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Sale, concept
A contract whereby one of the contracting parties (known as the seller or vendor), obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other party, (known as the buyer or vendee), obligates
himself to pay therefor a price certain in money or its equivalent. (SeeArt. 1458.)
2. Natural elements - Those inherent in a contract of sale, which in the absence of stipulation excluding them
are deemed to exist
a. Warranty against eviction
b. Warranty against hidden defects and encumbrances
3. Accidental elements - They refer to particular stipulations of the parties such as terms, place and time of
payment, and other conditions agreed upon.
Puregoods Corporation, which maintains a professional basketball team, entered into a contract with Avenidas
Footwear Company for the latter to provide a pair of rubber shoes to the former's two imported basketball players,
Scottie Duncan and John Bryant. Avenidas Footwear was instructed to make a pair for any or both of the players
in case the company did not manufacture shoes of their size. No pair was, however, immediately available for both
the players. Scottie Duncan, who is 6'3' tall and wears size 12 rubber shoes, was given a pair the following day
from the 200 pairs that Avenidas Footwear was in the process of manufacturing for its customers at the time the
orders were received. John Bryant, who is stands at 7 feet and wears size 18 shoes, was provided three days later,
with a pair that was specially made for him since Avenidas Footwear does not make shoes of his size. What kind
of contracts were entered into for the shoes provided to the two basketball players?
Answer: The contract with respect to the shoes provided to Scottie Duncan was one of sale since the pair given
to him was manufactured by Avenidas Footwear in the ordinary course of business. The contract with respect to
the pair provided to John Bryant was for a piece of work since it was specially made for him and upon Puregoods'
special order.
Sale distinguished from barter and rule if consideration is partly in money and partly in another thing
In sale, the cause or consideration is in money. In barter, the cause or consideration is another thing.
However, where the consideration is partly in money and partly in another thing, the following rules shall be
observed to determine whether the contract is a sale or barter:
1. The contract shall be one of sale or barter depending upon the manifest intention of the parties.
2. If the intention of the parties does not clearly appear:
a. The contract is one of barter if the value of the thing given as part of the consideration exceeds the
monetary consideration.
b. The contract is one of sale if the monetary consideration is more than or equal to the value of the thing
given as part of the consideration. (Art. 1468)
Examples:
1. S and B entered into a written contract which states that "S, Seller, hereby transfers his ring worth
P20,000.00 to B, Buyer, for B's cell phone worth P12.000.00 and cash of P8,000.00." What contract was
entered into between S and B?
Answer: The contract entered into between S and B is one of sale. It is evident that such was their intention
when they referred to themselves as seller and buyer, respectively, even if the value of the cell phone, the
property consideration, (P12,000.00) is more than the monetary consideration of P8.000.00.
2. Suppose the written contract merely states that "S hereby transfers his ring worth P20,000.00 to B, for B's
ceil phone worth P12.000.00 and cash of P8,000.00." What contract was entered into between S and B?
Answer: The contract is one of barter since the intention of the parties does not clearly appear, and the value
of the cell phone, the property consideration (P12,000.00) is more than the monetary consideration of
P8,000.00.
3. Suppose the written contract provides that "S hereby transfers his ring worth P20,000.00 to B, for B's cell
phone worth P10,000.00 and cash of P10,000.00." What contract was entered into between S and B?
Answer: The contract is one of sale. Under Art. 1468, if the intention of the parties does not clearly appear,
"it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount
of money or its equivalent; otherwise, it is a sale." "Otherwise", meaning, the monetary consideration is more
than or equal to the value of the property consideration.
2. The vendor must have the right to transfer the ownership of the thing at the time that it is delivered. (Art.
1459)
Thus, it is not necessary that the vendor must be the owner at the time of sale.
3. Things having a potential existence may be the object of a contract of sale. (Art. 1461) Thus, one can sell
the young of animals that thereafter will be born or the future harvest from a farm. However, the thing must
come into existence; otherwise, the sale will not be effective for not having a subject matter.
Distinction between sale of an expected thing (emptio rei speratae) and the sale of the hope itself (emptio spei)
a. Emptio rei speratae is the sale of a future thing; emptio spei deals with a present thing - the hope or
expectancy.
b. In emptio rei speratae, the thing sold must come into existence; otherwise, the sale will not be effective.
In emptio spei, the sale produces effects even if the thing hoped for does not come into existence. However,
the sale of vain hope or expectancy is void, such as the sale of a losing sweepstake ticket already drawn.
4. The goods which form the subject of a contract of sale may be either:
a. Existing goods owned or possessed by the seller. Thus, the sale of bathroom fixtures currently stored in
the seller's warehouse is a sale of existing goods.
b. Goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale,
called "future goods", or goods whose acquisition by the seller depends upon a contingency which may or
may not happen. (Art. 1462)
Examples:
1) The garments to be sewn or to be purchased by the seller are goods to be manufactured or acquired by
the seller.
2) There may also be a sale of chickens that may be raised in a poultry farm.
3) D promised to give C a specific car if Ccompletes his course in mechanical engineering. C may sell
the car to X although the acquisition by C of the car is subject to a contingency.
5. The sole owner of a thing may sell an undivided interest therein. (Art. 1463) Such sale shall produce the
effect of making the seller and the buyer co-owners of the thing sold.
Example: S is the sole owner of an apartment. He sells 1/4 undivided interest therein to B. Such sale shall
produce the effect of making S and B co-owners of the property with each party becoming an owner of 1/2
undivided interest.
7. Things subject to a resolutory condition may be the object of a contract of sale. (Art. 1465)
Example: S sold his lot to B with S being given the right to repurchase the lot within 5 years from the date of
sale. The sale and the right to repurchase were registered in the Register of Deeds where the lot is located. Two
years after the sale, B sold the lot to X. X became the owner of the lot subject to the right of S to repurchase it
within the 5-year period from the time he sold it to B.
Price, concept
Price is the sum stipulated as the equivalent of the thing sold, and also every incident taken into consideration
for the fixing of the same, put to the debit of the vendee, and agreed to by him. (Unson vs. Urquico, 50 Phil. 171)
Rules on price
1. Certainty of price
The price of the thing sold must be certain; otherwise, the sale is void by reason of the absence of meeting of
minds between the parties. The price is considered certain under the following rules:
a. If the parties have agreed upon a definite amount for the sale.
Example: S sold to B a specific wristwatch. The parties agreed that B would pay P2,500.00 for it. The
price is certain because the parties have agreed on a definite amount for the thing sold.
3. imulated price
S
If the price is simulated (i.e., the parties make it appear that a price certain in money is to be paid or has been
paid), the sale is void, but the act may be shown to have been in reality a donation, or some other act or
contract. (Art. 1471)
Example: S and B entered into a contract where they made it appear that S sold his car to B for P100,000.00.
In reality however, B did not give S P100,000.00. The sale here is void by reason of the absence of an essential
requisite which is the price. The parties may, however, show that S really donated the car to B, in which case,
the contract shall be one of donation, not a sale.
When a contract of sale is perfected
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.
From that moment, the parties may reciprocally demand performance, subject to the provisions of law
governing the form of contracts. (Art. 1475)
2. Under the Statute of Frauds, the sale involving the following must be in writing to be enforceable:
a. Sale of real property or of any interest therein (regardless of the price).
b. Sale of goods, chattels or things in action the price of which is P500.00 or more. (Art. 1403) Things in
action include credit, shares of stock and other incorporeal properties.
2. Unilateral promise - Here, the promise to buy or to sell a determinate thing at a certain price is made by
only one of the parties. The promise may be accepted or not and shall have the following effects:
a. If not accepted by the promissee (policitaciori) – This does not produce any legal effect.
b. If accepted by the promissee -
1) And is supported by a consideration distinct from the price, the promise is binding upon the promissor.
(Art. 1479)
2) And it is not supported by any consideration distinct from the price, the promise is not binding upon the
promissor. Accordingly, the promissor- can withdraw his promise by informing the promissee of such
withdrawal even before the lapse of any option period given to the promissee. (See Art. 1324 on option
contracts.)
A unilateral promise to buy or sell, even if accepted, is only binding if supported by a consideration. In other
words, "an accepted unilateral promise" can only have a binding effect jf supported by a consideration,
which means that the option can still be withdrawn, even if accepted, if the same is not supported by any
consideration. (Eulogio vs. Sps. Apeles, G.R. No. 167884, January 20, 2009, citing Southwestern Sugar and
Molasses Company vs. Atlantic Gulf and Pacific Co., 97 Phil 241)
Examples:
a. B promised in writing to buy and S promised in writing to sell his car for P100,000.00. The promise of each
party is reciprocally demandable.
b. S promised to sell his car to B for P100,000.00 giving B one week to decide whether to buy or not. If B
does not accept the promise, such non-acceptance does not create any obligation on the part of the parties. If B
accepts the promise, S will be bound by the promise if B gives a consideration, say P500.00 because a contract
of option is perfected. So S cannot dispose the property within the period that he gave to B for the exercise of
his option. B, may or may not buy the car since he is not obliged to buy but is merely given the option to buy it.
Query: How much will B pay if he eventually decides to buy the car? P100,000.00 or P99.500.00?
Answer; P100,000.00 because the amount paid by B as option money is not part of the purchase price.
Rules on preservation of, injury to or benefit from the thing sold before or after perfection
1. Duty of seller to preserve thing after perfection but before delivery
The seller is obliged to take care of the thing with the diligence of a good father of a family unless the law or
the stipulation of the parties requires another standard of care. (Art. 1163)
2. Right of the buyer to the fruits
The buyer has a right to the fruits of the thing from the time of the perfection of the contract (Art. 1537),
unless a contrary stipulation has been agreed upon or a later date is set by the parties when such right will
accrue such as when the obligation to deliver arises at some future date. However, the buyer shall acquire no
real right over the thing and its fruits until the same have been delivered to him. (Art. 1164)
Rescission by buyer
If the goods delivered do not correspond with the sample, description, or sample and description, as the case
may be, the buyer may ask for the rescission of the sale. (Art. 1481)
Remedies of vendor in installment sales of personal property (Recto Law) (Art. 1484), and contracts
purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of
the possession or enjoyment of the thing
1. Exact fulfillment of the obligation, should the vendee fail to pay.
This remedy applies regardless of the number of installments defaulted.
2. If the vendee's failure to pay covers two or more installments, he may, at his option, avail himself of the
first remedy, or do either of the following:
a. Cancel the sale.
When the sale is cancelled or rescinded, the vendor shall return to the vendee the sums received minus
reasonable rent. However, the parties may stipulate that the installments or rents paid shall not be returned
provided the stipulation is not unconscionable (Art. 1486)
b. Foreclose the chattel mortgage on the thing sold, if one has been constituted. 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
is void.
Note: The above remedies are alternative, not cumulative. Accordingly, the availment by the vendor of one
remedy will not entitle him to make use of the others. (Pacific Commercial Co. vs. Dela Rama, 72 Phil 380)
S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of P10,000.00 each. As
security, B executed a chattel mortgage on the car.
1. After paying the first three installments, B defaulted in the payment of the fourth installment. What remedy
or remedies are available to S?
Answer: S can exact fulfillment of the obligation, i.e., he can demand payment of the installment defaulted
only unless there is an acceleration clause (the whole shall become due upon default of the payment of an
installment) or that the default of the buyer is under such circumstance as to make him lose the right to make
use of the period given to him. (Art. 1198)
2. May S cancel the sale or foreclose the chattel mortgage on the car?
Answer: No, because the remedy of cancelling the sale or foreclosing the chattel mortgage constituted on the
thing is available only when the buyer's default covers two or more installments.
3. B defaulted in the payment of fourth and fifth installments and as a result, S foreclosed the chattel
mortgage constituted on the car. At the foreclosure sale, the car was sold only for a net amount of 'P50.000.00.
Can S recover the deficiency of P20,000.00 from B?
Answer: No. Since S chose the third remedy, he shall have no further action against the buyer for any
deficiency. This is true even if there was an agreement between S and B that S could go after B should the
purchase price at the auction sale be less than the balance of the original purchase price.
O, the owner of a forklift, leased the same to T. The lease contract provided, among other terms and conditions,
the following: (1) Lease period - two years; (2) monthly rental P2,000.00; (3) T is given the option to buy the
forklift at the end of the term of the lease with the monthly rentals being considered as installments payments.
After 8 months, T defaulted in his payment of rental on the ninth, tenth and eleventh months. Accordingly, O
terminated the lease contract and repossessed the forklift. May O recover the rental in arrears from T?
Answer: No. The contract between 0 and T which is a lease of personal property with option to buy is
considered a sale of personal property in installments. Accordingly, Art. 1484 is applicable. Hence, O has no
further action against T including the recovery of the rental in arrears.
S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of P10,000.00 each. As security,
B executed a chattel mortgage on the car and another chattel mortgage on his piano. After paying the first 2
installments, B defaulted in the payment of the third, fourth and fifth installments. As a consequence, S foreclosed
the chattel mortgage on the piano which was sold for P75,000.00.
1. May S recover the deficiency of P5.000.00?
Answer: Yes, because the prohibition on the recover of the deficiency applies only when the chattel
mortgage foreclosed was on the thing sold, which was the car.
2. May S foreclose the chattel mortgage on the car in order to recover the deficiency?
Answer: No, because S will just be going around the law.
S sold his only car to B for P100,000.00 payable in 10 equal monthly installments of P10,000.00 each. As security,
B executed a chattel mortgage on the car. After paying the first 2 installments, B
defaulted in the payment of the third, fourth and fifth installments. As a consequence, S brought a court action
against B to recover the balance. The court rendered judgment in favor of S and against B who was ordered to pay.
Since B had no other property except the car, S moved for the attachment of the car and its sale to satisfy the
judgment. At the execution sale, the car was sold only for a net amount of P75,000.00. May S recover the
deficiency of P5,000.00?
Answer: Yes, because the prohibition to recover the deficiency applies only if S had the chattel mortgage on the
car foreclosed. The prohibition does not apply if the thing is sold in an execution sale. In the instant case, S had
the car sold to satisfy the judgment.
Sale of Real Property in Installments (R.A. No. 6552, the Maceda Law)
The law is known as the "Realty Installment Buyer Act". Its objective is "to protect buyers of real estate on
installment payments against onerous and oppressive conditions.
1. Transactions covered
Sale or financing of real estate on installment payments, including residential condominium apartments, but
excluding industrial lots, commercial buildings, and sales to tenants under ,RA No. 3844 as amended by RA
No. 6389 (Land Reform Law), where the buyer has paid at least two years of installments.
B bought from S Realty, Inc. a residential house and lot for P600.000.00. The terms of the contract provided for
the following: down payment of P60,000.00; balance payable in 15 years in installments of P3,000.00 per month.
After paying the down payment and 84 monthly installments, B defaulted in the payment of the 85th and
succeeding installments. As a consequence, S Realty, Inc. cancelled the sale. How much cash surrender value is B
entitled to receive?
