SALES seek to extinguish.
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.)
Elements of a contract of sale
1. Essential elements/requisites - Those without which a contract of sale would not exist.
a. Consent of the contracting parties
b. Subject matter which should be a determinate thing
c. Price certain in money or its equivalent
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.
Characteristics of a contract of sale
1. Consensual - It is perfected by mere consent of the parties.
2. Principal - It can exist by itself without being dependent upon another contract.
3. Bilateral - The parties are bound by reciprocal obligations.
4. Onerous - Valuable considerations are given by both parties to acquire rights.
5. Commutative - The parties exchange almost equivalent values.
6. Nominate - It has a special name given to it by law.
Sale distinguished from dacion en pago
1. In sale, there is no pre-existing credit, while in dacion en pago, there is a pre-existing credit.
2. A sale creates obligations, while dacion en pago extinguishes obligations.
3. In sale, the cause or consideration is the price, from the seller's point of view; and the
delivery of the object, from the buyer's point of view. In dacion en pago, the cause or
consideration is the extinguishment of the obligation, from the debtor's point of view; and the
delivery of the object given in place of the credit, from the creditor's point of view.
4. In sale, there is greater freedom in fixing the price, while in dacion en pago, there is less
freedom in fixing the price because of the amount of the pre-existing credit which the parties
Sale distinguished from payment by cession or cession de bienes
1. In sale, there is no pre-existing credit, while in payment by cession, there are pre-existing
credits.
2. A sale creates' obligations, while payment by cession extinguishes obligations.
3. In sale, the cause or consideration is the price, from the seller's point of view; and the
delivery of the object, from the buyer's point of view. In payment by cession, the cause or
consideration is the extinguishment of the obligation, from the debtor's point of view; and the
assignment of the things to be sold, from the creditors' point of view.
4. In sale, there is greater freedom in fixing the price, while in payment by cession, there is less
freedom in fixing the price because of the fixed amount of the pre-existing credits which the
parties seek to extinguish.
5. In sale, the ownership of the thing is transferred to the buyer. In payment by cession, the
creditors do not become the owners of the properties assigned to them but are merely given
the right to sell such properties and apply the proceeds to their claims.
Sale distinguished from contract for a piece of work
A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of business manufactures or procures for the general market, whether the same is on hand
or not, is a contract of sale.
However, if the goods are to be manufactured specially for the customer and upon his special
order, and not for the general market, it is a contract for a piece of work. (Art. 1467)
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.
Sale distinguished from contract to sell
1. in a contract of sale, the title to the property passes to the vendee upon the delivery of the
thing sold; in a contract to sell, ownership is, by agreement, reserved to the vendor and is not
to pass to the vendee until full payment of the purchase price. (Sps. Orden vs. Sps. Aurea, G.
R. No. 172733, August 20, 2008.) In a contract to sell, the prospective seller does not yet
agree or consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, such as, in most cases, the full payment of the purchase price. (David
vs. Misamis Occidental II Electric Cooperative, Inc., G.R. No. 194785, July 11,2012)
2. In a contract of sale, non-payment of the price is a negative resolutory condition, i.e.; the
vendor loses ownership of the property and cannot recover it until and unless the contract of
sales is resolved or rescinded. In a contract to sell, full payment of the purchase price is a
positive suspensive condition, i.e., title remains in the vendor if the vendee does not comply
with condition precedent of making payment at the time specified in the contract. In other
words, failure to pay the price is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective. (Sps. Orden vs. Sps. Aurea, supra; Castillo
vs. Reyes, G. R. No. 170917, November 28, 2007; Serrano vs. Caguiat, G. R. No. 139173,
February 28, 2007; Sps. Garcia vs. Court of Appeals, G.R. No. 172036, April 23,2010)
3. In a contract of sale, the risk of loss is on the buyer. In contract to sell, the risk of loss is on
the seller.
Sale distinguished from agency to sell
1. In sale, title to the goods is transferred to the buyer upon delivery of the thing sold. In agency
to sell, title to the goods is retained by the owner despite the delivery of the goods to the
agent.
2. In sale, the buyer is required to pay the price. In agency to sell, the agent is required to turn
over to the principal the price of the goods which he received from the buyer.
3. In sale, the recipient (i.e., the buyer) of the property may do with the property as he pleases.
In agency to sell, the principal retains control of the property. (Sps. Viloria vs. Continental
Airlines, Inc., G. R. No. 188288, January 16, 2012, citing Commissioner of Internal Revenue
vs. Constantino, 31 SCRA 779)
Rules on the object of the contract of sale
1. Requisites of object of a contract of sale
a. The thing must be within the commerce of men.
b. The thing must be licit, i.e., it must not be contrary to law, morals, good customs, public
order or public policy. (Art. 1459)
c. The thing must be determinate.
A thing is determinate' if it is particularly designated or physically segregated from all
others of the same class. The requisite that a thing is determinate is satisfied if at the
time the contract is entered into, the thing is capable of being made determinate without
the necessity of a new or further agreement between the parties. (Art. 1460)
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.
6. Sale of fungible goods
Fungible goods refer to interchangeable goods such as grain, oil, etc., that allow one to
be replaced by another without loss of value. '
There may be a sale of an undivided share of a specific mass of fungible goods though
the seller purports to sell and the buyer purports to buy a definite number, weight or measure
of the goods in the mass, and though the number, weight or measure of the goods in the
mass is undetermined. The following rules shall be observed if the quantity sold is different
from the quantity of the mass:
a. If the quantity, i.e., number, weight or measure, of the mass is more than the quantity
sold, the parties shall become co-owners of the mass. (Art. 1464)
Example: S sells to B 200 sacks of corn from a mass stored in the warehouse of S. The
mass, however, actually consists of 300 sacks of corn. Thus, S and B will become co-
owners of the whole mass to the extent of 2/3 for B and 1/3 for S.
b. If the quantity of the mass is less than the quantity sold,the buyer becomes the owner of
the whole mass, with the seller being bound to make good the deficiency from goods of
the same kind and quality, unless a contrary intent appears. (Art. 1464)
Example: S sells to B 300 sacks of yellow corn from a mass stored in the warehouse
of S. The mass, however, actually consists of 280 sacks of yellow corn. In this case, B
becomes the owner of all the 280 sacks of yellow corn and S is bound to deliver to B an
additional 20 sacks of yellow corn to complete the quantity agreed upon.
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.

Fixing of the price by one of the contracting parties.
The fixing of the price can never be left to the discretion of one of the contracting
parties. However, if the price fixed by one of the parties is accepted by the other, the sale
is perfected. (Art. 1473)
Example: S sold his car to B at a price to be fixed by S ten days after their
agreement. On the tenth day, S fixed the amount at P100,000.00. If B accepts the said
price, the sale is perfected as there is a meeting of minds. If B does not so accept, no
sale is perfected.
b. If it be certain with reference to another thing certain. (Art. 1469)
Example: S sells to B a certain ring the price of which is the price of 20 bags of
Island cement being sold at a certain store.
c. If the determination of the price is left to the judgment of a specified person or persons.
(Art. 1469)
1) If such persons or persons are unable or unwilling to fix the price, the contract shall
be inefficacious, unless the parties subsequently agree upon the price.
2) If the third person or persons acted in bad faith or by mistake, the courts may fix the
price.
3) If such third person or persons are prevented from fixing the price or terms by the
fault of the seller or buyer, the party not at fault may have such remedies against the
party at fault as are allowed the seller or buyer, as the case may be. (Art. 1469)
d. If the price fixed is that which the thing sold would have on a definite day, or in a
particular exchange or market, or when an amount is fixed above or below the price on
such day, or in such exchange or market, provided said amount is certain. (Art. 1472)
Example: S sells to B 500 shares of stock of San Miguel-B shares at the price
equivalent to the closing price of the shares on April 23, 2010, at the Philippine Stock
Exchange. This is of course on the condition that there will be trading of the said shares
on the day agreed upon; otherwise, the sale is of no effect. Or the parties may agree that
the price of the shares will be 20% above or 20% below the price of the shares in the
exchange on the said day.
Effect if the price cannot be determined
The sale shall be inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is
reasonable price is a question of fact dependent on the circumstances of each particular
case. (Art. 1474)
2. Gross inadequacy of price
Gross inadequacy of price does not affect a contract of sale, except as it may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. (Art. 1470) There is gross inadequacy of price if a reasonable man will not agree to
dispose of his property. (Vda. De Delfin vs. Dellota, G.R. No. 143697, January 28, 2008,
citing Aguilar vs. Ribato and Gonzales Vila, 40 Phil 570)
Example: S sells to B for P80,000.00 a certain car whose actual value is P100,000.00.
The fact that the price is inadequate does not affect the validity of the contract. However, if S
agreed to sell the car at P80.000.00 because B used insidious words or machinations so that
S would sell the car for the said price, then S may annul the sale on the ground of vitiated
consent due to fraud.
3. Simulated price
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)
Form of a contract of sale
1. Subject to the provisions of the Statute of Frauds and of any other applicable statute, a
contract of sale may be in any of the following forms:
a. in writing, or
b. by word of mouth, or
c. partly in writing and partly by word of mouth, or
d. may be inferred from the conduct of the parties. (Art. 1483)
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.
3. Sale of a piece of land through an agent
The authority of the agent to sell a piece of land must be in writing; otherwise, the sale is
void. (Art. 1874)
a. If the authority of the agent to sell a piece of land is not in writing - the sale is void
whatever may have been the form it was entered into, i.e., oral, private instrument or
public instrument.
b. If the authority of the agent is in a private instrument and the sale was:
1) entered into orally - the sale is unenforceable. (Art. 1403)
2) in a private instrument - the sale is valid.
3) in a public instrument - the sale is valid.
c. If the authority of the agent is in a public instrument and the sale was:
1) entered into orally - the sale is unenforceable. (Art. 1403)
2) in a private instrument - the sale is valid.
3) in a public instrument - the sale is valid.
Note: In order, however, that the sale may be recorded in the Register of Deeds, both the authority
of the agent and the sale must be in a public instrument. (See Art. 1358, paragraphs 1 and 3.)
Rules in case of sale by auction (Art. 1476)
1. Sale by auction in lots
Each lot is the subject of a separate contract of sale.
2. When sale by auction is perfected
When the auctioneer announces its perfection (a) by the fall of the hammer, or (b) in any
other manner.
a. Rights of parties before perfection
1) Any bidder may retract his bid.
This is so because a bid is merely an offer and an offer may be withdrawn at
anytime before acceptance.
2) The auctioneer may withdraw the goods from the sale unless the auction has been
announced to be without reserve.
Withdrawal of the goods is equivalent to a rejection of the offer made by any
bidder.
a) Auction with reserve
In an auction with reserve, the auctioneer is the offeree and has the power
of acceptance. As offeree, he has the power to reject all bids. Such rejection
includes withdrawal of the goods during the bidding process.
b) Auction without reserve
In an auction without reserve, the auctioneer is much like an offeror, with
the bidders competing to determine who will win the power of acceptance. After
the auctioneer calls for bids on an article or lot, that article or lot cannot be
withdrawn unless no bid is made within a reasonable time.
b. Rights of parties after perfection
The winning bidder cannot retract his bid nor can the auctioneer withdraw the goods
since there is already a perfected contract. Withdrawal from the contract by either party
constitutes a violation of the Principle of Mutuality of Contracts. (See Art. 1308.)
3. Right of seller to bid
The seller may bid at the auction provided the following requisites are present:
a. The right to bid must have been reserved expressly by or on behalf of the seller.
b. His right to bid must not be prohibited by law or stipulation.
For instance, in the exercise by the unpaid seller of his right to resell the goods, he
cannot buy the goods directly or indirectly. (See Art. 1533.)
c. Notice must be given that the sale is subject to a right to bid by or on behalf of the seller.
Effect of employment by the seller of "by bidders" or "puffers" without notice
"By bidders" or "puffers" refer to persons employed by . the seller to bid in his behalf, the
purpose of which is to raise the price, but the said persons are not in themselves bound by
their
bids.
Any sale whereby the seller employs "by bidders" or "puffers" without notice may be
treated as fraudulent by the buyer. (Art. 1574). Thus, the buyer may annul the sale on the
ground of vitiated consent due to fraud.
When ownership of the thing sold is transferred
The ownership of the thing sold is transferred upon the actual or constructive delivery thereof.
(Art. 1477) The time when ownership is transferred is important to determine the party who shall
bear the loss.
The parties may, however, stipulate, that ownership in the thing sold shall not pass to the
purchaser until he has fully paid the price. (Art. 1478)
Promise to buy and/or sell
1. Bilateral promise - This takes place when one party promises to buy and the other party
promises to sell a determinate thing at an agreed price.
