. Implied Reservation
The following are instances when there is an
implied reservation of ownership
a. Goods are shipped, but by the bill of
lading goods are deliverable to the seller
or his agent, or to the order of the seller
or his agent
CIVIL LAW REVIEWER
b. Bill of lading is retained by the seller or
his agent.
c. When the seller of the goods draws on
the buyer for the price and transmits the
bill of exchange and bill of lading to the
buyer, and the latter does not honor the
bill of exchange by returning the bill of
lading to the seller.
4. When sale not valid
eg. When the thing sold is a public property
5. When Seller is not the owner
(Asked in 77, 78, 86, 87)
General Rule: Ownership is not acquired by
the buyer. One cannot give what one does
not have. (Art 1505, CC)
Exceptions: (RE-ROM)
a. Seller has a Right to transfer ownership
 Seller need not be the owner of the
thing at the time of perfection of the
contract It is sufficient that seller has
a right to transfer ownership thereof
at the time it is delivered (Art. 1459)
 One who sells something he does
not own yet is bound by the sale
when he acquires the thing later
(Bucton vs Gabar, 55 SCRA 469)
b. Estoppel: Owner is by his conduct
precluded from denying the seller’s
authority to sell. (Art. 1434)
c. Registered land bought in good faith
 General rule: Buyer need not go
beyond the Torrens title
 Exception: When he has actual
knowledge of facts and
circumstances that would impel a
reasonably cautious man to make
further inquiry
d. Order of courts Statutory Sale
In execution sale, the buyer merely
steps into the shoes of the judgment
debtor (Rule 39, sec. 33, ROC)
e. When goods are purchased in
Merchant’s store, Fair, or Market (Art
1505, CC)
The policy of the law has always
been that where the rights and
interest of the vendor clash with that
of an innocent buyer for value, the
latter must be protected. (Sun
Brothers and Co. V. Velasco,
(1958)
Chapter II. OBLIGATIONS of the SELLER and BUYER
6. Sale by person having a voidable title
a. True owner may recover the thing when
provided the ff. requisites concur:
 Subject matter is movable
 Owner has either lost the thing or
has been unlawfully deprived. (Art
559, CC)
b. Reimbursement is necessary before
owner can recover when:
 Buyer acted in good faith
 Acquired at a public auction (Art
559, CC)
c. Recovery no longer possible when:
 Buyer in good faith
 Acquired it at a merchant’s store,
fair or market. (Art 1506, CC)
__________
B. To warrant against eviction & hidden
defects (Art. 1495; 1547)
Warranties— 281
A statement or representation made by the seller
SALES
contemporaneously and as part of the contract
of sale, having reference to the character,
quality, or title of the goods, and by which he
promises or undertakes to ensure that certain
facts are or shall be as he then represents.
Effects of Warranties—
1. Natural tendency is to induce buyer to
purchase the subject matter
2. Buyer purchases subject matter relying
thereon
3. Seller liable for damages in case of breach
Effects of Waivers—
Only applicable to waiver of warranty against
eviction (see the following section) – parties may
increase or decrease warranty against eviction
but the effect depends on good/bad faith of the
seller
1. Seller in bad faith and there is warranty
against eviction – null and void
2. buyer without knowledge of a particular risk,
made general renunciation of warranty – not
waiver but merely limits liability of seller in
case of eviction (pay value of subject matter
at time of eviction)
3. buyer with knowledge of risk of eviction
assumed its consequences and made a
waiver – vendor not liable
4. waiver to a specific case of eviction – wipes
out warranty as to that specific risk but not
as to eviction caused by other reasons
CIVIL LAW REVIEWER Chapter II. OBLIGATIONS of the SELLER and BUYER

Condition v. Warranty— Express Warranty False Representation

Concealment of facts  When concealment of
Condition Warranty does not necessarily facts comes with an
Pertains to and affects Goes into the amount to false active misstatement of
the existence of the performance of an representation fact or a partial
obligation obligation and may, in statement of fact such
itself, be an obligation that withholding of that
Non-happening does not Non-fulfillment unsaid portion makes
amount to breach of constitutes breach of that which is stated
contract contract absolutely false
Must be stipulated Stipulation or operation  However, buyer who
of law fails to inspect condition
May attach to either to Always relates to the of property despite
the seller’s duty to subject matter or the ample opportunity to do
deliver thing or some seller’s obligations as to so and no opposition on
other circumstance the subject matter the part of seller cannot
later on allege false
representation. (Phil
 If seller has promised that the condition
Mftg Co. v Go Jucco,
should happen or be performed, the 1926) This is because
buyer may treat the nonperformance of buyer’s duty to inspect
the condition as a breach of warranty. remains despite false
(Art.1545) representation by the
seller. Buyer has the 282
Form— duty to exercise due

SALES
1. Express Warranty (APIR) diligence.
For there to be express warranty, the
following requisites must concur:
a. An affirmation of fact or any promise 2. Implied Warranty
relating to the thing sold; a. Implied Warranty of Title
b. The natural tendency of such affirmation b. Implied Warranty against Encumbrance
or promise is to induce the buyer to buy; / Non-Apparent Servitudes
c. The buyer buys the thing relying c. Implied Warranty against Hidden
thereon. (Art. 1546) Defects (Art. 1547)
d. Made before the sale not upon delivery  Implied warranty as to
or any other point Merchantable Quality and Fitness
of Goods
An express warranty can be made by and  Implied warranty against
also be binding on the seller even in the sale Redhibitory Defect in the Sale of
of a second hand article. (Moles v. IAC, Animals (Art. 1572)
1989)  Quality and Fitness of Goods in
Sale by Sample or Description
Express Warranty Dealer’s or Trader’s d. Other Warranties
Talk
What is specifically  Affirmation of the Implied Warranty of Title—
represented as true in value of the thing or 1. Implied warranty arises by operation of law
said document cannot be statement of the and need not be stipulated in the contract of
considered as mere seller’s opinion only sale.
dealer's talk. (Moles v. is not a warranty 2. Warranty of Seller’s Right to Sell: seller
IAC, 1989) unless:
warrants his right to sell at the time the
- The seller made
it as an expert; ownership is to pass.
- It was relied upon  Inapplicable to a sheriff, auctioneer,
by the buyer. mortgagee, pledgee, or other person
(Art.1546) professing to sell by virtue of authority in
 Ordinarily, what does fact or law. (Art. 1547)
not appear on the face 3. Warranty against Eviction: seller warrants
of the written that buyer, from the time ownership passes,
instrument (Moles v. shall have and enjoy legal and peaceful
IAC, 1989) possession of the thing. Its requisites are:
a. Buyer is deprived of the whole or a part
of the thing sold;
CIVIL LAW REVIEWER
b. Eviction is by final judgment
c. Final judgment based on a right prior to
the sale or an act imputable to the
vendor
d. Seller is summoned and made co-
defendant in the suit for eviction at the
instance of the buyer. (Power
Commercial and Industrial Corp. v.
CA, 1997)
Implied Warranty against Encumbrance /
Non-Apparent Servitudes—
Requisites for breach:
1. Thing sold is an immovable
2. Burden or servitude encumbering the thing
sold is
a. Non-apparent to the naked eye
b. Not mentioned in the agreement
c. Of such nature that it must be presumed
that the buyer would not have bought it
had he been aware thereof
d. Not recorded in the Registry of Property
unless there is an express warranty that
the thing is free from all burdens and
encumbrances (Art.1560)
Implied warranty against Hidden Defects—
Requisites for breach:
1. The defect renders the thing sold unfit for
the use for which it was intended OR
diminishes its fitness for such use to such an
extent that had the buyer been aware
thereof, he would not have bought it or
would have paid a lower price;
2. The defect is not patent or visible;
3. The buyer is not an expert who, by reason of
his trade or profession, should have known
the defect
4. The seller is aware of the hidden fault or
defect, OR even he is not aware thereof, if
there is no stipulation to the contrary
(Arts.1561 &1566)
Implied warranty as to Merchantable Quality
and Fitness of Goods—
Merchantable Quality:
1. Where the goods are brought by description
from a seller who deals in goods of that
description (Art.1562)
2. In a sale by sample, if the seller is a dealer
in goods of that kind and the defect is not
apparent on reasonable examination of the
sample (Art.1566)
Fitness for a particular purpose: Where the
buyer expressly or impliedly makes known to the
seller the particular purpose for which the goods
are acquired AND it appears that the buyer
Chapter II. OBLIGATIONS of the SELLER and BUYER
relies on the seller’s skill or judgment
(Art.1562(1))
Implied warranty against Redhibitory Defect
in the Sale of Animals (Art. 1572)—
 Redhibitory defect- a hidden defect of
animals of such nature that expert
knowledge is not sufficient to discover it,
even in case a professional inspection has
been made
 No warranty in case of (Art. 1574):
a. Animals sold at fairs or public auctions
b. Livestock sold as condemned
 The following sales are void (Art. 1575):
a. Sale of animals suffering from
contagious diseases
b. Sale of animals unfit for the purpose for
which they are acquired as stated in the
contract
 Veterinarian liable if he fails to discover or
disclose the hidden defect through
ignorance or bad faith (Art 1576) 283
 Seller liable if animal dies within 3 days after
SALES
its purchase due to a disease that existed at
the time of sale. (Art 1578)
Other Warranties—
1. Warranty in Sale of Consumer Goods
Consumer goods – goods primarily for
personal, family, household or agricultural
purposes, which shall include but not limited
to food, drugs, cosmetics, and devices
:
(Sec.4(q), RA 7493 Consumer Act of the
Phil)
Kinds:
a. “Full warranty”- if the written warranty
meets the minimum standards
b. “Limited warranty- if the written warranty
does not meet the minimum standards
(Sec.6(c), RA7394)
Minimum standard for warranties that the
warrantor shall:
a. Remedy such consumer product within
a reasonable time and without charge in
case of a defect, malfunction or failure to
conform to such written warranty;
b. Permit the consumer to elect whether to
ask for a refund or replacement without
charge of such product or part, as the
case may be, where after reasonable
number of attempts to remedy the defect
or malfunction, the product continues to
have the defect or to malfunction
The warrantor will not be required to perform
the above duties if he can show that the
defect, malfunction or failure to conform to a
CIVIL LAW REVIEWER Chapter II. OBLIGATIONS of the SELLER and BUYER