Answer: B shall be entitled to receive a cash surrender value of PI87,200.00 computed as follows: 60%
[P60,000.00 + (P3.000 x 84 months)]. Since B has paid more than 5 years of installments, he shall be entitled to a
cash surrender value equivalent to 50% plus 5% for the sixth year and another 5% for the seventh year for a total
of 60%.
Installment sale of subdivision lots and condominiums (P.D. No. 957, otherwise known as The Subdivision and
Condominium Buyers' Protective Decree)
1. Transactions covered, what "sale" or "sell" includes [Sec. 2 (b)]
a. Every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, including the
building and other improvements thereon, if any, in a subdivision project or a condominium unit in a
condominium project.
b. Contract to sell, contract of purchase and sale, exchange, attempt to sell, option of sale or purchase, a
solicitation of a sale, or an offer to sell, directly or by an agent, or by circular, letter, advertisement or
otherwise.
2. Subdivision lot and condominium unit, concept
a. "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or recreational,
in a subdivision project. [Sec. 2 (e)]
b. "Condominium unit" shall mean a part of the condominium project intended for any type of independent
use or ownership, including one or more rooms or spaces located in one or more floors (or part or parts of
floors) in a building or buildings and such accessories as may be appended thereto. [Sec. 2 (h)]
c. Rights of buyer in case of default
The rights of the buyer in the event of his failure to pay the installments due for reasons other than the
failure of the owner or developer to develop the project shall be governed by R.A. No. 6552, otherwise
known as the "Realty Installment Buyer Act" or the Maceda Law. (Sec. 24)
No installment payment made by the buyer shall be forfeited in favor of the owner or developer when the
buyer, after due notice to the owner or developer, desists from further payment due to the failure of the
owner or developer to develop ' the subdivision or condominium project according to the approved plans and
within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total
amount paid including amortization interests but . excluding delinquency interests, with interest thereon at
the legal rate. (Sec. 23)
Note: A reading of The Subdivision and Condominium Buyers' Protective Decree indicates an expansion of the
application of the Maceda Law so -as to include subdivision lots whether residential, commercial, industrial, or
recreational, in a subdivision project. [Sec. 2 (e)], and condominium units in any condominium project intended
for any type of independent use or ownership, including one or more rooms or spaces located in one or more
floors (or part or parts of floors) in a building or buildings and such accessories as may be appended thereto. [Sec.
2 (h)]
Examples:
1. Sale or return
On May 2, S delivered an electronic calculator to B under a "sale or return" arrangement. S gave B up to
May 7 to return the electronic calculator. On delivery, B became the owner of the calculator. If on or before
May 7, B does not return the calculator, the sale to him will become absolute. If B returns the calculator on or
before May 7, ownership thereof is revested in S.
Suppose that before B could return the calculator, the same is destroyed in a fire, must B still pay its price?
The answer is Yes, because upon delivery, he became the owner of it, so the risk of loss was with him. The
same rule applies, with more reason, if the loss was due to his fault.
2. Sale on approval
On June 3, S delivered a computer to B under a "sale on approval" basis. S gave B up to June 10 to try the
computer and decide to purchase it if it proves satisfactory. If the computer proves satisfactory after trial by B
and B signifies his approval to S, the ownership of the computer is passed on to B upon his communication of
his approval to S. If B does not signify his approval of the computer but retains possession of the computer
even after June 10, ownership thereof is likewise passed on to him.
Suppose that before the time given to B has expired and B has not yet signified his approval to S, the
computer is destroyed in a fire, will B be obliged to pay its price? The answer is No because the risk of loss is
with S who retained ownership of the computer despite its delivery to B. However, if the cause of the loss is
due to the fault of B, then B must pay for its price.
Transfer of ownership by delivery of specific goods to carrier or other bailee
General rule: Delivery of specific goods to a carrier or other bailee for the purpose of transmission to the buyer
transfers ownership to the buyer.
Exceptions, i.e., ownership of specific goods is retained by the seller despite delivery to carrier or other bailee
in the following cases:
1. When there is a stipulation to that effect.
2. When by the terms of the bill of lading, the goods are to be delivered to the seller or his agent or to the
order of the seller or his agent.
3. When by the terms of the bill of lading, the goods are to be delivered to the order of the buyer or his agent,
but the bill of lading is retained by the seller or his agent.
4. When the seller draws on the buyer a bill of exchange for the price of the goods and transmits the bill of
exchange and the bill of lading to the buyer to secure acceptance or payment of the bill of exchange, but the
buyer dishonors such bill of exchange. (Art. 1503)
However, if the bill of lading is negotiated to a purchaser for value in good faith, ownership of the goods is
passed on to him. (Art. 1503)
Sale by a person who is not the owner of the thing sold
When goods are sold by a person who is not the owner thereof, the buyer acquires no better title than the seller
had, except in the following cases:
1. When the sale is made under authority or with the consent of the owner.
2. When the owner is precluded by his conduct from denying the seller's authority to sell.
3. When the sale is made under the provisions of any factor's acts, recording laws or any other provisions of
law enabling the apparent owner to dispose of the goods as if he were the true owner thereof. (Art. 1505)
4. When the sale is made under a statutory power of sale or under the order of court of competent jurisdiction.
(Art. 1505)
5. When the purchase is made in a merchant's store, or in fairs, or markets. (Art. 1505)
Problems:
1. S stole the ring of O and sells the same to B who does not have any knowledge that the ring was stolen. Did
B acquire title to the ring?
Answer: No, because the title of S is that of a thief and B, the buyer acquires no better title than S had over
it. O may therefore recover the ring from B without any obligation on his part to reimburse B. Whoever loses a
movable or has been unlawfully deprived thereof may recover it from the person in possession of the same
without such possessor being entitled to reimbursement, except if the acquisition in good faith had been made
in a public sale or auction. (Art. 559)
2. uppose the ring found its way into a jewelry store and it was from that jewelry store that B bought the ring
S
in good faith, (a) Did B acquire title to the ring? (b) Can O recover the ring from B?
Answers: (a) Yes, because when the purchase is made from a merchant's store, fair or market, title to the
thing is transferred to the buyer notwithstanding that the seller is not the owner thereof. This is so because a
contrary ruling would be in restraint of trade, (b) No, he cannot recover even if he offers to reimburse. The right
to reimburse is available to the owner only if the acquisition was in a public sale.
3. O authorized S to sell his ring. Thereafter, S sells the ring of 0 to B. Did B acquire title to the ring?
Answer: Yes, because the sale was made under the authority of the owner.
4. O gave his ring to S for safekeeping. Later, S sold the ring to B in the presence of O but without O's express
authority. O did not make any objection while S was selling the ring to B. Did B acquire title to the ring?
Answer: Yes, because 0 is precluded by his conduct from denying S's authority to sell the ring.
5. O, the owner of certain parcel of land, sold the same to B in a public instrument. B, however, did not
register the sale. Subsequently, O sold the land to C who was not aware of the previous sale to B and who
registered the transfer of the land to his name with the Register of Deeds. Who has a better right to the land, B
or C?
Answer: - C has a better right to the land. While 0 was no longer the owner of the land at the time he sold it
to C, still 0 was the apparent owner in the records of the Register of Deeds. This enabled him to dispose of it as
if he were the true owner thereof. (Art. 1505) Also, in the case of the sale of immovables to different vendees,
ownership thereof shall belong to the person who in good faith first registered the sale in the Registry of
Property. (Art. 1544)
Effect of special indorsement of a document of title which states that the goods are deliverable to bearer
The document of title becomes an order document of title. Consequently, it may be further negotiated by
the indorsee only by indorsement completed by delivery. (Art. 1508)
This is a feature of a negotiable document of title that distinguishes it from a negotiable instrument
payable to bearer. A negotiable instrument payable to bearer remains a bearer instrument even if specially
indorsed.
b) If by the terms of the document of title, the carrier, warehouseman or other bailee issuing it undertakes
to deliver the goods to the order of a specified person and such person or a subsequent indorsee of the
document has indorsed it in blank or to bearer.
Example:
D deposits his goods in the warehouse of W. W issues a warehouse receipt which provides that the goods
are "Deliverable to order of D." If D indorses the warehouse receipt in blank, i.e., he just writes his signature
and nothing else, or he writes "Deliver to bearer" and signs his name, and delivers the warehouse receipt to
A, A may negotiate the instrument by mere delivery.
2. By indorsement plus delivery.
If by the terms of the document of title, the goods are to be delivered to the order of a specified person, the
document of title may be negotiated by him only by indorsement coupled with delivery. (Art. 1509) Such
indorsement may take any of the following forms:
a. Blank indorsement - This consists of the signature of the indorser without specifying the name of the
indorsee. In this case, the document may be further negotiated by mere delivery.
b. To bearer - Where the indorsement states that the goods are deliverable to bearer. The document may be
further negotiated by mere delivery.
c. Special indorsement - Where the name of the indorsee is specified. The document may be negotiated
further through the indorsee's indorsement plus delivery.
Example: D indorses the warehouse receipt as follows: "Deliver to A. (Sgd.) D"
2. By the person to whom the possession or custody of the document has been entrusted by the owner in the
following cases:
a. If, by the terms of the document, the bailee issuing the document, undertakes to deliver the goods to the
person to whom the possession or custody of the document has been entrusted.
Example:
D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse receipt which states
that "(T)he goods are to be delivered to the order of D or to the person to whom this document has been
entrusted by D". Thereafter, D entrusted the document to X. X may negotiate the document to another
person.
b. If, at the time of such entrusting the document, it is in such form that it may be negotiated by delivery.
Example:
D deposited 100 sacks of rice in the warehouse of W. W issues to him a warehouse receipt which states
that "(T)he goods are to be delivered to bearer." Thereafter, D entrusted the document to X. X may negotiate
the document to another person.
Rights acquired by a person to whom a negotiable document of title is negotiated (Art. 1513)
1. The title of the person negotiating the document, over the goods covered by the document.
2. The title of the depositor or shipper over the goods covered by the document.
3. The direct obligation of the bailee issuing the document to hold possession of the goods for him according
to the terms of the document as fully as if such bailee had contracted directly with him.
Problems
D, depositor; W, warehouseman. An order negotiable warehouse receipt was issued for the goods. Thereafter, D
indorsed the receipt to A, A to B, and B to H, holder.
1. When H presented the receipt to W, W failed to deliver the goods to him because they were lost through
his negligence. Is D, A or B liable to H for the failure of W to deliver the goods?
Answer: No. because an indorser is not liable for the failure of the bailee to fulfill his obligation. (Art. 1517)
2. Supposing that the receipt presented by H to W was forged for which reason W refused to deliver the goods
to H, will D, A or B be liable to H?
Answer: Yes, because an indorser warrants that the document of title is genuine. (Art. 1516).
However, A negotiated the warehouse receipt to H. Later, W refused to deliver to H on the ground that his
title is defective. H can hold A liable because he warranted that he had a legal right to negotiate the warehouse
receipt.
3. Supposing that D stole the goods of T and deposited them in W's warehouse, may H obtain delivery of the
goods from W assuming that H is a holder for value and without notice?
Answer: No, because H acquired only whatever rights D had over the goods, which was the same right
acquired by the indorsers subsequent to D. (Art. 1513) A depositor who has no title to the goods cannot confer
title to them by depositing them with a warehouseman or other bailee and obtaining a receipt therefor
notwithstanding that the purchaser of the goods is an innocent purchaser for value.
4. Refer to No. 3. Will D, A or B be liable to H by reason of the non-delivery of the goods to H?
Answer: Yes, because an indorser warrants that he has the right to transfer the title to the goods. (Art. 1515,
par.4)
Non-impairment of the validity of negotiation although it was made in breach of duty, etc. (Art. 1518)
The validity of the negotiation, if the person to whom the document is negotiated or a person to whom the
document is subsequently negotiated was a purchaser for value in good faith and without notice, is not impaired
by the following:
1. That the negotiation was made in breach of duty of the person negotiating.
2. That the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident,
mistake, duress or conversion.
Example:
S delivers his goods to C, a common carrier, for shipment. C issues to S a bill of lading for the goods which
states that they are to be delivered to bearer. However, the bill of lading is stolen by T who thereafter negotiates it
by mere delivery to H, a purchaser for value in good faith and without notice of T's defective title. Is the
negotiation of T to H valid?
Answer: Yes, because the validity of the negotiation is not impaired by the fact that the owner of the document
was deprived thereof by theft. (Art. 1518) Accordingly, H can obtain possession of the goods.
Rights of the buyer when quantity or quality of goods delivered is different from that which the seller contracted to
sell (Art. 1522)
1. When the quantity delivered is less than that which the parties had agreed upon, the buyer may:
a. Reject the goods.
This is based on the rule the creditor cannot be compelled to accept partial payment.
b. Accept the goods.
However, if he accepts the goods knowing that the seller is not going to perform the contract in full, he
must pay for them at the contract rate. If the buyer has used or disposed of the goods before he knows that
the seller is not going to perform his contract in full, the buyer shall not be liable for more than the-fair value
to him of the goods so received.
Example:
B ordered 500 cans of sardines from S at P8.00 per can. On due date, however, S could deliver only 450
cans. The rights of B shall be as follows:
a. B may reject the 450 cans.
b. B may accept the 450 cans. If he accepts the 450 cans believing that S could no longer deliver the
balance of 50 cans, then he only has to pay the 450 cans received at the contract rate of at P8.00 per can or a
total of P3.600.00. If he accepts the 450 cans believing that S would still deliver the deficiency and he has
disposed of the 450 cans received, then he only has to pay the fair value of the goods, which amount may be
lower, but not greater, than the contract rate.
2. When the quantity delivered is more than that which the parties agreed upon, the buyer may:
a. Accept the goods agreed upon and reject the rest.
Thus, if in the example in No. 1, S delivered 520, B may accept only 500 cans and reject the excess of 20
cans.
b. Accept the whole of the goods delivered and pay for them at the contract rate.
Thus, B may accept all the 520 cans and pay for them at the contract rate at P8.00 per can.
c. Reject the whole of the goods if they are indivisible.
Example: B ordered a container of orange concentrate weighing 20 gallons from S. S delivered a sealed
container weighing 25 gallons. B may reject the whole 25 gallons because although 5 gallons can be
removed from the container being delivered, still the whole container is indivisible because punching a hole
on it to extract the extra 5 gallons will destroy the integrity of the product.
3. When the seller delivers the goods agreed upon but are mixed with goods of different description, the
buyer may:
a. Accept the goods agreed upon and reject the rest, if the sale is divisible.
b. Reject the whole of the goods, if the sale is indivisible.
Examples:
a. B ordered 10 sacks of rice from S. S delivered 8 sacks of rice and 2 sacks of com. B may reject all
because the quantity of rice being delivered is incomplete, while the 2 sacks of corn are of a different
description.
b. If S delivered 10 sacks of rice and 2 sacks of corn, B may accept the 10 sacks of rice and reject the 2
sacks of corn.
c. If S delivered 12 sacks with each sack containing a mixture of rice and corn, B may reject the whole
delivery even if the ratio of rice to corn is 10:2 in each sack..
3. Right of resale
a. When right available
This right is available to an unpaid seller when the following requisites are present:
1) The buyer has defaulted in the payment of the price.
