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CHAPTER 1: INTRODUCTION

CONTRACT OF SALE By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be
absolute or conditional. (Article 1458)

CHARACTERISTICS:
1. nominate
2. principal
does not depend on another contract for its validity or existence
3. bilateral
imposes obligations on both parties to the contract
power to rescind is implied and need not be stipulated in order for the innocent party to invoke such remedy (Art.
1191)
4. onerous
all doubts in construing the contract shall be settled in favor of the greatest reciprocity of interests
5. commutative
equal value is exchanged for equal value (based on the point of view of the parties in the contract)
Test: subjective as long as parties in all honesty that he is receiving equal value then it complies with test & would
not be deemed a donation; but must not be absurd.
Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale; inadequacy can show
vitiation of consent & sale may be annulled based on vice but not on inadequacy
6. consensual
perfected by mere consent
for there to be a meeting of the minds, the offer must be certain and the acceptance absolute
7. Title & not a mode gives rise to an obligation to transfer; it is delivery w/c actually transfer ownership; mode which
actually transfer ownership.


Fule v. CA
A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract
and upon the price. Art. 1358 CC which requires the embodiment of certain contracts in a public instrument, is only for
convenience and registration thereof only adversely affects 3
rd
parties. Non-compliance therewith does not adversely affect the
validity of the contract not the contractual rights and obligations of the parties thereunder.


ESSENTI AL REQUI SITES:
1. consent
there is a meeting of the minds as to the price and the object (Article 1475)
acceptance must be absolute
if the agreement is covered by the Statute of Frauds, only the enforceability of the agreement is affected
2. determinate (or determinable) subject matter
particularly designated or physically segregated from all others of the same class (Article 1460)
3. cause or consideration (price certain in money or its equivalent)
equivalent = check or promissory note; does not include goods or merchandise

Torres v. CA
Where the contract of sale of a parcel of land clearly provides that the consideration for the sale was the expectation of profits
from a subdivision project, it constituted valid cause or consideration to validate the sale and delivery of the land. Consideration
can take different forms, such as the prestation or promise of a thing or service by another.

Co v. CA
A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and
enforceable contract of sale.

1. Contract of sale (absolute)
real obligation obligation to give
remedies available:
a. specific performance
b. rescission
c. damages

2. Contract to sell (conditional)
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personal obligation obligation to do
remedies available:
a. resolution
b. damages

absolute sale: ownership passes to the buyer upon delivery of the thing sold

conditional sale: ownership does not transfer upon delivery of the thing until fulfillment of the condition [such as full payment
of purchase price (Articles 1478 and 1503)]
if the obligation of one party is subject to any condition and it is not fulfilled, such party may (Article 1545):
refuse to proceed with the contract
waive the performance of the condition and proceed with the contract
if the condition is in the nature or a promise that it should happen, the non-performance of such condition may be
treated as a breach of warranty (Article 1545)
where the ownership has not passed, the buyer may treat fulfillment by the seller of his obligation to deliver, as
described and as warranted, as a condition of the obligation of the buyer to perform his promise to accept and pay for
the thing (Article 1545)


STAGES IN LI FE OF CONTRACT OF SALE:
1. negotiation
2. perfection by mere consent; performance may be demanded ( specific performance )
3. consummation

DISTINGUI SHED FROM OTHER CONTRACTS:
1. Donation
donation is gratuitous; sale is onerous
donation is formal contract; sale is consensual
donation is governed by law on donation; sale is governed by law on sale

2. Barter

in barter, the consideration is the giving of a thing; in sale, it is giving of money as payment
both are governed by law on sales; both are species of the genus sales
if consideration consists party in money & partly by thing look at manifest intention; if intention is not clear (1468 ):
a. value of thing is equal or less than amount of money sale
b. value of thing is more than amount of money barter

3. Contract for piece of work
test in article 1467:
a. contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for
general market ( whether on hand or not ) sale
b. goods are to be manufactured specially for a customer and upon special order and not for the general market
contract for piece of work.
jurisprudence:
a. Timing test under art 1467; Inchausti; whether the thing transferred would have never existed but for the order
contract for piece of work (abandoned)
b. Habituality test enunciated in Celestino v CIR; contract of sale if manufacturer engages in activity without need
to employ extraordinary skills and equipment; contract for piece of work is sale of service; contract of sale is sale
of things.
c. Nature of the object test enunciated in EEI v CIR; each products nature of execution differs from the others;
products are not ordinary products of manufacturer.
main factor in decision of the SC: essence of why parties enter into it:
a. essence is object contract of sale
b. essence is service contract for piece of work
contracts for a piece of work, unlike contracts of sale, are not within the Statute of Frauds

Celestino Co & Co. v. Collector
The company claimed it was only subject to 3% contractors tax instead of 7% tax imposed for sales. The SC ruled against the
company. Although the windows and doors are manufactured only when the customers place their orders, the company
ordinarily manufactured or was in a position habitually to manufacture these in the usual course of their business. When this
Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally
performed by it, it thereby contracts for a piece of work, filling special orders within the meaning of Article 1467. The orders
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herein exhibited were not shown to be special. They were merely orders for work nothing is shown to call them special
requiring extraordinary service of the factory.

Commissioner of I nternal Revenue v. Engineering Equipment and Supply Co.
The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing
transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a
thing which would have existed but has been the subject of sale to some other persons even if the order had not been given. If
the article ordered by the purchaser is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or
modification of it is made at purchaser's request, it is a contract of sale even though it may be entirely made after, and in
consequence of the purchaser's order for it.
4. Agency to sell
in sale, buyer pays for price of object; in agency to sell, agent not obliged to pay for price, merely obliged to deliver
price received from buyer.
in sale, buyer becomes owner of thing; in agency; principal remains owner even if object delivered to him
in sale, seller warrants; in agency, agent assumes no risk/liability as long as within authority given
in sale, not unilaterally revocable; in agency, may be revoked unilaterally because fiduciary & even w/o ground
in sale, seller receives profit; in agency, agent not allowed to profit
TEST: essential clauses of whole instrument ( art 1466 motherhood statement, not good law )
Agency is a personal contract; sale is real contract ( to give ) rescission not available in agency

Ker and Co. v. Lingad
Ker and Co. entered into a contract with the United States Rubber International (the company) as distributor for the latter. It
was agreed that the distributor will hold the products in such quantities as the company wishes and that all goods were to be
the property of the company until sold by the distributor. However, it was expressly stated that the distributor is not to be the
agent or legal representative of the company. The Court held that there existed an agency to sell, notwithstanding the
categorical statement in the contract that no agency is to exist. The decisive test is the retention of the ownership of goods
delivered to the possession of the dealer for resale with the price and terms remaining subject to the control of the firm
consigning the goods.

5. Dacion en pago
dacion: contract where property is alienated to satisfy/extinguish obligation to pay debt
in dacion: novates creditor-debtor relationship into seller-buyer
in dacion: delivery is required ( real contract )

6. Lease
in sale: obligation to absolutely transfer ownership of thing; in lease: use of thing is for specified period only with
obligation to return
in sale: consideration is price; in lease: consideration is rent
in sale: seller needs to be owner of thing to transfer ownership; in lease: lessor need not be owner
lease with option to by: really a contract of sale but designated as lease in name only; it is a safe by installments

7. Chattel Mortgage
in chattel mortgage, the thing is a security for an obligation; if the debtor is unable to pay, the ownership cannot be
transferred automatically to the creditor, but is still subject to foreclosure proceedings


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CHAPTER 2: PARTI ES TO A CONTRACT OF SALE

GENERAL RULE: All parties with capacity to contract can enter into a valid contract of sale
1. Natural
2. J udicial - corporation/partnership/associations/Cooperatives
Status of contract valid
Remedies available therefore are:
a. specific performance
b. rescission
c. damages

EXCEPTION TO GENERAL RULE:
1. Minors
where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable
price therefore (Article 1489)
necessaries are things which are needed for sustenance, dwelling, clothing and medical attendance, in keeping with
the financial capacity of the family
status of contract: voidable only, therefor ratifiable
remedy is action for annulment (with partial restitution in so far as the minor is benefited)

2. SALE BY & BETWEEN SPOUSES
a. Contract with 3
rd
parties
status of contract is valid
b. Sale between parties
Status not provided for by law but VOID according to case law
Reason:
i. prevent defraudation of creditors
ii. avoid situation where dominant spouse take advantage of others
iii. avoid circumvention on prohibition of donation between spouses
Exception
i. separation of property agreed (marriage settlement)
ii. judicial separation of property
c. Common Law Spouses (Paramours)
Status of contract: VOID (per case law)
Rationale: evil sought to be avoided is present

Medina v. Collector of Internal Revenue
Contracts violative of the provisions of Article 1490 of the Civil Code are null and void. The government is always an interested
party to all matters involving taxable transactions and, needless to say, is qualified to question their validity or legitimacy
whenever necessary to block tax evasion.

3. OTHERS PER SPECIFIC PROVISIONS OF LAW
a. Guardian with regards to property of ward during period of guardianship
b. Agent with regards to property of principal
c. Executor/administrator with regards to the estate of the deceased
d. Public officers with regards to the property of the estate
e. Officer of court & employee with regards to property in litigation

LEGAL STATUS OF CONTRACT:
1. VOID (PER CASE LAW) guardian/ executor/public officers / officers of the court
2. VOIDABLE (PER CIVIL CODE) agent; and if with consent, VALID

TWO GROUPS OF PROHI BITED PARTIES FROM ENGAGI NG I N CONTRACT OF SALE:
1. Guardian / Agent / Executors ratifiable in the sense that only private wrong is involved
2. Public Officials / Officers of Court not ratifiable in the sense that public wrong is concerned

GUARDI AN/ AGENT/ ADMINISTRATOR
1. Legal status of contract: VOID (case law)
2. Direct or indirect
3. If mediator no need to prove collusion; inutile
4. Even if court approved sale
5. Reason: fiduciary relationship is based on trust

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ATTORNEYS
REQUISITES:
1. Lawyer-client relationship exists
2. Subject matter property in litigation (all types)
3. Duration while in litigation (from filing of complaint to final judgment); may be future litigation
Reason: due to public policy; ground for mal practice
a. Client is at the mercy of the lawyer
b. Law is a noble profession
c. 2 Masters 2 interest; one cannot serve 2 masters at the same time
Exception: CONTINGENT FEE ARRANGEMENT
a. Amount of legal fees is based on a value of property
b. Property itself is involved
Not a sale but service contract
I give that you may do (innominate contract) so has to be governed by law on sales but because of public policy,
considered VALID
Reason why contingent fee is followed:
i. constitutional prohibition v impairment of contract
ii. subject to control of courts (may be reduced if unconscionable or nullified)
iii. canons of legal ethics
iv. higher public policy litigants

Philippine Trust v. Roldan
Bernardo, a minor, inherited land from his father. His stepmother, Roldan, was appointed his guardian. Thereafter, the court
authorized the execution of a deed of sale in favor of Ramos, the brother-in-law of Roldan. Subsequently, a deed of
conveyance was executed in favor of Roldan. Philtrust replaced Roldan as guardian and sought to rescind the contract. The
Court held that Ramos acted as an intermediary for Roldan. Whenever the guardian acquires the ward's property through an
intermediary, he violates the Civil Code and such transaction and subsequent ones emanating therefrom shall be annulled.

Municipal Council of I loilo v. Evangelista
Vda. de Tan Toco sought to recover just compensation for expropriation of her property by the Municipal Council. There were
several claimants over the amount of the judgment, one of which is Atty. Soriano, who claimed payment for professional
services he rendered for Vda. de Tan Toco in other cases. The Court held that the prohibition in the Civil Code did not apply
since there was no attorney-client relation between Soriano and Vda. de Tan Toco in the expropriation case in question.

Rubias v. Batiller
Rubias was the counsel of Militante in an application for the registration of land title, which land is in possession of Batiller. The
case was dismissed. Pending appeal, Militante sold the subject land to Rubias. The decision of the trial court was upheld.
Rubias sought to recover the land from Batiller. The Court held that even if Militante had title to the land (which he didnt), the
sale between him and Rubias is void. Pursuant to Article 1491 of the Civil Code, Rubias is barred from purchasing from his client
the same property which was the subject of the case he handled for Militante.

Valencia v. Cabanting
Cabanting served as counsel for Serapia in a land dispute with Valencia. The trial court rendered a decision in favor of Serapia.
Valencia filed a petition for certiorari with the CA. While this was pending, the trial court issued an order of execution of its
decision. Thereafter, Serapia sold part of the subject land to Cabanting. The SC declared Cabanting guilty of malpractice for
violation of Art. 1491 and the Canons of Professional Ethics. While it is true that the sale occurred after finality of judgment,
there was still a pending certiorari proceeding. Hence, it is not safe to conclude, for purposes of Art. 1491, that the litigation
has terminated.

Fabillo v. I AC
Article 1491 prohibits lawyers from acquiring properties and rights which are the objects of litigation in which they may take
part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes
place during the pendency of the litigation involving the client's property. A contract between a lawyer and his client stipulating
a contingent fee is not covered by said prohibition because the payment of said fee is not made during the pendency of the
litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of
Professional Responsibility, a lawyer may have a lien over funds and property of his client and may apply so much thereof as
may be necessary to satisfy his lawful fees and disbursements. As long as there is no undue influence or fraud on the part of
the lawyer or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and
enforceable.