written warranty was caused by damage due Exception: if there is a stipulation to the
to unreasonable use thereof. (Sec.68(d), RA contrary (Art. 1487)
7394)
Expenses incurred subsequent to the transfer of
2. Warranty in sale of Subdivision Lot or title are to be borne by the buyer, unless caused
Condominium Units by the fault of the seller
The owner or developer shall be answerable
and liable for the facilities, improvements,
infrastructures or other forms of II. Obligations of the Buyer
development represented or promised in
brochures, advertisements and other sales
Obligations of the Buyer—
propaganda disseminated by the owner or
1. To Accept delivery
developer or his agents and the same shall
2. To Pay the price of the thing sold
form part of the sales warranties enforceable
against said owner or developer, jointly and
Pertinent Rules—
severally. (Sec.19, PD 957: The
1. In a contract of sale, the seller is not
Subdivision and Condominium Buyers’
required to deliver the thing sold until the
Protective Decree)
price is paid nor is the buyer required to pay
the price before the thing is delivered in the
__________
absence of an agreement to the contrary
(Art 1524) 284
C. To preserve the thing, pending delivery,
2. If stipulated, then the buyer is bound to
with proper diligence (Art. 1163)

SALES
accept delivery and to pay the price at the
time and place designated
Duration: From the perfection of sale until
3. If there is no stipulation as to the time and
delivery (Art 1480)
place of payment and delivery, the buyer is
bound to pay at the time and place of
Default standard of care: Diligence of a good
delivery
father of a family
4. In the absence also of stipulation, as to the
place of delivery, it shall be made wherever
General rule: seller is liable for loss or
the thing might be at the moment the
deterioration (Art. 1174)
contract was perfected (Art. 1521)
5. If only the time for delivery of the thing sold
Exception: fortuitous event (Art. 1174)
has been fixed in the contract, the vendee is
required to pay even before the thing is
Exception to exception: seller is still liable for
delivered to him.
fortuitous event if
1. Law provides for it (e.g. delay or promising
First Obligation: accept delivery—
to deliver the same thing to 2 or more
1. Form
persons with different interests – Art. 1165)
a. Express: buyer intimates acceptance
2. By stipulation
b. Implied:
3. Nature of obligation requires assumption of
 Goods delivered to the buyer and he
risk
does any act in relation to them that
is inconsistent with the ownership of
Fungibles sold for a price fixed according to
the seller.
weight, number or measure: duty to preserve
 After the lapse of a reasonable time,
begins only after the things are weighed,
the buyer retains the goods without
counted or measured except when seller is
intimating to the seller that he has
already in delay.
rejected them. (Art.1585)
__________
2. Manner
Right of Inspection: reasonable
D. To pay for the expenses for the execution
opportunity to examine the goods upon
and registration of the deed of sale (Art.
delivery. If there is a stipulation that delivery
1487)
is preconditioned on payment, then buyer
has no right of inspection until he has paid.
General rule: The seller has the duty to pay for
(Art.1584) Exception: in case such right of
the expenses for the execution and registration
inspection is permitted by agreement or
of the deed of sale
usage trade.
CIVIL LAW REVIEWER Chapter II. OBLIGATIONS of the SELLER and BUYER

3. Effect of Refusal to accept new term (Heirs of Escanlar, et.al. v.

a. If buyer refuses to accept goods, having
the right to do so, he is not bound to
return them to the seller; it being
sufficient that he notifies the seller of his
refusal to accept
 If he voluntarily constitutes himself a
depositary of the goods, he shall be
liable as such. (Art.1587)
b. Unjust refusal to accept still results to
transfer of ownership; title to the goods
passes to the buyer from the moment
they are placed at his disposal, except if
ownership has been reserved by the
seller (Art.1588)
Second Obligation: pay the price of the thing
sold (Art. 1582)—
1. Payment of interest
Buyer is liable for interest when: (SFD)
a. Interest is stipulated;
b. Thing sold produces fruits or income;
c. Buyer is in default - interest accrues
CA, 1997)
 R.A. 6552 (Maceda Law) – applies to
sale or financing of real estate on
installment (Rillo v. Court of
Appeals,1997)
 Buyer is awarded a grace period of
1 month per year of installments
paid or 60 days, whichever is
higher, within which he may pay
without additional interest
o may be used once every 5
years of the life of the contract
or any of its extensions
 If contract is to be cancelled, seller
must first:
o 30 day notice of cancellation,
and
o refund cash surrender value to
buyer; amount is equivalent to
50% of total payments made
including deposits, options and 285
down-payments plus 5% for

SALES
from the time of judicial or extrajudicial every year in excess of 5 years
demand for payment of the life of the contract or any
of its extensions
2. Suspension of payments
Buyer may suspend payment when:
a. his ownership or possession of the thing
is disturbed or
b. he has reasonable grounds to fear such
disturbance by a vindicatory action or a
foreclosure of mortgage

Exceptions: buyer cannot suspend

payment when:
a. seller gives security for the return of the
price in a proper case
b. it has been stipulated that,
notwithstanding any such contingency,
the buyer shall be bound to pay (Art.
1590)

Suspension may continue until the seller has

caused the disturbance or danger to cease
 A mere act of trespass shall not
authorize the suspension of the
payment. (Art.1590)

3. Sale of real property

 In the sale of immovable property, buyer
may pay even beyond the expiration of
the period agreed upon, as long as no
demand for rescission of the contract
has been made upon him either
judicially or by a notarial act, despite a
stipulation providing for ipso jure
rescission (Art.1592) (Asked in 88, 00)
After demand, court may not grant him a
CIVIL LAW REVIEWER Chapter III. DOUBLE SALES

both registration in its ordinary and strict

Chapter III. Double Sales sense and cancellation, annotation, and
(Asked in 77, 87, 89, 98, 01, 04) even marginal notes. (Cheng v. Genato,
1998)
I. General Rule
II. Requisites
NOTE: Pencilled entries on the title are not
III. Rules governing sale of movables,
immovables and unregistered lands
considered registration (AFPMBAI v.
IV. Purchaser in good faith Court of Appeals, 1999).