2) The seller has the right of lien or has stopped the goods in transitu.
3) Title to the goods has passed on to the buyer.
4) The grounds must be any of the following:
a) The goods are of a perishable nature.
b) The seller has expressly reserved the right to resell the goods in case the buyer should make default.
c) The buyer has been in default for an unreasonable time. (Art. 1533)
b. How resale is made
The seller may resell the goods in a public or private sale. He is bound to exercise reasonable care and
judgment in making the resale. He cannot, directly or indirectly, buy the goods. (Art. 1533)
c. Effects of resale
1) The seller shall not be liable to the original buyer upon the contract of sale or for any profit made by
such resale.
2) He may recover damages from the buyer for any loss occasioned by the breach of contract of sale.
3) The new buyer acquires a good title against the original buyer. (Art. 1533)
d. Importance of notice to the original buyer
Notice need not be given to the original buyer of the intention to resell the goods for the validity of the
resale. However, if the basis of the resale is not the perishable nature of the goods or upon an express
provision in a contract of sale, the giving or failure to give notice shall be relevant in any issue involving the
question whether the buyer has been in default for an unreasonable time before the resale was made.
It is not likewise essential to the validity of the resale that notice of the time and place of such resale
should be given by the seller to the original buyer. (Art. 1533)
Effect on possessory lien or right of stoppage in transitu if buyer has sold or disposed of the goods
The sellers possessory lien or right of stoppage in transitu is not affected by any sale or' disposition of the
goods made by the buyer except in the following cases:
1. When the seller has assented to the sale by the buyer.
2. When a negotiable document of title representing the goods has been negotiated to a purchaser for value in
good faith. (Art. 1535)
Sale of real estate with a statement of its area at the rate of a certain price per unit of measure or number
The vendor shall deliver the area mentioned in the contract of sale. However, if the actual area is more or less
than the area specified in the contract, or if a part of the immovable is not of the quality specified therein, the
following rules shall be observed:
1. If the actual area is less than that stated in the contract (Art. 1539) - The buyer may:
a. Ask for a proportionate reduction in the price if the lack in area is less than one-tenth of that stated in
the contract, unless the vendee would not have bought the thing had he known of its smaller area, in which
case, he may opt to rescind the sale.
b. Rescind the sale if the lack in area is not less than one-tenth of that stated.
2. If the actual area is more than that stated in the contract (Art. 1540) - The buyer may:
a. Accept the area stated in the contract and reject the rest.
b. Accept the whole area and pay for them at the contract rate.
3. If the area is the same but a part of the immovable is not of the quality specified in the contract (Art. 1539)
- The buyer may:
a. Ask for a proportionate reduction of the price if the inferior value of the thing does not exceed one-tenth
of the price agreed upon, unless the buyer would not have bought the thing had he known of its inferior
quality, in which case, he may opt to rescind the sale.
b. Rescind the sale if the inferior value of the thing exceeds one-tenth of the price agreed upon.
Illustration:
S sold to B a lot consisting of 1,500 square meters at the rate of P1,000.00 per square meter.
1. Suppose the actual area being delivered is only 1,400 square meters, what are the rights of B?
a. B may ask for a proportionate reduction in the price since the lack in area is less than one-tenth of that
stated in the contract (One-tenth of 1,500 square meters is 150; while the lack in area is 100.) Thus, B has to
pay only 1,400 square meters at P1,000.00 per square meter or a total of P1,400,000.00.
b. B may ask for rescission if he would not have bought the lot had he known of its smaller area.
2. Suppose the area being delivered by S is only 1,300 square meters, what is the right of B?
B may ask for the rescission of the contract because the lack in area consisting of 200 square meters is not
less than one-tenth of the area agreed upon.
3. Suppose the area being delivered by S is 1,600 square meters, what are the rights of B?
a. B may accept the area being delivered (1,600 square meters) and pay for them at the contract rate.
b. B may accept only 1,500 square meters and reject the rest.
4. Assume the area being delivered is the same as that stated in the contract, i.e., 1,500 square meters.
a. Suppose 200 square meters should be priced only at P950.00 per square meter because of inferior
quality, what are B's rights?
Since the inferior value of P50.00 (P1,000.00 - 950.00) does not exceed one-tenth of the price agreed upon
which is P100.00 (P1,000.00 x 1/10):
1) B may ask for a proportionate reduction in the price by paying only P1,490,000.00 (1,300 x
P1,000.00) + (200 x P950.00), or
2) He may ask for rescission if he would not have bought the lot had he known that a part thereof is of
inferior value.
b. Suppose 200 square meters should be priced only at P800.00 per square meter because of inferior
quality, what are B's rights?
In this case the inferior value (P200.00) exceeds 1/10 of the value agreed upon; hence, B may ask for the
rescission of the contract.
Sale of real estate for a lump sum and not at the rate of a certain sum for a unit of measure or number (Art 1542)
1. Area to be delivered
The vendor is bound to deliver all that it is included within the boundaries stated in the contract although
there be greater or less area or number than that stated in the contract.
2. The price to be paid by vendee
The vendee shall pay the lump sum stipulated with no increase or decrease in the price although there be
greater or less area br number than that stated in the contract.
3. Buyer's remedies if the vendor does not deliver the area within the boundaries stated in the contract
a. Buyer may ask for a proportionate reduction in the price, or
b. Rescind the contract.
Illustration:
B bought from S a lot for a lump sum of P1,500,000.00. Aside from mentioning the boundaries of the lot, the
deed of sale also states the area at 1,500 square meters.
1. Suppose the area contained within the boundaries is actually 1,400 square meters, then all that S has to
deliver is 1,400 square meters. B will have to pay the same amount of P1,500,000.00, i.e, there is no
proportionate reduction in the price.
2. Suppose the area contained within the boundaries is actually 1,600 square meters, then S will have to
deliver such area with no increase in the price that B must pay. If S wants to deliver only 1, 500 square meters,
B has the right:
a. To rescind the contract, or
b. Ask for a proportionate reduction in the price, hence, he can pay only P1,406,250.00 (1,500/1,600
square meters xP1,500,000.00).
Example:
On May 1, S sold his lot to X. The deed of sale was in a private instrument. On May 3, S sold the same lot to
Y in a public instrument. On May 5, S sold again the said lot.to Z in a public instrument. Z immediately
registered the sale with Register of Deeds. X, Y and Z did not know of the sale made to the other two and none
of them took physical possession of the lot.
a. Who has a better right to the lot?
Answer: Z because he was the first to register the sale in good faith.
b. Suppose Z did not register the sale or he registered the sale but he was in bad faith (meaning, he was
aware of one or both of the previous sales), who has a better right to the lot?
Answer: Y will have a better right because he was the first to take possession in good faith. Since the sale
to him was in a public instrument, the lot was deemed constructively delivered to him.
c. Suppose all the sales were in a private instrument and all buyers are in good faith, who has a better right
to the lot?
Answer: Since no one registered the sale or took possession of the lot, X shall be the owner because he has
the oldest title.
Knowledge gained by first buyer of the second sale does not defeat his rights
The governing principle in double sale is priore tempore, potior jure (first in time, stronger in right.).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights, except where the
second buyer registers in good faith the second sale ahead of the first. Such knowledge of the first buyer does not
bar him from availing himself of his rights under the law, among them to register first his purchase as against the
second buyer. However, knowledge gained by the second buyer of the first sale defeats his rights even if he is first
to register the second sale, since such knowledge taints his prior registration with bad faith. It is thus essential, to
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering the deed of sale. (Fudot vs. Cattleya Land, Inc., G. R. No. 171008, September 13, 2007)
(Note: The Supreme Court, in the foregoing case, reiterated the rule that the principle of automatic registration
does not apply to the first buyer when he gains knowledge of the second sale. In other words, the first buyer, who
was in good faith at the time the sale was madeito him, remains in good faith notwithstanding his knowledge of
the second sale. For the second buyer, in order that he may invoke Art. 1544, he must possess good faith from the
time of sale in his favor until the registration of the same.) (See Pagaduan vs. Spouses Estanislao, G.R. No.
176308, May 8, 2009.)
Kinds of warranties
1. Express warranties
Express warranty refers to any affirmation of fact or any promise by the seller relating to the thing whose
natural tendency is to induce the buyer to purchase the same, and if the buyer purchases the thing relying on
such affirmation or promise. (Art. 1546)
2. Requisites in order that the seller’s warranty against eviction may be enforced
a. The purchaser has been deprived of the whole or part of the thing sold
b. The eviction is by final judgment
The vendee need not appeal from the decision or judgment in order that the vendor may become liable for
eviction. (Art. 1548)
c. The deprivation is based on a right prior to the sale or an act imputable to the vendor. (Art. 1548)
d. The vendor must have been notified of the suit for eviction at the instance of the vendee
The defendant vendee shall ask within the period fixed in the Rules of Court for answering the complaint,
that the vendor be made a co-defendant. (Art. 1559) This will enable the vendor to defend his title (City of
Manila vs. Lack, 19 Phil 324) and show that the suit for eviction against against the buyer is unjust (Javier
vs. Rodriguez, 40 OG No. 5, p. 1006) (See also Ang vs. Court of Appeals, G. R. No. 177874, September 29,
2008.)
Example:
S sold his lot to B in a private instrument. B took immediate actual possession of the lot. Two days later, S
sold the same lot in a public instrument to X who recorded the sale with the Register of Deeds. Neither one was
aware of the sale made to the other. When X visited the lot to take actual possession of it, he saw that B was
occupying the same and learned from B that S had sold the lot to B earlier. Accordingly, X filed a complaint for
eviction against B. Upon receipt of the summons and the complaint, B notified S of the suit brought against
him. After hearing, the court rendered judgment evicting B from the lot. B can hold S liable for breach of
warranty against eviction because all the elements for liability for breach of warranty against eviction are
present.
3. Other instances when seller is liable for breach of warranty against eviction
a. Sale of the property for non-payment of taxes
If the property is sold for non-payment of taxes due and not made known to the vendee before the sale, the
vendor is liable for eviction. (Art. 1551)
b. Judicial sales
The judgment debtor is liable for eviction unless otherwise decreed in the judgment. (Art. 1551)
Consumer product warranties under R. A. No. 7394, otherwise known as the "Consumer Act" approved on April
13, 1992 and published in the Official Gazette on June 15,1992
In addition to the Civil Code provisions on sale with warranties, the following provisions shall govern the sale
of consumer products with warranty:
1. Terms of express warranty - Any seller or manufacturer who gives an express warranty shall:
a. Set forth the terms of warranty in clear and readily understandable language and clearly identify himself
as the warrantor;
b. Identify the party to whom the warranty is extended;
c. State the products covered;
d. State what the warrantor will do in the event of a defect, malfunction or failure to the written warranty
and at whose expense;
e. State what the consumer must do to avail (himself) of the rights which accrue to the warranty; and
f. 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. [Sec. 68 (a)]
2. When express warranty operative
All written warranties or guarantees issued by a manufacturer, producer or importer shall be operative from
the moment of sale. [Sec. 68 (b)]
3. Persons liable
a. Manufacturer.
b. Distributor.
c. Retailer.
The retailer shall be liable only subsidiarily, i.e, when the manufacturer and distributor fail to honor the
warranty. In such case, the retailer shall shoulder the expenses and costs necessary to honor the warranty. He
may, however, proceed against the manufacturer and distributor. [Sec. 68 (b) (3)]
4. Minimum standards for warranties
For the warrantor of a consumer product to meet the minimum standards for warranty, he shall:
a. Remedy such consumer product within a reasonable time and without charge in case of defect,
malfunction or failure to conform to such written warranty.
b. Permit the consumer to elect whether to ask for a refund or replacement without charge of such product
or part, as the case may be, where after reasonable number of attempts to remedy the defect or malfunction,
the product continues to have the defect or to malfunction. [Sec. 68 (d)]
EXTINGUISHMENT OF SALE
How sales are extinguished
Sales are extinguished:
1. By the same causes as all other obligations.
2. By the various causes of extinguishment in Title VI (Sales) Such as:
a. Cancellation of sale of personal property payable in installments. (Art. 1484)
b. Resale of the goods by the unpaid seller. (Art. 1532)
c. Rescission of the sale by the unpaid seller. (Art. 1534)
d. Rescission by the buyer in case of partial eviction. (Art. 1556)
e. Rescission by the buyer in case of breach of warranty against hidden defects. (Art. 1567)
f. Rescission by the buyer of sale of animals with redihibitory defects. (Art. 1580)
3. By redemption, whether conventional or legal
Conventional redemption
1. Concept
Conventional redemption takes place when the vendor reserved the right to repurchase the thing sold, with
the obligation:
a. to return to the vendee:
1) the price of sale,
2) the expenses of the contract, and any other legitimate payments made by reason of the sale, and
3) the necessary and useful expenses made on the thing sold; and
b. to comply with other stipulations which may have been agreed upon. (Arts. 1601, 1616)
2. Period of redemption
a. When no period is fixed
If the right of redemption was agreed upon but there was no stipulation as to the period within which the
right shall be exercised, the period of redemption shall be four (4) years from the date of the contract.
b. When a period is fixed by the parties
1) If the period does not exceed ten years – such as when the right to repurchase shall be exercised
within five (5) years, then the period shall be five (5) years from the date of the contract.
2) If the period exceeds ten (10) years, then the period shall be ten (10) years from the date of the
contract, the stipulation as to the excess being null and void. (Montiero vs. Salgado, 27 Phil 631)
c. Where the period agreed upon is indefinite, such as when the repurchase may be made "at any time", the
repurchase may be exercised within ten (10) years from the date of the contract. (Soriano vs. Abalos, et. al.,
G.R. No. L-1525, July 27, 1949)
d. In case there was a civil action between the parties, the vendor may still exercise the right to repurchase
within thirty (30) days from the time final judgment was rendered in a civil action on the basis that the
contract was a true sale with a right to repurchase. (Art. 1606)
Legal redemption
1. Concept
Legal redemption is the right to be subrogated upon the same terms and conditions stipulated in the contract,
in the place of one who acquires a thing by purchase, or dation in payment, or by any other transaction whereby
the ownership is transmitted by onerous title. (Art. 1619)
2. Instances of legal redemption
a. Legal redemption by co-owner
A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or
of any of them, are sold to a third person. (Such is the rule in order to reduce the number of co-owners since
co-ownership is not favored upon).
If two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to
the share they may respectively have in the thing owned in common. (Art. 1620)
Example: A, B and C are co-owners of a lot. A sells his 1/3 undivided interest in the property to X. B or C
may redeem the share of A from X. If both of them desire the redeem the share of A, each can redeem only
1/6 of the property; i.e., they halve the share of A.
b. Legal redemption by adjoining owner of rural land
If a piece of rural land not exceeding one hectare is alienated, the adjoining owner shall have the right of
legal redemption unless the grantee does not own any rural land.
Rule if two or more adjoining owners desire to exercise the right of redemption:
1) The owner of the adjoining land of smaller area shall be preferred.
2) if both lands have the same area, the one who first requested the redemption, shall be preferred. (Art.