This is reciprocally demandable since this is as good as a perfected contract of sale. For
enforceability, however, observance of the proper form is required, if the object of the sale is
a movable with a price of at least P500.00, or real property or an interest therein, regardless
of the price (See Art. 1403.) In other words, the promises should be in writing.
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.
Earnest money and option money, concept and distinctions
Earnest money is the money given as part of the purchase price and as proof of the
perfection of the contract. (Dizon vs. Lustre, 02381-R, June 21, 1974) It is also called
"arras" or something of value to show that the buyer was really in earnest, and given to the seller to
bind the bargain. (14 Words and Phrases 230)
Option money, on the other hand, is 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, which consideration is
separate and distinct from the purchase price. (Dizon vs. Lustre, supra) However, the consideration
for an option contract is not always monetary but could consist of other things or undertakings. If
the consideration is not monetary, these must be things or undertakings of value, in view of the
onerous nature of the option contract. Furthermore, when a consideration for an option contract is
not monetary, said consideration must be clearly specified as such in the option contract or clause.
(Bible Baptist Church vs. Court of Appeals, G.R. No. 126454, November 26, 2004, 444 SCRA
607, also cited in Eulogio vs. Sps. Apeles, supra)
From the foregoing discussions, earnest money and option money are distinguished as
follows:
1. Earnest money is part of the purchase price, while option money is separate and distinct from
the purchase price.
2. Earnest money is paid upon the perfection of a contract of sale, while option money is paid
for a sale that is yet to be perfected.
Illustration of earnest money
B is interested in buying the car of S for P100,000.00 payable within 30 days from the dale of
sale. To show that he is really in earnest, B gives S P1.000.00 upon the execution of their
agreement, which amount S accepts. There is here a perfected contract of saie between B and S.
Accordingly, on the due date for the payment of the price, B will have to pay S the amount of
P99.000.00 only.
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)
3. Loss of or injury to the thing
a. Loss before perfection (including deterioration in quality)
1) In case of complete loss, the sale is void because of the absence of the object.
2) In case of partial loss, the buyer may choose between:
a) Withdrawal from the contract (rescission), and
b) Demanding the remaining part and paying its proportionate price. (Arts.
1493,1494)
b. Loss after perfection - There are two views on this matter.
1) First view - Buyer bears the risk of loss (Art. 1480), i.e., he must pay the price.
 After perfection but before delivery, the buyer bears the risk of loss of or injury
to the thing since any benefit therefrom during the same period inures to him.
Therefore, the loss of the thing through a fortuitous event extinguishes the seller's
obligation except in the following cases:
a) When the seller delays.
b) When the law provides that the seller shall be liable even in case of fortuitous
event.
c) When the parties have stipulated that the seller shall be liable even in case of a
fortuitous event.
d) When the nature of the seller's obligation requires the assumption of risk. (Art
1262)
2) Second view - Seller bears the risk of loss (Art. 1504), i.e., buyer is not obliged to
pay the price.
After perfection, the goods remain at the seller's risk until the ownership of the
goods is transferred to the buyer by actual or constructive delivery. However,
notwithstanding that the ownership is not transferred to the buyer, the goods are the
buyer's risk:
a) If there is an agreement to that effect.
b) If ownership of the goods is retained by the seller merely to secure the
performance by the buyer of his obligation under the contract.
c) When actual delivery has been delayed through the fault of the buyer.
Note: The weight of authority is on the second view because it is consistent with the
principle of "res perit domino" which means "(T)he loss of property falls upon the owner."
Sale by sample; description; and sample and description
1. Sale by sample
The parties contract solely with reference to the sample. The seller warrants that the bulk
of the goods delivered correspond with the sample shown to the buyer.
2. Sale by description
The parties contract solely with reference to the description. The seller warrants that the
bulk of the goods delivered correspond with the description of the goods presented to the
buyer.
3. Sale by sample and description
The seller warrants that the bulk of the goods delivered correspond with both the sample
and the description, and not with only one. (Art. 1481) The buyer shall have reasonable
opportunity of comparing the bulk with the description or the sample. (Art. 1481)
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.
When deficiency may be recovered
1. In case of sale on straight-term.
2. If security foreclosed is other than the chattel mortgage constituted on the thing sold.
3. In the case of sale on execution of judgment in favor of the seller.
S sold his only ring to B for P50,000.00 under the following terms: down payment of P30,000.00;
balance payable at month end. As security, B executed a chattel mortgage on the ring. B defaulted
in the payment of the balance. By reason thereof, S foreclosed the chattel mortgage on the ring.
However, only P15,000.00 was realized in the foreclosure sale. Can S still proceed against B to
collect the deficiency of P5,000.00?
Answer: Yes because Art. 1484 does not apply to a sale on straight term which is a sale
where the balance is to be paid in its entirety after the payment of an initial sum. This is an
application of the general rule that if the foreclosure sale in chattel mortgage results in deficiency,
the same may be recovered by the creditor. Article 1484 is an exception to such general rule, i.e.,
no deficiency may be recovered.
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.
2. Rights of the buyer
a. Grace period to pay installment in case of default
1) If at least 2 years of installments had been paid at the time of default
a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him, which is fixed at the rate of one (1) month grace
period for every one (1) year of installments paid. This right shall be exercised
by the buyer only once in every five (5) years of the life of the contract and its
extensions, if any.
b) If the contract is cancelled, he shall be entitled to the refund of the cash
surrender value of the payments on the property equivalent to fifty percent
(50%) of the total payments made, and after five (5) years of installments, an
additional five percent (5%) every year but not to exceed ninety percent (90%)
of the total payments made.
When cancellation shall take place
The actual cancellation shall take place after thirty (30) days from receipt
by the buyer of the notice of cancellation or the demand for rescission of the
 contract by notarial act and upon full payment of the cash surrender value to the
buyer.
Note: Down payments, deposits or options on the contracts shall be included in
the computation of the total' number of installments.
2) If less than two (2) years of installments had been paid at the time of default
The buyer shall be given a grace period of not less than sixty (60) days from the
date the installment became due to pay.
When cancellation shall take place
If the buyer fails to pay the installment due upon the expiratioir of the grace
period, the ' seller may cancel the sale after thirty (30) days from the receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by
notarial act.
b. Additional rights
1) The buyer shall have the right during the grace period before the cancellation of the
contract:
a) To sell his rights to another by notarial act;
b) To assign his rights to another, by notarial act; or
c) To reinstate the contract by updating the account.
2) To pay in advance any installment or the full unpaid balance any time without
interest.
3) To ask for the annotation of the full payment of the purchase price in the certificate
of title covering the property.
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)]
Requisites for cancellation of contract to sell under the Maceda Law
Under the Maceda Law, the actual cancellation of a contract to sell takes place after 30 days
from receipt by the buyer of the notarized notice of cancellation, and upon full payment of the cash
surrender value to the buyer. In other words, before the contract to sell can be validly and
effectively cancelled, the seller has (1) to send a notarized notice of cancellation to the buyer and
(2) refund the cash surrender value. Until and unless the seller complies with these twin mandatory
requirements, the contract to sell between the parties remain valid and subsisting. Thus, the buyer
has the right to continue occupying the property subject of the contract to sell, and may "still
reinstate the contract by updating the account during the grace period and before the actual
cancellation" of the contract. (Communities Cagayan, Inc. vs. Sps. Nanol, G.R. No. 176791,
November 14, 2012.)
Capacity to buy or sell
1. Who may enter into a contract of sale
As a general rule, all those who may oblige themselves may enter into a contract of sale.
(Art. 1489)
2. Kinds of incapacity in a contract of sale
a. Absolute incapacity - This applies to persons who cannot bind themselves and includes
minors, insane or demented persons, and deaf-mutes who do not know how to write.
(Art. 1327)
A contract of sale entered into by a person suffering from absolute incapacity is
voidable. However, when necessaries, are sold to a minor or other Incapacitated person,
he must pay a reasonable price therefor. The sale therefore is valid. Necessaries include
everything indispensable for sustenance, dwelling, clothing, medical attendance,
education and transportation (Art. 194, Family Code)
b. Relative incapacity - This applies to certain persons who, under circumstances, cannot
purchase certain property.
The following are cases of relative incapacity.
1) The husband and the wife cannot sell property to each other, except:
a) When a separation of property was agreed upon in the marriage settlements.
b) When there has been a judicial separation of property. (Art. 1490)
Note: A sale between husband and wife that does not fall under the exceptions is void.
2) Persons prohibited from acquiring by purchase
a) The guardian, the property of the person or persons under his guardianship.
b) Agents, the property whose administration or sale may have been entrusted to
them, unless the consent of the principal has been given.
c) Executors and administrators, the property of the estate under administration.
d) Public officers and employees, the property of the State or of any subdivision
thereof, or of any government owned or controlled corporation or institution, the
administration of which has been entrusted to them; this provision applies to
judges and government experts who, in any manner whatsoever, take part in
the sale.
e) Justices, judges, prosecuting attorneys, clerks of court, and other officers and
employees connected with the administration of justice, the property and rights
in litigation or levied upon an execution before the court whose jurisdiction or
territory they exercise their respective functions; this prohibition includes the act
of acquiring by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in which they make
take part by virtue of their profession. (Art. 1491)
The contracts mentioned above have the following status:
a. For items (a) to (c), the contract is voidable since only private interests are
involved.
b. For items (d) and (e), the contract is void since they are imbued with public
interest.
Note: It may be observed that the persons above-mentioned occupy positions
of trust and confidence.
OBLIGATIONS OF THE VENDOR
Obligations of the vendor
1. To transfer the ownership of the thing sold.
The ownership of the thing sold is acquired by the vendee from the moment the thing is
delivered to him. (Art. 1496)
2. To deliver the thing sold.
The vendor is bound to deliver the thing sold and its accessions and accessories in the
condition in which they were upon the perfection of the contract. All the fruits shall pertain to
the vendee from the day on which the contract is perfected. (Art. 1537)
As a rule, the creditor has a right to the fruits of the thing from the time the obligation to
deliver the thing arises (Art. 1164), but in a contract of sale, the fruits shall pertain to the
buyer from the day on when the contract was perfected. (Art. 1537). The seller and buyer
may, however, stipulate that the fruits of the thing sold shall pertain to the buyer at some
future time such as when the obligation is one with a period.
3. To warrant the thing sold. (Art. 1495)
The vendor is liable for breach of warranty against eviction and warranty against hidden
defects or encumbrances. (Art. 1547)
4. To take care of the thing sold 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, Art. 1480) In case
of loss, deterioration or improvement of the thing before delivery, the rules under Art. 1189
shall be observed, the vendor being considered the debtor. (Art. 1538)
Delivery or tradition, concept
It is a mode of acquiring ownership whereby the object of the contract is placed in the control
and possession of the vendee, either actually or constructively.
Delivery, in its natural sense, means something in addition to the delivery of property or title;
it means transfer of possession. In the Law on Sales, delivery, whether actual or constructive
contemplate "the absolute giving up of the control and custody on the part of the vendor, and the
assumption of the same by the vendee." [Equatorial Realty Development, Inc. vs. Mayfair Theater,
Inc., 370 SCA 56 (2001)]

Kinds of delivery or tradition
1. Actual or real delivery - This is delivery by physically placing the thing sold in the hands of the
vendee (in the case of movables) or physically placing it in his possession and control (in the
case of immovables).
2. Constructive or legal delivery
a. By legal formalities - When the sale is made through a public instrument, the execution
thereof shall beequivalent to the delivery of the thing sold, if from the deed the contrary
does not appear or cannot be clearly inferred. (Art. 1498) This kind of delivery applies to
both movable and immovable property.
The execution of a public instrument only gives rise to a prima facie presumption of
delivery. Sue presumption is destroyed when the delivery is not effected because of a
legal impediment. Thus, there is no constructive delivery although there was an
execution of a deed of absolute sale which was duly notarized if the thing sold is in the
control of another person. (See Asset Privatization Trust vs. TIJ. Enterprises, G.R. No.
167195, May 8, 2009.) A person who does not have actual possession of the thing sold
cannot transfer constructive possession by the execution and delivery of a public
instrument. (Villamar vs. Mangaoil, G.R. No. 188661, April 11, 2012) The
presumption is also negated by the failure of the vendee to take actual possession of the
land sold despite her assertion that she was the lawful owner thereof and despite the fact
that the sale to her was in a public instrument. (Beatingo vs.Bugasis, G.R. No. 179641,
February 9, 2011)
b. Symbolic delivery (traditio simbolica) - Delivery that takes place by delivering the keys of
the place or depository where the movable is stored or kept. (Art. 1498) Also referred to
as traditio clavium.
c. Traditio longa menu - Delivery of a movable by mere consent or agreement of the parties
if the thing cannot be transferred to the possession of the vendee at the time of sale.