C. Sale by Virtue of Execution and

I. General Rule
Prior tempore, potior jure (“he who is first in time
is preferred in right”) applies.
II. Requisites
Requisites (Cheng v Genato, 1998)
1. 2 or more valid sales;
2. Same subject matter;
3. 2 or more buyers with conflicting interests at
odds over the rightful ownership of the thing
Attachment
Art. 1544 does NOT apply to the sale of
unregistered land at an execution sale
because a buyer of unregistered land at a
execution sale only steps into the shoes of
the judgment debtor, and merely acquires
the latter's interest in the property sold as of
the time the property was levied upon.
(Carumba v. CA, 1970)
D. Sale of Unregistered Land 286
1. Instrument or deeds establishing,

sold;
4. Same seller
III. Rules Governing Sale of Movables,
Immovables and Unregistered Lands
A. Sale of Movables
Ownership shall be transferred to the person
who may have first taken possession in
good faith.
B. Immovables
1. Ownership belongs to the person who:
a. In good faith first recorded in the
Registry of Property; OR
b. If there is no inscription, ownership
passes to the person who in good faith
was first in possession; OR
c. In the absence thereof, to the person
who presents the oldest title,
PROVIDED there is good faith. NOTE:
good faith is required all the time.
NOTE:
a. “Oldest Title” – any public document
showing acquisition of the land in good
faith. To constitute “title,” the
transmission of ownership must appear
in a public document [Art. 1358 (1)]
b. Examples: Deed of Sale, Deed of
Donation, Deed of Trust
SALES
transmitting, acknowledging, modifying or
extinguishing rights with respect to lands not
registered under the Land Registration Act
or the Spanish Mortgage Law, are required
to be registered in the Registry of Property
rd
to prejudice 3 persons, although such
registration is understood to be “w/o
rd
prejudice to a 3 party with a better right”.
(PD 1528 Sec 113)
2. Art. 1544 applies to unregistered land
subject to a conventional sale (because of
Art. 1358) but NOT to unregistered land
subject to judicial sale.
E. Purchaser in good faith
(Asked in 76, 86, 08)
1. General Characteristics
a. One who buys the property of another,
without notice that some other person
has a right to or interest in such
property, and who pays a full and fair
price for the sale, at the time of the
purchase or before he has notice of the
claim/interest of some other person in
the property. (Agricultural and Home
Extension Development Group v CA,
1992)
b. A buyer could not have failed to know or
discover that the land sold to him was in
adverse possession; hence he is
deemed to have acted in bad faith.
(Heirs of Ramon Duran v Uy, 344
SCRA 238)

2. Registration includes any entry made in the

Primary Entry Book of the registry, including
CIVIL LAW REVIEWER Chapter III. DOUBLE SALES

2. Presumption
Gen Rule: As a rule, he who asserts the
status of a purchaser in good faith and for
value, has the burden of proving such
assertion. This onus probandi cannot be
discharged by mere invocation of the legal
presumption of good faith, i.e., that everyone
is presumed to act in good faith (Mathay v
CA, 295 SCRA 556)

When buyer is presumed to be in bad

faith:
a. Annotation of adverse claim: Places
any subsequent buyer of the registered
land in bad faith. (Balatbat v CA, 261
SCRA 128)
b. Annotation of Lis Pendens: Buyer
cannot be considered an innocent
purchaser for value where it ignored the
lis pendens on the title.

Lis Pendens Annotation of Adverse 287

Claim

SALES
maybe cancelled even may be cancelled only in
before the action is one instance, i.e., after the
finally terminated for claim is adjudged invalid
causes which may not or unmeritorious by the
be attributable to the Court
claimant
Both are intended to protect the interest of a
claimant by posing as notices and caution to those
said with the property that same is subject to a
claim.

NOTE: The two are not contradictory or

repugnant to one another; nor does the
existence of one automatically nullify the
other, and if any of the registrations should
be considered unnecessary or superfluous,
it would be the notice of lis pendens (A.
Doronila Resources Development Inc v CA,
1988)
CIVIL LAW REVIEWER Chapter IV. RISK of LOSS

Chapter IV. Risk of Loss

I. GENERAL RULE
II. EXCEPTION

I. General Rule

 Res perit domino: Owner bears risk of

loss
 Ownership is not transferred until delivery

II. Exceptions

1. Contrary stipulation
2. An obligation to deliver a generic thing is
not extinguished by loss. (Art 1263, CC)
3. Risk of loss of specific things is subject to
the ff: 288
a. When loss occurs before perfection,

SALES
such loss is borne by seller
b. When loss occurs at time of perfection,
loss must have occurred before the
contract was entered into, without the
knowledge of both parties

TOTAL LOSS PARTIAL LOSS (Or loss

which results in
substantial change in
character)
Contract is Buyer may withdraw from
ineffective. the contract
OR
 Because there Buy the remainder at a
can be no contract proportionate price
without an object

c. When loss occurs after perfection but

before delivery
 Seller bears risk of loss
 Buyer does not bear risk of loss until
goods are delivered to him
CIVIL LAW REVIEWER Chapter V. DOCUMENTS of TITLE

Who may negotiate it? (Art.1512,CC)—

Chapter V. Documents of Title 1. Owner
2. Person to whom the possession or custody
I. IN GENERAL of the document has been entrusted by the
II. NEGOTIABLE DOCUMENTS OF TITLE
owner
III. NON-NEGOTIABLE DOCUMENTS OF TITLE
a. If bailee undertakes to deliver the goods
to such person
b. If document is in such form that it may
I. In General be negotiated by delivery

Definition— A person to whom a document has been

A document used in the ordinary course of
business in the sale or transfer of goods, as
proof of the possession or control of the goods,
or authorizing or purporting to authorize the
possessor of the document to transfer or
receive, either by endorsement or by delivery,
goods represented by such document. (Art.
1636)
Examples: bill of lading, quedan, warehouse
receipts, trust receipts
negotiated acquires—
1. Rights of the vendor
2. Rights of the original consignee
A person who negotiates a document of title
warrants—
1. Genuineness of document
2. Legal right to negotiate or transfer
3. No knowledge of fact which would impair the
validity or worth of the document
4. Right to transfer the title to the goods and 289
merchantability or fitness for a particular

Purpose—
1. Evidence of possession or control of goods
described therein
2. Medium of transferring title and possession
over the goods described therein without
having to effect actual delivery thereof
(Villanueva)
3. The custody of a negotiable warehouse
receipts issued to the order of the owner, or
to bearer, is a representation of title upon
which bona fide purchasers for value are
entitled to rely, despite breaches of trust or
violations of agreement on the part of the
apparent owner. (Siy Cong Bieng vs.
HSBC, 56 Phil 598)
II. Negotiable Documents of Title
SALES
purpose, whenever such warranties would
have been implied had the contract been
transfer the goods without a document
He does not warrant that—
1. Common carrier will fulfill its obligation to
deliver the gods
2. Previous indorsers will fulfill their obligation
(Art. 1516-1517, CC)
Goods in the hands of the carrier covered by
a negotiable document cannot be attached or
levied upon, UNLESS—
1. Document is first surrendered to the carrier;
or
2. Impounded by the court; or
3. Its negotiation is enjoined. (Art. 1519-
1520,CC)