1621)
When right not available
If adjacent lands are separated by brooks, drains, ravines, roads and other apparent servitudes for the
benefit of other estates. (Art. 1621)
c. Legal redemption by adjoining owner of urban land
If a small piece of urban land which was bought for speculation has been resold, the owner of the
adjoining land has a right of redemption at a reasonable price.
Rule if two or more adjoining co-owners wish to exercise the right of redemption or pre-emption
Preference shall be given to the owner whose intended use of the land in question appears best justified.
(Art. 1622)
Note: The right of redemption of co-owners excludes that of adjoining owners. (Art. 1623)
3. Period of pre-emption or redemption
a. Pre-emption – Within 30 days from written notice by prospective vendor.
b. Redemption - Within 30 days from written notice by vendor.
Equitable mortgage
1. Concept
An equitable mortgage is one which, although lacking in some formality, or form or words, or other
requisites demanded by statute, nevertheless reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to law. Its essential elements are:
a. The parties enter into what appears to be a contract of sale.
b. Their intention is to secure an existing debt by way of mortgage. (Vda. De Delfin vs. Dellota, G. R. No.
143697, January 28, 2008.)
2. Contracts presumed to be an equitable mortgage
A contract of sale with a right to repurchase and other contracts purporting to be an absolute sale, shall be
presumed to be an equitable mortgage, in any of the following cases:
a. When the price of a sale with a right to repurchase is unusually inadequate.
b. When the vendor remains in possession as lessee or otherwise.
c. When the period for the exercise of the right to repurchase is extended.
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. When the real intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. (Art. 1602)
In any of the above cases, 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. (Art. 1602)
3. Rule in case of doubt
A contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. (Art.
1603)
4. Right to reformation
The apparent vendor may ask for the reformation of the instrument in the contracts presumed to be an
equitable mortgage. (Art. 1605)
ASSIGNMENT OF CREDIT
AND OTHER INCORPOREAL RIGHTS
Assignment of credits, concept
Assignment of credits is a contract whereby a person (assignor) transfers his credit, right or action against a
third person to another person (assignee) for a consideration which is certain in money or its equivalent.
An assignment of credit not only entitles the assignee to the credit itself, but also gives him the power to
enforce it as against the debtor of the assignor. (Sps. Serfino vs. Far East Bank and Trust Co., Inc., G.R. No.
171845, October 10, 2012)
Example: D owes C P5.000.00. C assigns his credit right toT for a consideration with notice to D. C is the
assignor. T is the assignee. D will have to make his payment to T and no longer to C.
2. As regards the debtor's solvency, he does not warrant the same, except:
a. When there is a stipulation.
b. When the insolvency already existed prior to the sale and of public knowledge.
Example:
D obtained a loan of P50,000.00 from C. Thereafter, C assigned his credit right to X. On due date, X
demanded payment from D but D could not pay because he is insolvent. In this case, X cannot not go after C
except in the said two cases.
Duration of assignor's warranty of the debtor's solvency if assignor was in good faith
1. The period stipulated.
2. If no period was stipulated -
a. If the assignment was made before maturity - 1 year from maturity.
b. If the assignment was made after maturity - 1 year from the time of the assignment:
(Therefore, the one-year period shall be counted from the date of maturity or the date of the assignment,
whichever comes later.)
Vendor's warranty for lump sum sale of the whole of certain rights, rents or products (Art. 1631)
The vendor warrants the legitimacy of the whole in general, and shall not be obliged to warrant each of the
various parts of which it may be composed, except when he is evicted:
1. From the whole of the thing;
2. From a part of the greater value.
Example: S sold his receivables from more than 50 customers to B for P1,000,000.00. B was deprived of the
amount of P20,000.00 representing an alleged receivable from D. Here, S shall not be liable because the
warranty of S is on the legitimacy of the whole of the receivables. If B, however, is deprived of the whole
amount of the receivables or more than 50% thereof, S shall be liable to B.
4. One of the following characteristics of dacion en pago is also a characteristic of a contract of sale. Which is
it?
a. There is a pre-existing credit.
b. Obligations are extinguished.
c. There is less freedom in fixing the price.
d. Ownership of the object is transferred to the other party.
5. The following are characteristics of a contract of sale except for one which refers to payment by cession.
Which characteristic refers to payment by cession?
a. There is no pre-existing credit.
b. The cause or consideration is the price.
c. There is more freedom in fixing the price.
d. Assignee of the property acquires the right to sell the thing but not the ownership thereof.
7. One of the following is not a requisite of the object of a contract of sale. Which is it?
a. It must be within the commerce of men.
b. It must be licit.
c. It must be determinate or determinable,
d. Vendor must have the right to transfer the ownership of the thing at the time of sale.
8. The following items pertain to either emptio rei speratae or emptio spei.
I. The sale of a future thing.
II. The sale of hope or expectancy.
III. The sale of a present thing.
IV. The thing sold must come into existence,
Based on the above information, which of the following is correct?
a. Items I and II pertain to emptio rei speratae.
b. Items II and III pertain to emptio spei.
c. Items II and III pertain to emptio rei speratae.
d. Items III and IV pertain to emptio spei
9. Santiago sells to Bermejo 500 sacks of rice at P1.000.00 per sack from the stock then stored in the
warehouse of Santiago. Unknown to the parties, the warehouse contains only 480 sacks of rice. What is the
status of the contract between Santiago and Bermejo?
a. The sale is void since the quantity available is less than the quantity sold.
b. The sale is valid up to 480 sacks of rice but void as to the deficiency of 20 sacks of rice.
c. The entire sale is valid up to 500 sacks of rice. Bermejo becomes the owner of the whole stock available
and Santiago must deliver the deficiency of 20 sacks of rice.
d. The sale is valid up to 480 sacks of rice but rescissible as to the deficiency of 20 sacks of rice by reason
of damage suffered by Bermejo.
10. Somera sells to Buenviaje at P50 per gallon 300 gallons of gasoline stored in his truck's tank which,
unknown to the parties, contains 500 gallons gasoline. What is the status of the contract of sale between
Somera and Bermejo?
a. The sale is void because the quantity available is more than the quantity sold.
b. The sale is valid up to 500 gallons of gasoline. Buenviaje must pay for the additional 200 gallons of
gasoline.
c. The sale is valid up to 300 gallons of gasoline. Buenviaje becomes the owner of 3/5 of the whole stock,
while Somera becomes the owner of 2/5 thereof.
d. The sale is rescissible because Somera will suffer lesion of more than % of the value of the whole stock.
11. San Manuel Corporation, which maintains a professional basketball team, entered into a contract with
Armstrong Rubber Company for the latter to provide a pair of rubber shoes to the former's two imported
basketball players, Charles Jordan and Michael Barkley. Armstrong Rubber Company was instructed to make a
pair for either or both players in case the company did not manufacture shoes of their size. No pair was,
however, immediately available for both the players. Charles Jordan, who is 6'5' tall and wears size 12 rubber
shoes, was given a pair the following day from the 300 pairs that Armstrong was in the process of
manufacturing for its customers at the time the orders were received. Michael Barkley, who is 7' tall and wears
size 18 shoes, was provided three days later, with a pair that was specially made for him since Armstrong does
not make shoes of his size. What kind of contracts were entered into for the shoes provided to the two
basketball players?
a. The contract for the pair of shoes provided to Charles Jordan is a contract for a piece of work, while that
for Michael Barkley is a contract of sale.
b. The contract for the pair of shoes provided to Charles Jordan is a contract of sale, while that for Michael
Barkley is a contract for a piece of work.
c. Both contracts are contracts of sale.
d. Both contracts are contracts for a piece of work.
12. S and B entered into a contract whereby S transferred to B a specific car for the price of P200.000.00,
while B gave to S P90.000.00 in cash and a diamond ring worth P110.000.00. The heading of the written
contract signed by the parties reads "Contract of Sale".
a. The contract is void because the intention of the parties is void since the value of the diamond ring is
more than the monetary consideration given.
b. The contract is a valid contract of sale as intended by the parties regardless of whether the monetary
consideration is more or less than the value of the . property consideration.
c. The contract is a valid contract of barter since the value of the property given is more than the monetary
consideration. The intention of the parties is immaterial.
d. The contract is partly a contract of barter and partly a contract of sale.
15. A sum of money paid, or a thing delivered upon the making of a contract for the sale of goods, to bind the
bargain, the delivery and acceptance of which makes the final assent of both parties to the contract.
a. Option money c. Reservation money
b. Earnest money d. Down payment
16. S orally offered to sell a certain diamond ring to B for P50,000.00. B accepted the offer and to prove that
he was in earnest, he gave S P1,000.00. The parties agreed that the delivery of the ring and the payment of the
price would be made 30 days later. On due date:
a. S may collect from B P50.000.00.
b. S may collect from B P49.000.00.
c. S cannot enforce payment because the contract was not reduced to writing.
d. S cannot enforce payment because' there was no contract of sale yet.
17. On June 1, 2014, S sold to B 50 units of machines which were scheduled to arrive from Japan the
following day on board the vessel "MT Nippon Maru" The sale was evidenced by an invoice identifying
each machine by serial number. Each machine was priced at P10,000.00. Unknown to the parties, 30 units were
damaged beyond repair by seawater on May 31, 2014. Based on the foregoing, which of the following
statements is incorrect?
a. B may rescind the whole contract.
b. B may demand delivery of the remaining 20 units and pay the price therefor.
c. S may require payment of the whole shipment from B since S was not aware of the damage caused on
the machines at the time of sale.
d. S has no option to rescind the whole contract or require payment of the remaining 20 units.
18. It refers to the delivery of the thing sold from hand to hand in case of movables, or the taking of
possession with respect to immovables, in the presence and with the consent of the vendor.
a. Actual or real delivery.
b. Traditio constitutum possessorium.
c. Traditio longa manu.
d. Traditio brevi manu.
19. On May 1, 2014, S sold to B through a private instrument 20 sacks of corn stored in the only warehouse of
S. On May 10, 2014, S delivered the keys to the warehouse to B. The delivery made by S to B is known as:
a. constructive delivery by legal formalities.
b. symbolic delivery by traditio clavium.
c. traditio longa manu.
d. traditio brevi manu.
20. Delivery of incorporeal property may be made through any of the following means, except:
a. execution of a public document.
b. placing the titles of ownership in the possession of the vendee.
c. use by the vendee of his rights, with the debtor's consent.
d. execution of private instrument.
21. One of the following statements on the transfer of ownership of the thing in "sale on trial" is incorrect.
Which is it?
a. Ownership of the thing is transferred to the vendee when he signifies his approval or acceptance to the
vendor.
b. Ownership of the thing is transferred to the vendee when he does an act adopting the transaction.
c. Ownership of the thing is transferred to the vendee if the time fixed for the return of the thing has
expired and the vendee retains the thing without giving notice of rejection or acceptance to the vendor,
d. Ownership of the thing is transferred to the vendee upon delivery.
22. On March 1, 2014, S sold and delivered to B a television set for P10,000.00 "on sale or return" giving B
up to March 16, 2014 within which to return the television set or pay the price. On March 10, 2014, the
television set was burned through no fault of B. Based on the foregoing, which of the following statements is
incorrect?
a. B must pay the price of the television set.
b. S must bear the loss since the time for the return of the television set had not yet expired.
c. The ownership of the television set was transferred to B upon delivery to him.
d. B must bear the loss of the television set.
23. In one of the following cases, delivery of the goods to a carrier for the purpose of transmission to the
buyer transfers ownership to the latter. Which one is it?
a. . When by the terms of the bill of lading, the goods are to be delivered to the seller or his agent.
b. When by the terms of the bill of lading, the goods are to be delivered to the order of the buyer or his
agent but the seller retains the bill of lading.
c. When the seller draws a bill of exchange on the buyer for the price of the goods and transmits such bill
of exchange and the bill of lading to the buyer to secure acceptance or payment of the bill of exchange and
the buyer dishonors the bill of exchange.
d. When the owner does not reserve the right of possession or ownership of the thing sold upon delivery to
the carrier.
24. 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, except to:
a. exact fulfillment of the obligation, should the vendee fail to pay any number of installments.
b. cancel the sale, should the vendee's failure to pay cover two or more installments.
c. foreclose the chattel mortgage on the property if the vendee's failure to pay cover two or more
installments and recover any deficiency after the foreclosure sale if they have stipulated it.
d. foreclose the chattel mortgage on the property if the vendee's failure to pay cover two or more
installments but he may no longer recover any deficiency after the foreclosure sale.
25. Baldomero bought a residential house and lot from Sta. Ana Realty for P250,000.00 giving a down
payment of P10,000.00 and promising to pay the balance of P240,000.00 in 20 years in monthly installments of
P1,000.00. After paying 72 installments, Baldomero defaulted in the payment of the 73rd installment and
subsequent ones. Despite the grace period he had earned, he was not able to make any further payments.
Accordingly, Sta. Ana Realty cancelled the sale. How much cash surrender value is Baldomero entitled to
receive?
a. P45,100.00. c. P36,000.00.
b. P39,600.00. d. P41,000.00.
26. S stole a ring belonging to O. Subsequently, the ring was offered for sale at a public auction where X, who
was not aware that the ring was stolen, bought it. A few weeks later, O saw the ring and recognized it as his.
Based on the foregoing information, which of the following statements is correct?
a. O may recover the ring from X without reimbursing X since O was unlawfully deprived of the ring.
b. O may recover the ring from X but he has to reimburse X since X acquired title to the ring.
c. O may no longer recover the ring even if he is willing to reimburse X.
d. X did not acquire title to the ring since the auctioneer had no valid title thereto.
27. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the
sale, the buyer acquires title to the goods. Such acquisition of title has the following requisites, except the:
a. buyer must have bought the goods in good faith.
b. buyer must have bought them for value.
c. buyer bought them without notice of the seller's defect of title.
d. party from whom the seller obtained the goods must ratify the sale.
29. An unpaid seller loses his lien on the goods in the following cases, except:
a. when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer
without reserving the right of ownership in the goods.
b. when the buyer or his agent lawfully obtains possession of the goods.
c. when the seller waives his possessory lien.
d. when he has obtained judgment for the price of the goods.
30. Three of the following are the requisites in order that an unpaid seller may exercise his right of stoppage
of transitu. Which one is not?
a. The seller is unpaid.
b. The seller has not parted with the possession of the goods.
c. The goods are in transit.
d. The buyer is or becomes insolvent.
32. An unpaid seller's right to resell the goods is available in the following cases, except:
a. if the goods are of a perishable nature.
b. when the seller reserved the right to resell the goods.
c. when the buyer has defaulted in the payment of the price for an unreasonable time.
d. when the seller has lost his lien on the goods.
33. Barrameda bought a piece of land from Sarmiento for a lump sum of P120,000.00. Aside from mentioning
the boundaries in the contract which is required in the sale of real estate, the contract also states that the piece
of land consists of 1,000 square meters. Before delivery, Sarmiento discovered that the piece of land actually
contains 1,200 square meters.
a. Sarmiento must deliver all the 1,200 square meters; Barrameda must pay P120,000.00 plus an additional
amount for the excess of 200 square meters.
b. Sarmiento is required to deliver only 1,000 square meters; Barrameda must pay the contract price of
P120.000.00.
c. Sarmiento must deliver all the 1,200 square meters; Barrameda has to pay only P120,000.00.
d. Neither party is required to perform the obligation because of mistake.