Gan Tingco v. Pabinguit
A judge cannot take part in the sale of property that had been the subject of litigation in his court. He also cannot intervene in
the auction of property which, though not directly litigated in his court, is nevertheless levied upon and sold as the result of a
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writ of execution issued by him. What the law intends to avoid is the improper interference with and interest of a judge in
property levied upon and sold by his order.

Article 1492. The prohibitions in Articles 1490 and 1491 are applicable to sales in legal redemption, compromises and
renunciations.








CHAPTER 3: SUBJ ECT MATTER OF SALE

TO BE A VALID & BI NDI NG SUBJ ECT MATTER, THE FOLLOWING MUST CONCUR:
1. Existing, Future & Contingent
2. Licit
3. Determinate or determinable

EXISTING, FUTURE, CONTINGENT
Refers to subject matter that are existing & not existing but capable of existence (pursuant to present, technology)
1. if this is present, status of contract: VALID
2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF ACTION
3. if mere pipe dream : VOID
a. SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei Speratae)
Sale of future things; no physical existence yet
A resolutory condition that thing will come into existence
Non happening of condition: RESULUTORY: EXTINGUISH THE CONTRACT
Remedy: can recover what has been paid
b. SALE OF HOPE (Emptio Spei)
Every sale of future thing is subject to condition that they will come into existence
If hope does not come true NO RECOVERY OF PAYMENT/NO RESCISSION
Aleatory character but valid

LI CI T & VENDOR MUST HAVE A RI GHT TO TRANSFER SUBJ ECT MATTER
1. LICIT must be within the commerce of men
VOID SUBJ ECT MATTER:
a. Contrary to law
b. Simulated/fictitious
c. Did not exist at a time of transaction
d. Outside commerce of men
e. Impossible service
f. Intention can not be ascertained
g. By provision of law
2. SELLER MUST BE OWNER only at a time of consummation since tradition transfers ownership but to have a perfected
contract of sale, Vendor need not be owner of thing; can be validated/ratified by subsequent acquisition of title by seller

DETERMINATE & DETERMI NABLE
Absence: VOID; there is subject matter but Intention regarding subject matter can not be ascertained VOID
Kinds of subject matter:
1. Specific - Determinate
Particularly designated or segregated from all others of the same class
2. Generic - Determinable
Test: reach a point of description where both minds concur
At the time the contract is entered in to the thing is capable of being made determinate without the necessity of a
new or further agreement between parties
Exact quantity not essential
Sale of generic things VALID; still executory
There can only be contract of sale when subject is finally chosen for delivery already segregated or designated;
but before designation, valid K of sale already exists
3. Undivided interest (BUYER becomes co-owner)
4. Undivided share in mass of fungible goods (BUYER becomes co-owner)
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Atilano v. Atilano
Eulogio I owned a lot subdivided into 5 parts. He sold one portion to Eulogio II, who had possession of, and whose house was
built on, the said portion even before the sale was executed. Years later, the heirs of Eulogio II had the lot resurveyed and
they discovered, based on the deed of sale, that the land they possessed was actually the lot in the name of Eulogio I, and vise
versa. The Court held that although there was a mistake in the designation of the lots, it was clear that the parties intended
the object of the sale to be the lot occupied by Eulogio II and no other.

Yu Tek and Co. v. Gonzales
Gonzales received P3000 from Yu Tek and Co. for which he obligated himself to deliver to the latter 600 piculs of sugar. No
sugar was delivered. In the suit against him, Gonzales interposed the defense of force majeure as he was not able to produce
any sugar from his crop. However, the Court still held him liable since there was no mention in the contract that the sugar is to
come exclusively from his crop. The object being generic, there is no risk of it being lost.

Gaite v. Fonacier
Gaite sold 24,000 tons of iron ore, more or less, to Fonacier for the sum of P75,000. Fonacier contends that only 7,573 tons
were delivered to him. The sale in this case is that of a specific mass of fungible goods for a lump sum. The price agreed upon
by the parties was not based on the measurement of the ore. The subject matter of the sale is a determinate object, the mass,
and not the actual number of tons contained therein. All Gaite had to deliver was the mass of ore, notwithstanding that the
quantity is less than the amount estimated by them.

J ohannes Schuback and Sons v. CA
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and
upon the price. In this case, the item number, part number and description of the parts to be purchased were already agreed
upon. Although the quantity was yet to be determined, there was already a perfected contract of sale. Quantity is immaterial
in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause.


CHARTER 4: PRICE signifies the sum stipulated as equivalent of the thing sold

CHARACTERISTICS OF VALID PRI CE
1. Must be real
2. Must be in money or its equivalent
3. Must be certain or ascertainable at the time of the perfection of the contract
4. Manner of payment provided for

REAL
1. When price stated is one intended by parties
If fictitious: no intention with respect to price - VOID
If False/simulated: what appears in contract is not the true price
a. VALID if there is true consideration
b. VOID but if none (because it is fictitious)
2. Valuable
When not valuable VOID
When contract is onerous, presumed to have valuable consideration
Nominal consideration w/c is common law concept does not apply (P1.00)
Gross inadequacy of price in ordinary sale does not render contract void unless it is shocking to conscience of man.
Except:
a. J udicial sale
Shocking to conscience of man
Higher price can be obtained at re-sale
b. Rescissible contracts due to lesion
c. Sales with right to repurchase (raises presumption of equitable mortgage) Remedy is reformation

CERTAI N OR ASCERTAI NABLE
CERTAIN
a. if the parties have fixed or agreed upon a definite amount
b. if it be certain with reference to another thing certain
c. if it be certain with reference to a definite day, particular exchange or market (Article 1472)
applies especially to securities, grain and liquids which are subject to fluctuations in the market
d. if the determination of the price is left to the judgment of specified person/s
when the 3
rd
person acts in bad faith or by mistake, the court may fix the price
effect if price is not fixed by the 3
rd
person designated:
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i. by refusal of 3
rd
person: the contract shall become ineffective, unless the parties agree on a price
ii. by prevention of seller or buyer: the party not in fault may seek rescission or fulfillment (court will fix the
price), with damages in either case

GEN. RULE: The fixing of the price can never be left to the discretion of one of the parties.

EXCEPTION: The sale is perfected if the price fixed by one of the parties is accepted by the other (Article 1473).

EFFECT OF FAI LURE TO DETERMI NE PRI CE (Article 1474):
1. where contract is executory the contract is inefficacious (without effect)
2. where delivery has been made the buyer must pay a reasonable price for the things already delivered

GSIS v. CA
A seller cannot unilaterally increase the purchase price previously agreed upon with the buyer, even when such adjustment is
due to increased construction cost. Art. 1473 provides that the fixing of the price can never be left to the discretion of one of
the contracting parties.


MANNER OF PAYMENT MUST BE AGREED UPON
Deemed to be an essential requisite because it is part of the presentation of the contract
Integral part of concept of price
If there is failure to meet minds as regards term of payment: CASH BASIS
Must be certain or at least ascertainable
Effect is absent: NO CONTRACT SITUATION

Other Points to Consider:

Gross Inadequacy and Simulation

Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or
that the parties really intended a donation or some other act or contract.

Article 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some
other act or contract.

GEN. RULE: Gross inadequacy of price does not invalidate a contract of sale.

EXCEPTIONS:
1. Gross inadequacy of price may be a ground for setting aside a judicial sale, only when it is shocking to the conscience of
man and there is showing that, in the event of a resale, a better price can be obtained.
unless there is right of redemption
2. In instances covered by Art. 1381, lesion of more than the value of the thing makes the sale rescissible unless approved
by the court.
3. In sales a retro, gross inadequacy of price raises a presumption of equitable mortgage (Article 1602)

If the price is false (there is actually another price), the contract is valid, but subject to reformation.

Balatbat v. CA
Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract. The failure of the buyer
to pay the price after the execution of the contract does not make the sale null and void for lack of consideration, but puts him
in default.

Bagnas v. CA
Two deeds of sale were purportedly executed by Mateum in favor of the private respondents, the consideration being P1.00,
including services rendered, being rendered to and to be rendered for Mateums benefit. However, Mateum remained in
possession of the lands and he also made tax payments for them until he passed away. Upon assessment, it turns out that the
actual value of the lands is P10,500. The Court held such sale as null and void. The gross disproportion in price demonstrates
false and fictitious consideration. Moreover, the private respondents did not show any other true and lawful cause for the sale.

Vda. de Gordon v. CA
The inadequacy of price is not material "when the law gives the owner the right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price, the easier it is far the owner to effect the redemption.''

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CHAPTER 5: FORMATION OF CONTRACT OF SALE

3 STAGES IN LIFE OF A CONTRACT OF SALE
1. Policitacion/negotiation Stage offer is floated, acceptance is floated but they do not meet; time parties indicate their
interest but no concurrence of offer & acceptance
2. Perfection concurrence of all requisites; meeting of the minds
3. Consummation parties perform their respective undertakings

POLITIACION
1. offer is floated but not absolute
2. acceptance is likewise floated but conditional

RULES:
1. offer is floated prior to acceptance, may be withdrawn at will by offeror
2. offer floated with a period without acceptance, extinguished when period has ended & maybe withdrawn at will by
offeror; right to withdrawn must not be arbitrary otherwise, liable to damage under Art 19, 20, 21 of civil code
3. offer floated with a condition extinguished by happening/non-happening of condition
4. offer floated without period/without condition continues to be valid depending upon circumstances of time, place &
person
5. offer is floated & there is counter-offer original offer is destroyed, there is a new offer; can not go back to original offer
6. offer is floated no authority of offeror to modify offer
7. offer is accepted absolutely proceed to perfected stage

OPTION CONTRACT- a privilege existing in one person, for which he had paid a consideration and which gives him the right to
buy certain specified property, from another person, at any time within the agreed period at a fixed price (Enriquez de la
Cavada v. Diaz)

option money: price given in consideration for the option contract

earnest money (Article 1482): partial payment of the purchase price and is considered proof of the perfection of the
contract
cannot be forfeited when buyer backs out, unless stipulated

OPTI ON MONEY EARNEST MONEY
applies to a sale not yet
perfected
given only where there is
already a sale
party who gives option
money is not required to
buy
party who gives earnest
money is required to pay
the balance

The option may be withdrawn at any time. However, if there is consideration for the option, the seller will be liable for
damages for breach of the option.

If another buyer in good faith purchases the thing that is the object of the option contract, such sale is valid but the seller
will be liable for damages.

Acceptance by letter/telegram binds only at time it came to knowledge of seller; prior thereto the offer may still be
withdrawn.

Villonco Realty Co. v. Bormaheco, I nc.
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and acceptance absolute. A qualified acceptance constitutes a counter-offer. However,
where the changes or qualifications made by the seller on the buyer's offer are not material or are mere clarifications of what
the parties had previously agreed upon, such changes would not prevent a perfection of the contract.

Villamor v. CA
The consideration of the Deed of Option is the essential reason which moves the parties to enter into the contract. In this case,
the consideration was the difference in price between the offer of the buyers and the reasonable prevailing price. The former
was greatly higher than the latter. However, the Deed of Option did not provide for the period within which the parties may
demand performance. The parties could not have contemplated that the delivery of the property and the payment thereof could
be made indefinitely and render uncertain the status of the land. The failure of either parties to demand performance of the
obligation of the other for an unreasonable length of time renders the contract ineffective.
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Carceller v. CA
A lease agreement with option to purchase was executed. Fifteen days prior to the expiration of the option period, the lessee
sent a written notice requesting for a 6-month extension of the period. This request was denied after the expiration of the
option period. Thereafter, the lessee sent notice to exercise his option to purchase and the lessor refused to grant the exercise
of the option. The SC held that the delay of 18 days by the lessee cannot be considered substantial not fundamental since the
lessee exercised the option within a reasonable time after the end of the period, immediately after the lessee was informed of
the denial of his request.