(Art. 1499) Literally, "delivery by the long hand"; usually made by pointing at the thing.
d. Traditio brevi menu - Delivery that takes place when the vendee is already in the
possession of the thing sold even before the sale and thereafter continues in possession
thereof in the concept of an owner. (Art. 1499) This applies, to movables only. Literally,
"delivery oythe short hand."
e. Traditio eonstitutum possessohum - Delivery that takes Place when the vendor continues
in possession of the thing, sold after the sale but in another capacity such as that ef a
lessee or depositary. (Art. 1500) This applies to both movable and immovable property.
Literally, "delivery by agreement of possessors."
3. Delivery tit incorporeal property, (quasi-traditio)
a By constructive tradition - Delivery of incorporeal property by the execution of a public
document.
b. Placing the titles of ownership in the possession of the vendee (such as delivering the
stock certificate covering the snares of stock sold):
c. Use by the vendee of his rights, with, the consent of the vendor, (Art. 1501) (such as
when the seller authorizes the buyer of shares of stock to vote during the stockholders'
meeting).
"Sale or return" and "sale on approval"
1. Sale or return
The ownership of the goods is transferred to the buyer on delivery, but the buyer has the
option to revest their ownership on the seller by returning them within the time fixed in the
contract, or if no time has been fixed, within a reasonable time. (Art 1502)
2. Sale on approval or on trial or on satisfaction
Ownership of the goods remains with the seller despite delivery but shall be transferred
to the buyer in the following cases:
a. When he signifies his approval or acceptance of the goods.
b. When he does an act adopting the transaction.
Thus, the buyer is deemed to have approved of the goods if he starts consuming or
using them.
c. If he does not signify his approval or acceptance of the goods but retains the goods
without giving notice of rejection within the time fixed in the contract, or within a
reasonable time, and such time has expired. (Art. 1502)
Distinctions between "sale or return" and "sale on approval or on trial or satisfaction"
1. In "sale or return", ownership of the goods passes to the buyer upon delivery. In "sale on
approval, ownership passes to the buyer upon his acceptance of the goods or the expiration
of the time given to him to signify his acceptance.
2. In "sale or return", the risk of loss is on the buyer. In "sale on approval", the risk of loss is on
the seller.
3. In "sale or return", the buyer may return the goods even if he is satisfied of its quality. In "sale
on approval', the buyer has no right to return the goods iftie is satisfied of its quality.
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. Suppose the ring found its way into a jewelry store and it was from that jewelry store that B
bought the ring 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)

When seller's title to the goods is voidable
If the seller's title is voidable but the same has not been avoided at the time of sale, the buyer
acquires a good title to the goods, provided he buys them in good faith, for value, and without
notice of the seller's defect of title. (Art. 1506)
Example: S, a minor of 17 years, sold his wristwatch for P1.500.00 to B, 30 years old. The
guardian of S was not aware of the sale; hence, no action for annulment has yet been filed.
Subsequently, B sold the wristwatch to T, who acquired it in good faith. Did T acquire title to the
wristwatch?
Answer: Yes, because although the title of B was voidable, T acquired the wristwatch in good
faith, for value, and without notice that the title of B was defective.
Document of title to goods, concept
"Document of title to goods" includes any document used in the ordinary course of business
in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or
purporting to authorize the possessor of the document to transfer or receive, either by indorsement
or by delivery, goods represented by the document. (Art. 1636)
Common forms of documents of title
1. Bill of lading - This refers to the written acknowledgment of the receipt of the goods by a
carrier, and an agreement to transport and to deliver the goods at a specified place to a
person named therein, or to his order or to bearer. Other terms used are receipt for
transportation, forwarder's receipt, shipping receipt (Continental Co. Ltd. vs. Liberation
Steamship Co., CV-58713, April 29, 1983) It is an instrument in writing, signed by a carrier or
his agent, describing the freight so as to identify it, stating the name of the consignor, the
terms of the contract for carriage, and agreeing or directing that the freight to be delivered to
the order or assigns of a specified person at a specified place. (Ace Navigation Co., Inc. vs.
FGU Insurance Corp., G.R. No. 171591,June 25, 2012.)
2. Dock warrant - A warrant given by a dock owner to the owner of the goods imported and
warehoused on the dock upon the faith of the bill of lading, as a recognition of the title to the
goods of the owner of such goods.
3. Warehouse receipt or order - This a written acknowledgment by a warehouseman of the
receipt of the goods which are placed in his possession. This is also a contract between the
owner of the goods and the warehouseman whereby the latter agrees to store the goods and
the former to pay the compensation for such storage.
Quedan is a kind of warehouse receipt.
Classes of documents of title
1. Negotiable documents of title
A negotiable document of title is one in which it is stated that the goods will be delivered
to bearer, or to the order of any person named in such document. (Art. 1507)
Examples:
a. Bearer document of title - "Deliver the goods to bearer"
b. Order document of title - "Deliver the goods to the order of Dionisio Diamante" or "Deliver
the goods to Dionisio Diamante or his order"
2. Non-negotiable documents of title
A non-negotiable document of title is one in which it is stated that the goods are to be
delivered to a specified person.
Example: "Deliver the goods to Dionisio Diamante"
How negotiable document of title negotiated
1. By delivery
a) If by the terms of the document of title, the carrier, warehouseman or other bailee issuing
it undertakes to deliver the goods to bearer. (Art. 1508)
Example:
D deposits his goods in the warehouse of W. W issues a warehouse receipt which
provides that the goods are "Deliverable to bearer." D may negotiate the warehouse
receipt to another by mere delivery.
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"
Effect if negotiable document of title is marked "non-negotiable"
A negotiable document of title even if marked "non-negotiable" remains to be negotiable. (Art.
1510)
Delivery of an order document of title without indorsement
The delivery of an order document of title without any indorsement does not constitute
negotiation, but a mere assigment by the holder to the purchaser or donee. (Art. 1511)
Transfer of a non-negotiable document of title
A non-negotiable document of title cannot be negotiated. It can only be transferred or
assigned. Its indorsement does not constitute negotiation and gives the transferee no additional
rights. (See Art. 1511.)
Who may negotiate negotiable document of title (Art. 1512)
1. By the owner thereof.
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". D, as owner of
the warehouse receipt, may negotiate it to another.
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.
Rights of the transferee of a document of title
1. Non-negotiable document of title
The transferee of a non-negotiable document of title acquires the following rights:
a. As against, the transferor, the title to the goods, subject to the terms of any agreement
with the transferor.
b. The right to notify the bailee (warehouseman or carrier) of the transfer to him of the
document of title.
Effect of notification
Upon notification to the bailee of the transfer to him of the document, the transferee
acquires the direct obligation of the bailee to hold possession of the goods for him
according to the terms of the document.
Effect of lack of notification
Before notification, the title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
1) The levy of an attachment or execution upon the goods by the creditor of the
transferor.
2) A notification to such bailee by the transferor or a subsequent purchaser from the
transferor of a subsequent sale of the goods by the transferor.
Example:
D deposited his goods on June 1 with W, warehouseman, who issued a non-negotiable
warehouse receipt for the goods to D. On June 2. D assigned the warehouse receipt to A. On
June 5, A assigned the warehouse receipt to H. Neither A nor H notified W of the transfer of
 the document to H. On June 7, A sold the goods covered by the warehouse receipt to X who
immediately informed W of the sale to him of the goods. Who has a better right to the goods?
H or X?
Answer: X has a better right to the goods because the notification he made to W of the
sale made to him by A defeated H's title to the goods and right to acquire the direct obligation
of W to hold possession of the goods in favor of H even if the transfer of the document took
place ahead of the sale of the goods by A to X. Upon the transfer of the warehouse receipt to
him, H should have immediately notified W.
2. Negotiable document of title
The transferee to whom a negotiable document of title has been transferred but not
negotiated acquires the following rights:
a. As against the transferor, the title to the goods, subject to the terms of any agreement
with the transferor. (Art. 1514)
b. The right to notify bailee (warehouseman or carrier) of the transfer to him of the
document of title. (Art. 1514)
Effect of notification
Upon notification to the bailee of the transfer to him of the document, the transferee
acquires the direct obligation of the bailee to hold possession of the goods for him
according to the terms of the document. (Art. 1514)
Effect of lack of notification
Before notification, the title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
1) The levy of an attachment or execution upon the goods by the creditor of the
transferor.
2) A notification to such bailee by the transferor or a subsequent purchaser from the
transferor of a subsequent sale of the goods by the transferor. (Art. 1514)
c. The right to compel the transferor to indorse the document unless a contrary intention
appears. (Art. 1515)
Effect of indorsement
1) The negotiation takes effect upon the indorsement.
2) Upon indorsement, the transferee acquires the direct obligation of the bailee to hold
possession of the goods. No further notification by the transferee to the bailee is
required upon such indorsement completed by delivery (Arts. 1513, 1514) for the
transferee to acquire such direct obligation.
Example:
On July 1, D deposited his goods with W, warehouseman, who issued to D a warehouse
receipt which states that the goods are to be delivered to the order of D. Thereafter, D
indorsed the warehouse receipt to A.
a. Assume that on July 5, A delivered the warehouse receipt without any indorsement to H,
a purchaser for value. On July 7, A notified W that he h,ad sold the goods to X. At the
time of such notificatidh, W had not yet learned of the transfer of the document made by
A to H. Who has a better right to the goods? H or X?
Answer: X has a better right. If a negotiable document of title is not negotiated but is
merely transferred, the transferee does not acquire the direct obligation of the bailee at
the time of transfer. In the above case, H should have notified W of the transfer of the
warehouse receipt to him ahead of the notification to W of the sale made by A to X. If a
negotiable document of title is merely transferred and not negotiated, if shall be treated
as if it were non-negotiable.
b. Suppose that on July 5, A instead indorsed the warehouse receipt to H, a purchaser for
value. On July 7, A notified W that he had sold the goods to X. At the time of such
notification, W had not yet learned of the indorsement of the warehouse receipt made by
A to H. Who has a better right to the goods? H or X?
Answer: H has a better right. This is so because upon the indorsement of the
warehouse receipt to him, H acquired the direct obligation of W to hold the goods for him
as if he had contracted directly with W. If the transfer was by negotiation, there is no
need for the transferee to notify the bailee which, in this case, is the warehouseman.
Warranties of a person transferring or negotiating a document of title (Art. 1516)
A person who for value negotiates or transfers a document of title by indorsement or delivery,
including one who assigns for value a claim secured by a document of title unless a contrary
intention appears, warrants the following:
1. That the document is genuine.
Thus, if the transferee cannot obtain the goods from the warehouseman because the
warehouse receipt is forged, he can hold liable the person transferring or negotiating the
document to him.
2. That he has a legal right to negotiate or transfer it.
Example: D deposited goods with W who issued to D a warehouse receipt stating that
the goods are deliverable to bearer. D entrusted the warehouse receipt to A for safekeeping.
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. That he has knowledge of no fact which would impair the validity or worth of the document.
Thus, a transferor is not liable if at the time he transferred the document, he had no
knowledge that the same was already worthless because goods represented by it had been
lost.
4. That he has a right to transfer the title to the goods and that the goods are merchantable or fit
 for a particular purpose, whenever such warranties would have been implied if the contract of
the parties had been to transfer without a document of title the goods represented thereby.
These refer to the warranty against eviction and warranty against hidden defects.
Effect of failure of bailee or previous indorsers to fulfill their obligations
The indorser shall not be liable for any failure on the part of the bailee who issued the
document or previous indorsers to fulfill their respective obligations. (Art. 1517)
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.
Attachment or surrender of goods covered by a document of title
1. Negotiable document of title (Art. 1519)
a. As a general rule, the goods covered by a negotiable document of title cannot be
attached or levied upon, except:
1) When the document is surrendered to the bailee; or
2) The negotiation of the document is enjoined.
b. The bailee cannot be compelled to surrender the goods, except:
1) When the document is surrendered to him, or
2) The document is impounded by the Court.
2. Non-negotiable document of title
The goods covered by a non-negotiable document of title may be attached or levied
upon in execution although the document is not surrendered to the bailee.