34. Sison sold a registered piece of land to Bautista on May 1, 2014 in a public instrument. On May 3, 2014,
Sison sold in a private instrument the same piece of land to Cruz, who took physical possession of the land.
Neither buyer was aware of the sale made to the other.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The land still belongs to Sison, because both sales are void.
d. The land should be divided equally between Bautista and Cruz to give effect to both sales.
35. Refer No. 34. Assume that on May 5, 2014, Sison sold the land in a public instrument to Domingo who
was not aware of the two previous sales. Domingo then registered the sale with the Register of Deeds.
a. The land belongs to Bautista.
b. The land belongs to Cruz.
c. The land belongs to Domingo.
d. The land will be equally divided among the three buyers.
36. On June 1, 2014, Sanchez sold to Borlaza in a private instrument a certain computer. Two days later,
Sanchez orally sold the same computer to Contreras who immediately took possession of the computer. Neither
party was aware of the sale made to the other.
a. The computer belongs to Borlaza.
b. The computer belongs to Contreras.
c. The computer will be co-owned by Borlaza and Contreras to give effect to both sales.
d. Both, sales are void. Accordingly, Sison will still be the owner.
37. This refers to the implied warranty on the part of the seller that he has the right to sell the thing at the time
when ownership is to pass, and that the buyer from that time shall have and enjoy legal and peaceful possession
of the thing.
a. Warranty against hidden defects. c. Warranty of ownership.
b. Warranty against eviction. d. Warranty of possession.
38. Three of the following are the requisites in order that the vendee may enforce the vendor's liability in case
of eviction. Which one is not?
a. There must be a final judgment depriving the vendee of a part or the whole of the thing sold.
b. The vendee must have appealed from such judgment rendered against him.
c. The deprivation of the vendee is based on a right prior to the sale or an act imputable to the vendor.
d. The vendor is notified of the suit at the instance of the vendee.
39. This refers to an encumbrance imposed upon an immovable for the benefit of another immovable
belonging to a different owner.
a. Easement or servitude c. Pledge
b. Real estate mortgage d. Chattel mortgage
40. Three of the following are the requisites in order that the buyer may enforce the seller's liability for hidden
defects. Which one is not?
a. The defects of the thing sold must not be patent or visible.
b. The defects render the thing unfit for the use for which it is intended, or which diminish its fitness for
such use to such an extent that had the buyer been aware thereof, he would not have bought it.
c. The defects must be existing at the time of sale.
d. The defects must be capable of determination by an expert.
41. Alessandra purchased from Rose Tan's Department Store, two pieces of imported identical bathrobe, one
of which was embroidered with "HIS" and the other with "HERS", which she planned to give to his friends
Jules and Assunta as a wedding present. She inspected the items very carefully with the assistance of the store
clerk before paying for them. While she was wrapping them shortly after she arrived home, she noticed that the
hem of the 'HERS" bathrobe had disintegrated because it was loosely sewn, which damage was not apparent
because of the many colors of the apparel.
a. Alessandra can rescind the sale of both pieces of bathrobe.
b. Alessandra can rescind only the sale of the bathrobe marked "HERS"
c. Alessandra cannot rescind because she should have inspected the item well when she bought it.
d. Alessandra must pay for both pieces of bathrobe.
42. The vendor shall be liable for the death of the animal sold when the following requisites are present,
except:
a. the disease' existed at the time of sale.
b. the disease is the cause of the death of the animal.
c. the disease must be redhibitory.
d. the animal dies within 3 days from the time of purchase.
43. The justified refusal of the buyer to accept the goods produces the following effects, except:
a. buyer has no duty to return the goods, unless otherwise stipulated.
b. title to the goods does not pass on to him.
c. buyer shall not be obliged to pay the price.
d. buyer is obliged to constitute himself as depositary until he returns the goods.
44. In three of the following cases, the buyer is not entitled to suspend the payment of the price. Which one
will give him the right to suspend payment?
a. Disturbance in the possession or ownership of the thing purchased.
b. The seller gives him security for the return of the price.
c. It has been stipulated that the buyer shall pay the price notwithstanding any disturbance.
d. The disturbance is a mere act of trespass.
45. A contract of sale with a right to repurchase and other contracts including a contract purporting to be an
absolute sale shall be presumed to be an equitable mortgage in the following cases, except when the:
a. price of sale with right to repurchase to repurchase is unusually inadequate.
b. vendor remains in possession of the thing sold.
c. period to repurchase the property is extended.
d. vendee binds himself to pay the taxes due.
46. An owner Of a rural land has the right of legal redemption of an adjoining rural land sold if the following
requisites are present, except when the:
a. adjoining rural land is not separated by any apparent servitudes for the benefit of other estates..
b. land sold does not exceed one hectare.
c. grantee owns another rural land.
d. grantee owns an urban land.
47. This refers to the right of an adjoining owner of an urban land to be given preference to the purchase of a
small piece of urban land which is held for speculation before it is offered for sale to others.
a. Right of subrogation. c. Right of pre-emption.
b. Right of redemption. d. Right of repurchase.
48. A, B, and C, are co-owners of an undivided parcel of land. On May 1, A sold his share to X; on June 1, B
sold his share also to X; and on July 1, C sold his share also to X. Each sale was with a right to repurchase.
a. X may compel A, B and C to come to an agreement to repurchase the whole land.
b. Each co-owner may exercise his right of redemption on the whole property including the share of the
other two co-owners.
c. Each co-owner may exercise his right of redemption only with respect to his share.
d. Any two of the three co-owners may redeem the property proportionately.
49. R, S and T are co-owners of an undivided parcel of land. R sold his 1/3 interest to T in a deed of absolute
sale. Which is correct?
a. S may exercise the right of redemption on the interest sold by R to T.
b. S cannot exercise the right of redemption.
c. The sale made by R to T is voidable.
d. S may redeem only 1/2 of the interest sold by R to T.
50. T steals the goods of O and deposits them in the warehouse of W. W issues to T a warehouse receipt which
by its terms indicates that goods are to be delivered to the order of T. T, thereafter, negotiates the receipt to H
who purchases the document in good faith and for value.
a. H may obtain delivery of the goods from W because H was an innocent purchaser for value.
b. H can obtain delivery of the goods from W because the issuance of the warehouse receipt to T conferred
a valid title to him over the goods.
c. H can obtain delivery of the goods from W because the acquisition by H of the warehouse receipt in
good faith cured the defect in T's title.
d. H cannot obtain delivery of the goods because he acquired whatever title T had over such goods, which
is the title of a thief.
51. O delivered certain goods to C, a common carrier, which issued to O a bill of lading stating that the goods
are to be delivered to bearer. Without O's fault, the bill of lading was stolen by T who thereafter negotiated the
document by mere delivery to H, a purchaser .for value and without notice of the defect in the title of T.
a. The negotiation of the bill of lading by T to H is not valid because of T's defective title.
b. The negotiation of the bill of lading by T to H is valid. T's defective title does not have any effect on the
validity of the negotiation.
c. H may not obtain delivery of the goods from C because H acquired whatever title T had over the
document.
d. H acquired title to the document but not to the goods.
52. D obtained from C a loan amounting to P50,000.00, the same being secured by a mortgage on D's lot.
Thereafter, C assigned his credit right to T with notice to D. Based on the foregoing facts, which of the
following statements is incorrect?
a. T cannot collect from D if D does not give his consent to the assignment.
b. T can collect from D. D's consent to the assignment is not required.
c. T can collect from D and if D cannot pay, T can foreclose the mortgage on the lot.
d. The notice to D of the assignment is sufficient. D must make his payment to T and no longer to C.
53. A kind of mortgage which, although lacking some formality, form of words, or requisites prescribed by
law, shows the intention of the parties to charge real property as security for debt and contains nothing
impossible or contrary to law is known as:
a. legal mortgage. c. conventional mortgage.
b. equitable mortgage. d. voluntary mortgage.
54. If a movable property is sold separately to two or more different vendees, ownership shall belong to the
person:
a. who in good faith first paid the purchase price in full.
b. who in good faith first recorded the sale in the Registry of Property.
c. who in good faith presents the oldest title.
d. who in good faith first took possession of the property.
56. It is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter
into another contract at a future time, upon the happening of certain events, or the fulfillment of certain
conditions.
a. Contract of adhesion c. Contract of sale
b. Contract of option d. Auto-contract
58. The following may not be valid objects of a contract of sale, except:
a. objects outside the commerce of men.
b. Illicit things.
c. future goods.
d. impossible service.
59. This is a kind of constructive delivery where the vendor remains in possession of the property sold, such
as by virtue of a lease agreement with the vendee.
a. traditio longa manu.
b. traditio brevi manu.
c. traditio constitutum possessorium.
d. delivery to common carrier.
60. When the goods are delivered to the buyer, the ownership thereof passes to the buyer in:
a. sale on approval. c. sale on trial.
b. sale or return. d. contract to sell.
61. S promised to sell his car to B for P200.000.00 giving B 30 days to decide. B accepted the promise of S
and informed S that he (B) would make known his decision before the lapse of 30 days. He also gave S
P2.000.00 as consideration so that S would hold on to his promise. The contract entered into between S and B
and the consideration given by B to S are known as:
a. Option contract and option money, respectively.
b. Contract of sale and earnest money, respectively.
c. Contract of sale and down payment, respectively.
d. Contract to sell and reservation money, respectively.
63. The Recto Law applies to which of the following examples of sale?
a. Sale of a car on straight term.
b. Sale of house and lot on installment.
c. Sale of car on installment where the buyer constituted a mortgage on his truck.
d. Sale of a piano on installments where the buyer constituted a chattel mortgage on the piano.
64. S sold to B a lot through a deed of absolute sale duly acknowledged before a notary public. Three days
later, S sold the same lot to X, also through a deed of sale duly acknowledged before a notary public. X had the
sale registered with the Register of Deeds. Neither B nor X was aware of the sale made by S to the other and
neither took physical possession of the lot. ' Who is the present owner of the lot?
a. B, because he was the first purchaser in good faith.
b. X. because he registered the sale in good vaith.
c. Neither B or X
d. S, as long as he does not surrender physical possession of the lot.
65. B purchased from S a laptop computer worth P100,000.00. The terms of sale provide for a down payment
of P20.000.00 with the balance payable in 8 equal monthly installments To secure the balance, S required B to
execute a chattel mortgage on the laptop computer and a real mortgage on B's lot. B complied with all the
requirements but defaulted in the payment of the third and fourth installments. These remedies are available to
S except one. Which is it?
a. Cancel the sale.
b. Exact fulfillment of the obligation.
c. Foreclose the real mortgage and thereafter recover any deficiency from B.
d. Foreclose the chattel mortgage and thereafter foreclose the real mortgage in case of deficiency.
66. S and B entered Thto a contract whereby S transferred to B a specific piano for the price of P80.000.00,
while B gave to S cash of P30.000.00 and a diamond ring worth P50.000.00. What kind of contract was entered
into between S and B?
a. A contract of barter.
b. A contract of sale.
c. The contract is partly a contract of barter and partly a contract of sale.
d. The contract is an innominate contract because the intention of the parties cannot be determined.
67. One of the distinctions between option money and earnest money is that earnest money is:
a. the consideration paid for the purpose of holding one to his promise to buy or sell a determinate thing for
a certain period of time.
b. not part of the purchase price.
c. proof of the perfection of the contract of sale.
d. paid before the perfection of the contract of sale.
68. This refers to the warranty of the seller that he has the right to sell the thing at the time when ownership is
to pass, and which can be enforced if the buyer is deprived of the property sold by a final judgment in court.
a. Warranty against hidden defects. c. Warranty against eviction.
b. Warranty of merchantable quality. d. Warranty of possession.
69. P, who was in Hong Kong, made an overseas call to A, his friend, to sell P's lot in Quezon City
immediately as P needed cash. Accordingly, A sold the lot to B. The deed of sale was in a public document.
The sale of P's lot is:
a. valid. c. unenforceable.
b. rescissible. d. void.
70. One of the distinctions between a contract of sale and a contract for a piece work is that a contract for a
piece of work:
a. is not governed by the Statute of Frauds.
b. refers to a contract for the delivery goods which are manufactured in the ordinary course of business
although the same are not available.
c. has for its parties the vendor and the vendee.
d. has for its consideration the price of the thing.
71. A and B are co-owners of a rural lot not exceeding 1 hectare.The lot is surrounded on its four sides as
follows: on the North, by the road; on the East, by the lot of X consisting of 2 hectares; on the South, by the lot
of Y consisting of 2 Vz hectares; and on the West, by Z's lot consisting of 2 % hectares. A sells his undivided
interest in the agricultural lot to T, who owns several hectares of rural land in the area. Who has the right of
legal redemption over the undivided interest in the lot sold by A to T?
a. B c. Y
b. X d. Z
72. It is an affirmation of fact or any promise by the seller relating to the thing which has a natural tendency to
induce the buyer to purchase the same, relying on such promise or affirmation.
a. Condition c. Warranty
b. False representation d. Seller's talk
73 In one of the following cases, the ownership of the thing object of the contract is transferred to the other
party upon delivery.
a. Contract to sell. c. Sale or return.
b. Agency to sell. d. Sale on approval.
74. Under the "Realty Installment Buyer Act", the buyer of real estate on installment payments may pay an
installment defaulted without additional interest if he has paid at least two years of installments. The law is
applicable to sales/transactions involving:
a. industrial lots.
b. commercial buildings.
c. residential lots.
d. sales to tenants under the Land Reform Law.
75. S, the owner of a rent-a-car business, leased one of his cars to B for one month. On the day of the
expiration of the lease and while B was still in physical possession of the car, B offered to buy the car from S
for P200,000.00. Believing the price to be a good one, S readily accepted B's offer and then and there executed
a deed of absolute sale in favor of B who immediately paid the price in cash. Thereafter, B drove away from the
place of S.
a. The delivery of the car by S to B is by constitution possessorium.
b. The delivery of the car by S to B is by traditio longa manu.
c. The delivery of the car by S to B is by traditio brevi manu.
d. There was no delivery because B should have turned over the physical possession of the car to S upon
the expiration of the lease so that S could make the proper delivery to him upon the execution of the contract
of sale.
76. B called on S at the shoe factory of S for the latter to make a pair of shoes which B would be needing in
the play "Romeo an Juliet." B provided S with the description of the pair of shoes thaj he wanted since S did
not manufacture the kind of shoes that I needed. S quoted a price of P1,000.00 which B agreed to, pay upon
delivery to him of the pair of shoes. Since been neighbors for a long time, their agreement was sealed with a
handshake.
a. The contract between S and B becomes enforceable if S had already completed making the pair of shoes.
b. The contract between S and B becomes enforceable if B had already paid the amount agreed upon for
the work.
c. The contract between S and B is enforceable even if it is still executory.
d. The contract cannot be enforced by either party because it was not in writing.