Cavite Devt. Bank v. Lim (2000)
CDB sold land to Lim, which land it previously foreclosed from Guansing. Lim paid P30,000 as option money. Subsequently,
the title to the land was reverted to Guansings father, on the ground that it was fraudulently secured by Guansing. Lim then
filed an action for specific performance against CDB. As a defense, CDB alleged that there was no perfected contract of sale
with Lim. The SC held that there was a perfected contract of sale, the option money paid being in the nature of earnest
money or down payment. In this case, the contract (Offer to Purchase) provides for the payment only of the balance of the
purchase price, implying that the option money forms part of the purchase price.



floats in the policitacion stage
offer with a period but founded upon a separate consideration distinct from the price
no presumption of consideration, needs to be proven
Characteristics:
a. not the contract of sale by itself, distinct
b. nominate
c. principal; but can be attached to other principal contracts
d. onerous
e. commutative
f. unilateral vs contract of sale which is bilateral
to be perfected & give rise to action, the following must concur
a. subject matter of sale must be agreed upon
b. price of sale & manner of payment must be agreed upon
c. consideration separate & distinct from price
d. period as per contract; if period not provided prescribes in 10 years (written contract)
e. how exercised: notice of acceptance should be communicative to offeror without actual payment as long as there is
delivery of payment in consummation stage

2 SITUATIONS IN AN OPTI ON CONTRACT:
1. with separate consideration
Legal consequence:
a. option contract is valid
b. offeror can not withdrawn offer until after expiry period
c. subject to rescission, damages but not to specific performance because this is not an obligation to give
2. without separate consideration
Legal consequence:
OLD RULE:
a. offer is still valid, but
b. option contract is void
c. not subject to rescission, damages
NEW RULE: Right if first refusal recognized

RI GHT OF FI RST REFUSAL:
creates a promise to enter into a contract of sale and it has no separate consideration, not subject to specific performance
because there is no contractual relationship here & it is not an obligation to give (not a real contract)
New doctrine: may be subject to specific performance
Effect of new doctrine: turned the world of policitacion upside down because while valid option contract is not subject to
specific performance, right of first refusal which does not even have a separate consideration may be subject to specific
performance
Recognizes recovery of damage based on abuse of rights doctrine




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OPTION CONTRACT & RI GHT OF FI RST REFUSAL DI STI NGUI SHED
OPTI ON CONTRACT RIGHT OF FIRST REFUSAL
Principal contract; stands on its own Accessory; can not stand on its own
Needs separate consideration Does not need separate consideration
Subject matter & price must be valid There must be subject matter but price not
important
Not conditional Conditional
Not subject to specific performance Subject to specific performance

Paraaque Kings Enterprises v. CA
In order to have full compliance with the right of first refusal, there should be identity of terms and conditions to be offered to
the buyer holding such right and all other prospective buyers. If the terms of the offers are different, it becomes necessary for
the seller to go back to the party with the right of first option.
The 3
rd
person who bought the property from the seller who violated the right of first refusal cannot claim to be a stranger to
the arrangement since he steps into the shoes of the owner-lessor of the property be virtue of his purchase and assumes all the
obligations of the previous owner under the lease contract.

Asuncion v. CA
In a right of first refusal, while the object might be made determinate, the exercise of the right is dependent not only on the
grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it belongs to a class of preparatory juridical relations governed not by
contracts but by, among other laws of general application, the provisions of the Civil Code on human conduct. Even if such
right of first refusal has been decreed under a final judgment, its breach cannot justify the issuance of a writ of execution under
a judgment that merely recognizes its existence, nor would it sanction an action for specific performance. It is not to say,
however, that the right of first refusal would be inconsequential, for an unjustified disregard thereof, can warrant a recovery for
damages.

San Po Ek v. Martinez (2000)
Martinez, and her mother before her, leased property to San Po Ek for a total of 28 years. After this period, Martinez wrote the
lessee to inform the latter of her intention to sell the leased property. However, the property was thereafter sold to a 3
rd
party.
San Po Ek filed a case praying for the nullity of this sale. The SC held that San Po Ek does not have a right of first refusal to
assert against Martinez. Although the right of first refusal may be provided for in a lease contract, such right was never
stipulated in any of the several lease contracts. The grant of the right of first refusal must be clearly embodied in a written
contract.



PERFECTION: OFFER & ACCEPTANCE
PERFECTION
Sale is a consensual contract, perfected by meeting of minds regarding subject matter & price
Meeting of Minds:
1. Offer certain
2. Acceptance absolute
Qualified acceptance merely a counter-offer which needs to be absolutely accepted to give rise to perfected
contract of sale
Business ads are mere invitations to make an offer except when it appears to be otherwise
Acceptance by letter/telegram binds only at time it came to knowledge of SELLER; prior thereto offer may still
be withdrawn
Must be exact terms to be considered absolute
When deviations allowed:
a. anything that refers to price is material
b. small items are insignificant, does not make acceptable unconditional
when sale is subject to suspensive condition, no perfected contract of sale yet; becomes perfected only upon happening of
condition
In sales at auction, perfected when auctioneer announces its perfection by the fall of the hammer or in other customary
manner may impose terms under bidder may retract his bid; owner of property sold at auction may impose terms under
w/c the auction will proceed & it shall be binding w/n the bidders are aware
Place of perfection: where the meeting of minds happen; when acceptance sent by mail, perfection is deemed where the
offer is made
Performance has nothing to do with perfection stage



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EARNEST MONEY
1. money given as part of purchase price
2. its acceptance is proof that contract of sale exists
nothing in law prevents parties from treating earnest money differently
old concept: subject to forfeiture when BUYER backs out
new concept: can not be forfeited part of purchase price; must be restored
qualification: if old concept is stipulated VALID
presumption of perfection of contract of sale and such earnest money as art of purchase price is disputable

FORM OF SALES
1. Form not important in validity of sale
Sale being consensual, may be oral or written, perfected by mere consent as to price & subject matter
If particular form is required under the statute of frauds:
a. valid & binding between parties
b. not binding to 3
rd
persons only
Reason: purposes of convenience only & not for validity & enforceability; cause of action is granted to sue & compel
other party to execute the document
2. When form is important for validity; exception by specific provision of law;
a. power to sell a piece of land granted to an agent otherwise VOID
b. sale of large cattle; must also be registered with Municipal treasurer otherwise VOID
c. sale of land by non-Christian if not approved by Governor VOID
3. When form is important for enforceability (STATUTE OF FRAUDS)
a. sale to be performed 1 year after
b. Agreement to sell things with value of 500 and up
c. Sale of real property or interest therein
Exception:
i. When there is a note or memorandum in writing & subscribe by party or his agent (contains essential terms of the
contract)
ii. When there has been partial performance/execution (seller delivers with intent to transfer title/receives price)
iii. when there has been failure to object to presentation of evidence (oral)
(constitute waiver)
4. Expenses for execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary
(Article 1487).

Dalion v. CA
Dalion executed a private document of absolute sale in favor of Sabesaje. Dalion claims that the document is fictitious, and that
since the alleged sale was embodied in a private instrument (and not in a public instrument), it didnt convey title or rights. The
SC upheld the validity of the sale. A contract of sale is perfected by mere consent and no particular form is required for its
validity. The process provided for under Art. 1358 CC is only for convenience, not for validity or enforceability.

Ortega v. Leonardo
Ortega and Leonardo disputed over the occupancy of a parcel of land. Leonardo asked Ortega to desist from pressing her
claim, and promised to sell her a portion of the lot, provided the latter paid for the surveying and subdivision of the lot. Ortega
then caused the survey and subdivision of the portion Leonardo promised to sell. She even made some improvements on the
said portion. However, Leonardo refused to accept tender of payment. The SC ruled that while, as a general rule, an oral
agreement to sell a piece of land is not provable, where there is partial performance of the sale contract, the principle excluding
evidence of parol contracts for the sale of realty will not apply. In this case the following indicates partial performance:
relinquishment of rights, continued possession, building of improvements, tender of payment rendition of services, payment of
taxes, surveying of the land at the vendee's expense, etc.

Baretto v. Manila Railroad Co.
Delivery of the deed to the agent of the buyer, with no intention to part with the title until payment of the purchase price, does
not constitute partial performance and does not take the case out of the Statute of Frauds.

RULES GOVERNI NG AUCTI ONS (Article 1476)

Sales of separate lots are separate contracts of sale.
Sale is perfected by the fall of the hammer.
before perfection of the sale, the bidder may retract his bid and the auctioneer may withdraw the goods from the sale
(unless the auction is without reserve)
The seller or his agent has the right to bid in the auction sale provided:
such right was reserved
notice was given
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right to bid by seller is not prohibited by stipulation or law

SALE OF GOODS BY DESCRI PTI ON AND/ OR SAMPLE (Article 1481)

sale by description OR sample: contract may be rescinded if bulk of goods delivered do not correspond with the description
or sample

sale by description AND sample: bulk of the goods must correspond to both the description and the sample

bulk of the goods: does not designate the greater portion of the goods, but the goods themselves as distinguished from the
sample or description


SALE BY I NSTALLMENT

Article 1484. In a contract of sale of personal property, the price of which is payable in installments, the vendor may exercise
any of the following remedies:
1) Exact fulfillment of the obligation, should the vendee fail to pay;
2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two
or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

The remedies are alternative and not cumulative.

This provision incorporates the Recto Law or the Installment Sales Law.
rationale: to prevent abuses of mortgagees who seize the mortgaged property, buy the same for a low price at the
foreclosure sale and then bring suit against the mortgagor for a deficiency judgment

Article 1484 applies to leases of personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing (Article 1485).

Article 1486. In cases falling under Arts. 1484 and 1485, a stipulation that the installments or rents paid shall not be
returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.

Levy Hermanos v. Gervacio
In order to apply the provisions of article 1454-A CC (old) it must appear that there was a contract for the sale of personal
property payable in installments and that there has been a failure to pay two or more installments. In this case, the contract is
not one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its
totality at the time specified in the promissory note. Accordingly, the mortgagee is not bound by the prohibition therein
contained as to its right to the recovery of the unpaid balance. Where the price is payable in several installments, generally
payable in relatively small amounts, there is great temptation for improvident purchasers to buy beyond their means. There is
no such temptation where the price is to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for, in
the latter case, the partial payments are not so small as to place purchasers off their guard and delude them to a miscalculation
of their ability to pay.

Zayas, J r. v. Luneta Motor Company
Zayas purchased a car from Escao Enterprises, a dealer of LMC. A chattel mortgage was constituted on the car and Escao
assigned its rights to LMC. When Zayas defaulted, LMC extrajudicially foreclosed the mortgage and subsequently filed a civil
suit to recover the deficiency in price. The SC held that Escao Enterprises was the agent of LMC and that LMC, as assignee,
had no better rights than assignor Escao Enterprises under the same transaction. Article 1484 applies and LMC cannot recover
deficiency in price.

Industrial Finance Corp. v. Ramirez
The rule is that in installment sales, if the action instituted is for specific performance and the mortgaged property is
subsequently attached and sold, the sale does not amount to a foreclosure of the mortgage. Therefore, the seller has the right
to recover on the unpaid balance of the purchase price from the buyer.

Delta Motor v. Niu Kim Duan
Where the seller retakes possession of the thing sold from the buyer, through a writ of replevin, it can no longer exact payment
from the buyer for the balance of the purchase price.

EliscoTool Manufacturing Corp. v. CA
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If the main purpose for seeking recovery of personal property under a writ of replevin was merely to ensure enforcement of the
remedy of specific performance under Art. 1484(1), then there would be no bar to recover any amount from the lessee by
reason of the enforcement of the writ.

Northern Motors v. Sapinoso
Although the seller had already filed an action for foreclosure, if prior to the actual sale of the subject property at public auction
the seller had received further payments from the buyer, the seller is not obliged to refund said payments after foreclosure. It
is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the vendor of any balance on the
purchaser's outstanding obligation not satisfied by the sale.

Cruz v, Filipinas I nvestment & Finance Corp.
The seller may not recover deficiency judgment by foreclosing on a mortgage constituted by 3
rd
-party mortgagors, after
foreclosing on the chattel mortgage constituted on the subject matter of the sale. This is because the guarantor would be
entitled to reimbursement from the debtor-vendee for what he paid the seller. Ultimately, it will be the debtor-vendee who will
be made to pay for the deficiency in price after foreclosure.
The action barred under Art. 1484 includes not only judicial proceedings, but should include extrajudicial proceedings by virtue
of which the seller maybe enabled to exact recovery of the deficiency in price.


CHAPTER 6: CONSUMMATI ON STAGE/ PERFORMANCE STAGE
Stage where parties both comply with their obligation
Nature of diligence required: diligence of good father of family unless other requirement is stipulated
Consequence: Seller will guilty of breach if thing is lost through his fault

OBLI GATIONS OF THE VENDOR

1. PRESERVE THE THING PENDI NG DELI VERY (Art. 1163)

RULES I N CASE OF LOSS, DETERI ORATI ON, OR I MPROVEMENT OF THI NG:
before perfection of the contract: the seller bears the risk of loss/deterioration

at the time of perfection (Article 1493):
if the thing is entirely lost, the contract shall be without any effect
if the thing is lost in part only, the vendee may withdraw from the contract or demand the remaining part, paying its
proportionate price

after perfection but before delivery (Articles 1504 and 1538):
GEN. RULE: the risk of loss is borne by owner of the thing under the rule res perit domino
remember that generally, delivery transfers ownership

EXCEPTIONS:
i. buyer assumes risk at the time of delivery where the seller reserves ownership, despite delivery, to secure
performance of buyers obligations
ii. party who causes delay in actual delivery bears the loss which might have occurred but for such fault

LOSS OF THING
without sellers fault thru sellers fault
the obligation shall be
extinguished
seller shall be obliged to
pay damages

DETERI ORATI ON OF THE THI NG
without sellers fault thru sellers fault
the impairment is to be
borne by the buyer
the buyer may choose
between:
rescission
specific performance
with damages in either
case

I MPROVEMENT OF THE THI NG
by nature or time at sellers expense
improvements shall inure seller shall have no other
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to the benefit of the
buyer
right than that granted to
the usufructuary

VILLANUEVA: The rules are different for loss and deterioration/improvement because in the former, the obligation to
transfer ownership arises upon delivery while in the latter, the buyer becomes owner of the fruits, accessions and
accessories upon mere perfection of the contract.

Article 1480. Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the
perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of
their weight, number, or measure.
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to
the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay.

Under this provision, the risk of loss is borne by the buyer after perfection of the contract and even before delivery, as an
exception to the rule of res perit domino.

after delivery: goods are at the buyers risk

Chrysler Philippines Corp. v. CA
The general rule is that before delivery, the risk of loss is borne by the seller who is still the owner, under the principle of res
perit domino.