Definition—
Document of title which states that the goods III. Non-Negotiable Documents of Title
referred to therein will be delivered to the bearer,
or to the order of any person named in such  Goods described in a non-negotiable
document (Art. 1508, CC). document of title are deliverable only to a
specified person
TERMS OF THE HOW NEGOTIATED  Carrier will not deliver the goods to any
DOCUMENT holder of the document or to whom such
Goods are deliverable to By delivery of the document may have been endorsed by the
bearer document to another consignee
 Must present the deed of sale or donation in
Endorsed in blank by the
his favor
person to whose order the
goods were deliverable
Goods are deliverable to By indorsement of
the order of a specified such person (Art.
person 1509,CC)
CIVIL LAW REVIEWER Chapter V. DOCUMENTS of TITLE

 “Negotiation” [negotiable document of

title] VS. “Transfer” [non-negotiable
document of title]:

Negotiation (Art. 1508) Transfer

Delivery of a negotiable The assignment of rights
document of title to of the consignee of a
another if by the terms non-negotiable document
thereof, the goods are of title to another; or
deliverable to bearer, or
when the document was Document of title was
endorsed in blank by ordered sold or assigned,
the person to whose without indorsement.
order the goods are
deliverable.
Transferee does not
In a negotiable acquire a better title than
document of title, the his transferor
buyer may acquire a
better title.