78. D deposited his goods in the warehouse of W who issued to D a warehouse receipt stating that the goods
are to be delivered to bearer. Thereafter, A obtained possession of the warehouse receipt from D in exchange
for what A claimed to be a bar of gold, which, however, was discovered by D to be fake. D demanded the
return of the warehouse receipt from A but the same had already been negotiated by A to H who purchased the
document for value, in good faith and without notice that D was deprived possession thereof by fraud. The
negotiation by A to H is:
a. voidable. c. void.
b. valid. d. rescissible.
79. B purchased a pair of leather shoes from the store of S. Shortly after leaving the store, B decided to return
and requested S, the owner, to place a protective rubber covering on the sole of each shoe. Since the job
required at least 30 minutes to complete, B left the store of S to shop at the neighboring stores. When he
returned to the store of S after 30 minutes, the pair of shoes was nowhere to be found. It turned out that C, a
sales clerk, had sold the pair of shoes that B bought to X, another customer.
a. X acquired ownership of the pair of shoes earlier bought by B.
b. X did not acquire ownership of the pair of shoes earlier bought by B.
c. B remained the owner of the pair of shoes that he had bought despite its sale to X.
d. S reacquired ownership of the pair of shoes when it was brought to him for additional work.
80. S sold 500 shares of stock of San Manuel Corporation to B at P50.00 per share. The transfer of the
ownership of the shares of stock may be made through any of the following means, except:
a. execution of the sale in a public instrument.
b. the giving by S to B of the power to vote in the stockholders' meeting of San Manuel Corporation and its
actual exercise thereof by B.
c. the indorsement by S of the stock certificate covering the 500 shares of stock and its placing it in the
possession of B.
d. the issuance by S of the official receipt for the full payment of the purchase price of the shares by B.
81. Which of the following documents of title requires indorsement and delivery for its negotiation?
a. A warehouse receipt which states that the goods are to be delivered to bearer.
b. A bill of lading which states that the goods are to be delivered to the order of a specified person but such
person indorsed it in blank.
c. A warehouse receipt which states that the goods are to be delivered to bearer but the bearer indorsed it to
a specified person.
d. A bill of lading which states that the goods are to be delivered to a specified person.
82. S and B executed a deed of absolute sale involving a parcel of land supposedly containing 2,000 square
meters. B paid a lump sum of P2,200,000.00 for the purchase. Based on the foregoing facts, which of the
following statements is correct?
a. If the parcel of land is actually 2,200 square meters in area, S has to deliver only 2,000 square meters
thereof and B must pay P2,200,000.00 as agreed upon.
b. If the parcel of land is actually 1,800 square meters in area, S must deliver only 1,800 square meters and
B has to pay only the price equivalent to 1,800 square meters.
c. If the parcel of land actually contains 2,200 square meters, S must deliver all of 2,200 square meters with
B still paying the amount of P2,200,000.00.
d. If the parcel of land actually contains 2,200 square meters, S must deliver all of 2,200 square meters but
B must pay a proportionate amount for the additional 200 square meters in addition to the price of
P2,200,000.00.
83. S sold a specific parcel of land separately to the following persons: on July 1, 2014, to X, in a public
document; on July 5, 2014 in a private document to Y, who took physical possession of the land; and on July 9,
2014, to Z, who registered the sale with the Register of Deeds. Neither X, Y nor Z was aware of the sale made
to the other two buyers. Who is the owner of the parcel of land?
a. X, because he Was the first purchaser.
b. Y, because he took physical possession.
c. Z, because he registered the sale.
d. S, because the multiple sales he made rendered each sale a void contract.
84. In which of the following cases is the seller not obliged to make any payment to the buyer for breach of
warranty against eviction?
a. When such warranty has not been agreed upon.
b. When there was no stipulation exempting the seller from liability.
c. When there was a stipulation exempting the seller (who was in good faith) from breach of warranty and
the waiver was made by the buyer without knowledge of the risks of eviction.
d. When there was a stipulation exempting the seller (who was in good faith) from breach of warranty and
the waiver was made by the buyer with knowledge of the risks of eviction.
85. Mother Lilly purchased from Santiago Farms four horses with different colors: a white, a gray, a black,
and a brown, which Mother Lilly intended to use in a movie to be starred in by four movie actors each one of
whom represents one of the colors. Each horse was certified to be fit by the veterinarian who was hired by the
parties to examine them. Mother Lilly paid a separate price for each of the horses. During the filming of the
movie, the brown horse was always sick and could not function as the three others. It was subsequently
discovered that it was suffering from an incurable heart ailment.
a. Mother Lilly may ask.for.the rescission of the sale of the brown horse only since she paid a separate
price for each of the horses.
b. Mother Lilly may ask for the.rescission of the sale of all the horses.
c. Mother Lilly may not ask for rescission of the sale of any horse because she freely entered into the
contract of sale.
d: Mother Lilly is bound by the sale of all the four horses and must honor such contract because the
veterinarian certified that all horses were fit..
86. The buyer is obliged to pay interest for the period between the delivery of the thing sold and the payment
of the price in the following cases, except if:
a. there is a stipulation to pay interest.
b. there is no such stipulation but the thing sold produces fruits or income.
c. the buyer is in default, from the time of judicial or extra-judicial demand for the payment of the price.
d. none of the foregoing.
87. Earnest money possesses three of the following characteristics. Which is the exception?
a. It is part of the purchase price.
b. It is proof of the perfection of the contract of sale.
c. It js paid at the time of the perfection of the contract of sale,
d. It is paid as a consideration for the purpose of holding one to his promise to buy or sell a determinate
thing for a certain period.
88. S sold his farm lot to B with S reserving his right to repurchase the property within five years from the
date of the sale. Based on the foregoing facts, which of the following statements is incorrect?
a. The sale is subject to a suspensive condition.
b. B may validly sell the lot to a third person against whom S may exercise the right to repurchase provided
the right is registered.
c. B is subrogated to the rights and actions of S.
d. B's ownership of the lot becomes irrevocable if S fails to exercise his right to repurchase within the
period stated.
89. D borrowed P50.000.00 from C. The obligation is secured by a mortgage of D's house and lot. Thereafter,
C assigned his credit right to T. Based on the foregoing facts, which of the following statements is incorrect?
a. The consent of D to the assignment is not required in order that T may collect from D.
b. The assignment of the credit right did not carry with it the assignment of the mortgage.
c. If D pays C before D was notified of the assignment, D is released from liability.
d. The assignment, to bind third persons, must be in a public instrument and recorded with the Registry of
Property.
90. A contract of sale possesses three of the following characteristics. Which is the exception?
a. Bilateral, since the parties are bound by reciprocal prestations.
b. Commutative, because the parties give almost equivalent values.
c. Onerous, since there is an exchange of valuable consideration.
d. Real, because the object of sale must be delivered for the perfection of the contract.
91. S sold his lot to B reserving his right to repurchase the same within 5 years from the date of the execution
of their agreement. The sale together with the right to repurchase was registered with the Register of Deeds.
Two years after the execution of the sale, B sold the same lot to X who was not aware that S reserved his right
to repurchase the lot.
a. The sale by S to B is subject to a suspensive condition.
b. The sale by S to B is subject to a resolutory condition.
c. The sale by S to B is subject to a condition which is neither suspensive or resolutory.
d. The sale by S to B is absolute without any condition.
93. B wanted to buy the car of S for P100,000.00 and to show that, he was in earnest, he gave to S P2,000.00
which S accepted. There was no written instrument signed by S and B to incorporate their agreement. Based on
the foregoing, which of the following statements does not pertain to the contract?
a. B, thereafter, needs to pay P98,000.00.
b. The giving of earnest money binds S and B to a contract of sale.
c. B, thereafter, must pay C the amount of P100,000.00.
d. The contract between S and B is enforceable although there was no written agreement between them.
94. When the buyer is justified in refusing to accept the goods being delivered to him and has relayed such
refusal to the seller, such refusal produces the following effects, except:
a. buyer has no duty to return the goods unless stipulated.
b. title to the goods does not pass to the buyer.
c. buyer is not obliged to pay the price.
d. buyer automatically becomes a depositary of the goods
95. The unpaid seller, in addition to his right to retain the goods while he is in possession of them, has the
following rights, except the right:
a. of stoppage in transitu. c. to rescind the sale.
b. to resell the goods. d. to bid when the goods are resold.
97. On January 1, 2014, Santos offered to sell his only diamond ring for P50.000.00 cash to Bersola who was
interested in buying the same. Santos told Bersola that he was giving the latter up to January 31, 2014 to decide
whether to buy the ring or not. Bersola agreed to the option and gave Santos option money of P500.00. On
January 18, 2014, Santos found another buyer who was willing to pay P70,000.00 cash. Santos personally
visited Bersola to inform him that he was withdrawing his offer unless Bersola agreed to buy the ring for
P70,000.00.
a. Santos may validly withdraw the offer without being held liable for breach of contract since it would be
unfair to him if he would receive only P50,000.00 as the price of his ring when another person is willing to
buy it at a higher amount.
b. Bersola is bound to pay P70,000.00 if he were to avail himself of his option to buy the ring.
c. Santos cannot withdraw the offer because the option is founded upon a consideration of P500.00.
d. Bersola needs to pay only P49,500.00 if he decides to buy the ring since the option money of P500.00
that he paid forms part of the purchase price.
98. S and B executed a deed of absolute sale duly acknowledged before a notary public whereby S conveyed
his car to B for P100,000.00. B, however, informed S that he would be going away on a business trip and that
he would be taking the car from the place of S when he returned after two weeks. Three days after the sale of
the car to B, S soid the same car to X through a deed of absolute sale which was also acknowledged before a
notary public. X then drove the car away from the place of S and had the sale recorded with the Land
Transportation Office which issued to him a certificate of registration of the car in his name. Neither B nor X
was aware of the sale made to the other until B returned from his business trip.
a. Preference shall be given to B since the car was first sold to him.
b. X did not acquire title to the car because S was no longer the owner when the sale was made to him.
c. X acquired title to the car because S appeared to be the owner in the record of the Land Transportation
Office.
d. S remained the owner of the car because the sale made to one buyer nullified the sale to the other.
99. D gives his ring worth P25,000.00 to C in consideration of C's giving of P10,000.00 and a bracelet worth
P15,000.00 to D. Based on the foregoing facts, which of the following statements is incorrect?
a. The transaction between D and C is a sale if they intended it to be a contract of sale.
b. The transaction between D and C is a barter if they intended it to be a contract of barter.
c. The transaction is barter regardless of the intention of the parties because the bracelet is of more value
than P10,000.00.
d. The transaction is barter if the intention of the parties cannot be determined.
100. S, the proprietor of a rent-a-car enterprise, sold his business and his fleet of 10 cars to B for a lump sum
of P3,000,000.00. S physically delivered the permits and other papers for the operation of the business and the
vehicles to B at the latter's office except for one car which the parties agreed shall be leased by S for one month
while he was winding up his affairs in the Philippines as he was then leaving for abroad. In the meantime, the
contract of sale and the contract of lease, though already signed by the parties, have not been acknowledged
before a notary public, and hence, were still private instruments.
a. The ownership of the car leased by S remained with S.
b. The ownership of the car leased by S has been transferred to B although there was no physical delivery
thereof to B.
c. The execution of the private instrument for the sale of the business and the cars likewise transferred the
ownership to B of the car leased by S.
d. Both the contract of sale and the contract of lease must be acknowledged before a notary public by the
parties before the ownership of the car leased by S is transferred to B.
101. King Gems Company, a jewelry manufacturer, shipped five dozen necklaces to Queen Jewelry Store.
The shipment was made under a written agreement allowing Queen Jewelry Store to return the necklaces
within a period of one month from delivery. Based on the foregoing facts, which of the following statements is
incorrect?
a. Title to the necklaces passed to Queen upon delivery.
b. If Queen does not return the necklaces within one month, the sale to it becomes absolute.
c. If the necklaces are destroyed by fire without the fault of Queen, Queen need not pay the price thereof.
d. If the necklaces are destroyed through the fault of Queen, Queen must pay the price thereof to King
Gems Company.
102. On January 3, 2014, D deposited his goods with W, warehouseman, who issued a warehouse receipt
which states that the goods are to be delivered "to the order of D". On January 5, 2014, D indorsed the receipt
to A. On January 8, 2014, however, D sold the goods represented by the receipt to X who informed W
immediately of the sale to him of the goods by D. At that time, W was not aware that D had indorsed the
receipt to A.
a. A acquired title to the goods as represented by the receipt at the time such receipt was indorsed to him
b. X acquired title tothe goods because at the time of the sale to him, W, the warehouseman was not yet
aware that D had indorsed the receipt to A.
c. D retained ownership of the goods because he cannot indorse the receipt to one person and sell the goods
to another.
d. W will be bound to deliver the goods to X.
103. One of the following statements pertaining to a sale by auction is incorrect. Which is it?
a. A sale by public auction is perfected when the auctioneer announces its perfection by the fall of the
hammer, or in any other manner.
b. Before perfection, any bidder may retract his bid.
c. Before perfection, the auctioneer may withdraw the goods unless the auction was announced to be
without reserve.
d. The seller may validly participate in the bidding without prior notice to the bidders.
104. S sold a specific laptop computer to B for P120,000.00 with B giving a down payment of P10,000.00
and promising to pay the balance in 11 equal monthly installments. B likewise executed a chattel mortgage on
the computer and a real mortgage on his lot to secure the payment of the balance of the purchase price. After
paying the first two installments, B defaulted in the payment of next three installments. S may avail himself of
any of the following remedies except to:
a. exact fulfillment of the obligation.'
b. cancel the sale.
c. foreclose the chattel mortgage and recover any deficiency during the foreclosure sale if there is an
agreement to that effect.
d. foreclose the real mortgage and recover the deficiency during the foreclosure sale even if there is no
agreement to that effect.
105. B bought from Century Properties, Inc. a 1,000 square-meter lot located beside the Manila International
Airport on which he intended to construct a warehouse condominium. The terms of the sale provided for the
payment of the contract price of P300,000.00 in 60 equal monthly installments of P5,000.00 each. After having
paid 36 installments, B defaulted in the payment of the succeeding installments. As a consequence, Century
cancelled the sale. B now wants to claim the return of the cash surrender value of the payments he had made
pursuant to the "Realty Installment Buyer Act", otherwise known as the Maceda Law.
a. B is entitled to a cash surrender value of 50% of P180,000.00, or P90,000.00 under the Maceda Law.
b. B is entitled to a cash surrender value of 55% of P180,000.00, or P99,000.00 under the Maceda Law.
c. B is entitled to a cash surrender value of 90% of P180,000.00, or P162.000.00 under the Maceda Law.
d. B cannot invoke the Maceda Law for the return of any of the payments he had made for the lot he
purchased.
106. S shipped FOB Manila, perishable goods worth P50.000.00 to B who is based in Cebu. B remitted a
check amounting to P50.000.00 for the price of the goods. While the carrier was on its way to Cebu, S was
informed by his bank that the check issued by B was dishonored for insufficient funds. On further inquiry, he
learned that B had become insolvent. Accordingly, S obtained physical possession of the goods from the
carrier. After notifying B.'S resold the goods.