2. TRANSFER OWNERSHI P OF AND DELI VER THING WITH FRUITS AND ACCESSORIES

The vendor must have ownership of the thing sold at the time when the ownership is to pass, and not necessarily at the
time of the perfection of the contract (Article 1459).
generally, the ownership of the thing sold is transferred upon actual or constructive delivery (Article 1477)

Quijada v. CA
Ownership by the seller of the thing sold at the time of the perfection of the contract of sale is not an element for its perfection.
What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection per
se does not transfer ownership and a perfected contract of sale cannot be challenged on the ground of non-ownership on the
part of the seller at the time of its perfection.

The thing sold and its accessions and accessories must be delivered in the condition in which they were upon the perfection
of the contract (Article 1537).

The vendee has a right to the fruits from the time of perfection of the contract (Article 1537).


DELIVERY OF THE THI NG
Transfer ownership (tradicion) twin obligation:
1. transfer title(ownership) SELLER must be owner of thing at the time of consummation to validly transfer title
2. delivery of the thing
Different kinds of delivery:
1. Actual
when thing sold is placed in the control & possession of the buyer
2. Constructive

DIFFERENT FORMS OF CONSTRUCTIVE DELI VERY:
1. Traditio Longa Manu
Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering
2. Traditio Brevi Manu
Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as
lessee)
3. Symbolic delivery
As to movables ex: delivery of the keys to a car
4. Constitutum possessarium
at the time of perfection of contract, seller continues to hold possession merely as a holder
5. Execution:
Exception:
a. when there is stipulation to contrary, execution does not produce effect of delivery
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b. when at the time of execution of instrument, subject matter was not subject to control of the seller
subject matter should be within control of seller; he should have capacity to deliver at the time of execution
of public instrument when he wants to effect actual delivery
such capacity should subsist for reasonable time after execution of instrument (reason time depends on
circumstances of persons, places & things)
Effect when 2 requisites do not concur: no constructive delivery; no compliance on part of SELLER to deliver
Even when thing is mortgaged, seller can still deliver because naked title still belongs to him & can still do acts of
ownership including conveyance
6. Negotiable documents of title & non negotiable instruments (1501)
transferee acquires title of transferor
when delivered without negotiation, it is a mere assignment
7. Intangibles/ incorporeal property
through public instrument
execution is equivalent to delivery if from the deed, contrary does not appear

Pasagui v. Villablanca
While the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land, this presumptive
delivery only holds true when there is no impediment that may prevent the passing of the property from the vendor to the
vendee. It can be negated by the fact that the vendees actually failed to obtain material possession of the land subject of the
sale.

Dy, J r. v. CA
Constructive delivery be the execution of a public instrument would produce the effect of tradition, insofar as title is concerned,
provided that at the time of the execution there was no legal impediment on the part of the seller to transfer title to the buyer,
even if at the time of the sale, control or possession of the subject matter was not in the hands of the seller.


DELIVERY OF FRUI TS & ACCESSIONS/ ACCESSORIES
Right to fruits & accessions/accessories accrue from time sale is perfected
but no real right over it until it is delivered

DELIVERY THROUGH CARRI ER
1. FAS FREE ALONG SIDE
When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed fulfilled)
2. FOB-FREE ON BOARD
a. Shipment when goods are delivered at ship at point of shipment; delivery to carrier by placing goods on vessel is
delivery to buyer
b. Destination when goods reach the port even if not disembarked yet from the vessel, there is delivery to the buyer
3. CIF COST, INSURANCE, FREIGHT
a. when buyers pays for services of carrier delivery to carrier is delivery to buyer; carrier is agent of the buyer
b. when buyer pays seller the price from moment the vessel is at port of destination, there is already delivery to buyer.
c.
Behn, Meyer & Co. v. Yangco
Behn, Meyer & Co. (vendor) entered into a contract of sale and delivery with Yangco (vendee). The shipping terms were c.i.f.
Manila on the goods coming from New York. Yangco only received 9 of the 80 drums of caustic soda ordered, and such were
in bad condition. The Court held that the loss is to be borne by the vendor. The phrase c.i.f. Manila signifies that the price
fixed covers not only the cost of the goods, but also the expense of freight and insurance to be paid by the seller. The terms
"C. I. F." and "F. O. B." merely make rules of presumption which yield to proof of contrary intention, which was not present in
this case.

General Foods v. NACOCO
Under an ordinary C.I.F. agreement, delivery to the buyer is complete upon delivery of the goods to the carrier and tender of
the shipping and other documents required by the contract and the insurance policy taken in the buyer's behalf. However, the
parties may, by express stipulation or impliedly, modify a CIF contract and throw the risk upon the seller until arrival in the port
of destination. In this case, the parties agreed that the payment of the price was to be according to the "net landed weight"
upon arrival in the port of destination. Therefore, notwithstanding the CIF contract, delivery to the carrier in Manila was not
delivery to the buyer and the vendor bore the risk of loss.


Contracts of Sale or Return, and of Sale on Trial or Approval or Satisfaction (Article 1502)
a. sale or return: where the buyer has the option to purchase or return the goods, ownership of the goods passes to the
buyer upon delivery but is re-vested in the seller upon its return
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b. sale on trial or approval: where the satisfaction of the buyer is a condition precedent to the perfection of the contract,
the ownership passes to the buyer upon:
i. the buyers approval of the goods
ii. retention of the goods by the buyer without giving notice of rejection

Industrial Textile Manufacturing Co. v. LPJ Enterprises, Inc.
For a sale to be considered and construed as a sale or return or sale on approval, there must be a clear agreement to either
of such effect. Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice purporting to
embody a sale without condition or restriction constituted a contract of sale or return. If the purchaser desired to incorporate a
stipulation securing to him the right of return, he should have done so at the time the contract was made. On the other hand,
the buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the "on
approval" situation.

Where Specific Goods are Shipped (Article 1503)

GEN. RULE: The ownership in the goods sold passes to the buyer upon their delivery to the carrier (Article 1523).

EXCEPTI ONS: The seller reserves ownership in the goods where:
a. a contrary intention appears by the terms of the contract
b. by the bill of lading the goods are deliverable to the seller, his agent or to the order of the seller or his agent
c. possession of the bill of lading is retained by the seller or his agent
d. the seller transmits the bill of exchange and the bill of lading together to the buyer to secure acceptance or payment of the
bill of exchange

EFFECTS WHERE BI LL OF EXCHANGE IS NOT HONORED BY THE BUYER:
a. buyer is bound to return the bill of lading
b. if buyer wrongfully retains the bill of lading, he acquires no additional right thereby
c. a purchaser in good faith for value from the buyer will obtain ownership in the goods

SELLERS DUTY AFTER DELI VERY TO CARRI ER (Article 1523):
a. to make such contract with the carrier on behalf of the buyer as may be reasonable under the circumstances
if the seller omits to do so, the buyer may:
decline to treat the delivery to the carrier as delivery to himself
hold the seller responsible in damages
b. to give notice to the buyer regarding necessity to insure the goods, unless the buyer had all the information necessary to
insure
if the seller fails to do so, the goods shall be deemed to be at his risk during such transit


COMPLETENESS OF DELI VERY
1. MOVABLES delivery of thing plus accessories & accessions in the condition in which they were upon the perfection of the
contract including the fruits
a. LESS buyer has 2 options:
i. reject
ii. accept
(1) when accepts with knowledge that seller is not going to perform contract in full, he must pay at price
stipulated
(2) when accepts & consumes before knowledge that buyer will both perform contract in full, liable only for fair
value of goods delivered
b. LARGER buyer has 2 options;
i. accepts per contract & reject the rest
ii. accept the whole pay price stipulated
iii. reject whole if subject matter is indivisible
c. MIXED WITH GOODS OF DIFFERENT DESCRIPTION buyer has 2 options:
i. accepts good w/c are in accordance with contract & reject the rest
ii. reject goods entirely if indivisible
2. IMMOVABLES
a. sold per unit or number
with statement of its area, rate at certain price
deliver all that may heave been stated in the contract
if impossible, remedies of buyer:
LESS IN AREA
i. rescission
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ii. proportional reduction of price LACK IN AREA SHLD NOT BE LESS THAN 1/10 OF AREA AGREED UPON
GREATER IN AREA
i. accept per stipulation & reject the rest
ii. accept whole area pay at contract rate
Not applicable to judicial sales
b. sold for lump sum
When price per unit not indicated
Is area delivered is either greater or lesser price will not be adjusted accordingly

Sta. Ana v. Hernandez
Where two parcels of land sold were identified by the conspicuous boundaries that separated the lands in question from the rest
of the property, the sale made was of definite and identified tract that obligated the vendors to deliver to the buyer all the land
within the boundaries, irrespective of whether the real area should be greater or smaller than what is recited in the deed. This
is particularly true where the area given is qualified to be approximate only, i.e., more or less. To hold the buyer to no more
than the area recited on the deed, it must be made clear therein that the sale was made by unit of measure at a definite price
for each unit. As between the absence of a recital of a given price per unit of measurement, and the specification of the total
area sold, the former must prevail and determines the applicability of the norms concerning sales for a lump sum.

TI ME & PLACE OF DELI VERY
1. follow stipulation in contact, or
2. follow usage of trade, or
3. sellers place of business or his residence
4. specific goods place where the thing is
5. at reasonable hour

In case of specific goods, the place of delivery is that where such goods were at the time the contract was made.

The seller shall not be released until the 3
rd
person with possession of goods acknowledges being the bailee for the buyer.

The seller bears the expenses to place the thing in a deliverable state, unless otherwise agreed.

RULES GOVERNING TIME OF DELIVERY, in the following order:
a. time agreed upon
b. time determined by usage of trade
c. if no time is fixed, the seller is bound to send the goods to the buyer within a reasonable time

GEN. RULE: The vendor shall not be bound to deliver the thing sold unless the price be paid (Article 1524).

EXCEPTI ON: The thing must be delivered though the price be not first paid, if a time for such payment has been fixed in the
contract.

EFFECTS OF DELI VERY: Title to thing is transferred/ownership is transferred
Except: contrary is stipulated as in the case of:
1. contract to sell
2. sale on acceptance/approval
3. sale or return
4. there is implied reservation of ownership

WHO BEARS EXPENSES OF DELIVERY Seller

Sale by description/ sample
1. Sample goods must correspond with sample shown
2. Description goods must correspond with description or sample
Effect if there is no compliance: RESCISSION may be availed of by the buyer



OBLI GATI ON OF BUYER
1. Pay the price
Buyer is obligated to pay price according to terms agreed upon regarding time, place & amount
If payment of interest is stipulated must pay; if amount of interest not mentioned apply legal rate
When buyer defaults constitutes breach: subject to specific performance/rescission & damages ; interest to be paid
also from of default
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2. Accept delivery of thing sold
Where to accept: at time & place stipulated in the contract; if none specified at the time & place of delivery
Goods; there is acceptance when:
a. He intimates to seller that he has accepted
b. When delivered & does any act inconsistent with ownership of seller
c. Retains without intimating to seller that he has rejected
Sale of Goods on installment:
a. Goods must be delivered in full, except when stipulated
b. When not examined by buyer not accepted until examined or at least had reasonable time to examine
Acceptance of goods in general, absent contrary express stipulation, does not discharges seller from liability in case of
breach of warranties (unless no notice or failure to give it within reasonable time)
When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is
stipulation to contrary

DOUBLE SALE- where the same property is sold to different vendees.

General Rule: FIRST IN TIME, PRIORITY IN RIGHT
When does it apply: when not all requisites embodied in 1544 concur

SPECIAL RULE: 1544
Requisites;
1. exactly same subject matter
2. exactly same immediate seller
3. they buyers represent conflicting interest
4. both sales are valid

RULES ACCORDING TO 1544:
1. MOVABLE
owner is first to posses in good faith
2. IMMOVABLE
First to register in good faith
No inscription, first to possess in good faith
No inscription & no possession in good faith Person who presents oldest title in good faith
Sales of immovable property are subject to the Mortgage Law and Land Registration Law (Article 1637).


GOOD FAI TH
1. one who buys property without notice that another person has a right or interest in such property
2. one who has paid price before notice that another has claim or interest
lis pendens notice that subject matter is in litigation
adverse claim notice that somebody is claiming better right

POSSESSION
Both actual or constructive

REGI STRATI ON
1. registered under Torrens system
1544 applies
2. not registered under the Torrens system
1544 still applies
decided case which excluded unregistered land dealt with judicial sale whereby buyer acquires right of transferor;
outside of such situation must apply to conflicting sale over same unregistered parcel of land
3. when situation is sale 1 deals with land when not yet registered & sale 2 is done when land already registered apply
FIRST IN TIME, PRIORITY IN RIGHT

Agricultural & Home Extension v. CA
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or
interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the
claim or interest of some other person in the property. The annotation of lis pendens on the title to the property by 3
rd
parties
does not place the buyer in bad faith since such does not establish a lien or encumbrance on the property affected.

Cheng v. Genato
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The rules on double sales under Art. 1544 are not applicable to a contract to sell. For Art. 1544 to apply, there must be valid
sales transactions and the buyers must be at odds over the rightful ownership of the subject matter who must have bought
from the very same seller. Such circumstances are lacking in a contract to sell since there is no transfer of ownership and no
sale has yet been consummated. Nevertheless, the governing principle of Art. 1544 should apply, mainly the principle of primus
tempore, portior jure (first in time, stronger in right).