290

SALES
CIVIL LAW REVIEWER
Chapter VI. Remedies of the Seller and
Buyer
I. GENERAL REMEDIES
A. SPECIFIC PERFORMANCE
B. RESCISSION
C. DAMAGES
II. REMEDIES OF THE SELLER
A. IN THE SALE OF MOVABLES
1. EXTRAJUDICIAL REMEDIES
2. JUDICIAL REMEDIES
B. IN THE SALE OF IMMOVABLES
1. RESCISSION FOR ANTICIPATORY
BREACH
2. SPECIFIC PERFORMANCE WITH
DAMAGES
3. RESCISSION WITH DAMAGES
4. MACEDA LAW
III. REMEDIES OF THE BUYER
A. FOR BREACH OF OBLIGATION TO
PRESERVE
B. FOR BREACH OF OBLIGATION TO
DELIVER
C. FOR BREACH OF WARRANTY
I. General Remedies (Art. 1191, CC)
The following remedies arise from the bilateral
nature of the contract of sale:
1. Specific performance (Asked in 02)
2. Rescission (Asked in 03, 08)
 General rule is that rescission of a
contract will not be permitted for a slight
or casual breach, but only for such
substantial and fundamental breach
as would defeat the very object of the
parties in making the agreement. (Song
Fo & Co. vs. Hawaiian-Philippine Co.,
(1925))
3. Damages
Neither party incurs in delay if the other does not
comply or is not ready to comply in a proper
manner with what is incumbent upon him (Art
1169, CC)
Prescriptive periods—
1. 10 years if based on written contract
2. 6 years if based on oral contract
II. Remedies of the Seller
A. In the Sale of Movables
1. Extrajudicial or Self-Help Remedies
[NOTE: No need to resort to the courts; as
long as possession of the goods has not yet
passed to the buyer]
Chapter VI. REMEDIES of the SELLER and BUYER
a. Possessory lien over the goods—
Right to retain possession of goods until
payment or tender of the whole price, or
unless he agrees to sell on credit (1526-
1529, 1503, 1535)
When available:
 Goods are sold without stipulation
as to credit
 Goods are sold on credit, but term
of credit has expired
 Buyer becomes INSOLVENT
When lost:
 Seller delivers goods to carrier or
other bailee for transmission to the
buyer under a straight or non-
negotiable bill of lading
 Buyer/his agent lawfully obtains
possession of goods
 Seller waives it 291
 Not lost in remainder of goods
SALES
when only partial delivery is
made (unless such is symbolic
delivery of the whole)
 Not lost by mere fact that seller
obtained a judgment for the
price
When revived: Goods are returned by
the buyer in a wrongful repudiation of
the contract
b. Right of stoppage in transitu—
An extension of the lien for the price;
entitles unpaid seller to resume
possession of the goods while they are
in transit before the goods come in
possession of the vendee (1530-1532,
1535, 1636[2])
Available when: Vendee becomes
INSOLVENT
When are goods in transit?
 From time of delivery to the
carrier or other bailee by the seller,
for the purpose of transmission to
the buyer, until the buyer or his
agent takes such delivery from the
carrier.
 Even when goods have reached
their ultimate destination, if buyer
rejects them and carrier retains
possession
CIVIL LAW REVIEWER
 To terminate transit by delivery
to a middleman, delivery must
be to keep, not to transport.
When are goods no longer in transit?
 Buyer obtained delivery of the
goods before such have reached
their ultimate destination
 Goods have arrived at ultimate
destination, but carrier refuses to
deliver
 Carrier enters into a new contract
with the buyer upon arrival of the
goods at their ultimate destination
How exercised?
 By obtaining actual possession of
the goods
 By giving notice of his claim to the
carrier/other bailee who has
possession of the goods
 Carrier must redeliver goods to
seller, or according to his
instructions
 Carrier not obliged to redeliver
until the negotiable document of
title, if any, has been
surrendered for cancellation
Seller’s right to stoppage in transitu not
affected even if buyer has sold or
disposed of the goods; Unless the seller
assented
c. Special right of resale—
Available to unpaid seller who has a
right of lien or who has stopped the
goods in transitu (1533)
Purpose: For seller to liquidate his
damages
 He must do so within a reasonable
time and in such manner as to
obtain the best price possible.
 Resale = fair sale if in accordance
with established business practices,
with no attempt to take advantage of
the original buyer.
 Resale may be in a private or public
sale, but seller cannot buy indirectly
or directly.
 For resale to be valid, buyer need
not be notified of an intention to
resell or the time and place of the
resale.
Chapter VI. REMEDIES of the SELLER and BUYER
Effects:
 Seller is no longer liable to the
original buyer upon the contract of
sale or for any profit made by the
resale
 Buyer at resale acquires good title
as against the original owner
 In case resale is at a loss, seller
entitled to recover the difference
from the original buyer
 Seller may recover damages from
original buyer for breach of contract
d. Special right to rescind:
RETURN of the title over the
undelivered goods to the seller, and
right to recover DAMAGES for breach of
contract (1534)
Available to unpaid seller who has a
right of lien or who has stopped the 292
goods in transitu
SALES
When available:
 Seller expressly reserved right to
rescind in case buyer defaults
 Buyer has been in default in
payment for an unreasonable time
Transfer of title shall not be held to have
been rescinded by the unpaid seller until
he manifests by notice to the buyer or
some other overt act an intention to
rescind.
2. Judicial Remedies of an unpaid seller
a. Action for the price or specific
performance (1595)—
Conditions:
 the goods has passed to the buyer
 Price is payable on a certain day,
irrespective of delivery of the goods
 Buyer can set up the defense that
seller could not or did not intend to
deliver the goods
 Seller was notified by the buyer of
his repudiation of the contract after
the seller has completed the
manufacture of the goods/had
procured the goods to be delivered
and the goods could not readily be
resold for a reasonable price
b. Action for damages for non-
acceptance, if buyer wrongfully neglects
or refuses to accept and pay for the
goods (1596)
CIVIL LAW REVIEWER
Measure of damages: Estimated loss
directly and naturally resulting in the
ordinary course of events from the
buyer’s breach
 Where there is available market for
goods: Difference between the
contract price and the market price
at the time the goods ought to have
been accepted or if no time was
fixed, at the time of refusal to accept
 If the resale was made with
diligence, resale price is evidence of
market value, taking into account
whether or not the goods could be
readily sold
 Where labor/expense was
necessary for seller to fulfill his
obligation: Labor performed and
expenses made by seller before
receiving notice of buyer’s
repudiation or countermand
 Profit that the seller would have
made if sale had been fully
performed
c. Rescission by giving the buyer notice of
the election to rescind (1597)
Under this rule, rescission would bar an
action on the contract because it means
cancellation of the contractual
obligations between the parties.
(Baviera)
d. Special rule for sale of movables by
instalments – Recto Law (1484, 1485)
(Asked in ‘99)
Applies in cases of:
 Sale of movables in installment
 Levy Hermanos vs. Gervacio,
(1939): The rule is intended to
apply to sales of movables, the
price of which is payable in 2 or
more installments, but not to
straight-term sales where the
price is payable in full, after
making a down payment
because the law aims to protect
improvident buyers who may be
tempted to buy beyond their
means.
 Lease of personal property with
option to buy
 When lessor has deprived the
lessee of the possession or
enjoyment of the thing (Ex.
When lessor files a complaint
for replevin against lessee)
Chapter VI. REMEDIES of the SELLER and BUYER
 Also applies when seller assigns
his credit to someone else
Alternative Remedies of the unpaid
seller under Recto Law
 Specific Performance
 Cancellation of sale: If vendee fails
to pay 2 or more installments
 When the seller cancels the sale
by repossessing the property
sold, he is barred from exacting
payment for its price.
 Foreclosure of Chattel Mortgage: If
vendee fails to pay 2 or more
installments
 If seller chooses this remedy, he
shall have no further action to
recover any unpaid balance,
and any stipulation to the
contrary shall be void
 Motors vs. Sapinoso, (1970):
What Art 1484 (3) prohibits is 293
“further action against the
SALES
purchaser to recover any unpaid
balance of the price;” and
although this Court has
construed the word “action” to
mean “any judicial or
extrajudicial proceeding by
virtue of which the vendor may
lawfully be enabled to exact
recovery of the supposed
unsatisfied balance of the
purchase price from the
purchaser or his privy,” there is
no occasion at this stage to
apply the restrictive provision of
the said article because there
has not yet been a foreclosure
sale resulting in a deficiency.
The payment of the sum of
P1,250 of Sapinoso was a
voluntary act on his part and did
not result from a “further action”
instituted by Northern Motors.
 Bachrach Motor Co., Inc. v.
Millan, (1935): Purpose of the
law is to remedy the abuses
committed in foreclosure of
chattel mortgages. It prevents
mortgagees from seizing the
mortgaged property, buying it at
foreclosure sale for a low price
and then bringing the suit
against the mortgagor for a
deficiency judgment. The
almost invariable result of this
procedure was that the
mortgagor found himself minus
CIVIL LAW REVIEWER
the property and still owing
practically the full amount of his
original indebtedness.
Nonato vs. IAC (1985): Remedies are
ALTERNATIVE, not cumulative, i.e.
exercise of one bars exercise of the
others
NOTE: “Unpaid Seller” (1525):
e. When the whole of the price has not
been paid or tendered;
f. When a bill of exchange or other
negotiable instrument has been received
as conditional payment, and the
condition on which it was received has
been broken by reason of the dishonor
of the instrument, the insolvency of the
buyer, or otherwise.
_________
B. In the Sale of Immovables
1. Rescission for Anticipatory Breach
(1591)
a. Available when seller has reasonable
grounds to fear the loss of the
immovable property sold and its price
b. Example: Buyer destroys the building
sold, there being no security therefor,
and buyer becomes insolvent
c. Court has no discretion to compel the
seller to wait for the expiration of the
period to pay, or to grant the buyer more
time to pay
2. Specific Performance + Damages (1191)
a. Seller may choose between specific
performance and rescission, with
damages in either case
b. Court has discretion, for a just cause, to
give the buyer more time to pay even if
the seller chooses rescission
3. Rescission + Damages (1191)
a. If seller chose specific performance, and
such becomes impossible, he may still
avail of rescission
b. If absolute sale, seller must make a
demand for rescission
 Judicially, OR
 By a notarial act
c. Necessary even if automatic rescission
is stipulated
d. Effect of lack of demand: Buyer can still
pay
e. Effect of demand: Court may not grant
buyer a new term
Chapter VI. REMEDIES of the SELLER and BUYER
4. Maceda Law: Sale of Residential Realty
on Installments
(Asked in 77, 89, 99, 00)
RA 6552: An Act To Provide Protection for
Buyers of Real Estate on Installment
Payments
DOES not apply to:
a. Industrial lots
b. Commercial buildings
c. Sale to tenants under Agricultural
Reform Code (RA 3844)
Imposes ADDITIONAL REQUIREMENTS
FOR A VALID RESCISSION:
a. If buyer has paid at least 2 years of
installments: GRN
 Grace period: 1 month per year of
installment payments made. BUT
buyer may only avail of it only once
in every 5 years 294
 Refund of Cash Surrender Value
SALES
(CSV): 50% of total amount paid +
st
5% for every year after the 1 5
years of installments
 BUT not greater than 90% of
total amount paid
 Notice of cancellation of demand for
rescission by notarial act, effective
30 days from the buyer’s receipt
thereof and upon full payment of
CSV
b. If buyer has paid less than 2 years: GN
 Grace period: at least 60 days
 Notice of cancellation or demand for
rescission by notarial act, effective
30 days upon receipt thereof
c. Down payments, deposits, or options on
the contract shall be included in the total
number of installments made
d. Seller may go to court for judicial
rescission in lieu of a notarial act of
rescission
e. During the grace period, buyer shall
have the right:
 To sell or assign his rights, to be
evidenced in a notarial instrument
 To update his account
 To pay in advance any installment,
or the full unpaid balance of the
price, without any interest
CIVIL LAW REVIEWER Chapter VI. REMEDIES of the SELLER and BUYER

III. Remedies of the Buyer deficiency from goods of the same kind and quality,
UNLESS a contrary intent appears.

 General rule: Courts will refuse to decree

Real Estate (1539-1543)—
specific performance with respect to
1. If at the rate of a certain price per unit of
chattels, because damages are a sufficient
measure or number:
remedy
 Exception: Buyer is entitled to the specific Less (in area or quality) than More
thing which to him has special value and what was agreed upon:
which he cannot readily obtain in the market Proportional reduction of price Reject the excess
OR where damages would not furnish a OR OR
complete and adequate remedy (Baviera) Rescission, if: Accept the whole
_________  Lack in area is at least 1/10 and pay at contract
of what is stated, or inferior rate
A. Remedy for breach of obligation to value of thing sold exceeds
preserve 1/10 of price
 Buyer would not have
bought the property has he
If thing is lost— been aware of the inferior
1. Without fault of seller: No breach; Obligation quality or smaller area
is extinguished
2. Through fault of seller (or through fortuitous
event, if seller is liable): Damages [NOTE: Also applies to judicial sales (1541)] 295