Case A - If the goods are resold for P52,000.00, the profit of P2,000.00 belongs to B since title had already
passed to him.
Case B - If the proceeds of sale, net of incidental expenses, amounted to P47,000.00, S can recover the loss of
P3,000.00 from B.
a. Both Cases are true.
b. Both Cases are false.
c. Case A is true; Case B is false.
d. Case A is false; Case B is true.
107. B visited a store' selling lamps, light bulbs and similar items. He informed the seller that he was buying 2
units of a 50-watt "Phillips" bulb. Though he intended to use the 2 bulbs for the headlight of his car, he did not
inform the seller of his purpose. Thereafter, he installed the 2 units of "Phillips" bulb on his car but they did not
function. Based oh the foregoing, which of the following statements is incorrect?
a. The seller is liable for breach of warranty of fitness for a particular purpose.
b. The seller is not liable for breach of warranty of fitness for a particular purpose because the buyer did
not rely on the seller's skill or judgment.
c. The seller is not liable to B since the seller's warranty is only for merchantability, or that the bulb is fit
for the general purpose for which it was intended.
d. There is no warranty of fitness for a particular purpose since the bulb was sold to B under its trade name.
108. It refers to the right which the vendor reserves to himself to repurchase the thing sold, with the
obligation to reimburse the vendee of the price, the expenses of the contract, any other legitimate payments
made therefor and the necessary and useful expenses made on the thing sold.
a. Conventional redemption. c. Equity of redemption.
b. Legal redemption. d. Right of pre-emption.
109. Palmares ordered from Superstar Sportswear Company, a sportswear manufacturer, 2 dozens of jackets
and jogging pants styled and designed by Palmares for the use of his basketball team. This was not the type of
sportswear normally manufactured by Superstar. The price agreed upon by the parties was P72.000.00. After
the articles were manufactured, Palmares refused to accept them and claimed that he was not liable since the
contract did not comply with the Statute of Frauds.
a. Palmares is liable although the contract was not in writing.
b. The contract is a contract of sale.
c. The contract is a contract to sell.
d. There was no contract at all because no writing was executed by the parties.
110. B received at his office a brand-new computer printer. The printer was delivered to B after the latter filled
up a coupon which he cut out from a magazine where Supreme Machines Company placed an advertisement
allowing a "Free Trial for 7 days" of the printer to prospective customers. After trying the printer shortly after
its delivery to him, B placed it on a table located just beside a glass window. B forgot all about the printer until
two weeks later. By that time, the plastic parts of the printer had been deformed because of its long exposure to
sunlight such that the printer would no longer function.
a. The ownership of the printer was transferred to B upon its delivery to him.
b. B must pay for the price of the computer.
c. B is not liable for the damage because it was caused by "a fortuitous event.
d. Supreme Machines Company must shoulder the damage because it retained ownership of the printer
despite the delivery.
111. Salvosa shipped FOB Manila goods worth P20.000.00 to Bordelo who is based in Davao City. While the
carrier was on a stopover in Cebu City, Salvosa was informed by his bank that the check issued by Bordelo was
dishonored by reason of insufficiency of funds. He also learned from the Credit Bureau that Bordelo had
become insolvent. Accordingly, Salvosa notified the carrier that he was taking possession of the goods. The
right availed of by Salvosa in the situation is known as the right of:
a. stoppage in transitu. c. attachment.
b. subrogation. d. garnishment.
112. Refer to No. 111. After obtaining actual possession of the goods, Salvosa offered them for sale at public
auction. Based on the foregoing facts, which of the following statements is incorrect pertaining to the sale of
the goods?
a. Salvosa may bid at the public auction provided there is notice of his participation.
b. The buyer of the goods at the public auction acquires title to the goods as against Bordelo.
c. If the goods are sold at P19,000.00 net of cost of selling and other expenses, Salvosa may recover the
amount of P1,000.00 from Bordelo.
d. If the goods are sold at P22,000.00 net of cost of selling and other expenses, the profit of P2,000.00
belongs to Salvosa.
113. Brothers Antonio, Benito, Carmelo and Donato are co-owners of an agricultural lot which they inherited
from their parents. Antonio sold his undivided share in the property to Teodulfo. Either Benito, Carmelo and
Donato may purchase Antonio's share in the property from Teodulfo by virtue of their right of:
a. legal redemption. c. conventional redemption.
b. pre-emption. d. consolidation.
114. D, owner of certain goods, deposited the goods with' W, a warehouseman, who issued to D a warehouse
receipt which states that "The goods are to be delivered to the order of D." D may negotiate the warehouse
receipt by any of the following means, except by:
a. mere delivery.
b. special indorsement completed by delivery.
c. blank indorsement completed by delivery.
d. indorsement to bearer completed by delivery.
115. S delivered a diamond ring to B for B's necklace worth P10,000.00 and cash of P15,000.00 which B is
scheduled to deliver one week after their agreement. The contract between S and B was not in writing. The
contract between S and B is:
a. an enforceable contract of barter.
b. an enforceable contract of sale.
c. an enforceable contract that is partly a sale and partly a barter.
d. a sale but it is unenforceable not being in writing and the cash to be paid by B is at least P500.00.
116. These contracts are presented to you for evaluation:
I. A contract for the delivery of an article which is manufactured in the ordinary course of business, but
the article was not available at the time of the contract was executed.
II. A contract for the delivery of an article to be manufactured specially for the customer and upon his
special order.
In your evaluation of the said contracts:
a. Both contracts refer to a contract of sale.
b. Both contracts refer to a contract for a piece of work.
c. I refers to a contract of sale; II refers to a contract for a piece of work.
d. I refers to a contract for a piece of work; II refers to a contract of sale.
121. S sold a computer to B for P120.000.00 under the following terms: P20,000.00 down; balance payable in
10 equal monthly installments with an acceleration clause. To secure payment of the balance, B executed a
chattel mortgage on the computer and a real mortgage on his lot. After paying the first two installments, B
defaulted in the payment of the third, fourth and fifth installments. S wants to recover in full the balance of
P80,000.00 even in case of deficiency so he consults you on which of the following courses of action to take to
achieve that purpose:
I. Exact fulfillment of the balance by suing B and have the computer sold for the execution of the
judgment against B.
II. Foreclose the chattel mortgage on the computer.
III. Foreclose the real mortgage on the lot.
Based on your evaluation of the foregoing data, the course of action that you will likely recommend to S to
achieve his purpose is:
a. Either I or II.
b. Either II or III.
c. Either I or III.
d. Any of I, II or III.
122. On January 5, Samonte, who was going abroad as an immigrant, offered to sell his car for P150,000.00 to
Baldriga. He informed Baldriga, however, that he wanted to rent the car for P1,000.00 per day up to January 15
as soon as the sale is executed since his flight was not scheduled until January 16. Baldriga accepted both
offers, and accordingly, he and Samonte executed a contract of sale and a contract of lease simultaneously on
the same day, January 5. All the while, Samonte remained in physical possession of the car until January 10
when the car was stolen without his fault. The car was never recovered.
a. Samonte must bear the loss by returning the sum of P150,000.00 since Baldriga did not become the
owner not having obtained physical possession thereof.
b. Baldriga must bear the loss because he acquired ownership of the car despite its lack of physical delivery
to him..
c. Both Samonte and Baldriga must share equally in the loss.
d. Samonte must bear the loss by returning P150,000.00 less P5,000.00, the rental of the car for 5 days, in
partial compensation.
123. S, who is based in Manila, shipped FOB Cebu goods worth P50.000.00 to B. While the goods were on
their way to Cebu, S was informed by his bank that the check remitted by B was dishonored for insufficient
funds. Accordingly, S notified the carrier not to proceed with the delivery and that he was taking possession of
the goods. Based on the foregoing facts, which remedy is available to S?
a. Resale of the goods.
b. Rescission of the sale.
c. Either resale or rescission of the goods, at the option of S.
d. Neither resale nor rescission.
126. Refer to No. 125. O may recover the ring from B without the need of reimbursement in:
a. I only. c. Ill only.
b. II only. d. All three contracts.
127. S sold a brand-new electric typewriter to B for P20.000.00 on a credit term of 30 days. The agreement
between the parties provides that B may return the typewriter within the same period. Ten days after delivery to
B, burglars entered the office of B and carted away various valuables including the typewriter he bought from
S.
a. B must pay the price of the typewriter to S.
b. B is not obliged to pay the price of the typewriter because the loss thereof was without his fault.
c. S must shoulder the loss because B's ownership of the typewriter was not absolute since he had the
option to return it within 30 days.
d. The loss must be shared equally by S and B in fairness to both.
129. S sold to B a specific car for P200.000.00. The terms of the sale provide the following: down payment of
P40,000.00; balance payable in 8 equal monthly installments of P20.000.00 each, with a real estate mortgage to
be executed by B on his lot to secure the said balance. After paying 3 installments, B defaulted in the payment
of 3 more installments. Based on the foregoing facts, the following remedies were presented to B:
I. Exact fulfillment of the obligation.
II. Cancel the sale.
III. Foreclose the real mortgage on the lot and recover any deficiency in the foreclosure sale.
If you were B, the remedy that you may avail yourself of is:
a. either I or II.
b. either II or III.
c. either I or III.
d. any of the three remedies presented.
130. An unpaid seller may avail himself of the following remedies, except the right to:
a. retain the goods while he is in possession of them.
b. resume possession of the goods at any time while they are in transit.
c. buy the goods at any public sale if he decides to resell them.
d. rescind the sale.
131. S sold his lot to X on April 1, 2014. The deed of sale was duly acknowledged by the parties before a
notary public. However, X did not take physical possession of the lot. On April 10, 2014, S sold the same lot to
Y under a deed of sale which was still to be notarized. Y immediately took physical possession of the lot. Y
was not aware of the previous sale to X. When X visited the property, he found Y already building a structure
thereon. It was also then that he discovered that S had sold the same lot to Y.
a. The lot belongs to X.
b. The lot belongs to Y.
c. The lot will be co-owned by X and Y in fairness to both of them since they were in good faith.
d. The lot still belongs to S until it can be determined who between X and Y is the owner of the lot.
134. Orlando is the owner of an agricultural lot consisting of 9,000square meters (or .9 hectare). The lot is
surrounded on the North by Nonato's lot consisting of 7,000 square meters; on the East, by Espino's lot
consisting of 6,500 square meters; on the South, by Serrano's lot consisting of 8,500 square meters; and on the
West, by the road, across which was Wagan's lot consisting of 6,300 square meters. Orlando donates the lot to
Benito, his brother, who is the owner of several rural lots in the area. Of the adjoining owners, only Serrano
expressed to Benito his desire to redeem the lot. The right of legal redemption is available to:
a. Serrano because it was only he who offered to redeem the lot.
b. Wagan because he is the owner of the smallest adjoining lot.
c. Espino because he is the owner of the smallest lot that is nearest to the lot of Benito.
d. None of the adjoining owners may avail himself of the right of legal redemption including Nonato.
135. Barrameda visited the furniture store of Farrales to buy window frames for his house which was
undergoing construction. Not finding any window frame of his liking, he made a sketch of the design he
wanted and asked Farrales if he could make four pieces of the specification for delivery after one week.
Farrales answered that he could at the price of P2.000.00 per frame. The window frames ordered by Barrameda
was of such odd shape and design that when completed and installed, Barrameda's house would be the only one
in the community that had windows of such type. Barrameda left the sketch with Farrales who did not ask any
down payment since he had previously transacted with Barrameda and knew him. During all the time that
Barrameda and Farrales were dealing with each other, Arnulfo, the assistant of Farrales, was present. When the
window frames were finished, Farrales proceeded to the house of Barrameda to deliver them but Barrameda
refused to accept them saying that he had changed his mind, and that at any rate, the contract was
unenforceable, not being in writing.
a. The contract is enforceable because the sketch made by Barrameda was sufficient to bind him.
b. The contract is enforceable because Arnulfo can testify in court to prove its existence.
c. The contract is enforceable even if no writing was executed by the parties.
d. The contract is unenforceable because no writing was subscribed by the parties.
136. Refer to the preceding number. What contract was entered into between Barrameda and Farrales?
a. Contract of sale. c. Contract to sell.
b. Contract for a piece of work. d. An innominate contract.
137. A contract for a piece of work is different from a contract of sale in that in a contract for a piece of work:
a. the Statute of Frauds does not apply.
b. the article object of the contract is manufactured or procured in the ordinary course of business.
c. there is usually a stock which is kept on hand and made available to anyone.
d. if the article is not available, there is no change or modification of it when it is ordered by the customer.
138. Which of the following statements is common to both sale or return and sale on trial?
a. Ownership of the thing is transferred upon delivery to the buyer.
b. Ownership of the thing is transferred to the buyer at some future time.
c. Ownership of the thing may be reverted to the seller should the buyer return it within the time agreed
upon.
d. In case the thing is lost through a fortuitous event after the lapse of the time to keep or return it and the
buyer was still in possession of it, the risk of loss is with the buyer.
139. The full payment of the price is a positive suspensive condition in:
a. contract to sell. c. sale or return.
b. contract of sale. d. sale on trial.
141. When there is a stipulation exempting the vendor from the obligation to answer for eviction and the
vendee made the waiver with knowledge of the risks of eviction and assumed the consequences, such waiver is
known as:
a. waiver intencionada. c. forfeiture of rights.
b. waiver consciente. d. surrender of rights
142. In case of eviction, the vendor shall be liable to the vendee only for the value of the thing sold at the time
of eviction in which of the following cases?
a. When there is waiver intencionada
b. When there is waiver consciente
c. When the vendor was in bad faith and there was no stipulation exempting the vendor from liability in
case of eviction.
d. When the vendor was in bad faith and there was stipulation exempting the vendor from liability in case
of eviction.
143. S and B entered into a contract for the sale of the car of S to B for P100,000.00. In reality, however, B
did not give any amount to S because the latter intended to donate the car to B. In this case:
a. The contract between S and B is void because the price is simulated.
b. The contract between S and B is a valid contract of donation.
c. The contract between S and B is a void contract of donation.
d. The contract between S and B is a valid contract of sale.
144. On July 1, Serena sold to Berbola through a private instrument a specific piano for P20,000.00.
Simultaneous with the sale, the parties agreed that Serena would lease the piano for one week in preparation for
a concert after which Berbola could physically get the piano. Before the week was over, Serena sold the same
piano, also in a private instrument and for P25,000.00, to Jezebel who immediately loaded the piano in her van.
Neither Berbola nor Jezebel was aware of the sale made to the other. Who is the owner of the piano?
a. Berbola
b. Jezebel
c. Berbola and Jezebel, as co-owners.
d. Serena who retained ownership because of Berbola and Jezebel's conflicting rights.