Gatmaitan v. CA
If immovable property is sold 2 different parties, the ownership shall pertain to the person acquiring it who, in good faith, first
registered it in the Registry of Property. This rule however, admits of an exception, and that is where the 2nd purchaser had
knowledge of the other sale, prior to or at the time of the sale. In such case, his knowledge is equivalent to registration and
taints his purchase with bad faith. The applicable rule in this case would be that the ownership shall pertain to the person who,
in good faith, first entered into possession of the property or, in the absence of possession, to the person who presents the
oldest title, provided there is good faith.

Navera v. CA
Where both sales were not recorded in the Registry of Property, the law clearly vests the ownership upon the person who in
good faith was first in possession of the disputed lot. The possession mentioned in Article 1544 for determining who has better
right when the same piece of land has been sold several times by the same vendor includes not only the material but also the
symbolic possession, which is acquired by the execution of a public instrument. In the case at bar, both sales were executed
through public instruments. Ownership should therefore be recognized in favor of the first vendee.

Cruz v. Cabana
Prior registration by the 2
nd
buyer does not by itself confer ownership or a better right over the property. Such registration
must be coupled with good faith. The governing rule is primus tempore, potior jure (first in time, stronger in righs). Knowledge
gained by the 2
nd
buyer of the first defeats his rights even if he is first to register the sale, since such knowledge taints his prior
registration in bad faith.

Baricuatro v. CA (2000)
Galeos sold 2 lots of a subdivision, on installment basis, to Baricuatro and subsequently sold the entire village to Amores.
Galeos told Baricuatro that he should make full payment to Amores. After Baricuatro failed to make payment to Amores, the
latter sold the same 2 lots to the Nemenio spouses. The 2
nd
vendee obtained title to the lots and asked Baricuatro to vacate.
When the latter refused to do so, the Nemenios filed an action to quiet title. The SC declared the sales to Amores and Nemenio
as null and void. It ruled that even if Amores and the Nemenios were purchasers in good faith, they did not act in good faith
when they registered their titles to the disputed lots as they already had knowledge of the sale to Baricuatro before such
registration. For a 2
nd
buyer to successfully invoke Art. 1544, he must possess good faith from the time of acquisition of the
property until the registration of the deed of conveyance covering the same.

Carumba v. CA
While under Article 1544, registration in good faith prevails over possession in the event of a doubt sale by the vendor of the
same piece of land to different vendees, said article is of no application to unregistered land at an execution sale. The reason is
that the purchaser of unregistered land at a sheriff's execution sale only steps into the shoes of the judgment debtor. He merely
acquires the latter's interest in the property sold as of the time the property was levied upon. In this case, the first vendee
bought the property before the land was levied upon. Therefore, he has a better right to the land even if the 2
nd
vendee was
first to register the land in good faith.



CHAPTER 7: DOCUMENTS OF TI TLE
DOCUMENTS OF TI TLE
not creations of law but by merchants to allow them to deal with merchandise without having to physically carry them
around
pertains to specific type of movables only : GOODS

2 FUNCTIONS
1. evidence of existence & possession of goods described therein
2. medium by which seller is able to transfer possession of goods

2 FORMS
1. negotiable
a. deliver to bearer (negotiation by mere delivery)
b. deliver to specific person or his order (negotiation by endorsement + delivery)
even if face of instrument says NON-NEGOTIABLE it is still NEGOTIABLE; limiting words not to destroy
negotiability
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if order instrument & no endorsement was made equivalent to assignment




I MPORTANT CONSI DERATI ONS
1. Negotiation gives better right than assignment
NEGOTIATION ASSIGNMENT
transferor/holder acquires title to goods acquires title to goods against transferor
bailee has direct obligation to holder as if directly
dealt with him
acquires right to notify bailee so that he acquires
obligation of bailee to hold goods for him
2. Assignee takes document with defects of the assignor
3. Obligation of bailee bailee is immediately bound to the document

WARRANTIES ON NEGOTI ATI ON/ ASSIGNMENT THE SAME
1. the document is genuine
2. he has legal right to negotiate or transfer it
3. he has knowledge of no fact which would impair the validity or worth of the document
4. he has right to transfer title to goods and goods are merchantable/fit

RULES OF LEVY/ GARNI SHMENT OF GOODS COVERED BY DOCUMENTS OF TI TLE
1. Non negotiable
Notification is operative act to transfer title/possession of goods in favor assignee
Before notification can be garnished but not when there is notification already
2. Negotiable
Can not be levied or garnished when docs already with purchaser in good faith, unless:
a. Document is first surrendered
b. Document is pounded by court
c. Negotiation is enjoined

Siy Cong Bieng v. Hongkong and Shanghai Banking Corp.
Between the owner of a negotiable document of title who indorsed it in blank and entrusted it to a friend, and the holder of
such negotiable document of title to whom it was negotiated and who received it in good faith and for value, the latter is
preferred. This is because of the principle that as between two persons, he who made the loss possible should bear the loss.


CHAPTER 8: SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE

1. SALE BY NON-OWNER
Perfection Stage
a. sale by owner valid
b. sale by non-owner valid;
because ownership is necessary only transfer title to goods; at perfection stage, no obligation on part of seller to
transfer ownership
law on estoppel further bolster it: title passes by operation of law to grantee when person who is not owner of goods
sold delivers it and later on acquires title thereto
since valid, action to annul is improper; there is perfected contract
Consummation Stage
Contract of sale is valid because it has passed perfected stage, despite:
a. seller is not owner
b. seller has no authority to sell
What is void is the transfer of title/ ownership did not pass
Effect: buyer acquired no better right than transferor
Legal effect: CAVEAT EMPTOR BUYER BEWARE
a. co-owner sells whole property prior to partition sale is void as to his spiritual share
b. co-owner sells definite portion to partition sale is void as to other co-owner but valid as to his spiritual share
Exception:
a. owner by his conduct is precluded from denying sellers authority (ESTOPPEL)
b. contrary is provided for in recording laws (pd 1529)
c. sale is made under statutory power of sale or under a court of competent jurisdiction
d. sale is made under merchants store in accordance with code of commerce & special laws

City of Manila v. Bugsuk
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A principal office is not a store. A store is defined as any place where goods are kept for sale, whether by wholesale or retail, or
any place where goods are deposited and sold by one engaged in buying and selling them.

Aznar v. Yapdiangco
Under Article 1506, it is essential that the seller should have a voidable title at least. It is clearly inapplicable where the seller
had no title at all. Where the would-be buyer took possession of the subject matter by stealing the same while it was in the
custody of the vendor's agent, there is unlawful deprivation and the owner has the right to recover the thing not only from the
finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber,
pursuant to Art. 559, CC.

EDCA Publishing v. Santos
An impostor, identifying himself as a professor, obtained delivery of books from EDCA for which he issued a check that
subsequently bounced. The impostor sold the books to Santos for value. According to the SC, the non-payment of the
purchase price by the impostor, although amounting to fraud, did not amount to unlawful deprivation under Art. 559. Such
fraud may be considered a vitiation of consent, making the contract voidable, but valid until annulled. Hence, the sale to Santos
was valid.

2. SALE BY SELLER WITH VOIDABLE TITLE
Perfection Stage
Valid sale buyer acquires title of goods
Consummation Stage
Valid sale if title has not yet been avoided buyer buys goods under following condition:
a. in good faith
b. for value
c. without notice of sellers defect of title

TITLE AS TO MOVABLE PROPERTI ES
Rule: POSSESSION IS EQUIVALENT TO TITLE
Requisites:
a. Possession of a movable
b. In good faith
Exception:
a. Owner lost movable owner can recover w/o reimbursing price
b. Owner is unlawfully deprived owner can recover w/o reimbursing price
Exception to Exception:
a. movable is bought at public sale owner can only recover after reimbursing price
b. in good faith & for value

III. OBLI GATIONS OF THE VENDEE

A. ACCEPTANCE OF DELIVERY

The vendee is bound to accept delivery of the thing sold at the time and place stipulated in the contract (Article 1582).
if no time and place is stipulated = see rules under Place and Time of Delivery

express acceptance (Article 1585): when the buyer intimates to the seller acceptance of delivered goods

implied acceptance (Article 1585):
when the buyer does an act, in relation to the delivered goods, which is inconsistent with the sellers ownership
when the buyer retains the goods after the lapse of reasonable time, without intimating to the seller that he has rejected
the goods

GEN. RULE: Acceptance of goods by the buyer shall not discharge the seller from liability for breach of any promise or warranty.

EXCEPTIONS:
1. where there is an agreement to the contrary
2. where the buyer fails to give notice to the seller of any breach of promise or warranty within a reasonable time after he
comes to know or ought to have known of it

1. Delivery in Installments (Article 1583)

GEN. RULE: The buyer is not bound to accept goods delivered in installments.

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EXCEPTION: where there is a stipulation to the contrary

WHERE GOODS ARE TO BE DELIVERED IN INSTALLMENTS AND PAID FOR SEPARATELY:
if seller makes defective delivery or if the buyer fails to take delivery or make payment, it depends upon each case whether
the breach affects the entire contract or just a part thereof
where breach affects entire contract, the injured party may refuse to proceed further and sue for damages for breach of
the entire contract
where breach is severable, it will give rise to a claim for compensation for the particular breach only

2. Right of Examination (Article 1584)

unless otherwise stipulated, the buyer is not deemed to have accepted the goods delivered to him until he has had
reasonable opportunity to examine them
when the seller tenders the goods, the buyer must request for the opportunity to examine the goods
where goods are delivered to a carrier and delivery to the buyer is withheld until payment of the price, the buyer is not
entitled to examine the goods before payment of the price, in the absence of agreement or usage of trade permitting
the examination

3. Refusal to Accept
a. justified refusal (Article 1587):
buyer is not bound to return the goods to the seller, it being sufficient that he notifies the seller of his refusal to
accept
goods are at the risk of the seller even if such are in the possession of the buyer, unless the latter should
voluntarily constitute himself a depositary thereof
b. wrongful refusal (Article 1588): title passes to the buyer, and he bears the risk of loss

La Fuerza v. CA
The thing sold is understood as delivered when it is placed in the control and possession of the vendee. From the time of
installation and trial run of the conveyors, the vendees were in a position to decide whether or not it was satisfied with the
goods, and, hence, to state whether the same were accepted or rejected. The vendee's failure to express categorically whether
they accepted or rejected the conveyors does not detract from the fact that the same were actually in its possession and
control, and that the period prescribed in Art. 1571, CC had begun to run.


B. PAYMENT OF PRI CE

1. Liability of Vendee for Interest (Article 1589)
for the period between delivery and payment

a. if stipulated
stipulated rate governs; otherwise, the rate is 12%
stipulation may be oral
b. if the thing delivered produce fruits or income
c. if the buyer is in default, from the time of judicial or extrajudicial demand for payment

2. Suspension of Payment (Article 1590)
a. should the vendee be disturbed in possession or ownership of the thing by vindicatory action or foreclosure of
mortgage
b. should the vendee have reasonable grounds to fear disturbance of possession or ownership by vindicatory action or
foreclosure of mortgage

vendee may suspend payment until the vendor has caused the disturbance or danger to cease

where vendee cannot suspend payment:
if the vendor gives security for the return of the price
if it has been stipulated that the vendee should pay notwithstanding the disturbance or danger
if the vendor causes the disturbance or danger to cease
if the disturbance is a mere act of trespass

3. Rescission of Sale of Immovable Property

ACTION BROUGHT BY VENDOR (Article 1591): should he have reasonable grounds to fear the loss of the immovable and its
price
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contemplates a situation where the immovable has been delivered but the price has not yet been paid
should such ground not exist, Article 1191 shall be observed

WHERE AUTOMATIC RESCISSION FOR NON-PAYMENT IS STIPULATED (Article 1592):
vendee may still pay, even after expiration of the period, as long as no demand for rescission has been made either
judicially or by a notarial act
after demand, the court may not grant the vendee a new term

vendee may no longer pay the price after the expiration of the period:
in sales on installments wherein the parties have laid down the procedure to be followed in case of default by vendee
in a mere promise to sell where the title remains with the vendor until full payment of the price

IN CASE OF SUBDIVISION OR CONDOMINIUM PROJ ECTS (P.D. 957):
no installment payments made by the buyer shall be forfeited in favor of the owner or developer when the buyer desists
from further payment due to the failure of the owner or developer to develop according to the approved plan and within
the time limit for complying with the same
buyer must give due notice to the owner or developer
the buyer is granted the option to be reimbursed the total amount paid

Legarda Hermanos v. Saldaa
Legarda Hermanos sold 2 lots to Saldaa on installment basis. After 8 years of continuous payments, Saldaa defaulted and
because of this, Legarda Hermanos cancelled the contract. According to the SC, the vendor could not rescind the sale of both
lots since the payments made by Saldaa were enough to cover the purchase price of one lot. In this case, there was
substantial performance on the part of Saldaa as to prevent rescission.

Siska Development v. Office of the President
The sending of a notice of cancellation to the buyer is mandated by R.A. 6552 (the Maceda Law) which took effect on
September 14, 1972. Section 3(b) provides that "the actual cancellation of the contract shall take place 30 days from receipt of
the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer." While the contract was entered into before the effectivity of the Maceda Law, the
rescission took place when the said law was in full force and effect. But even before the effectivity of said law, jurisprudence
made necessary a notice of rescission. As stressed in University of the Philippines v. Walfrido De los Angeles, the act of the
party in treating a contract as cancelled should be made known to the other.
Moreover, unilateral cancellation of a contract to sell is not warranted if the breach is slight or casual.