SALES
A thing is lost when it— 2. If for a lump sum:
1. Perishes
2. Goes out of commerce Everything is within Not everything is
3. Disappears in such a way that its existence boundaries, even if less or within boundaries
is unknown or it cannot be recovered more than stated area
No remedy Proportional
If thing deteriorates— Rudolf Lietz, Inc. v. CA, reduction in price
(2005): Where both the area OR
Without fault of seller Through fault of seller and the boundaries of the Rescission
immovable are declared, the
No breach Rescission + damages
area covered within the
 Impairment shall be Or
boundaries of the immovable
borne by buyer Specific performance +
prevails over the stated area.
damages
_________
Prescriptive period: 6 months, counted from
B. Remedy for breach of obligation to
date of delivery
deliver
_________
Delivery of wrong quantity (1522)—
C. Remedy for breach of warranty
Goods are less than what More
was contracted
Express Warranty—
Reject the goods Reject the excess (Or 1. Prescriptive period: Period specified in
OR the whole, if express warranty OR 4 years, if no period is
Accept and pay indivisible) specified (following the general rule on
 At contract rate if buyer OR rescission of contracts)
accepts knowing that seller Accept the whole and 2. Remedies:
won’t perform in full pay at contract rate a. Accept goods + demand
 At fair value: If goods were diminution/extinction of price
used before knowing that b. Accept goods + damages
seller won’t be able to
c. Refuse to accept goods + damages
perform in full
d. Rescind (Refuse to accept or return or
offer to return) + recover price paid
Art. 1464. Civil Code. In the sale of an undivided
share of a specific mass of fungible goods, if the
3. Rescission not available when buyer:
mass contains less than the number, weight, or a. Knew of breach of warranty when he
measure bought, the buyer becomes the owner of the accepted the goods without protest
whole mass and the seller is bound to make good the
CIVIL LAW REVIEWER Chapter VI. REMEDIES of the SELLER and BUYER

b. Fails to notify the seller about election to
rescind within a reasonable period of
time
c. Fails to return or offer to return the
goods to the seller in substantially a
good condition as they were when
delivered, unless deterioration was due
to breach of warranty
4. Measure of damages: Difference between
value of goods at time of delivery and the
value they would have had if they had
answered to the warranty
5. Effects of rescission:
a. Buyer no longer liable for price
 Entitled to return of any part of price
paid, concurrently with or
immediately after an offer to return
the goods
b. If seller refuses to accept offer to return
goods: buyer deemed bailee for seller
and has right of lien to secure payment
of part of price paid
c. If property sold for nonpayment of taxes
due and not made known to the buyer
before the sale: seller liable
d. Judgment debtor also responsible for
eviction in judicial sales, unless it is
otherwise decreed in the judgment
2. If there is waiver of warranty:
a. Seller acted in bad faith: Waiver is void,
seller liable for eviction
b. Buyer made waiver without knowledge
of risks of eviction: Seller liable only for
the value of thing sold at time of eviction
c. Buyer made waiver with knowledge of
risks: Seller not liable, buyer assumed
the consequences
Implied warranty against encumbrances
(1560)—
1. Rescission: Within 1 year from execution of
deed of sale OR
2. Damages: Within 1 year from execution of 296
deed of sale or discovery of the burden or

SALES
servitude
Implied warranty against eviction
(1555,1556)— Implied warranty against hidden defects
(1567-1571)—
TOTAL EVICTION PARTIAL EVICTION 1. If thing is not lost:
Enforce liability for Enforce liability (demand a. Withdraw from contract (accion
eviction VICED) redhibitoria) + damages
- Demand from seller: OR b. Demand a proportionate reduction of the
VICED Rescind price (accion quanti minoris) + damages
 Value of thing sold at  If he would not have
time of eviction bought the thing sold
 Income or fruits, if he without the part lost BUT 2. If thing is lost:
has been ordered to he must return the thing
deliver them to the without other Due to hidden Due to fortuitous event
party who won the encumbrances than fault or fault of buyer
eviction suit those which it had when  If seller aware of Demand:
 Costs of eviction suit he acquired it defect, buyer may - Price paid minus value of
and in a proper case, demand: thing when it was lost
suit against seller for - Return of price - Damages, if seller acted
warranty - Refund of in bad fait
 Expenses of the expenses of
contract, if buyer has contract
paid them - Damages
 Damages and
interests, and
ornamental  If seller not aware
expenses, IF sale of defect:
was made in bad Buyer may demand
faith price and expenses
BUT NOT damages
1. Rules:
Prescriptive period: 6 months from delivery
a. Buyer need not appeal from decision to
hold seller liable for eviction
b. When adverse possession commenced Implied warranty against redhibitory defects
before sale, but prescription period of animals—
completed after transfer: seller is not 1. Remedies
liable a. Withdraw from contract + damages
b. Demand a proportionate reduction of the
price + damages
CIVIL LAW REVIEWER Chapter VI. REMEDIES of the SELLER and BUYER

2. If sale is rescinded:
a. Buyer must return animal in condition in
which it was sold and delivered
b. Buyer shall be liable for injury due to his
negligence.
3. Prescriptive period: 40 days from delivery

Warranty in sale of consumer goods (RA

7394, Sec.68)—
If implied warranty accompanies express
warranty, both will be of equal duration.

EXPRESS WARRANTY IMPLIED WARRANTY

1. Demand repair within 1. Retain the goods
30 days and recover
 Extendible for damages
causes beyond the OR
control of the 2. Reject the goods,
warrantor cancel contract and
2. Demand refund of recover from seller
price minus amount so much of the
directly attributable to purchase price as
the use of the has been paid + 297
consumer prior to the damages

SALES
discovery of the non-
conformity
CIVIL LAW REVIEWER Chapter VII. EXTINGUISHMENT of SALE

4. Co-owners of an immovable, if they sold

Chapter VII. Extinguishment of Sale their interests to the same person, may only
redeem their respective shares
I. IN GENERAL a. Vendee cannot be compelled to agree to
II. CONVENTIONAL REDEMPTION
a partial redemption
III. EQUITABLE MORTGAGE
IV. LEGAL REDEMPTION b. If the co-owners sold their interest to the
same person who previously bought the
share of a co-owner subject to a right of
redemption, then the latter may be
I. In General compelled to redeem the whole property

Generally, extinguished by the same causes as From whom to redeem—

all other obligations (Arts.1600 &1231) (P- 1. Vendee a retro
3 3
PLAN-C -R ) 2. His heirs, assigns or agents
1. Payment/performance 3. Subsequent purchaser of property, even if
2. Prescription the right to redeem was not mentioned in the
3. Loss of thing due subsequent contract; except if registered
4. Annulment land, where the right to redeem must be
a. Novation annotated in the title
5. Condonation/remission 4. If several heirs, then the right of redemption
6. Confusion/merger can be exercised against each heir for his
7. Compensation share of the property 298
8. Rescission

SALES
9. Resolutory condition fulfilled How exercised—
10. Redemption (Conventional or Legal) 1. Returning the ff. to the buyer: (PEN)
a. Price of the sale;
b. Expenses of the contract and other
II. Conventional Redemption legitimate payments made by reason of
the sale;
c. Necessary and useful expenses made
Definition—
on the thing sold
1. Vendor reserves the right to repurchase the
2. Complying with any other stipulation agreed
thing sold, with the obligation to comply with
upon, if any.
the provisions of Article 1616 and other
stipulations which may have been agreed
NOTE:
upon. (Art 1601,CC)
1. BPI Family Savings Bank, Inc. v. Veloso,
2. Available when the seller reserves the right
(2004): The general rule in redemption is
to repurchase the thing sold in the same
that it is not sufficient that a person offering
instrument of sale as one of the stipulations
to redeem manifests his desire to do so. The
of the contract (Villarica v CA, 1968)
statement of intention must be accompanied
by an actual and simultaneous tender of
Period (Asked in 77)—
payment for the full amount of the
General Rule: Follow period stipulated in
repurchase price.
contract, but should not exceed 10 years.
2. Paez v. Magno, (1949):Tender of payment
1. If no period stipulated, then it shall be four
is enough (i.e., consignation is not
years from the execution of the contract
necessary), if made on time, as a basis for
2. But vendor may still exercise the right to
action against the buyer to compel him to
repurchase within thirty days from the time
resell. But that tender does not in itself
final judgment was rendered in a civil action
relieve the buyer from his obligation to pay
on the basis that the contract was a true
the price when redemption is allowed by the
sale with right to repurchase
court.
By whom exercised—
Effect of redemption—
1. Vendor
1. The seller shall receive the thing free from
2. His heirs, assigns or agents
all charges or mortgages constituted by the
3. Creditor, if he has exhausted the property of
buyer BUT he shall respect leases executed
the vendor
by the buyer in good faith and in accordance
with local custom.
2. If there are growing fruits at the time of sale
CIVIL LAW REVIEWER Chapter VII. EXTINGUISHMENT of SALE