Remedy of creditor of debtor-owner of goods covered by a negotiable document of title
The creditor can ask the courts for an order attaching the document of title or enjoining the
delivery of the goods to the debtor-owner. (Art. 1520)
Time and place of delivery of thing sold
1. Place of delivery
a. Place stipulated.
b. If there is no stipulation, place fixed by usage or trade.
c. In the absence of both, the seller's place of business if he has one; if none, the seller's
place of residence. However, in the case of sale of specific goods, which to the
knowledge of the parties when the contract was made were in some other place, that
place shall be the place of delivery. (Art. 1521)
2. Time for delivery of goods
a. Time stipulated.
 b. If there is no stipulation, delivery must be made within a reasonable time from the
execution of the contract. (Art. 1521)
3. Goods in the possession of a third person
The seller has. not fulfilled his obligation to deliver the goods unless such third person
acknowledges to the buyer that he holds the goods on the buyer's behalf. (Art. 1521)
4. Demand or tender of delivery
It must be made at a reasonable hour to be effectual. (Art. 1521)
5. Expenses of delivery.
The seller bears the expenses of and incidental to putting the goods into a deliverable
state, unless otherwise stipulated. (Art. 1521)
When vendor is not bound to deliver the thing sold
1. If the vendee has not paid him the price. (Art. 1524)
2. If no period for the payment of the price has been fixed in the contract. (Art. 1524)
3. If a period has been fixed for the payment of the price, the vendor is bound to deliver the
thing sold. However, he is not bound to deliver if the vendee loses the right to make use of
the period (Art. 1536) as follows:
a. When the vendee becomes insolvent, unless he gives a guaranty or security for the
payment of the price.
b. When the vendee fails to furnish the guaranties or securities that he has promised.
c. When the guaranties or securities have been impaired through his own acts or when
through a fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory.
d. When the vendee violates any undertaking in consideration of which the vendor agreed
to the period.
e. When the vendee attempts to abscond. (Art. 1198)
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..
Unpaid seller, concept
An unpaid seller is one who has not been paid or tendered the whole of the price or who
has received a bill of exchange or other negotiable instrument as conditional payment and the
condition under which it was received has been broken by reason of the dishonor of the instrument,
the insolvency of the buyer, or otherwise. (Art. 1525)
Rights of an unpaid seller
1. Possessory lien, or a lien on the goods or right to retain them while he is in possession of
them. (Art. 1526)
a. When available
This right is available to the seller and notwithstanding that he may be in possession
of the goods as agent or bailee for the buyer in the following instances:
1) Where the goods have been sold without any stipulation as to credit.
2) Where the goods have been sold on credit, but the credit term has expired.
3) Where the buyer is insolvent. (Art. 1527)
b. Lien where there is partial delivery
Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show an intent to waive the lien or right of retention. (Art. 1528)
c. When lien is lost
The unpaid seller loses his lien on the goods in the following cases:
1) When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or the right to
the possession thereof.
2) When the buyer or his agent lawfully obtains possession of the goods.
3) By waiver thereof. (Art. 1529)
Note: The unpaid seller having a lien on the goods does not lose his lien by reason only that he
has obtained judgment or decree for the price of the goods. (Art. 1529)
2. Right of stoppage in transitu
This right involves the right of the unpaid seller to resume possession of the goods at
any time while they are in transit, and he will then become entitled to the goods as he would
have had if he had never parted with the possession. (Art. 1530)
a. When right available
This right is available after the unpaid seller has parted with the possession of the
goods and the buyer is or becomes insolvent. (Art. 1530)
b. How exercised
The unpaid seller may exercise this right:
1) By obtaining actual possession of the goods.
2) By giving notice of his claim to the carrier or other bailee in whose possession the
goods are.
This notice may be given either to the person in actual possession of the goods
or to his principal. If given to the principal, the notice to be effectual, must be given
at such time and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent delivery to the buyer.
When notice is given to the carrier or other bailee for the buyer, he must
redeliver the goods to, or according to the instructions of, the seller, with the seller
bearing the expenses of delivery. However, if a negotiable document of title
representing the goods has been issued, the carrier or other bailee shall not be
obliged or justified in delivering the goods to the seller unless such document is first
surrendered to him. (Art. 1532)
c. Effects of exercise of right of stoppage in transitu
1) The goods are no longer in transit.
2) The contract of carriage ceases; the carrier shall be liable as depositary or other
bailee.
3) The carrier must redeliver the goods to, or according to the instructions of, the seller.
(Art. 1532)
However, if a negotiable document of title has been issued for the goods, the
carrier will not be bound to deliver the goods unless the document of title is first
surrendered to him for cancellation. (Art. 1532)
d. When goods are in transit
1) From the time they are delivered to the carrier or other bailee for the purpose of
transmission to the buyer, until the buyer or his agent, takes delivery of them from
such carrier or other bailee.
2) If the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to received them back. (Art. 1531)
e. When goods no longer in transit
1) If the buyer obtains delivery of the goods before arrival at the appointed destination.
2) If the carrier or other bailee acknowledges to the buyer or his agent, that he is
holding the goods in his behalf, after arrival of the goods at their appointed
destination.
3) If the carrier or other bailee wrongfully refuses to deliver the goods to buyer or his
agent. (Art. 1531)
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)
4. Right to rescind the sale
a. When 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 seller has expressly reserved the right to rescind the sale in case the buyer
should make default.
b) The buyer has been in default in the, payment of the price for an unreasonable
time.
b. How rescission is made
1) By giving notice to the buyer of the intention to rescind.
2) By doing an overt act manifesting the intention to rescind.
It is not necessary that such overt act be communicated to the buyer, but 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 right of
rescission was asserted. (Art. 1534)
c. Effects of rescission
1) The seller shall not be liable to the buyer upon the contract of sale.
2) He may recover from the buyer damages for any loss occasioned by the breach of
contract of sale.
3) The seller resumes ownership of the goods.
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).
Rules of preference in case of double sale
1. Movable property
Ownership shall be transferred to the person who first took possession of the property in
good faith, ( i.e. first possessor in good faith)
The possession referred to here may either be actual or constructive.
Examples:
a. S sold his computer to B who told S that he would obtain delivery of the computer after 3
days. Before the third day, S sold that same computer to X who immediately took
physical possession of the computer. X was not aware of the previous sale to B. Neither
was B aware of the sale made to X because the sale to X had not yet taken place at the
time that he (B) purchased the computer. Who has a better right to the computer? B or
X?
Answer: X because he first took possession of the computer in good faith.
b. S sold his ring to B in a public instrument. However, B informed S that he would obtain
actual delivery of the ring after 3 days. The day after the sale to B, S sold the same ring
to X in a private instrument. X immediately took actual possession of the ring. X was not
aware of the previous sale to B. Neither was B aware of the sale to X at the time that he
(B) purchased the ring since the sale to X had not yet taken place. Who has a better right
to the ring B or X?
Answer: B because although he did not take actual possession of the ring, the sale
to him was in a public instrument the execution of which resulted in the constructive
 delivery of the ring to him.
2. Immovable property
a. Ownership shall belong to the person who in good faith first registered the sale in the
Registry of Property (i.e., first registrant in good faith).
b. If there was no registration, ownership shall belong to the person who first took
possession thereof in good faith (i.e., first possessor in good faith).
The possession referred to here is either actual or constructive.
c. In the absence of both registration and possession, ownership shall belong to the person
who presents the oldest title in good faith. (Art. 1544)
In all of the above cases, good faith is essential, being the basic premise of preferential
rights granted to the person claiming ownership of the immovable. [Tanglao vs. Parungao, G.
R. No. 166913, October 5, 2007; P-yongayong vs. Court of Appeals, 430 SCRA 210 (2004)]
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.)
Presence of occupants and improvements on immovable
B1 bought a lot from S Realty for P1,400,000.00 giving a down payment of P600,000.00.
Balance was to be paid within one year from execution of contract under an agreement that B1
could apply for a loan to pay the balance. In the meantime, B1 introduced permanent
improvements on the property consisting of a building and concrete parameter fence. B1 failed to
pay the balance because S Realty refused to deliver the title to the property which was required in
B1's application for a loan. S Realty then sold the lot to B2 who forcibly opened the steel gate and
the building doors and entered the premises. B2 thereafter registered the sale. Who shall be
preferred? B1 or B2?
Answer: B1 shall be preferred. At the time of the second sale, there were already
improvements on, and occupants (other than the seller) of, the property in question. These facts
should have put B2 on his guard. He cannot therefore be regarded as a buyer in good faith and
cannot have any right over the property. (See Tanglao vs. Parungao, supra.)
Conditions and Warranties
Conditions in a contract of sale
If the obligation of a party is subject to a condition which is not fulfilled, the other party may
choose to do any of the following:
1. Refuse to proceed with the contract.
He may also treat the non-performance of the condition as a breach of warranty.
2. Waive the performance of the condition. (Art. 1545)
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)

Statement of seller's opinion
This shall not be construed as a warranty unless made by an expert and it was relied
upon by the buyer. (Art. 1546)
2. Implied warranties
Implied warranties are those that are inherent in contracts of sale and accompany them
unless they are suppressed by the parties. They are of two kinds:
a. Warranty against eviction - 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 shall from that time have and enjoy the legal and peaceful possession of the thing.
b. Warranty against hidden defects - This refers to the implied warranty that the thing shall
be free from any hidden faults or defects, or any charge or encumbrance not declared or
known to the buyer. (Art. 1547)
Persons not liable for breach of warranty
1. Sheriff
2. Auctioneer
3. Mortagee
4. Pledgee
5. Other persons professing to sell by virtue of authority in fact or law. (Art. 1546)
Warranty in Case of Eviction
Warranty in Case of Eviction
1. Eviction, concept
Eviction is the deprivation of the vendee of the whole or a part of the thing sold by virtue
of a final judgement based on a right prior to the sale or an act imputable to the vendor. (Art.
1548)
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)
4. Vendor's liability.in case of eviction
a. If there is a stipulation exempting the vendor from the obligation to answer for eviction
1) Vendor acted in bad faith, i.e., he had knowledge at the time of sale of the existence
of a fact that may give rise to eviction, the waiver is void - Vendor shall be liable for
the following:
a) Value of the thing at the time of eviction.
b) Income or fruits, if the vendee has been ordered to deliver them to the party
who won the suit against him.
c) Cost of suit which caused the eviction, and, in a proper case, those of the suit
brought against the vendor for the warranty.
d) Expenses of the contract, if the vendee has paid them, and
e) Damages and interests, and ornamental expenses, if the sale was made in bad
faith. (Arts. 1553, 1555)
2) Vendor acted in good faith - Vendor's liability shall be as follows:
a) If vendee made the waiver without knowledge of the risks of eviction (waiver
consciente), the vendor shall pay only the value of the thing sold at the time of
eviction.
b) If vendee made the waiver with knowledge of the risks of eviction and assumed
the consequences (waiver intencionada), the vendor shall not be liable.
b. Where no warranty has been agreed upon or there was no stipulation exempting the
 vendor from liability
1) Vendor acted in bad faith - Vendor's liability shall be the same as items a) to e) in
4.a.1) above.
2) Vendor acted in good faith - Vendor's liability shall be the same as items a) to d) in
4.a.1) above, i.e., there is no liability for damages and interest.
5. Vendee's remedies in case of partial eviction
If the vendee loses, by reason of eviction, a part of the thing sold of such importance, in
relation to the whole, that he would not have bought it without said part, he may demand:
a. Rescission of the contract; or
b. Enforcement of the vendor's liability for eviction.
The above rule shall be observed when two or more things have been jointly sold for
a lump sum, or for a separate price for each of them, if it should clearly appear that the
vendee would not have purchased one without the other. (Art. 1556)
Rules on easement or servitude
1. Easement or servitude, concept
Easement or servitude is an encumbrance imposed upon an immovable for the benefit of
another immovable belonging to a different owner. (Art. 613)
Example: A and B are owners of adjoining lots. The only way by which B can have
access to his lot from the road is to pass through A's lot so he enters into an agreement with
A for A to give him a right of way. The right of way is an easement or servitude imposed upon
the lot of A for the benefit of tsshe lot belonging to B.
2. Kinds of easement or servitude
a. Apparent easement - One that is made known and continually kept in view by external
signs that reveal its use and enjoyment. (Art. 615)
b. Non-apparent easement - One which shows no external indication of its existence. (Art.
615)
3. Requisites for vendor's liability should the immovable sold be encumbered with easement or
servitude
a. The easement must be non-apparent.
b. It must not have been mentioned in the agreement.
c. It must be of such nature that it must be presumed that the vendee would not have
acquired the immovable had he been aware thereof. (Art. 1560)
4. Vendee's remedies should the immovable sold be encumbered with any non-apparent
easement or servitude
a. Within one year from the execution of the deed of sale, the vendee may ask for:
1) Rescission, or
2) Damages.
b. After one year from the execution of the deed of sale, the vendee may ask for:
Damages, within a period a period of one year from the discovery of the easement
or servitude. (Art. 1560)
5. When vendor not liable for easement or servitude
a. When the easement is apparent.
b. When the non-app'arent easement or servitude is recorded in the Registry of Property,
unless there is an express warranty that the thing is free from all burdens and
encumbrances. (Art. 1560)
c. When the vendee had knowledge at the time of the sale of the existence of the
easement or servitude, though it was non-apparent. (10 Manresa 222), such as when it
was mentioned in the agreement. (Art. 1560)
Warranty Against Hidden Defects of
or Encumbrances upon the Thing Sold
Warranty against hidden defects
1. Requisites for enforcement of vendor's liability against hidden defects.
a. The defect must exist at the time of sale. (Art. 1561)
b. The defect must be hidden, i.e., not patent or visible. (Art. 1561)
The vendor, however, shall not be liable for defects that are not visible if the vendee
is an expert who, by reason of his trade or profession, should have known them. (Art.