Odyssey Park, Inc. v. CA
In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not the breach
contemplated under Art. 1191 CC (where breach is the obligors failure to comply with an obligation already extant, not a failure
of a condition to render binding that obligation).

Bricktown Devt. Corp. v. Amor Tierra Devt.
A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, the grace period is effective without
further need of demand either calling for the payment of the obligation or for honoring the right. The grace period must not be
likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would generally still require judicial or
extrajudicial demand before "default" can be said to arise.

4. Rescission of Sale of Movable Property (Article 1593)

Vendor can rescind the sale as a matter of right if the vendee does not:
a. accept delivery
b. pay the price
exception: where a longer period has been stipulated for payment

reason why immovable property treated differently from movable property:
personal properties are not capable of maintaining a stable price such that any delay in their disposal may prejudice
the vendor

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CHAPTER 9: LOSS, DETERIORATION, FRUITS & OTHER BENEFITS
CIVIL LAW COMMON LAW
No valid contract involving generic subject matter; Perfection of K of sale which is not conditional
covers good that are determinable
To have a valid contract of sale, subject matter must
be determinate (law on loss, deterioration, fruits,
applies only to determine subject matter)
Perfection is the mode which transfers ownership to
buyer;

Not a title but a mode Tradition is merely a means to perform obligation
Perfection of contract of sale which is not

Res perit domino; owner bears risk of loss
Conditional include goods which are not deliverable;
transfers risk to buyer


WHO BEARS RISK OF LOSS/ DETERI ORATION/ FRUI TS
1. Before perfection
Res perit domino
Owner is seller so seller bears risk of loss
2. At Perfection
Res perit domino
Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale
Seller cannot anymore comply with obligation so buyer cannot anymore be compelled
3. After Perfection but before delivery
a. Loss confused state
2 views:
Paras: BUYER
Tolentino: SELLER
b. Deterioration & fruits - Buyer bears loss
4. After delivery
Res perit domino
Owner is buyer so buyer bears risk of loss
Delivery extinguish ownership vis-a-vis the seller & creates a new one in favor of the buyer

CHAPTER 10: REMEDI ES OF PARTI ES FOR BREACH OF CONTRACT OF SALE

SUBJ ECT MATTER: MOVABLES (IN GENERAL)

REMEDIES OF UNPAID SELLER
Any man may not take law in his own hands, must seek remedy through courts
Exception:
1. DOCTRINE OF SELF HELP
2. SPECIAL REMEDIES
Requisites:
1. Subject matter goods
2. Seller is unpaid not completely paid or received negotiable instrument under a condition & condition has been
breached by reason of dishonor
3. Physical possession is with seller

1. possessory lien
2. stoppage in transitu
3. special right of re-sale Can only be exercised when 2 prior rights
4. special right to rescind have been exercised

POSSESSORY LIEN
Seller not bound to deliver if buyer has no paid him the price
Right to retain; cannot be availed when seller does not have custody
Exercisable only in following circumstances:
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
c. buyer becomes insolvent
When part of goods delivered, may still exercise right on goods undelivered
Instances when possessory lien lost:
a. seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them
b. buyer or agent lawfully obtains possession of goods
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c. waiver
loses lien when he parts with goods (still has stoppage in transitu)
notice by seller to buyer not essential

STOPPAGE I N TRANSITU
Requisites:
1. Goods are in transit
When goods are in transit
From the time goods are delivered to carrier for purpose of transmission to buyer
Goods rejected by buyer & carrier continues to possess them
When goods no longer in transit
Reached point of destination
Before reaching destination, buyer met seller along the way
Goods are supposed to have been delivered to buyer but carrier refused
2. Shown by seller that buyer is insolvent ( failure to pay when debts come due )
How is right exercised:
a. Obtain actual possession of goods
b. Give notice of claim to carrier / bailee in possession thereof
Notice by seller to buyer is not required; notice to carrier is essential

SPECI AL RI GHT TO RESELL THE GOODS
Requisites:
1. goods are perishable
2. stipulated the right of resale in case buyer defaults in payment
3. buyer in default for unreasonable time
notice by seller to buyer not essential
why special there are things which seller cannot do in ordinary sale:
1. ownership is with buyer but seller can sell goods
2. title accorded to buyer is destroyed even without court intervention

SPECI AL RI GHT TO RESCI ND
why special ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court
intervention but in ordinary sale, need to go to court to destroy transfer of ownership
Requisites:
1. Expressly stipulated
2. Buyer is in default for unreasonable time
Notice needed to be given by seller to buyer

REMEDIES OF BUYER
When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN
GOODS ON PAYMENT OF DAMAGES

SALE OF MOVABLES ON I NSTALLMENT

REMEDIES OF UNPAID SELLER (1484)
1. Exact fulfillment should the buyer fail to pay
2. Cancel the sale if buyer fails to pay 2 or more installments
3. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments
If buyer chooses foreclosure, no further action against buyer to recover any unpaid balance of the price
When is law is applicable: Sale on movables by installment
Sale on installment: payment by several partial payments in small amount
Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment & at
the same time remedy abuse of commercial houses
Nature of remedies: alternative & not cumulative
Coverage: sale & financing transaction & contracts of lease with option to purchase
Action : J udicial & Extrajudicial

SPECIFIC PERFORMANCE
If already chose specific performance, cannot anymore choose other remedies
Except: after choosing, it has become impossible, rescission may be pursued

RESCISSION
When chosen, there is correlative obligation to restitute
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But stipulation that installments paid are forfeited are valid if not unconscionable
Deemed chosen when:
a. Notice of rescission is sent
b. Takes possession of subject matter of sale
c. Files action for rescission
Barring effect on recovery of balance

FORECLOSURE
Barring effect on recover of balance
Extent of barring effect: purchase price
Exception: mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc.


I MMOVABLES (I N GENERAL)
REMEDIES OF SELLER
1. Anticipatory breach
Seller has reasonable grounds to fear loss of immovable sold & its price sue for RESCISSION
2. Non payment of price
RESCISSION

REMEDIES OF BUYER
1. Disturbed in possession or with reasonable grounds to fear disturbance
SUSPEND PAYMENT
2. In case of subdivision or condo projects
If real estate developer fails to comply with obligation according to approved plan:
a) RESCIND
b) SUSPEND PAYMENT UNTIL SELLER COMPLIES

I MMOVABLES (BY I NSTALLMENT)
1592 Applies only to contract of sale
Maceda Law applies to COS & CTS & Financing

MACEDA LAW
Coverage: REAL ESTATE defines space v CONDO not defined space (w/ common areas)
1. contract of sale
2. contract to sell
3. financing transactions
Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws
RIGHTS GRANTED TO BUYERS:
1. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace period of 1 month for every year of installment payment
Grace to be exercised once every 5 years
b. When no payment - cancelled; buyer entitled to 50% of what he has paid + 5% for every year exceeding 90% of
payments made
Cancellation to be effected 30 days from notice & upon payment of cash surrender value
2. Buyer paid lees than 2 years installment
a. Grace period is 60 days
b. Cancellation if failure to pay within 60 days grace
c. 30 days notice before final cancellation
buyer can still pay within the 30 days period
with interest
Purpose of law : Protect buyers in installment against oppressive conditions
Notice needed waiver thereof id oppressive
Apply to contracts even before law was enacted
Stipulation to contrary is void
Other rights:
a. Sell rights to another
b. Reinstate contract by updating within 30 days before cancellation
c. Deed of Sale to be done by notarial act
d. To pay full installment in advance the balance of price anytime without interest
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e. Have full payment annotated in certificate of title

CHAPTER 11: REMEDY OF RESCI SSI ON IN CONTRACTS COVERING IMMOVABLES
RESCISSION (RESOLUTION) 1191 RESCISSION 1385
legal basis is substantial breach legal basis is lesion (rescissible contract)
principal remedy, retaliatory vs. unjust party subsidiary remedy cannot be instituted except when
other remedies exhausted
mutual restitution mutual restitution
Nature: J udicial
Extra judicial Rescission
allowed if stipulated; burden to sue shifts to party who do not like rescission
court still has final say as to propriety of rescission
Forfeiture of amounts valid being in nature of penal clause
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CONTRACT OF SALE CONTRACT TO SELL
Governed by genus SALE Governed by genus SALE
Ownership passes because of tradition Ownership passes upon full payment
Non-payment is resolutory condition which may be basis
of breach
Non payment is suspensive non-payment extinguishes
contract to sell
Perfection gives rise to reciprocal demandable obligation Perfection gives rise to reciprocal conditional obligation

CONTRACT OF SALE RESCISSION IS APPLICABLE
CONTRACT TO SELL RESCISSION NOT APPLICABLE
Non payment of purchase price would automatically cancel even without further action for rescission
Except: If subject matter is residential lots, law on rescission applies when there is substantial breach

CHAPTER 12: CONDI TION & WARRANTIES

A. CONDITION
When a contract contains a condition, the non-happening of which would not constitute a breach but extinguishes the
obligation
However, if party to the sales contract has promised that the condition should happen or be performed, the non-
performance of which may be treated by parties as breach
CONDITION WARRANTY
Purports to existence of obligation Purports to performance of obligation
Obligation must be stipulated to form part of the
obligation
Need not be stipulated; may form part of obligation
by provision of law
May attach itself to obligation of seller to deliver
possession & transfer
Relates to the subject matter itself or to obligation
of the seller as to the subject matter of the sale

B. EXPRESS WARRANTIES ( REQUISITES )
1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale
2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter
3. buyer purchases the subject matter relying thereon
when breached, seller is liable for damages

C. I MPLIED WARRANTIES deemed included in all contracts of sale whether parties are
actually aware or not aware or whether they were intended or not; by operation of law
1. warranty that seller has a right to sell
refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition
not applicable to sheriff, auctioneer, mortgagee, pledge, person professing to sell by virtue of authority in fact or law

2. warranty against eviction

Definition and Requisites

eviction (Article 1548): a judicial process whereby the vendee is deprived of the whole or part of the thing purchased by
virtue of:
a final judgment based on a right prior to the sale
such final judgment is essential (Article 1557)
vendor must be summoned in the suit for eviction at the instance of the vendee to be made liable for the breach
of warranty (Article 1558)
vendee shall ask that vendor be made his/her co-defendant (Article 1559)
to give the vendee a chance to defend the title he transferred
vendor is liable even if vendee does not appeal from the judgment (Article 1549)
an act imputable to the vendor
vendor is liable where property is sold at public auction for non-payment of taxes due him and unknown to
vendee (Article 1551)

GEN. RULE: The vendors liability for breach of warranty against eviction may be increased, diminished or suppressed by
stipulation (Article 1548).

EXCEPTI ON: Where the vendor acts in bad faith, stipulation waiving liability is void (Article 1553).
bad faith by vendee = selling the thing even with knowledge that there is cause for or risk of eviction
exception to the exception: where the vendee is also in bad faith, vendor cannot be held liable for the eviction
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Escaler v. CA
The Reynoso spouses sold a parcel of land to the petitioners, which sale was warranted against eviction. When the TCT in favor
of the petitioners was declared null and void (on the ground that the property covered by said title is already previously
registered in favor of a 3
rd
party), the petitioners sued for the violation of the warranty against eviction. The SC held that the
vendors were not liable because they were not summoned and made co-defendants in the suit at the instance of the vendees.
The vendees merely furnished the vendors a copy of the opposition filed in the eviction suit by registered mail.