145. B bought two carabaos, one male and one female, from S. He paid P2,000.00 and P3,000.00,
respectively, for the animals which he intended to use for breeding. Later, the female carabao was found unfit
for breeding because of a redhibitory defect.
a. B can rescind the sale of the female carabao only because he paid a separate price for it.
b. B can rescind the sale of both animals because he would not have bought the male carabao without the
female carabao.
c. B cannot rescind the sale of either animal under the "let the buyer beware" rule.
d. B can rescind the sale of both animals only if he had paid a single price for both them.
146. What may the consideration consist of in an option contract in order to bind the offerer?:
a. Monetary.
b. Other things or undertakings.
c. Either (a) or (b).
d. May not be a valuable consideration, i.e., may be gratuitous.
147. The following statements pertaining to sale by auction are presented to you:
I. The auctioneer may not withdraw the goods from the auction sale if the sale was announced to be
without reserve.
II. The auctioneer may withdraw the goods from the auction sale if the sale was announced to be with
reserve.
In your evaluation of the foregoing statements:
a. Both statements are true. c. Only Statement I is true.
b. Both statements are false. d. Only Statement II is true.
148. Under the Maceda Law, in determining the number of installments paid by the buyer, the following
payments are included, except:
a. down payments. c. option money.
b. deposits. d. none of the foregoing.
149. Necessaries include everything indispensable for sustenance, clothing and medical attendance, and which
of the following?
a. Dwelling c. Transportation
b. Education d. All of the foregoing.
150. While her* parents were away on a visit to the province, M, 17 years old, entered into a contract for the
purchase of textbooks prescribed in his course and an expensive evening gown. Which sale to M is/are
considered valid and binding, i.e., not voidable?
a. The sale of the textbooks.
b. The sale of the evening gown.
c. Both (a) and (b).
d. Neither (a) nor (b) because a minor is incapable of giving consent.
151. B bought a refrigerator from S for P20,000.00 which is payable in 20 installments at P1,000.00 per
month. After paying 6 installments, B defaulted in the payment of the seventh and eight installments. Should S
decide to exact fulfillment of the obligation, how much, as a rule, may S collect from B?
a. The total amount of installments defaulted, i.e., P2,000.00.
b. The remaining balance of P14,000.00.
c. Either (a) or (b) at the option of S.
d. Neither (a) nor (b) because S has to wait for the sale of the property to third persons.
152. A, B and C were the co-owners of a lot in the ratio of 1:2:1. A died. He was succeeded to the property by
S, his son and heir. Who may redeem the lot of A from S?
a. B, because as the owner of a bigger portion, he enjoys preference in the exercise of the right of legal
redemption.
b. C, so that he and B will have an equal share in the lot.
c. B and C, in proportion to the share of each in the lot.
d. Neither B nor C may exercise the right of legal redemption.
154. These statements concerning the double sale of an immovable are presented to you:
I. The first buyer who was in good faith at the time the sale was made to him, remains in good faith
notwithstanding that he subsequently obtains knowledge of the second sale.
II. In order that the second buyer may be given preference, he must possess good faith from the time of
sale in his favor until the registration of the same. In your evaluation of the foregoing statements:
a. Both statements are true. c. Only Statement I is true.
b. Both statements are false. d. Only Statement II is true.
156. D owed C P100,000.00. The debt is evidenced by a promissory note and secured by a mortgage of D's
lot. Before due date, C assigned his credit right to T by executing a deed of assignment but without the parties
informing D. On due date, T went to D to collect the debt at which time D learned of the assignment.
a. T cannot collect from D because the latter was not informed of the assignment at the time it was made.
b. T can collect from D but if D cannot pay, T cannot foreclose the mortgage on the lot.
c. T can collect from D but if D cannot pay, T can foreclose the mortgage which is deemed assigned
together with the credit right.
d. T can only go after C, the assignor, since the assignment was without D's knowledge.
158. The right of pre-emption differs from the right of redemption in that in pre-emption:
a. the action is directed against the buyer.
b. the action is directed against the seller.
c. the right arises after the sale.
d. there can be a rescission of the original sale.
160. A sale between husband and wife is valid in which of the following cases?
a. When a separation of property has been agreed upon in the marriage settlements or when there has been
a judicial separation of property.
b. When price of the sale is a moderate amount.
c. When the object of the sale is a necessary such as food or clothing.,
d: When the spouses are living separately.
TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the statement or explains
the numbered items.
1 Barter 26 Pactum commissorium
Conventional
2 Piece of work
27 redemption
3 Price 28 Vendor
4 By-bidders/puffers 29 Relative incapacity
5 Policitacion 30 Waiver consciente
6 Symbolic delivery 31 Emptio spei
7 Traditio constitutum 32 Legal formalities
8 Unpaid Seller 33 Necessaries
Warranty against
9
eviction 34 Stoppage in transitu
10 Accion redhibitoria 35 Order document of title
11 Legal redemption 36 Right of pre-emption
12 Equitable mortgage 37 Warehouse receipt
13 Document of title 38 Vendee
14 Bill of lading 39 Sale on trial
15 Sale or return 40 Absolute incapacity
16 Dacion en pago 41 Payment by cession
17 Fungible goods 42 Future goods
Bearer document of
18 Straight sale
43 title
19 Emptio rei speratae 44 Waiver intencionada
20 Earnest money 45 Traditio brevi manu
21 Traditio longa manu 46 Assignment of credit
22 Possessory lien 47 Bailee
23 Eviction 48 Redhibitory defect
24 Easement or servitude 49 Auction
25 Accion quanti minoris 50 Option money
Statements
A. Ownership of a thing is transferred to the creditor to settle a monetary obligation.
B. Lacks fo formalities but nevertheless shows the real intention of the parties to create a specific property
to secure the performance of an obligation.
C. They refer to interchangeable goods such as grain, oil, etc., that allow one to be replaced by another
without loss of value.
D. Proof of the perfection of a contract of sale.
E. Includes a warehouseman, carrier or other person who receives the possession or custody of the thing
delivered.
F. Even professional inspection is not sufficient to discover it.
G. Exercised by the seller by obtaining actual possession of the goods or by giving notice to the carrier or
other bailee having actual possession of the goods.
H. It is made by the buyer with knowledge of the risk of eviction; hence, the seller will not have any liability
if the buyer is evicted.
I. Ownership is transferred to buyer upon delivery but he has the option to revert such ownership to the seller.
J. Ownership of the thing sold is retained by the seller despite delivery to the buyer, but the latter agrees to
pay the price if he finds the thing satisfactory.
K. Delivery that takes place when the buyer who was in possession of the thing sold at the time of sale
continues in possession of the same as an owner.
L. Negotiated by indorsement.
M. Sale of property to the highest bidder.
N. The party in a contract of sale who is obligated to transfer the ownership of and to deliver a determinate
thing.
O. The consideratipn paid for the purpose of holding one to his promise to buy or sell a determinate thing for
a certain period of time, which consideration is separate and distinct from the purchase price.
P. Applies to persons who, under certain circumstances, cannot purchase certain property.
Q. The person obligated to pay the price of the thing purchased.
R. Delivery of a movable by mere agreement of the parties if the thing cannot be transferred to the vendee at
the time of sale.
S. Negotiated by mere delivery.
T. It is made by the buyer without knowledge of the risk of eviction.
U. The consideration of the contract is another thing.
V. Applies to persons who cannot bind themselves in a contract including a contract of sale.
W. A document used as proof of the possession or control of the goods, or authorizing or purporting to
authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, the goods
represented by such document.
X. Right given to an adjoining owner of an urban land to purchase the same ahead of others if such land is
he'd for speculation.
Y. Delivery through the execution of a public document.
Z. The deprivation by final judgment of the vendee of the whole or a part of the thing sold based on a right
prior to the sale or an act imputable to the vendor.
AA. Refer to goods to be manufactured, raised or acquired by the seller.
BB. The sale of hope or expectancy.
CC. Includes one who has received as conditional payment for the goods a negotiable instrument but the
condition has been broken by reason of the dishonor of the instrument or the insolvency of the buyer.
DD. Include everything indispensable for sustenance, dwelling, clothing, medical attendance, education and
transportation.
EE. The balance is payable in its entirety after the payment of an initial sum.
FF. A contract for the delivery at a certain price of an article to be manufactured specially for the customer
and upon his special order, and not for the general market.
GG. The sum stipulated as the equivalent of the thing sold.
HH. The right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is
transmitted by onerous title.
II. Seller's undertaking that the buyer shall enjoy legal and peaceful possession of the thing sold.
JJ. A stipulation in a contract of sale involving an immovable that the sale is automatically rescinded upon
failure of the buyer to pay the price.
KK. Delivery of the keys of the place where a movable is kept or stored.
LL. Contract for the storage of goods for a compensation.
MM. Buyer's remedy which involves the proportionate reduction in the price of the thing purchased.
NN. A unilateral promise to buy or sell a thing which is not accepted by the promissee.
OO. An unpaid seller's right to retain the goods for the price while he is in possession of them.
PP. Remedy of buyer to withdraw from the sale and ask for damages.
QQ. An encumbrance imposed upon an immovable for the benefit of another immovable belonging to a
different owner.
RR. A person employed by the seller or auctioneer to raise the price in an auction sale.
SS. A document issued by a common carrier acknowledging the receipt of the goods and agreeing to transport
and deliver them to a specified place.
TT. Right of seller to repurchase the thing sold and the exercise of which was reserved by the seller at the
time of sale.
UU. Delivery that takes place when the seller continues in possession of the thing sold after the sale but as
lessee, depositary or otherwise.
VV. The creditors are given the right to sell the debtor's properties and apply the proceeds to their respective
claims.
WW. It has for its purpose the transfer to another person of the right to collect the debt.
XX. Sale of an expected thing.
YY. None of the foregoing.
TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word "FALSE" if the
statement is false.
1. Warranty against eviction is inherent in a contract of sale; hence, it is an essential element thereof.
2. Dacion en pago partakes of the nature of a sale; hence, there is more freedom in fixing the price of the thing
conveyed.
3. A contract for a piece of work must comply with the Statute of Frauds. Accordingly, it must be in writing to
be enforceable if the price is P500.00 or more.
4. A sales contract requires the delivery of the thing sold for its perfection.
5. If the consideration received for a thing is another thing and a monetary consideration and the intention of
the parties does not clearly appear, the contract will be considered a contract of barter if the value of the
property consideration is greater than the monetary consideration.
6. In a contract to sell, the full payment of the price is a suspensive condition which upon fulfillment will
require the execution of a contract of sale.
7. It is not necessary that the vendor of a thing must be the owner thereof at the time of sale as long as he can
transfer its ownership to the buyer upon delivery.
8. The sale of hope or expectancy is valid even if the thing hoped for does not come into existence.
9. If the sale of a piece of land is made through an agent, the authority of the agent must be in writing for the
sale to be valid.
10. In a sale by auction, any bidder may retract his bid before the sale is perfected.
11. If a "by-bidder" or "puffer" is employed by a seller without notice in sale by auction, the sale may be
treated as fraudulent by the buyer.
12. The ownership of the thing sold is transferred upon the perfection of the contract of sale.
13. A unilateral promise to buy or sell a determinate thing at a certain price is binding upon the promissor if
the promise is supported by a consideration distinct from the price.
14. Earnest money is part of the purchase price of a thing; hence, deductible from the total selling price.
15. In sale of personal property payable in installments, the seller may exact fulfillment of the buyer's
obligation when the buyer defaults in the payment of one or more installments.
16. In sale of real property where the buyer has defaulted after paying at least 2 years installments, he shall be
entitled to pay, without additional interest, the unpaid installments due within the grace period earned by him.
17. The purchase by a guardian of the property of the person under his guardianship is valid.
18. The buyer shall be entitled to the fruits of the thing sold from the time of the perfection of the contract.
19. The delivery of incorporeal property may be made through the exercise by the vendee of his rights with
the consent of the vendor.
20. If goods are sold on "sale or return", the risk of loss of the thing sold remains with the seller after its
delivery to the buyer.
21. In "sale on approval", the buyer becomes the owner of the thing upon delivery, but he may revert such
ownership to the seller by returning it.
22. The delivery of specific goods to a carrier or other bailee for the purpose of transmission to the buyer
generally transfers ownership of the goods to the buyer.
23. When a thing is purchased from a merchant's store, fair or market, the buyer acquires title to the thing
although the seller may have stolen it or acquired it from a. thief.
24. A warehouse receipt is also a contract between warehouseman and the depositor of the goods.
25. A bearer document of title, becomes an order document of if it is specially indorsed.
26. The delivery of an order document of title without a indorsement does not constitute negotiation.
27. A negotiable document of title becomes non-negotiable if it is stamped with the mark "non-negotiable".
28. If the goods sold are in the possession of a third person, the seller is deemed to have delivered the goods
to the buyer if the third person acknowledges to the buyer that he holds the goods in the buyer's behalf.
29. If a period has been fixed for the payment of the price which has not yet arrived, the seller in the
meantime is bound to deliver the thing sold.
30. An unpaid seller exercising his right to resell the goods may buy the goods either directly or indirectly.
31. When an unpaid seller exercises his right of stoppage in transitu, the contract of carriage ceases, the carrier
becoming liable as a depositary.
32. If real estate is sold for a lump sum, the vendor is bound to deliver all that is included within the
boundaries stated in the contract although the actual area is greater than that stated in the contract.
33. If the same immovable is sold to two or more persons who are all in good faith, ownership shall belong to
the buyer who first paid its price.
34. In order that the buyer may enforce the seller's liability for breach of warranty against eviction, the
judgment depriving the buyer of the thing must first be appealed by the buyer.
35. The vendor's liability for breach of warranty against eviction may be validly waived by the vendee.
However, the vendor will still be liable if the waiver was made by the vendee without knowledge of the risks of
eviction.
36. As a rule, the vendor shall not be liable for a non-apparent easement that is recorded in the Registry of
Property.
37. The vendor shall be liable generally for any defect on the thing sold even if he was not aware thereof.
38. When animals are sold as a pair, the vendee may ask for the rescission of the sale of both animals
although only one of them suffers from a redhibitory defect.
39. The sale of animals suffering from contagious diseases is voidable.
40. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of animals
sold as condemned.
41. Acceptance of the goods by the buyer generally discharges the seller from his liability for any breach of
warranty.
42. If the buyer is justified in refusing to accept the goods, he shall be obliged to hold the goods as depositary.
43. The buyer is obliged to pay interest on the price of the goods for the period between the delivery of the
goods and the payment of the price if the thing sold produces fruits or income.
44. The buyer may suspend the payment of the price of the thing purchased by reason of trespass on the
thing.
45. A stipulation that the sale of an immovable is automatically rescinded upon the default of the buyer in the
payment of the price is valid.
46. In conventional redemption, the creditors of the vendor may make use of the right of redemption against
the vendee although they have not exhausted the properties of the vendor.
47. In case of doubt, a contract purporting to be a sale with a right to repurchase shall be construed as an
equitable mortgage,
48. For an assignment of credit to be binding against third persons if a movable property is involved, the
same must be in a public instrument and recorded in the Registry of Property.
49. A debtor who has paid his creditor before he learns of the assignment of his debt shall be released from
his liability to the assignee.
50. The debtor's consent is required for the validity of the assignment of the credit made by his creditor to
another person.