1561)
c. The defect must render the thing unfit for the use for which it is intended or diminishes its
fitness for such use to such an extent, that had the vendee been aware thereof, he would
not have acquired it or would have given a lower price for it. (Art. 1561)
d. The action to enforce it must be made within the period provided by law.
2. Warranties included
a. Implied warranty of fitness for a particular purpose
1) Requisites
a) The buyer makes known to the seller the particular purpose for which the goods
are acquired.
b) The buyer has relied upon the seller's skill or judgment. (Art. 1562)
2) Sale of goods under their patent or trade name
There is no warranty as to the fitness of such' goods for a particular
purpose, unless otherwise stipulated. (Art. 1563)
3) Usage of trade
An implied warranty or condition as to the quality or fitness for a
particular purpose may be annexed by the usage of trade. (Art. 1564)
b. Implied warranty of merchantable quality
 This is an implied warranty that the goods are fit for the general purpose of the thing,
and not necessarily for the purpose of the buyer. This warranty is present when the
goods are bought by description from a seller who deals in goods of such description
(whether he is the grower or not.) (Art. 1562)
c. Implied warranty of merchantability
In sale by sample, if the seller is a dealer in goods of that kind, there is an implied
warranty that the goods shall be free from any defect rendering them unmerchantable
which would not be apparent upon reasonable examination of the sample. (Art. 1565)
3. Responsibility for hidden defects
General rule: The vendor shall be liable to the vendee for any hidden faults or defects in
the thing sold, even though he was not aware thereof.
Exception: The vendor shall not be liable if there is a stipulation exempting him from such
defects and he was not aware thereof. (Art. 1566)
4. Remedies of vendee in case of breach (in the warranties under Arts. 1561, 1562, 1564, 1565
and 1566) The buyer may choose between:
a. Withdrawing from the contract or rescission (accion redhibitoria), and
b. Demanding a proportionate reduction in the price (accion quanti minoris), with damages
in either case. (Art. 1567)
Rules in case of loss of the thing with hidden defects
1. The cause of the loss is the defect -
a. If the vendor was aware of the defect, he shall be obliged:
1) To return the price;
2) To refund the expenses of the contract; and
3) To pay damages. (Art. 1568)
b. If the vendor was not aware of the defect, he shall be obliged:
1) To return the price;
2) To pay the interest thereon; and
3) To refund the expenses of the contract. (Art. 1568)
2. The cause if loss is a fortuitous event or the fault of the vendee -
a. If the vendor was aware of the defect, he shall be obliged:
1) To return the price paid less the value of the thing at the time of loss; and
2) To pay damages. (Art. 1569)
b. If the vendor was not aware of the defect, he shall be obliged:
To return the price • paid less the value of the thing at the time of loss. (Art. 1569)
Period of filing action
The action to withdraw from the contract (accion redhibitoria) or reduction of the price with
damages (accion quanti minoris) (Arts. 1561 to 1567); and all other actions to enforce the seller's
liability for hidden defects when the thing is lost (Arts. 1568 and 1569) and in judicial sales (Art.
1570), is six (6) months from the delivery of the thing sold (Art. 1571)
Rules in sale of animals with defects or disease
1. Sale of animals with redhibitory defects
a. Redhibitory defect, concept; liability of veterinarian
Redhibitory defect is a defect of such nature that expert knowledge, even after a
professional inspection has been made, is not sufficient to discover it.
If the veterinarian, through ignorance or bad faith should fail to discover or disclose
it, he shall be liable for damages. (Art. 1576)
b. Remedies of vendee in case of sale of animals with redhibitory defects
General rule: If two or more animals are sold together, whether for a lump sum or for
a separate price for each of them, the redhibitory defect of one shall only give rise to its
redhibition. Accordingly, the vendee may only ask for:
1) The' rescission of the sale of the defective animal {accion redhibitoria), or
2) Ask for a proportionate reduction in its price {accion quanti minoris). (Arts. 1572,
1567, 1580)
Exception: The redhibitory defect of one shall give rise to the redhibition of all the
animals sold, including the sound ones, if the vendee would not have bought the sound
animals without the defective one. This intention by the vendee is presumed when a
team, yoke, pair, or set is bought, even if a separate price has been fixed for each one of
the animals composing the same. (Art. 1572) Accordingly, the vendee may ask for the
rescission of the whole contract.
Note: The above rule and exception apply in like manner to the sale of other things.
(Art. 1573)
Example:
B bought 6 horses from S. A few days after the sale, one of the horses was found to
have a redhibitory defect. Here, B can only ask for the rescission of the sale of the horse
with such defect or for a proportionate reduction in its price.
However, if B bought the 6 horses as a team, such as for his horse-drawn carriage,
B may seek the rescission of the sale of all the horses because he would not have
bought the sound horses without the defective horse.
c. When must redhibitory action be filed The redhibitory action must be filed within forty (40)
days from the date of delivery to the vendee. This action can only be exercised with
respect to faults and defects which are determined by law or local customs. (Art. 1577)
d. Effect of the rescission of the sale of an animal with redhibitory defect
The animal shall be returned in the condition in which it was sold and delivered, the
vendee being answerable for any injury due to his negligence, and not arising from the
redhibitory fault or defect. (Art. 1579)
2. When sale of animals is void
a. When the animals are suffering from contagious diseases.
b. When the animals are found to be unfit for the use or service for which they were
acquired as stated in the contract. (Art. 1575)
3. Vendor's liability in case the animal sold dies of disease
The vendor shall be liable for the death of the animal sold, whether the defect is
redhibitory or not, if the following requirements are present:
a. The disease existed at the time of sale;
b. The disease is the cause of death of the animal, and
c. The animal dies within three (3) days from time of purchase. (Art. 1578)
4. Sale without warranty against hidden defects of animals
There is no warranty against hidden defects of animals sold at fairs or at public auctions,
or of livestock sold as condemned. (Art. 1574)
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)]
5. When warrantor not required to perform warranty
The warrantor will not be required to perform the duties mentioned in No. 4 above, if he
can show that the defect, malfunction or failure to conform to a written warranty was caused
by. damage due to unreasonable use thereof. [Sec. 68 (d)]
6. Duration of warranty
a. Period stipulated by the seller and consumer when the express warranty shall be
enforceable. If the implied warranty on merchantability accompanies an express
warranty, both will be of equal duration.
b. Any other implied warranty shall endure not less than
sixty (60) days nor more than one (1) year following the
sale. [Sec. 68 (e)]
7. Remedies for breach of warranty [Sec. 68 (f)]
a. Express warranty
The consumer may elect either of the following:
1) Repair of the product, in whole or in part
The warranty work must be made to conform to the express warranty within
thirty (30) days by either the warrantor or his representative, which period may be
extended by conditions beyond the control of the warrantor or his representative.
2) Refund of the purchase price
The amount directly attributable to the use of the consumer prior to discovery of
the non-conformity shall be deducted.
b. Implied warranty
The consumer may:
1) Retain in the goods and recover damages, or
2) Reject the goods, cancel the contract and recover from the seller so much of the
purchase price as has been paid, including damages.
OBLIGATIONS OF THE VENDEE
Obligations of the vendee
1. To accept the delivery of the thing sold. (Art. 1582)
a. When buyer deemed to have accepted the goods
1) When he intimates to the seller that he is accepting them.
2) When he does any act in relation to the goods which is inconsistent with the
ownership of the seller.
Thus, the buyer is deemed to have accepted the goods if he begins to consume
them or give them to others, or if he has performed additional work on them.
3) When he retains the goods after the lapse of a reasonable time without intimating to
the seller that he has rejected them. (Art. 1585)
b. Delivery of goods in installments
As a general rule, the buyer is not bound to accept delivery of the goods in
installments, unless otherwise agreed. (Art. 1583) This is consistent with the rule that
payment or performance must be complete. (Art. 1233)
If there is a stipulation and the seller makes defective deliveries in respect of one or
more installments, or the buyer neglects or refuses without just cause to take delivery of
or pay one or more installments, the injured party may, depending upon the
circumstances of the case:
1) Refuse to proceed further with the contract and sue for damages for breach of the
entire contract; or
2) Claim compensation but not damages, if the breach is severable. (Art. 1583)
c. Right of buyer to examine goods before accepting them
General rule: The buyer has the right to examine the goods before accepting them.
Exceptions, i.e., such right is not available in the following cases:
1) When there is an agreement to that effect.
2) When there is a stipulation that the goods shall not be delivered to the buyer until he
has paid the price such as when the goods are marked with the words "collect on
delivery" – unless there is an agreement or usage of trade permitting such
examination. (Art. 1584)
d. Effect of acceptance of goods on seller's liability for breach of warranty
General rule: The seller is not discharged from liability in damages or other remedy
for breach of warranty by the acceptance of the goods.
Exceptions, i.e., the seller is discharged from such liability in the following cases:
1) If there is an agreement, whether express or implied.
2) If the buyer fails to give notice to the seller of any breach of warranty within a
reasonable time after the buyer knows or ought to know of such breach. (Art. 1586)
e. Effect when buyer refuses to accept delivery
1) If refusal to accept delivery is justified (such as when the quantity is not complete or
the goods being delivered are different from those stipulated).
a) Buyer has no duty to return goods to the seller unless otherwise agreed. (Art.
1587)
b) Title to. the goods does not pass on to him. (Art. 1588)
c) He shall not be obliged to pay the price.
d) If he constitutes himself as depositary of the goods, he shall be liable as such.
(Art. 1587)
Obligation of the buyer
It is sufficient that the buyer notifies the seller that he refuses to accept the
goods (Art. 1587) so that the seller can take action on them.
2) If refusal to accept delivery is not justified.
a) Title to the goods passes to the buyer from the moment the goods are placed at
his disposal, (Art. 1588) except in the following:
(1) When there is a stipulation to the contrary. (Art. 1588)
(2) When the seller has reserved the ownership of the goods as a security for
the payment of the price. (Arts. 1523 and 1503)
b) He shall be obliged to pay the price.
2. To pay the price of the thing. (Art. 1582)
a. Time and place of payment of the price
1) At the time and place stipulated.
2) Time and place of delivery of the thing, in the absence of stipulation. (Art. 1582)
b. When interest will be paid on the price
The buyer shall pay interest for the period between the delivery of the thing and the
payment of the price, in the following cases:
1) If there is a stipulation.
If interest was stipulated but the rate was not indicated, the rate shall be the
legal rate of 6%. (Effective July 1, 2013, the legal rate shall be 6% per Circular No.
799 of the Monetary Board.)
2) If the thing sold produces fruits or income.
3) If he is in default, from the time of judicial or extrajudicial demand for the payment of
the price. (Art. 1589)
c. Suspension of payment of the price by vendee
1) Grounds
a) Disturbance in the vendee's possession or ownership of the thing purchased.
Thus, the vendee may suspend payment if a complaint for eviction was
brought against him.
b) Reasonable grounds to fear such disturbance, by a vindicatory action or
foreclosure of mortgage. (Art. 1590)
Thus, the vendee may suspend payment if he receives a demand letter
which threatens the filing of a complaint for the recovery of the thing sold or for.
 foreclosure of the mortgage constituted on the thing.
2) Duration of suspension of payment
Until the vendor has caused the disturbance or danger to cease. (Art. 1590)
3) When right to suspend payment not available.
a) If the vendor gives security for the return of the price.
b) If it has been stipulated that the vendee shall pay the price notwithstanding the
existence of the aforementioned disturbance or danger.
c) If the disturbance is a mere act of trespass. (Art. 1590) Thus, the mere entry
and presence of squatters will not justify suspension of the payment of the price
by the buyer.
d. Rescission by vendor
1) Immovables
a) When vendor is entitled to sue forimmediate rescission
The vendor may immediately sue for rescission of the sale if there are
reasonable grounds to fear:
(1) the loss of the immovable property sold, and
(2) its price. (Art. 1591)
Example: S sold his lot to B for P50.000.00. While the lot had been
delivered to B, B was to pay the price after 2 months. If the lot was in danger of
being eroded because B was cutting all the trees planted thereon and B was
squandering his money in gambling, S may sue for the immediate rescission of
the sale.