2. Kinds and Effects of Waiver of Eviction (Article 1554)
a. consciente: waiver is voluntarily made by the vendee without knowledge and assumption of risks of eviction
effect: vendor shall only pay the value which the thing sold had at the time of eviction
b. intencionada: waiver made by vendee with knowledge of the risk of eviction and assumption of its consequences
effect: the vendor shall not be liable provided he did not act in bad faith

The rule on warranty against eviction applies to a judgment debtor in judicial sales, unless otherwise decreed in the
judgment (Article 1552)

3. Effect of Acquisitive Prescription (Article 1550)
a. completed before the sale the vendor shall be liable for breach of warranty
b. completed after the sale the vendor shall not be liable for eviction since the vendee could easily interrupt the
prescriptive period by bringing the necessary action

4. Rights of the Vendee I n Case of Total Eviction (Article 1555)
a. return of the value which the thing sold had at the time of eviction, be it greater or less than the price of the sale
b. give income or fruits, if the vendee has been ordered to deliver the same to the party who won the suit
c. costs of the suit of eviction and the suit brought against the vendor for breach of warranty
d. expenses (registration and execution) of the contract, if paid for by the vendee
e. damages and interests and ornamental expenses if the sale was made in bad faith

5. Rights of the Vendee In Case of Partial Eviction (Article 1556)
a. enforce vendors liability for eviction
b. rescind the contract
when exercised:
i. if he would not have bought the thing without the part lost through eviction
ii. when 2 or more things have been jointly sold and the vendee would not have purchased one without the
other
vendee has obligation to return the thing without other encumbrances than those which it had when he acquired it

6. Rights of the Vendee Where I mmovable is Encumbered with Non-apparent Burden (Article 1560)
a. rescind the contract
b. ask for indemnity

to exercise these rights, the burden or servitude:
must be of such nature that the vendee would not have acquired the thing had he been aware thereof
must not be recorded in the Registry of Property (constructive notice)
unless there is an express warranty that the thing is free from all burdens and encumbrances
must not be known to the vendee

action for rescission or damages must be brought within 1 year from the execution of the deed
if one year period has elapsed, only the action for damages may be brought within a year from discovery of the burden
or servitude


3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites:
a. immovable sold is encumbered with non apparent burden or servitude not mentioned in the agreement
b. nature of non apparent servitude or burden is such that it must be presumed that the buyer would not have
acquired it had he been aware thereof
when breach of warranty exist: buyer may ask for rescission or indemnity
warranty not applicable when non apparent burden or servitude is recorded in the Registry of Property unless
there is expressed warranty that the thing is free from all burdens & encumbrances

4. WARRANTY AGAINST HIDDEN DEFECTS
SELLER does not warrant patent defect; caveat emptor
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Except when hidden
a. subject matter may be movable or immovable
b. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was
intended or should diminish its fitness
c. had the buyer been aware, he would not have acquired it or would have given a lower price
when defect is visible or even if visible if the buyer is an expert by reason of his trade or profession, seller is not
liable
obligation of seller for breach depends on whether he has knowledge of such defect or not
a. seller is aware seller should return price & refund expenses of contract with damages
b. seller is not aware - seller should return price and interest & refund expenses ( no damages )
buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages
in either case
applicable to judicial sale except judgement debtor not liable for damages
action to prescribe 6 months from delivery of subject matter

Filinvest Credit Corp. v. CA
In this case, the vendor was not held liable for breach of warranty against hidden defects. Aside from the fact that the vendee
signed a waiver which released the vendor from any liability in relation to warranty, he was also engaged in business which
deals with the particular type of machinery subject of the sale. Accordingly, the vendee should shoulder the responsibility of
protecting himself against product defects. Common sense dictates that a buyer inspects a product before purchasing it (under
the principle of caveat emptor or "buyer beware").

DOCTRI NE OF CAVEAT VENDITOR:
The ignorance of the vendor as to the hidden defects or faults does not relieve him from liability to the vendee for the
same (Article 1566).
exception: where the contrary is stipulated and the vendor acted in good faith

The rules on warranty against hidden defects are applicable to judicial sales, except that the judgment debtor shall not be
liable for damages (Article 1570).
no liability for damages since a judgment debtor is forced to sell


5. DEFECTS ON ANI MALS
even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient -
defect shall be considered as REDHIBITORY
if vet fails to discover through ignorance or bad faith he is liable for damages
a. sale of animals on teams ( 2 or more )
when only one is defective, only one is redhibited & not the others
exception: when it appears that purchase of team will not be done without the defective one
apply to sale of other things
b. sale of animals at fair or public auction
no warranty against hidden defects
c. sale of animals with contagious disease is void
d. sale of unit of animal
void if use / service for which they are acquired has been stated in the contract and they are found to be unfit
thereof
prescription of action: 40 days from date of delivery to buyer
if sale is rescinded, animals to be returned in same condition when they are acquired; buyer shall answer for
injury / loss due to his fault
buyer may elect between withdrawing from sale or demanding proportionate reduction of price with damages
in either case

E. ADDI TIONAL PROVI SI ONS GOVERNING WARRANTI ES FOR CONSUMER PRODUCTS (Art. 68, RA 7394,
Consumer Act of the Philippines)

1. Express Warranties
a. Express warranty is operative from the moment of sale

b. Seller or manufacturer shall:
state the products or parts covered
state what the warrantor will do in the event of a defect, malfunction of failure to conform to the written warranty
and at whose expense
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stipulate the period within which, after notice of defect, malfunction or failure to conform to the warranty, the
warrantor will perform any obligation under the warranty

c. Sales made by distributors must be reported to the manufacturer, producer, or importer of the product
sold within thirty (30) days from date of purchase, unless otherwise agreed upon
report shall contain the date of purchase, model of the product bought, its serial number, name and address of
the buyer
such report shall be equivalent to warranty registration with the manufacturer, producer or importer, sufficient to
hold them liable
failure to make the report or send them the form required by the manufacturer, producer, or importer shall relieve
the latter of its liability under the warranty, provided, the distributor shall be personally liable under the warranty
the manufacturer shall be obligated to make good the warranty at the expense of the distributor

d. Retailer is subsidiarily liable under the warranty
in case of failure of both the manufacturer and distributor to honor the warranty
nothing therein shall prevent the retailer from proceeding against the distributor or manufacturer

e. Enforcement of warranty
purchaser needs only to present to the immediate seller either the warranty card of the official receipt along with
the product to be serviced or returned to the immediate seller

f. Designation of written warranties:
i. full warranty meets the minimum requirements
ii. limited warranty does not meet the minimum requirements
minimum requirements:
remedy the product within a reasonable time and without charge in case of a defect, malfunction or failure to
conform to such written warranty
permit the consumer to elect whether to ask for a refund or replacement without charge of such product or
part

g. Remedies in case of breach
have the goods repaired
warranty work must be made to conform to the express warranty within 30 days by either the warrantor or
his representative
period may be extended by conditions beyond the control of the warrantor/his representative
refund of purchase price
the amount directly attributable to the use of the consumer prior to the discovery of the non-conformity shall
be deducted

2. Breach in Case of I mplied Warranties
the consumer may:
i. retain in the goods and recover damages
ii. reject the goods, cancel and contract and recover from the seller so much of the purchase price as has been paid,
including damages


D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS
1. Warranty as to fitness & quality; requisites:
a. buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer
relied on the sellers skill or judgement
b. goods are bought by description from seller who deals in goods of that description
no warranty unless there is stipulation in case of sale of specified article under its patent or trade name
measure of damage: difference between value of goods at time of delivery and value they would have had if they
had answered to the warranty

2. Sale of Goods by sample
If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from defect
rendering them unmerchantable which would not be apparent on reasonable examination of the sample

E. EFFECTS OF WAI VER
Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on
the part of the seller.
1. seller in bad faith & there is waiver against eviction null & void
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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 & made a waiver vendor not liable
(applicable only to waiver of warranty against eviction)
when goods delivered to buyer he cannot rescind sale
if he knew of the breach of warranty when he accepted goods without protest
if he fails to return or offer to return goods to seller in substantially as good condition as they were at time ownership
was transferred
when goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty

F. BUYERS OPTI ON I N CASE OF BREACH OF WARRANTY
1. Accept goods & set up breach of warranty by way of recoupment in diminution or extinction or the price.
2. Accept goods & maintain action against seller for damages
3. Refuse to Accept goods & maintain action against seller for damages
4. Rescind contract of sale & refuse to receive goods/return them when already received.

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CHAPTER 13: EXTI NGUI SHMENT
GROUNDS:
1. same grounds whereby obligations in general are extinguished:
a. payment or performance
b. loss of the subject matter
c. condonation or remission
d. confusion or merger of rights or creditor and debtor
e. compensation
f. novation
g. annulment
h. rescission
i. fulfillment of a resolutory condition
j. prescription
2. conventional redemption only applies to contract of sale
3. legal redemption only applies to contract of sale

CONVENTI ONAL REDEMPTION
seller reserved the right to repurchase thing sold
coupled with obligation to return price of the sale, expensed of contract & other legitimate payments and the necessary &
useful expenses made on the thing sold
right must be recognized in the deed of sale; must be the same contract

OPTION TO PURCHASE
right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale

Villarica v. CA
The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by
the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is
executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee
in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case.

Vda. de Zulueta v. Octaviano
Villarica ruling may only apply if there is adequate showing that the parties acted in good faith in executing the two separate
documents, and not to hide the fact that their transaction is one of sale with right of repurchase, or one of equitable mortgage.

Catangcatang v. Legayada
In the exercise of the right of repurchase, it is not sufficient that the vendor a retro manifests his desire to repurchase. This
statement of intention must be accompanied with an actual and simultaneous tender of payment which constitutes the legal
exercise of the right to repurchase. While consignation of the redemption price is not necessary in order to allow the repurchase
within the time provided by law or by contract, a mere tender being enough, said tender does not relieve the vendor from the
obligation of paying the price. However, when tender of payment cannot be validly made, the vendor a retro should file a suit
for consignation with the courts of the redemption price within the redemption period.

Ong Chua v. Carr
The pendency of an action brought in good faith and relating to the validity of a sale with pacto de retro, tolls the term for the
right of redemption.


EQUITABLE MORTGAGE
a contract with right to repurchase is equitable mortgage if the following requisites concur:
1. price of sale with right to repurchase is unusually inadequate
2. seller remains in possession as a lessee or otherwise
3. upon / after expiration of right to repurchase, another instrument extending the period of redemption is executed
4. buyer retains for himself a part of the purchase price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the payment of a debt or performance of other obligation

I N CASE OF DOUBT I N DETERMI NING WHETHER I T I S EQUI TABLE MORTGAGE OR SALE A RETRO (WI TH
RI GHT OF REPURCHASE I T SHALL BE CONSTRUED AS EQUI TABLE MORTGAGE)

WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT
1. language of the contract
2. conduct of parties to reveal real intent
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REMEDY AVAILABLE TO VENDOR: ask for reformation of contract

RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE:
1. Circumvention of usury law
2. Circumvention of prohibition against pactum commissorium creditor cannot appropriate the things given by way of pledge
or mortgage; remedy here is foreclosure
real intention of parties is that the pretended purchase price is money loaned & to secure payment of the loan, sale with
pacto de retro is drawn up

equitable mortgage: a mortgage which lacks the formalities of a mortgage but shows the intention of the parties to use the
property as security for the fulfillment of an obligation

provisions on equitable mortgage were drafted to provide safeguards and restrictions against the evils of sales with a right
of repurchase (pacto de retro sales)

a. When the price of a sale with right to repurchase is unusually inadequate;
b. When the vendor remains in possession as lessee or otherwise;
c. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or
granting a new period is executed;
d. When the purchaser retains for himself a part of the purchase price;
e. When the vendor binds himself to pay the taxes on the thing sold;
f. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.

Any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which
shall be subject to the usury laws.

In case of doubt, Article 1602 applies to pacto de retro sales and absolute sales (Articles 1603 and 1604).
this is an exception to the rule that doubts affecting an onerous contract shall be settled in favor of the greatest
reciprocity of interests

Article 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the
instrument.

In reformation, there has been a meeting of the minds between the parties, but the written instrument does not express
their true intention (Article 1359). If there has been no meeting of the minds, the remedy is annulment (Article 1390).

Uy v. CA
The presence of only one circumstance defined in Article 1602 is sufficient for a contract of sale with right to repurchase to be
presumed an equitable mortgage. The said article expressly provides therefor 'in any of the following cases', hence, the
existence of any of the circumstances enumerated therein, not a concurrence nor an overwhelming number of such
circumstances suffices to give rise to the presumption that the contract with right to purchase is an equitable mortgage.

Balatero v. IAC
Article 1602 is designed primarily to curtail the evils brought about by contracts of sale with right of repurchase, such as the
circumvention of the usury law and pactum commissorium. Being remedial in nature, Article 1602 may be applied retroactively
to cases arising prior to the effectivity of the New Civil Code.
Moreover, the execution of an affidavit of consolidation by the purported buyer to consolidate ownership over the subject parcel
of land is of no consequence and the constructive possession over the parcel of land would not ripen into ownership, since
only possession acquired and enjoyed in the concept of owner can serve as title for acquiring dominion (Art. 540).

I gnacio v. CA
The mere fact that the price in a pacto de retro sale is not the true value of the property does not justify the conclusion that the
contract is one of equitable mortgage. In a pacto de retro sale, the practice is to fix a relatively reduced price to afford the
vendor a retro every facility to redeem the property. Moreover, private respondents in this case have not been in actual
possession of the subject property. They had been leasing it out at the time the deed was executed.

Matanguihan v. CA
A document which appears on its face to be a sale absolute or with pacto de retro may be proven by the vendor to be one
of a loan with mortgage. In this case, parol evidence becomes competent and admissible to prove that the instrument was
given merely as security for payment of a loan.

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Solid Homes, Inc. v. CA
In a contract of sale with pacto de retro, the buyer has a right to the immediate possession of the property sold, unless
otherwise agreed upon. This is because title and ownership of the property sold are immediately vested in the vendee a retro ,
subject only to the resolutory condition of repurchase by the vendor a retro within the stipulated period.
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PERIOD OF REDEMPTION
1. No period agreed upon 4 years from date of contract
2. When there is agreement should no exceed 10 years; if it exceeded, valid only for the first 10 years.
3. When period to redeem has expired & there has been a previous suit on the nature of the contract seller shill has 30 days
from final judgement on the basis that contract was a sale with pacto de retro: rationale: no redemption due to erroneous
belief that it is equitable mortgage which can be extinguished by paying the loan.
4. When period has expired & seller allowed the period of redemption to expire seller is at fault for not having exercised his
rights so should not be granted a new period

EFFECT WHEN THERE IS NO REDEMPTION MADE:
1. jurisprudence before the NCC: buyer a retro automatically acquires full ownership
2. under present art 1607: there must be3 judicial order before ownership of real property is consolidate in the buyer a retro

HOW IS REDEMPTION EFFECTED:
1. Seller a retro must return first pay the following:
a. the price of the thing sold
b. expensed of the contract and other legitimate payments made by reason of the sale
c. necessary and useful expensed made on the thing sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is insufficient
4. Failure to pay useful & unnecessary expenses entitled vendee to retain land unless actual reimbursement is made

IN CASE OF MULTI-PARTIES
1. When an undivided thing is old because co-owners cannot agree that it be allotted to on of them vendee a retro my
compel the vendor to redeem the whole thing
2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his respective
share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a
partial redemption
3. When rights for co-owners over an undivided thins is sold as regards to their own share vendee retro cannot compel one
to redeem the whole property
4. Should one of the co-heirs/co-owners succeed in redeeming the property such vendor a retro shall be considered as
trustee with respect to the share of the other co-owners/co-heirs.