and at the time of redemption: no
reimbursement or prorating if the buyer did
not pay indemnity at the time of sale
3. If there were no growing fruits at the time of
sale, but some exist at the time of
redemption: fruits prorated (buyer entitled to
part corresponding to time he possessed the
land in the last year, counted from the
anniversary of the date of sale)
Effect of non-redemption—
Ownership is consolidated in the buyer BUT
the consolidation shall not be recorded in
the Registry of property w/o a judicial order,
after the vendor has been duly heard.
the realty taxes having been paid by them, the
contracts which purported to be pacto de retro
transactions are presumed to be equitable
mortgages, whether registered or not, there
being no third parties involved.
Legaspi v. Spouses Ong, (2005): A pactum
commissorium is a stipulation enabling the
mortgagee to acquire ownership of the
mortgaged properties without need of
foreclosure proceedings which is a nullity being
contrary to the provisions of Article 2088 of the
Civil Code. The inclusion of such stipulation in
the deed shows the intention to mortgage rather
than to sell.

Right to Redeem vs. Option to Purchase A pactum commissorium is contrary to the

(Villanueva)— nature of a true pacto de retro sale since
ownership of the property sold is immediately
Right to Redeem Option to Purchase transferred to the vendee a retro upon execution
Not a separate contract Generally a principal of the sale, subject only to the repurchase of a
but part of a main contract and may be vendor a retro within the stipulated period. 299
contract of sale, and created independent of

SALES
cannot exist unless another contract
reserved at the time of
Sale with right to Equitable mortgage
the perfection of the main
repurchase
contract of sale
Right to repurchase the When any of the
Does not need its Must have a
thing sold granted to cases in Art. 1602
separate consideration to consideration separate
the vendor in a arise
be valid and effective and distinct from the
separate instrument
purchase price to be valid
from the deed of sale
and effective (Arts. 1324
and 1479)

The maximum period for The period of the option Presumption that a contract is an equitable
the exercise of the right contract may be beyond mortgage arises when (5P-R)—
to repurchase cannot the 10-year period 1. Price unusually inadequate;
exceed 10 years 2. Possession retained by the seller as lessee
Requires in addition a May be exercised by or otherwise;
tender of payment of the notice of its exercise to 3. Period of redemption extended (or granted
amount required by law, the offeror anew) upon or after the expiration of the
including consignment
thereof if tender of
right to repurchase;
payment cannot be made 4. Part of the purchase price retained by the
effectively on the buyer seller;
5. Payment of taxes on the thing sold borne by
the seller;
6. Any other case where it may be fairly
III. Equitable Mortgage
inferred that the Real intention of the parties
(Asked in 79, 80, 82, 84, 86, 89, 91, 05) is for the transaction to secure a debt or
other obligation.
Definition—
Molina v. CA, (2003): An equitable mortgage is For the presumption of an equitable
defined as one which, although lacking in some mortgage to arise under Art. 1602, 2
formality, or form or words, or other requisites requisites must concur (Molina v. CA,
demanded by a statute, nevertheless reveals the 2003)—
intention of the parties to charge real property 1. That the parties entered into a contract
as security for a debt, and contains nothing denominated as a contract of sale, and
impossible or contrary to law. 2. That their intention was to secure an existing
debt by way of a mortgage.
Tan v. Valdehueza, (2003): The Valdehuezas
having remained in possession of the land and
CIVIL LAW REVIEWER Chapter VII. EXTINGUISHMENT of SALE

In case of doubt, a contract purporting to be a Period to Redeem—

sale with right to repurchase shall be construed
as an equitable mortgage (Art. 1603) To whom granted Period
a. Co-owner (Art 1620) 30 days from notice
Rationale behind provision on equitable - In writing
mortgage— b. Adjoining owner of - By the seller
1. Circumvention of usury law Rural Land (Article - Of the actual execution
1621) and delivery of the deed
2. Circumvention of prohibition against pactum of sale
commissorium – creditor cannot appropriate c. Adjoining owner of
the things given by way of pledge or urban land (Art. 1622) Doromal v. CA: Actual
mortgage since remedy here is foreclosure. knowledge of the sale is
immaterial
Remedies of apparent vendor—
1. If the instrument does not reflect the true Conejero v. CA: the law
agreement, the remedy is reformation did not provide for a
2. If decreed to be an equitable mortgage, then particular mode of written
notice, thus any
any money, fruits or other benefit to be compliance with “written
received by the buyer as rent or otherwise notice” should suffice,
considered as interest. including the giving of a
3. If decreed as a true sale with right to copy of the deed of sale
purchase- seller may redeem w/in 30 days Debtor in case a 30 days from the date the
from finality of judgment, even if the period credit or assignee demands 300
for redemption has expired. incorporeal right in payment from debtor

SALES
litigation is sold
(Art.1634)
Applicant or his widow 5 yrs. from date of
IV. Legal Redemption or legal heirs in case of conveyance
sale of homestead
Definition— (Sec.119, Public
 Right to be subrogated: Land Act)
a. upon the same terms and conditions Taxpayer in case of tax 1 year from date of
sale (Sec. 215, forfeiture
stipulated in the contract, NIRC)
b. in the place of one who acquires a thing Judgment debtor, 1 year from the date of
by purchase or dation in payment, or by successor–in- interest, registration of the
any other transaction whereby or creditor with certificate of sale
ownership is transmitted by onerous title subsequent lien, in case
(Art 1619, CC) of execution sale
(Rule 39, Sec.27,
 Applies to transfers of ownership by onerous ROC)
title where subrogation is possible. Hence, it Debtor-mortgagor, 1 year from the date of
successors-in- interest, the sale
cannot apply to barter or to transfer by
judicial/judgment
gratuitous title or hereditary succession. creditor, any person
 Applies to sales with pacto de retro having a lien on the
(BAVIERA citing MANRESA) property, in case of
extrajudicial foreclosure
Manner— of mortgage (Act No.
1. a formal offer to redeem or 3135. Sec. 6. )
2. filing of an action in court together with the Debtor-mortgagor in 90 days from finality of
consignation of the redemption price within case of judicial judgment
the reglementary period foreclosure of real
estate mortgage IF the
mortgagee is a bank or
a banking institution.
(The
General Banking
Law of 2000)
CIVIL LAW REVIEWER Chapter VII. EXTINGUISHMENT of SALE

Agricultural lessee w/o 2 years from the Order of preference if two or more wish to
knowledge of sale of registration of the sale exercise the right:
landholding a. Owner with smaller land area
(Agrarian Land b. If same land area, then the one who first
Reform Code,
requested the redemption
Sec.12)
Ortega v. Orcine, (1971): What constitutes
Instances of Legal Redemption—
“rural” or “urban” is to be determined from
1. Redemption by Co-owners (Art. 1621)
the character of the community or vicinity in
which it is found, and NOT from the nature
A co-owner of a thing may exercise the right
of the land itself nor the purpose to which it
of redemption in case the shares of all the
is devoted
co-owners or any of them are sold to a third
person
3. Redemption by adjoining land-owners of
a. Third person” refers to all persons who
urban land (applies only to small
are not heirs of the vendor, by will or
portions of urban land) (Art. 1621)
intestate succession
b. The right is available not only to original
Right of Pre-emption Right of Redemption
co-owners, but to those who had later
Owner of any adjoining If the resale has been
acquired the share of the co-owner land has a right of pre- perfected, the owner of
c. But the right of redemption may be emption at a reasonable the adjoining land shall
exercised by a co-owner only when part price when: have a right of 301
of the community property is sold to a -Urban land is so small redemption, also at a