If one or both grounds do not exist, the vendor may choose between:
(1) fulfillment of the contract, with damages, and
(2) rescission of the contract, with amages. (Art. 1191)
b) Pactum commissorium
This is an agreement between the vendor and the vendee in the sale of an
immovable that rescission of the contract shall of right take place if the vendee
fails to pay the price at the time agreed upon. (Art. 1592)
This agreement is not valid. Accordingly, the vendee may pay even after
the expiration of the period as long as no demand for rescission has been made
upon him either judicially or by notarial act. After the demand, the court may not
grant him a new term. (Art. 1592)
In the case of sale of real property which is payable in installments and the
buyer has paid at least two years of installments, the provisions of the Realty
Installment Buyer Act are applicable.
2) Movables
a) Grounds for immediate rescission
Rescission of the sale of a movable shall of right take place in the interest
of the vendor, i.e., at his option, if at the time fixed for the delivery of the thing,
the vendee:
(1) does not appear to receive the thing, or
(2) having appeared, does not pay the price, unless a longer period is
stipulated for its payment. (Art. 1593)
ACTIONS FOR BREACH
OF CONTRACT OF SALE OF GOODS
Actions by the seller
1. Maintain an action for the price of the goods if the buyer wrongfully neglects or refuses to
pay. (Art. 1595)
2. Maintain an action for damages if the buyer wrongfully neglects or refuses to accept and pay
for the goods. (Art. 1596)
3. Rescind the contract if the buyer has repudiated the sale, or manifested his inability to
perform his obligation, or has committed a breach of contract, where the goods have not
been delivered to buyer. (Art. 1597)
Actions by the buyer
1. Bring an action for specific performance, if the seller has broken the contract to deliver
specific or ascertained goods. (Art. 1598)
2. In case of breach of warranty by the seller, the buyer may, at his election:
a. Accept or keep the goods and set up against the seller, the breach of warranty by way of
recoupment or diminution or extinction of the price.
b. Accept or keep the goods and maintain an action against the seller for damages for
breach of warranty.
c. Refuse to accept the goods, and maintain an action against the seller for damages for
breach of warranty.
d. Rescind the sale and refuse to receive the goods or if the goods have already been
received, return them or offer to return them to the seller and recover the price or any
part thereof which has been paid. (Art. 1599)
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)
Liability with respect to fruits existing at the time of redemption
a. If there were visible or growing fruits at the time of sale
There will be no reimbursement for or prorating of the fruits at the time of redemption if no
indemnity was paid by the purchaser at the time the sale was executed.
b. If there were no fruits at the time of sale
The fruits at the time of redemption will be prorated between the redemptioner and
the vendee, giving the vendee the part corresponding to the time he possessed the land
in the last year, counted from the anniversary of the date of sale. (Art. 1617)
Condition of the property at the time of redemption
a. The vendor shall receive the property free from all charges constituted by the vendee.
b. He shall respect the leases which the vendee may have executed in good faith, and in
accordance with the custom of the place where the land is situated. (Art. 1618)
Right of vendee to subrogation
In sale with right to repurchase, the vendee is subrogated to the vendor's rights and
actions. (Art. 1609)
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)
3. Effect of failure to exercise right of repurchase
Ownership is consolidated in the vendee. However, in case of real property, a judicial
order, after the vendor has been duly heard, is required for the purpose of recording the
consolidation in the Registry of Property. (Art. 1607)
4. Against whom right to repurchase available
a. The vendee a retro (original vendee).
If the original vendee dies leaving several heirs, the vendor can exercise his right to
repurchase against each of them for his own share, whether the thing be undivided, or it
has been partitioned among them.
However, if the inheritance has been divided, and the thing sold has been awarded
to one of the heirs, the action for redemption may be instituted against for the whole.
(Art. 1615)
b. Every possessor whose right is derived from the vendee a retro (original vendee), even if
no mention is made in the second contract of the right to repurchase, provided the right
has been recorded in the Register of Deeds, or even, if the right is not registered, but the
possessor has knowledge of the existence of the right. (Art. 1608, Mortgage Law, Land
Registration Law)
Examples:
S sold his lot to B with a right to repurchase the said I within 5 years.
a. S may repurchase the lot from B, the original vendee, within the 5 year period.
b. Assume that B dies before S could repurchase the lot. B is survived by his sons X, Y
and Z. S may exercise his right to repurchase against X, Y and Z only to the extent
of 1/3 undivided interest of each on the lot.
If the lot has been divided, S may exercise his ' right to repurchase against X, Y
 and Z only to the extent of the part that had been given to each one of them in the
partition.
If X inherited the whole lot (Y and Z having been given other properties from the
estate), then S may exercise his right to repurchase against X alone.
c. Assume that B sold the property to C. S may exercise his right to repurchase against
C provided the sale with right to repurchase was registered or C was aware that the
sale was with a right to repurchase when he purchased the property from B.
5. Who may avail themselves of the right to repurchase
a. The vendor a retro
1) A co-owner of an undivided immovable which is essentially indivisible who sells his
share with a right to repurchase to a third person who subsequently acquires the
whole thereof, may be compelled by the latter to redeem the whole property, if the
former wishes to make use of the right of redemption. (Arts. 498 and 1611)
2) If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more
than his respective share. (Art. 1612)
If the person who sold an immovable alone has left several heirs, each heir may
redeem only the part which he may have acquired. (Art. 1612)
The vendee may demand that the co-owners or co-heirs come to an agreement
upon the repurchase of the whole thing, and if they fail to do so, the vendee cannot
be compelled to consent to a partial redemption. (Art. 1613)
3) Each one of the co-owners of an undivided immovable who may have sold his share
separately, may independently exercise the right of repurchase as regards his own
share and the vendee cannot compel him to redeem the whole property. (Art. 1614)
b. Creditors of the vendor.
However, they cannot make use of the right of redemption against the vendee, until
after they have exhausted the property of the vendor. (Art. 1610)
Examples:
a. S sold his lot to B reserving his right to repurchase the same within 5 years. S himself
may repurchase the lot from B.
b. A, B and C are co-owners of a lot. The lot is situated on a hillside and of a shape that
subdividing it among the owners would render the lot unproductive, hence, essentially
indivisible. A sells his 1/3 undivided interest to X with right to repurchase the same in 5
years. Shortly thereafter, B and C also sell their respective undivided interests to X
without a right to repurchase. When A exercises his right to repurchase, X may compel
him to redeem not only his share but also those of B and C, i.e., the whole property.
c. A, B and C are co-owners of a lot. They sell the lot to X with right to repurchase in the
same contract. In this case, each one may repurchase only to the extent of his 1/3
undivided interest. X, however, may demand that A, B and C come to an agreement to
redeem the whole property, and if they fail to do so, X cannot be compelled to consent to
a partial redemption.
The same rule applies if S was the original seller who sold the lot with right to
repurchase and he dies with A, B and C as heirs.
d. A, B and C are co-owners of a lot. A sells his undivided interest of 1/3 on the lot with right
to repurchase to X. Sometime later, B also sells his 1/3 undivided interest to X with right
to repurchase. Thereafter, C also sells his 1/3 undivided interest to X with right to
repurchase. A, B and C may each exercise his right to repurchase only with respect to
his share and no one of them can be compelled by X to redeem the whole property.
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.
Right of pre-emption by adjoining owner
If such small piece of urban land is about to be resold, the adjoining owner shall
have the right of pre-emption at a reasonable price, i.e., the adjoining owner shall -be
given the right to buy the property before it is offered to others.
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.
4. Recording of sale in the Registry of Property
The deed of sale shall not be recorded in the Registry of Property, unless accompanied
by an affidavit of the vendor thai he has given written notice of the sale to all possible
redemptioners. (Art. 1623)
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.
Nature of assignment of credits and other incorporeal rights
It partakes of the nature of a contract of sale; hence, it is perfected at the moment there is a
meeting of minds upon the credit or right which is the object of the contract and upon the price.
(See Arts. 1475,1624.)
Assignment of credit may also constitute exchange, donation or dation in payment (dacion en
pago). In case of dation in payment, the assignment of credit operates as a mode of extinguishing
the obligation; the delivery and transmission of ownership of a thing (in this case, the credit due
from a third person) by the debtor to the creditor is accepted as the equivalent of the performance
of the obligation. (Sps. Serfino vs. Far East Bank and Trust Co., supra)
Form of assignment of credits
1, Between the parties
It may be in any form. It may be oral or written, or partly oral and partly written.
2. For binding effect against third persons
 a. If personal property is involved - public instrument.
b. If real property is involved - public instrument recorded in the Registry of Property (Art.
1625)
Effect of payment by debtor to creditor
1. Before knowledge of the assignment
The debtor is released from his obligation if he pays his creditor without his knowledge
that his debt has been assigned. (Art. 1626)
2. After knowledge of the assignment
The debtor is not released from his obligation to pay the assignee.
Note: An assignment does not require the consent of the debtor. However, actual notice must be
given to him of the assignment so that he could make his payment to the assignee. This notice is a
form of protection in favor of the assignee.
Accessory rights included in the assignment (Art. 1627)
1. Guaranty
2. Mortgage
3. Pledge
4. Preference
This inclusion of accessory rights in the assignment is based on the rule that the accessory
follows the principal. (See Art. 1537.) However, the parties may stipulate that the accessory rights
shall be excluded from the assignment.
Example: D obtained a loan from C amounting to P200,000.00. The loan is secured by a
mortgage of D's lot. If C assigns his credit right to X, the mortgage right is also considered
assigned unless C and X agree otherwise.
Warranties of assignor (Art. 1628)
1. The legality and existence of the credit at the time of sale.
However, there is no such warranty if the credit was sold as doubtful.
Example: D owes C P10,000.00. The debt is evidenced by a promissory note.
Thereafter, C assigns his credit right to X. If X cannot collect later from D because the note
was issued for an illegal gambling debt, C will be liable to X because he warranted that the
credit was legal when he assigned it to X
If X cannot collect from D because it turned out that the debt had prescribed, C shall also
be liable to X because he warranted that the credit existed.
Assume that the credit right is in litigation. Here, the credit is doubtful because whether D
is liable or not to C depends upon the outcome of the case. Accordingly, if X later on cannot
collect from D because the court adjudges him not liable to C, X cannot hold C liable.
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.
Liability of the assignor when warranties are violated
1. If he was in good faith - He shall be liable for the following:
a. Price received.
b. Expenses of the contract.
c. Other legitimate payments by reason of the assignment. (Arts. 1628, 1616)
2. If he was in bad faith - He shall be liable for the following:
a. Price received.
b. Expenses of the contract.
c. Other legitimate expenses by reason of the assignment.
d. Damages (Arts. 1628,1616)
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.)
Sale of present inheritance
1. Warranty of person selling an existing or present inheritance He shall only be answerable for
his character as heir but not of the things composing the inheritance, unless such things were
enumerated. (Art. 1630) This is known as the warranty of heirship.
Example: A, B and C are heirs of X. Pending the partition of the estate of X, A sold his
share in the inheritance to Y for P200,000.00. After partition, A received only P180,000.00. In
this case, A will not be liable to Y for the difference because what he warranted was that
he'was an heir of X.
If A sold his inheritance to Y and listed down that he would be receiving a car, a house
and lot, furniture and fixtures, but later on he did not receive the car in the partition, then he
shall be liable to Y for violation of his warranty.
If A received nothing from X because he was not an heir in the first place, then A will
 likewise be liable to Y for violation of his warranty.
2. Liabilities of vendor of inheritance sold
If the vendor has profited from the fruits or received anything from the inheritance sold
(except as to the price thereof), he shall be obligated to pay them to the vendee unless the
contrary has been stipulated. (Art. 1632)
3. Liabilities of vendee of inheritance
The vendee must reimburse the vendor for the debts and charges on the estate paid by
the vendor, unless there is a stipulation to the contrary. (Art. 1633)
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.
Sale of credit or other incorporeal right in litigation (Art. 1634)
1. When right considered in litigation
The credit or other incorporeal right shall be considered in litigation from the time the
complaint concerning the same is answered.
2. Right of legal redemption of debtor when credit or other incorporeal right in litigation is sold
The debtor shall have the right to extinguish the same by reimbursing the assignee the
following:
a. Price paid by the assignee for the right purchased.
b. The judicial costs incurred by him.
c. Interest on the price from the day on which the same was paid.
3. Period within which debtor may be exercise the right
Within 30 days from the date the assignee demands payment from him.
4. Purpose of the legal redemption
a. To enable the debtor to pay less than the value of the credit.
b. To prevent speculation on the part of the assignee.