FRUITS
1. what controls is the stipulation between parties as regards the fruits; if none
2. at time of execution of the sale a retro there should be visible or growing fruits there shall be no pro-rating at time of
redemption of no indemnity was paid by the vendee a retro
3. at time of execution sale a retro there should be no fruits but there are fruits at time of redemption pro-rated between
vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land.

LEGAL REDEMPTION
right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the
thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title.
1. among co-heirs
any of heirs sells hereditary right to stranger before partition
any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse
buyer of the price of the sale
co-heirs has 1 month from receipt of notice in writing
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2. among co-owners
any or all of co-owners sells their shared to 3
rd
person
any co-owner may exercise right of redemption by paying reasonable price of property to the buyer
if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common

DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM CO-OWNERS
CO-HEIRS CO-OWNERS
Heir may redeem for himself alone the hereditary
right sold by a co-heir
Co-owner may redeem property but even if uses his
own funds, redemption inures to the benefit of other
co-owners
Sale of hereditary right (1088) over no particular
object
Sale of interest in particular property

Mariano v. CA
The fine distinction between Article 1088 and Article 1620 is that when the sale consists of an interest in some particular
property or properties of the inheritance, the right of redemption that arises in favor of the other co-heirs is that recognized in
Article 1620. On the other hand, if the sale is the hereditary right itself, fully or in part, in the abstract sense, without specifying
any particular object, the right recognized in Article 1088 exists.


3. among adjoining owners
a. rural land
where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless
grantee does not own a rural land
if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall
be preferred
if 2 or more adjacent lit owners desire to exercise right to redeem & both have same lot area, one who first
requested shall be granted
b. urban land
when piece of land is small & cannot be used for any practical purpose & brought merely for speculation, owner of
adjoining land can redeem
2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intention towards use of land
shall be preferred.

San Po Ek v. Martinez (2000)
Martinez, and her mother before her, leased property to San Po Ek for a total of 28 years. After this period, Martinez wrote the
lessee to inform the latter of her intention to sell the leased property. However, the property was thereafter sold to a 3
rd
party.
San Po Ek filed a case praying for the nullity of this sale. The SC held that San Po Ek does not have a right of pre-
emption/redemption or first refusal to assert against Martinez. Art. 1622 only deals with small urban lands that are bought for
speculation where only adjoining lot owners can exercise the right of pre-emption or redemption. In this case, San Po Ek is not
an adjoining lot owner but a lessee trying to buy the land that it was leasing. And although the right of first refusal may be
provided for in a lease contract, such right was never stipulated in any of the several lease contracts. The grant of the right of
first refusal must be clearly embodied in a written contract.

Francisco v. Boiser (2000)
Francisco co-owned 4 parcels of land with her 3 sisters and their mother, Blas. Blas then sold her 1/5 share to Boiser (another
sister of Francisco). Francisco received summons for a case filed by Boiser against her to demand the latters share in the
rentals being collected from the lease of a building erected on the parcels of land. Instead of giving such share, Francisco
counterclaimed that she wanted to exercise her right of redemption as a co-owner. However, both claim and counterclaim were
dismissed. Francisco filed another case against Boiser to enforce her right of redemption, claiming that the 30-day redemption
period had not yet begun to run since Blas never informed her of the sale to Boiser. According to the SC, the notice required
under Art. 1623 must be given by the vendor and not by any other person. This is because the vendor of an undivided interest
is in the best position to know who are his co-owners who under the law must be notified of the sale. Moreover, it is
notification from the vendor which can remove all doubts as to the fact of the sale, its perfection and validity. Therefore, even
if Boiser informed Francisco of the sale, the redemption period had not yet begun to run. The period should be counted from
the time Francisco received summons in the previous case since such amounted to actual knowledge of the sale.


c. sale of credit litigation
when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing
the assignee for the price the latter paid therefor plus judicial costs, interest
debtor may exercise right within 30 days from assignee demands payment from him
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WHEN PERIOD OF REDEMPTION BEGINS TO RUN
1. right of legal pre-emption of redemption shall be exercised within 30 days from notice by the buyer
2. deed of sale not to be recorded in RD unless accompanied by affidavit that buyer has given notice to redemptioners
3. when there is actual knowledge, no need to give written notice; period of redemption begins to run from actual knowledge

OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED
1. Redemption of homesteads
Public Land Act
Land acquired under free patent homestead
Subject to repurchase by wife, legal heirs within 5 years from date of conveyance
Granted by law, need not be stipulated

Lee v. CA
The Simeons sold to Lee a parcel of land acquired under a free patent. Subsequently, the Simeons advised Lee, in writing, of
their "desire to repurchase" the land. Three other letters were sent by the Simeons, but in no instance did they offer or tender
the repurchase price. Lee ignored the letters, except the last to which she replied that she cannot agree to the repurchase
because the redemption period of five (5) years had already expired. The SC held that the mere sending of letters by the
vendor expressing his desire to repurchase the property without an accompanying tender of redemption price fell short of the
requirements of the law. Sec. 119 of CA 141 should be construed with Art. 1616 CC.

Sta. Ignacia Rural Bank, Inc. v. CA
In this case, the land acquired through homestead patent was foreclosed and sold. According to the SC, the right to repurchase
under Sec. 119 cannot be waived by the party entitled thereto, and applies with equal force to both voluntary and involuntary
conveyances. Moreover, the 5-year redemption period under Sec. 119 begins to run from the day after the expiration of the 1-
year period of repurchase allowed in an extrajudicial foreclosure.


2. Redemption in tax sales
in case of tax delinquency/failure to pay tax assessments, property is foreclosed
delinquent payer has 1 year to redeem by paying to the revenue District Officer the amount of tax delinquencies, &
interest or purchase price.

3. Redemption by judgement debtor
1 year to redeem by paying purchaser at public auction with interest

Torres v. Cabling
Written notice of the sale is required to be given to the judgment debtor before the sale of property on execution to give him
the opportunity to prevent the sale by paying the judgment debt sought to be enforced. Moreover, when there is a 3
rd
party
claim, the sheriff should demand payment in cash from the judgment creditor, if he becomes the highest bidder, instead of just
crediting the amount to the partial satisfaction of the debt.


4. Redemption in extrajudicial foreclosure
1 year from date of sale and registration

Soriano v. Bautista
The stipulation in a deed of mortgage which renders the mortgagor's right to redeem defeasible at the election of the
mortgagee is not illegal or immoral, being merely an option to buy sanctioned by Article 1479 of the Civil Code, when supported
by a consideration distinct from the purchase price.



5. Redemption in judicial foreclosure of mortgage
no right to redeem is granted to debtor mortgagor
except when mortgagee is bank of a banking institution
90 days after finality of judgement

Cases Under Redemption:

Ongoco v. CFI of Bataan
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The petition to consolidate ownership under Article 1607 does not partake of the nature of a motion, it not being merely an
ordinary civil action or a special proceeding, but is an ordinary civil action cognizable by the CFI. As such ordinary action, a
complaint or petition must be filed.

De Guzman v. CA
Should one of the co-owners or co-heirs succeed alone in redeeming the whole property, such co-owner or co-heir shall be
considered as a mere trustee with respect to the shares of his co-owners or co-heirs. Therefore, no prescription will lie against
the right of any co-owner or co-heir to demand from the redemptioner to a lien in favor of the redemptioner for the amount
paid by him corresponding to the value of the share.

Mariano v. CA
The giving of a copy of a deed is equivalent to the notice as required by law in legal redemption. Written notice is
indispensable, notwithstanding the actual knowledge of the sale acquired in some other manners by the redemptioner. He or
she is still entitled to written notice to remove all uncertainty as to the sale, its terms and its validity, and to quiet any doubt
that the alienation is not definitive. The law not having provided for any alternative, the method of notifications remains
exclusive, though the Code neither prescribes any particular form of written notice nor any distinctive method for written
notification of redemption.

Alonzo v. CA
In this case, the redemption period began to run and expire although no notice in writing was given to the co-heirs (vendors a
retro). The SC made an exception to the written notice requirement, since the co-heirs lived with the purchaser in the same lot
and are deemed to have received actual notice of the sale. Moreover, the co-heirs sought to exercise their right of redemption
thirteen years after the pacto de retro sale.

Distrito v. CA
The only purpose of the written notice is to insure that all the co-owners shall be actually notified of the sale and to remove all
doubt as to the perfection of the sale. When as in this case the co-owner was actually present and was even an active
intermediary in the consummation of the sale of the property he is and must be considered to have had actual notice of the
sale. A written notice is no longer necessary.



CHAPTER 14: ASSI GNMENT
Sale of credits & other incorporeal things
Technical term but basically a sale

WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE:
ASSIGNMENT SALE
Subject matter Intangibles Tangibles
Form Consensual Consensual
Binding effect to 3
rd

persons
Recorded in registry of property No recording needed to such effect

EFFECT OF ASSIGNMENT
1. lack of knowledge or consent of debtor not essential for validity but has legal effect
2. assignment of rights made w/o knowledge of debtor debtor may set up against assignee the compensation w/c would
pertain to him against assignor of all credits prior to assignment and later ones until he had knowledge of the assignment
3. debtor has consented to assignment cannot set up compensation unless assignor was notified that he reserved his right
to the compensation
4. debtor has knowledge but no consent - compensation may still be set up

TRANSFER OF OWNERSHIP
by tradition & not by perfection
execution of public instrument because intangibles cannot be physically transferred

ACCESSORIES & ACCESSIONS
includes all accessory rights such as guaranty, mortgage, pledge or preference

PNB v. CA
In assignments, a consideration is not always a requisite, unlike in sales. Thus, an assignee may maintain an action based on
his title and it is immaterial whether or not he paid any consideration therefor.

to bind 3
rd
persons, the assignment of credit must (Article 1625):
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appear in a public instrument
be contained in an instrument recorded in the Registry of Property (if the assignment involves real property)

if the debtor pays the creditor before knowledge of the assignment, he shall be released from his obligation (Article 1626)
consent of the debtor is not needed to make an assignment; however, notice to the debtor is needed for the protection
of the assignee

DBP v. CA
An assignment to guarantee an obligation is virtually a mortgage and not an absolute conveyance of title which confers
ownership on the assignee. The assignment cannot be considered as dacion en pago since non-payment on the loan cannot
authorize the assignee to register the assigned property in its name as it would constitute pactum commissorium.


WARRANTIES
1. against hidden defect - N/A because intangibles has no physical existence
2. existence & legality of credit - there is warranty except when what is sold is doubtful account
3. solvency of debtor - no warranty, unless
a. there is stipulation
b. insolvency was prior to assignment & of common knowledge
shall only last for 1 year
4. one who assigns inheritance right w/o enumerating rights shall be answerable for his character as an heir
5. one who sells certain rights for a lump sum, shall be answerable for legitimacy of the whole in general but not for each of
the various parts

BREACH OF WARRANTY
1. if in good faith - expenses of the contract & other legitimate payments made by reason of the assessment
2. if in bad faith - expenses of contract & other legitimate payments plus useful & necessary expenses

ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION
speculative
law would rather benefit the debtor of such credits rather than the one who merely speculates for profit
when credit or incorporeal right in litigation is assigned or sold, debtor has a right to extinguish it by reimbursing the
assignee for the price the buyer paid plus interest
right to redeem to be exercised within 30 days from demand by assignee for payment

RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING INSTANCES (NOT CONSIDERED SPECULATIVE)
1. assignment of credit / incorporeal right to co-heir or co-worker
2. assignment to creditor in payment for his credit
3. assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned

CHAPTER 15: BULK SALES LAW

Protect creditor of merchant stored
3 types of transactions:
1. Sale of goods other than in ordinary course of business
2. Sale of business
3. Sale of fixtures & equipments
Should cover only merchants because creditors cannot get adequate security because goods are sold ordinarily in course of
business
Not covered:
1. with waiver of creditor of seller
2. receiver, assignee in insolvency proceeding
Duty of seller to perform the following when transaction is within the coverage of the law
1. make sworn statement of listing of creditors
2. delivery of sworn statement to buyer
3. apply the proceeds pro-data to claims of creditors shown in verified statement
4. written advance disclosure to creditors

EFFECTS OF NON-COMPLIANCE



FAILURE TO:
ON TRANSACTION ON SELLER
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Prepare & deliver sworn listing of creditors Fraudulent & void Criminal Liability
Apply proceeds pro-rata to listed creditors Fraudulent & void Criminal Liability
Make advance written disclosure of transactions to
creditors
Not void No Criminal Liability
Register sworn statement with DTI Not void No Criminal Liability
Include or omit names of creditors & correct
amount due in the statement
Void Criminal Liability
Sale for no consideration Void Criminal Liability

ANTI-DUMMY LAW
Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved only for Filipinos
Management, operation as officers, employees or laborers
Control or non-control position