SALES
stranger. When the portion is sold to and so situated that a reasonable price
another co-owner, the right does not major portion of it cannot
arise because a new participant is not be used for any practical Priority if 2 or more
added to the co-ownership (Fernandez purpose w/in a adjoining owners want to
reasonable time; redeem: owner whose
v. Taun)
-Was bought merely for intended use of the land
speculation; appears to be best
If the price of the alienation is grossly -Was resold justified
excessive, the redemptioner shall pay only a
Arises before sale Arises after sale
reasonable one
No rescission because There can be rescission
no sale exists yet of the original sale
Should two or more co-owners desire to The action is directed Action is directed against
exercise the right, they may also do so in against prospective buyer
proportion to the share they may seller
respectively have in the thing owned in
common
4. Redemption of Credit
Rationale: Public Policy, since co-
ownership is a hindrance to the Available when it is sold while in litigation
development and administration of the (From the time the complaint is answered)
property (BAVIERA)
NOT available when the assignment in favor
2. Redemption by Adjoining Land-owners of:
of rural land (Art. 1621) a. Co-heir/co-owner of right assigned
b. Creditor in payment of his credit
The ff. Requisites must concur: c. Possessor of a tenement or piece of
a. A piece of rural land is alienated land which is subject to the right
b. Area does not exceed one hectare assigned

When not applicable: How exercised: reimburse the assignee for

a. The grantee does not own any rural land the:
b. Adjacent lands are separated by brooks, a. Price paid
drains, roads and other apparent b. Judicial expenses incurred
servitudes for the benefit of other c. Interest on the price from date of
estates payment
CIVIL LAW REVIEWER Chapter VII. EXTINGUISHMENT of SALE

5. Under the Public Land Act the sale up to the time of

redemption
Coverage: -Any assessment or
a. Every conveyance of land acquired taxes which the
purchaser may have
under a free patent or homestead
paid
b. The ownership of the land must have
been transferred to another. If the
7. Under the Agrarian Land Reform Code
transaction is a mere promise to sell,
Lessees right of pre-emption
there is no right yet to redeem
a. The agricultural lessee shall have the
c. This refers to conveyances made after
preferential right to buy under the same
the prohibited 5 years from the issuance
reasonable terms and conditions, in
of the patent or grant
case the lessor decides to hold the
landholding
Period:
b. Conditions:
a. Within 5 years from the date of
 The landholding must be pre-
conveyance
empted by the DAR
b. If pacto de retro sale, the period to
 When two or more lessees, each
redeem cannot be less than 5 years
shall have preferential right only to
the extent of the area cultivated by
Who may redeem:
him
a. Gen Rule: Applicant, widow, or heirs
c. Period: 180 days from notice in writing
b. Exception: land is sold to another 302
member of the family of the applicant, or

SALES
Lessees right of redemption
his direct descendant or heir
a. Sec. 12 RA 3844: In case landholding is
c. From whom: Subsequent purchasers rd
sold to 3 person without the knowledge
of the lessee, the latter shall have the
right to redeem the same at a
6. Redemption in Foreclosure and
reasonable price and consideration
Execution Sales
b. Period: within 180 days from notice in
writing
Who may redeem In extra judicial
foreclosure
-Debtor
-Successor in interest
-Judicial or judgment
creditor of said debtor
-Junior encumbrancer
In execution sales
-Judgment debtor
-Successor in interest
-Creditor having a lien
on the property sold by
attachment, judgment or
mortgage on the
property subsequent to
the judgment
Period to redeem Extra judicial foreclosure
- within 1 year from the
date of the sale
Execution sale
- within 12 months after
the sale
If land is mortgaged in
favor of a bank
- within 1 year after the
sale (not available in
case of a corporate
mortgagor)
Amount of redemption -Amount of the purchase
-Interest at 1% per
month from the time of
CIVIL LAW REVIEWER Chapter VIII. PHILIPPINE BULK SALES LAW

Chapter VIII. Philippine Bulk Sales Law III. Duty of Seller

(Act 3952)
1. Sworn statement of list of creditors
I. PURPOSE  Contents:
II. COVERAGE o Names + addresses of all
III. DUTY OF SELLER creditors
IV. EFFECT OF NON-COMPLIANCE o Amount of indebtedness due or
owing
 When delivered: Before any part of
I. Purpose the purchase price is received, or
any promissory note or evidence of
indebtedness therefor
Purpose (Villanueva)—
 To compel the seller in bulk to execute  Delivered to:
and deliver a verified list of his creditors o Buyer, mortgagee or agent
to his buyer, and notice of intended sale o If corporation: president, vice-
to be sent in advance to said creditors president, treasurer or secretary
and to use the proceeds to cover o If partnership firm: a member
payment of outstanding liabilities thereof
 To protect creditor of merchant stores
2. Pro-rata application of the purchase or
The Law is constitutional as a valid exercise of mortgage money to the payment of 303
police power of the State. (Liwanag v. listed creditors

SALES
Menghraj, (1941))
3. Inventory of the goods, wares,
merchandise, provisions or materials
 When made: at least 10 days before
II. Coverage sale or mortgage
 Contents:
The Law covers all transactions, whether done  Quantity
in good faith or not, that fall within the
 Cost price of each article (as far as
description of what is “bulk sale” (Villanueva)
possible)
Transactions Covered—
4. Notice to listed creditors
Applies to sales and transfers in bulk,
 When made: at least 10 days before
including any sale, transfer, mortgage or
transfer of possession
assignment of:
1. A stock of goods, wares, merchandise,  How: personally or by registered
provisions or materials NOT in the ordinary mail
course of trade and the regular prosecution  Contents: Price, terms and
of the business of the seller, transferor, conditions of sale, transfer,
mortgagor, or assignor mortgage or assignment
2. All, or substantially all, of the business or
trade theretofore conducted by the seller, 5. Consideration for the sale, transfer,
transferor, mortgagor, or assignor mortgage or assignment
3. All, or substantially all, of the fixtures and  Must not be nominal
equipment used in and about the business
of the seller, transferor, mortgagor, or
assignor

When not applicable—

1. Written waiver by vendor, transferor,
mortgagor or assignor, as shown by verified
statements
2. To executors, administrators, receivers,
assignees in insolvency, or public officers,
acting under judicial process.
CIVIL LAW REVIEWER Chapter VIII. PHILIPPINE BULK SALES LAW

IV. Effect of non-compliance

On Transaction Itself—
If the purchase or mortgage money is not
applied pro-rata to the bona fide claims of listed
creditors: Sale, transfer or mortgage shall be
FRAUDULENT and VOID.

On Seller, Mortgagor, Transferor or

Assignor—
Violation Sanction
Failure to comply with criminal liability
the obligation to
prepare and deliver the Section 7: Transfer by any
sworn statement listing person, firm or corporation
his creditors and the “as owner of any stock of
application pro-rata of goods, wares,
the proceeds to the merchandise, provisions
creditors. (Sec 4) or materials, in bulk” of
title to the same without
consideration or for a
nominal consideration
only, subjects him to 304
criminal liability

SALES
On Buyer, Mortgagee, Transferee or
Assignee—
The Law imposes no direct obligation, thus a
buyer in bulk sale cannot be deemed to be
subject to the criminal liability under the Law

[NOTE: Criminal liability: 6 months to 5 years

imprisonment, or fine of P5K or less, or both.]

- end of Sales -