Example: D borrowed P50,000.00 from C. When D did not pay the debt upon demand by
C, C filed a complaint against him to collect the debt. D answered the complaint. The credit
right is considered in litigation. Suppose C sold the credit right to X for P40,000.00. D may
exercise his right of legal redemption (within 30 days from demand by X) by paying X the
amount of P40.000.00 plus judicial costs incurred by X and the interest on the P40.000.00
from the day that the same was paid by X to C.
5. Exceptions to legal redemption by debtor (Art. 1635)
The debtor's right of legal redemption shall not be available when the assignment of the
right in litigation is made:
a. To a co-heir or co-owner of the right assigned.
The prohibition is intended to do away with coownership. If redemption by the debtor
is allowed, the number of co-owners will again increase.
Example: D owes X and Y. X and Y sue D for collection. D files his answer to the
complaint. While the case is pending, X sells his share of the credit to Y. D cannot
redeem the share of X from Y.
b. To a creditor in payment of his credit.
Redemption is not allowed because the assignment is meant as a payment to the
assignee. There is therefore no speculation on the part of the assignee whose only
desire is to be paid.
Example: D owes X P100,000.00. For failure to pay, X sues D. D files his answer.
While the case is pending, X assigns his credit right to Y whom he owes P80.000.00. D
cannot redeem against Y.
c. To the possessor of a tenement or piece of land which is subject to the right in litigation
assigned.
Redemption is not likewise allowed since the intention of the assignee in taking the
credit is to preserve the property and not to speculate.
Example: D obtained a loan from C. To secure the debt, D mortgaged his lot. Later,
D sold his lot to X. When D could not pay, C sued D. While the case was pending, C
assigned his credit right to X. D has no right of legal redemption against X.
SALES - DIAGNOSTIC EXERCISES
TEST I - MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.
1. A contract whereby one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing and the other to pay therefor a price certain in money or
its equivalent is a contract of:
a. barter. c. dacion en pago.
b. sale. d. mortgage.
2. The following are the essential elements of a contract of sale, except:
a. consent of the contracting parties.
b. subject matter which should be determinate.
c. price which is certain in money or its equivalent.
d. warranty against eviction and against hidden defects.
 I. The sale of a future thing.
3. The following are the characteristics of a contract of sale, except: II. The sale of hope or expectancy.
a. principal, which means that a contract of sale can stand by itself. III. The sale of a present thing.
b. real, which requires the delivery of the object of the contract of sale for its perfection. IV. The thing sold must come into existence,
c. onerous, where rights are acquired in exchange of a valuable consideration. Based on the above information, which of the following is correct?
d. bilateral, which means that both parties are bound reciprocally to each other. a. Items I and II pertain to emptio rei speratae.
b. Items II and III pertain to emptio spei.
4. One of the following characteristics of dacion en pago is also a characteristic of a contract of c. Items II and III pertain to emptio rei speratae.
sale. Which is it? d. Items III and IV pertain to emptio spei
a. There is a pre-existing credit.
b. Obligations are extinguished. 9. Santiago sells to Bermejo 500 sacks of rice at P1.000.00 per sack from the stock then stored
c. There is less freedom in fixing the price. in the warehouse of Santiago. Unknown to the parties, the warehouse contains only 480
d. Ownership of the object is transferred to the other party. 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.
5. The following are characteristics of a contract of sale except for one which refers to payment b. The sale is valid up to 480 sacks of rice but void as to the deficiency of 20 sacks of rice.
by cession. Which characteristic refers to payment by cession? c. The entire sale is valid up to 500 sacks of rice. Bermejo becomes the owner of the whole
a. There is no pre-existing credit. stock available and Santiago must deliver the deficiency of 20 sacks of rice.
b. The cause or consideration is the price. d. The sale is valid up to 480 sacks of rice but rescissible as to the deficiency of 20 sacks of
c. There is more freedom in fixing the price. rice by reason of damage suffered by Bermejo.
d. Assignee of the property acquires the right to sell the thing but not the ownership thereof.
10. Somera sells to Buenviaje at P50 per gallon 300 gallons of gasoline stored in his truck's tank
6. The following items pertain to either a contract of sale or a contract to sell. which, unknown to the parties, contains 500 gallons gasoline. What is the status of the
I. Ownership of the thing sold is transferred upon delivery. contract of sale between Somera and Bermejo?
II. Ownership of the thing is transferred to the buyer at some future time. a. The sale is void because the quantity available is more than the quantity sold.
III. The risk of loss in on the buyer. b. The sale is valid up to 500 gallons of gasoline. Buenviaje must pay for the additional 200
IV. The risk of loss is on the seller. gallons of gasoline.
Based on the above data, which of the following is correct? c. The sale is valid up to 300 gallons of gasoline. Buenviaje becomes the owner of 3/5 of
a. Items I and III pertain to a contract to sell. the whole stock, while Somera becomes the owner of 2/5 thereof.
b. Items II and III pertain to a contract to sell. d. The sale is rescissible because Somera will suffer lesion of more than % of the value of
c. Items II and IV pertain to a contract of sale. the whole stock.
d. Items I and III pertain to a contract of sale.
11. San Manuel Corporation, which maintains a professional basketball team, entered into a
7. One of the following is not a requisite of the object of a contract of sale. Which is it? contract with Armstrong Rubber Company for the latter to provide a pair of rubber shoes to
a. It must be within the commerce of men. the former's two imported basketball players, Charles Jordan and Michael Barkley. Armstrong
b. It must be licit. Rubber Company was instructed to make a pair for either or both players in case the
c. It must be determinate or determinable, company did not manufacture shoes of their size. No pair was, however, immediately
d. Vendor must have the right to transfer the ownership of the thing at the time of sale. 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
8. The following items pertain to either emptio rei speratae or emptio spei. 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 both parties to the contract.
was specially made for him since Armstrong does not make shoes of his size. What kind of a. Option money c. Reservation money
contracts were entered into for the shoes provided to the two basketball players? b. Earnest money d. Down payment
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. 16. S orally offered to sell a certain diamond ring to B for P50,000.00. B accepted the offer and to
b. The contract for the pair of shoes provided to Charles Jordan is a contract of sale, while prove that he was in earnest, he gave S P1,000.00. The parties agreed that the delivery of
that for Michael Barkley is a contract for a piece of work. the ring and the payment of the price would be made 30 days later. On due date:
c. Both contracts are contracts of sale. a. S may collect from B P50.000.00.
d. Both contracts are contracts for a piece of work. b. S may collect from B P49.000.00.
c. S cannot enforce payment because the contract was not reduced to writing.
12. S and B entered into a contract whereby S transferred to B a specific car for the price of d. S cannot enforce payment because' there was no contract of sale yet.
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". 17. On June 1, 2014, S sold to B 50 units of machines which were scheduled to arrive from
a. The contract is void because the intention of the parties is void since the value of the Japan the following day on board the vessel "MT Nippon Maru" The sale was evidenced
diamond ring is more than the monetary consideration given. by an invoice identifying each machine by serial number. Each machine was priced at
b. The contract is a valid contract of sale as intended by the parties regardless of whether P10,000.00. Unknown to the parties, 30 units were damaged beyond repair by seawater on
the monetary consideration is more or less than the value of the . property consideration. May 31, 2014. Based on the foregoing, which of the following statements is incorrect?
c. The contract is a valid contract of barter since the value of the property given is more a. B may rescind the whole contract.
than the monetary consideration. The intention of the parties is immaterial. b. B may demand delivery of the remaining 20 units and pay the price therefor.
d. The contract is partly a contract of barter and partly a contract of sale. 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.
13. The price in a contract of sale is certain, except: d. S has no option to rescind the whole contract or require payment of the remaining 20
a. when the parties have fixed or agreed upon a definite amount. units.
b. if the price is certain with reference to another thing certain.
c. if the fixing of the price is left to the discretion of one of the contracting parties and the 18. It refers to the delivery of the thing sold from hand to hand in case of movables, or the taking
price fixed is not accepted by the other party. of possession with respect to immovables, in the presence and with the consent of the
d. if the price fixed is that which the thing sold would have on a definite day or in a vendor.
particular exchange or market. a. Actual or real delivery.
14. On January 1, S orally sold to B a specific ring for P450.00. The parties agreed that S shall b. Traditio constitutum possessorium.
deliver the ring to B on January 5, while B shall pay the price on January 7. c. Traditio longa manu.
a. The contract is perfected on January 5, when the ring is delivered by S to B. d. Traditio brevi manu.
b. The contract is perfected on January 1, when the parties had a meeting of minds on the
object and the price. 19. On May 1, 2014, S sold to B through a private instrument 20 sacks of corn stored in the only
c. The contract is perfected on January 7, when the price is paid, since both parties would warehouse of S. On May 10, 2014, S delivered the keys to the warehouse to B. The delivery
by then have performed their obligations in the contract. made by S to B is known as:
d. There is no perfected contract because the sale was made orally. a. constructive delivery by legal formalities.
b. symbolic delivery by traditio clavium.
15. A sum of money paid, or a thing delivered upon the making of a contract for the sale of c. traditio longa manu.
goods, to bind the bargain, the delivery and acceptance of which makes the final assent of 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.

28. An unpaid seller has the following rights, except:
a. a lien on the goods or the right to retain them for the price while he is in possession of
them.
b. in case of insolvency of the buyer, a right of stopping the goods in transitu after he has
parted with the possession of them.
c. a right of repurchase.
d. a right to rescind.
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.
31. Goods are still in transit:
a. if the buyer or his agent obtains delivery of the goods before their arrival at the appointed
destination.
b. when the carrier acknowledges possession of the goods as bailee for the buyer after the
arrival of the goods at the place of destination.
c. if the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent.
d. if the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to received them back.
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. effect on the validity of the negotiation.
a. Right of subrogation. c. Right of pre-emption. c. H may not obtain delivery of the goods from C because H acquired whatever title T had
b. Right of redemption. d. Right of repurchase. over the document.
d. H acquired title to the document but not to the goods.
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 52. D obtained from C a loan amounting to P50,000.00, the same being secured by a mortgage
was with a right to repurchase. on D's lot. Thereafter, C assigned his credit right to T with notice to D. Based on the foregoing
a. X may compel A, B and C to come to an agreement to repurchase the whole land. facts, which of the following statements is incorrect?
b. Each co-owner may exercise his right of redemption on the whole property including the a. T cannot collect from D if D does not give his consent to the assignment.
share of the other two co-owners. b. T can collect from D. D's consent to the assignment is not required.
c. Each co-owner may exercise his right of redemption only with respect to his share. c. T can collect from D and if D cannot pay, T can foreclose the mortgage on the lot.
d. Any two of the three co-owners may redeem the property proportionately. d. The notice to D of the assignment is sufficient. D must make his payment to T and no
longer to C.
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? 53. A kind of mortgage which, although lacking some formality, form of words, or requisites
a. S may exercise the right of redemption on the interest sold by R to T. prescribed by law, shows the intention of the parties to charge real property as security for
b. S cannot exercise the right of redemption. debt and contains nothing impossible or contrary to law is known as:
c. The sale made by R to T is voidable. a. legal mortgage. c. conventional mortgage.
d. S may redeem only 1/2 of the interest sold by R to T. b. equitable mortgage. d. voluntary mortgage.

50. T steals the goods of O and deposits them in the warehouse of W. W issues to T a 54. If a movable property is sold separately to two or more different vendees, ownership shall
warehouse receipt which by its terms indicates that goods are to be delivered to the order of belong to the person:
T. T, thereafter, negotiates the receipt to H who purchases the document in good faith and for a. who in good faith first paid the purchase price in full.
value. b. who in good faith first recorded the sale in the Registry of Property.
a. H may obtain delivery of the goods from W because H was an innocent purchaser for c. who in good faith presents the oldest title.
value. d. who in good faith first took possession of the property.
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. 55. A contract of sale is perfected upon:
c. H can obtain delivery of the goods from W because the acquisition by H of the a. compliance with the requirements of the law as to form.
warehouse receipt in good faith cured the defect in T's title. b. delivery of the object of the contract.
d. H cannot obtain delivery of the goods because he acquired whatever title T had over c. the meeting of the minds on the thing which is the object of the contract and upon the
such goods, which is the title of a thief. price.
d. demand.
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 56. It is a contract by virtue of the terms of which the parties thereto promise and obligate
T who thereafter negotiated the document by mere delivery to H, a purchaser .for value and themselves to enter into another contract at a future time, upon the happening of certain
without notice of the defect in the title of T. events, or the fulfillment of certain conditions.
a. The negotiation of the bill of lading by T to H is not valid because of T's defective title. a. Contract of adhesion c. Contract of sale
b. The negotiation of the bill of lading by T to H is valid. T's defective title does not have any b. Contract of option d. Auto-contract
57. A contract of sale is not a: 63. The Recto Law applies to which of the following examples of sale?
a. principal.contract. c. consensual contract. a. Sale of a car on straight term.
b. nominate contract. d. real contract. b. Sale of house and lot on installment.
c. Sale of car on installment where the buyer constituted a mortgage on his truck.
58. The following may not be valid objects of a contract of sale, except: d. Sale of a piano on installments where the buyer constituted a chattel mortgage on the
a. objects outside the commerce of men. piano.
b. Illicit things.
c. future goods. 64. S sold to B a lot through a deed of absolute sale duly acknowledged before a notary public.
d. impossible service. 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
59. This is a kind of constructive delivery where the vendor remains in possession of the property was aware of the sale made by S to the other and neither took physical possession of the lot.
sold, such as by virtue of a lease agreement with the vendee. ' Who is the present owner of the lot?
a. traditio longa manu. a. B, because he was the first purchaser in good faith.
b. traditio brevi manu. b. X. because he registered the sale in good vaith.
c. traditio constitutum possessorium. c. Neither B or X
d. delivery to common carrier. d. S, as long as he does not surrender physical possession of the lot.

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.
62. Refer to No. 61.
a. S may withdraw his offer to sell before the lapse of 30 days by informing B.
b. S may not withdraw his offer before the lapse of 30 days.
c. S may withdraw the offer by returning the amount of P2,000.00 that was paid to him by
B.
d. S may withdraw his offer even before the lapse of 30 days if a favorable price, i.e., more
than P200,000.00, is offered to him by another prospective buyer.
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. 73 In one of the following cases, the ownership of the thing object of the contract is transferred
b. not part of the purchase price. to the other party upon delivery.
c. proof of the perfection of the contract of sale. a. Contract to sell. c. Sale or return.
d. paid before the perfection of the contract of sale. b. Agency to sell. d. Sale on approval.

68. This refers to the warranty of the seller that he has the right to sell the thing at the time when 74. Under the "Realty Installment Buyer Act", the buyer of real estate on installment payments
ownership is to pass, and which can be enforced if the buyer is deprived of the property sold may pay an installment defaulted without additional interest if he has paid at least two years
by a final judgment in court. of installments. The law is applicable to sales/transactions involving:
a. Warranty against hidden defects. c. Warranty against eviction. a. industrial lots.
b. Warranty of merchantable quality. d. Warranty of possession. b. commercial buildings.
c. residential lots.
69. P, who was in Hong Kong, made an overseas call to A, his friend, to sell P's lot in Quezon d. sales to tenants under the Land Reform Law.
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: 75. S, the owner of a rent-a-car business, leased one of his cars to B for one month. On the day
a. valid. c. unenforceable. of the expiration of the lease and while B was still in physical possession of the car, B offered
b. rescissible. d. void. 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
70. One of the distinctions between a contract of sale and a contract for a piece work is that a immediately paid the price in cash. Thereafter, B drove away from the place of S.
contract for a piece of work: a. The delivery of the car by S to B is by constitution possessorium.
a. is not governed by the Statute of Frauds. b. The delivery of the car by S to B is by traditio longa manu.
b. refers to a contract for the delivery goods which are manufactured in the ordinary course c. The delivery of the car by S to B is by traditio brevi manu.
of business although the same are not available. d. There was no delivery because B should have turned over the physical possession of
c. has for its parties the vendor and the vendee. the car to S upon the expiration of the lease so that S could make the proper delivery to
d. has for its consideration the price of the thing. him upon the execution of the contract of sale.

71. A and B are co-owners of a rural lot not exceeding 1 hectare.The lot is surrounded on its four 76. B called on S at the shoe factory of S for the latter to make a pair of shoes which B would be
sides as follows: on the North, by the road; on the East, by the lot of X consisting of 2 needing in the play "Romeo an Juliet." B provided S with the description of the pair of shoes
hectares; on the South, by the lot of Y consisting of 2 Vz hectares; and on the West, by Z's lot thaj he wanted since S did not manufacture the kind of shoes that I needed. S quoted a price
consisting of 2 % hectares. A sells his undivided interest in the agricultural lot to T, who owns of P1,000.00 which B agreed to, pay upon delivery to him of the pair of shoes. Since been
several hectares of rural land in the area. Who has the right of legal redemption over the neighbors for a long time, their agreement was sealed with a handshake.
undivided interest in the lot sold by A to T? a. The contract between S and B becomes enforceable if S had already completed making
a. B c. Y the pair of shoes.
b. X d. Z b. The contract between S and B becomes enforceable if B had already paid the amount
agreed upon for the work.
72. It is an affirmation of fact or any promise by the seller relating to the thing which has a natural c. The contract between S and B is enforceable even if it is still executory.
tendency to induce the buyer to purchase the same, relying on such promise or affirmation. d. The contract cannot be enforced by either party because it was not in writing.
a. Condition c. Warranty
b. False representation d. Seller's talk 77. Which of the following contracts of sale is void?
 a. Oral sale of a piece of land made through an agent whose authority is in a public
instrument.
b. Sale of a piece of land in a public instrument made through an agent whose authority
was given orally by the principal.
c. Sale of a piece of land in a private instrument made through an agent whose authority is
in a public instrument.
d. Sale of a piece of land in a public instrument made through an agent whose authority is
in a private instrument.
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.
92. Refer to Item 91.
a. S may repurchase the lot from X within the five-year period although X was not aware of
the reservation of the right to repurchase.
b. S may not repurchase the lot because X was not aware of the reservation of the right.
c. S may repurchase the lot from X if X was aware of such reservation.
d. The sale by B to X is void because the acquisition of the lot by B from S is subject to a
contingency.
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.
96. One of the following is a natural element of a contract of sale.
a. The price of the goods.
b. The goods sold.
c. The stipulation to pay interest on the purchase price of the goods.
d. The seller's warranty against hidden defects.
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 I. Contract to sell.
warehouse receipt which states that "The goods are to be delivered to the order of D." D may II. Sale or return.
negotiate the warehouse receipt by any of the following means, except by: III. Sale on trial.
a. mere delivery. IV. Agency to sell.
b. special indorsement completed by delivery. Upon the delivery of the goods by the owner thereof to the other party, ownership is not
c. blank indorsement completed by delivery. transferred in:
d. indorsement to bearer completed by delivery. a. I, II and III. c. I, II and IV
b. I, III and IV d. II, III and IV
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 119. The following are characteristics of certain contracts:
B was not in writing. The contract between S and B is: I. Nominate
a. an enforceable contract of barter. II. Real
b. an enforceable contract of sale. III. Aleatory
c. an enforceable contract that is partly a sale and partly a barter. IV Commutative
d. a sale but it is unenforceable not being in writing and the cash to be paid by B is at least A contract for the sale of a sweepstakes ticket is considered as:
P500.00. a. I and II. c. I and III.
b. I and IV. d. Ill and IV.
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 120. These statements are presented to you for evaluation:
of business, but the article was not available at the time of the contract was I. Option money is part of the purchase price.
executed. II. Earnest money is proof of the perfection of the contract of sale.
II. A contract for the delivery of an article to be manufactured specially for the customer In your evaluation of the said statements:
and upon his special order. a. Both are true. c. Only I is true.
In your evaluation of the said contracts: b. Both are false. d. Only II is true.
a. Both contracts refer to a contract of sale.
b. Both contracts refer to a contract for a piece of work. 121. S sold a computer to B for P120.000.00 under the following terms: P20,000.00 down; balance
c. I refers to a contract of sale; II refers to a contract for a piece of work. payable in 10 equal monthly installments with an acceleration clause. To secure payment of
d. I refers to a contract for a piece of work; II refers to a contract of sale. 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
117. These statements are presented to you: installments. S wants to recover in full the balance of P80,000.00 even in case of deficiency
I. The sale of a thing having a potential existence is not effective if the thing does not so he consults you on which of the following courses of action to take to achieve that
come into existence. purpose:
II. The sale of hope or expectancy produces effects even if the thing hoped for does I. Exact fulfillment of the balance by suing B and have the computer sold for the
not come into existence. execution of the judgment against B.
In your evaluation of the foregoing statements: II. Foreclose the chattel mortgage on the computer.
a. Both are true. c. Only Statement I is true. III. Foreclose the real mortgage on the lot.
b. Both are false. d. Only Statement II is true.
Based on your evaluation of the foregoing data, the course of action that you will likely
118. The following terms are presented to you: recommend to S to achieve his purpose is:
 a. Either I or II. I. S sold a certain ring to B. It turned out that the ring was stolen from O, its true
b. Either II or III. owner.
c. Either I or III. II. S, a jewelry store sold a certain ring to B. The ring, however, actually belongs to O
d. Any of I, II or III. who had lost it a few days earlier.
III. S, a pawnshop, sold at a public auction a certain ring with B as the winning bidder.
122. On January 5, Samonte, who was going abroad as an immigrant, offered to sell his car for O, however, is the true owner of the ring but the pawnshop thought it was owned by
P150,000.00 to Baldriga. He informed Baldriga, however, that he wanted to rent the car for X, a defaulting borrower of the pawnshop.
P1,000.00 per day up to January 15 as soon as the sale is executed since his flight was not In your evaluation of the above sales, B acquired title to the ring in:
scheduled until January 16. Baldriga accepted both offers, and accordingly, he and Samonte a. I and II. c. I and III.
executed a contract of sale and a contract of lease simultaneously on the same day, January b. II and III. d. none of the three contracts.
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. 126. Refer to No. 125. O may recover the ring from B without the need of reimbursement in:
a. Samonte must bear the loss by returning the sum of P150,000.00 since Baldriga did not a. I only. c. Ill only.
become the owner not having obtained physical possession thereof. b. II only. d. All three contracts.
b. Baldriga must bear the loss because he acquired ownership of the car despite its lack of
physical delivery to him.. 127. S sold a brand-new electric typewriter to B for P20.000.00 on a credit term of 30 days. The
c. Both Samonte and Baldriga must share equally in the loss. agreement between the parties provides that B may return the typewriter within the same
d. Samonte must bear the loss by returning P150,000.00 less P5,000.00, the rental of the period. Ten days after delivery to B, burglars entered the office of B and carted away various
car for 5 days, in partial compensation. valuables including the typewriter he bought from S.
a. B must pay the price of the typewriter to S.
123. S, who is based in Manila, shipped FOB Cebu goods worth P50.000.00 to B. While the goods b. B is not obliged to pay the price of the typewriter because the loss thereof was without
were on their way to Cebu, S was informed by his bank that the check remitted by B was his fault.
dishonored for insufficient funds. Accordingly, S notified the carrier not to proceed with the c. S must shoulder the loss because B's ownership of the typewriter was not absolute since
delivery and that he was taking possession of the goods. Based on the foregoing facts, which he had the option to return it within 30 days.
remedy is available to S? d. The loss must be shared equally by S and B in fairness to both.
a. Resale of the goods.
b. Rescission of the sale. 128. The following statements are presented to you:
c. Either resale or rescission of the goods, at the option of S. I. A bearer document of title if it is specially indorsed can be negotiated thereafter only
d. Neither resale nor rescission. by indorsement completed by delivery.
II. A bearer negotiable instrument if it is specially indorsed can be negotiated thereafter
124. Before perfection in a sale by auction: only by indorsement completed by delivery.
I. Any bidder may withdraw his bid. In your evaluation of the foregoing statements:
II. The auctioneer may withdraw the goods from the sale unless the auction has been a. Both statements are true. c. Only I is true
announced to be without reserve. b. Both statements are false. d. Only II is true.
The statement is true for:
a. Both I and II. c. I only. 129. S sold to B a specific car for P200.000.00. The terms of the sale provide the following: down
b. Neither I nor II. d. II only. 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
125. The following contracts of sale are presented to you: 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.
132. A contract of sale is perfected upon the:
a. full payment of the purchase price by the buyer.
b. delivery of the object of the contract to the buyer.
c. meeting of minds between seller and the buyer on the object and the price.
d. acknowledgment of the deed of sale by the seller and the buyer before a notary public.
133. These statements are presented to you:
I. It is part of the purchase price.
II. It is paid before the contract of sale is perfected.
III. When given, it entitles the party making the payment to hold the recipient from
offering the object of the contract to other persons within the period agreed upon.
IV. It is proof the perfection of the contract of sale.
Based on your evaluation of the foregoing statements, which of the following is true?
a. I and III refer to option money.
b. II and III refer to option money.
c. II and IV refer to earnest money.
d. Ill and IV refer to option money.
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.
 a. When there is waiver intencionada
136. Refer to the preceding number. What contract was entered into between Barrameda and b. When there is waiver consciente
Farrales? c. When the vendor was in bad faith and there was no stipulation exempting the vendor
a. Contract of sale. c. Contract to sell. from liability in case of eviction.
b. Contract for a piece of work. d. An innominate contract. d. When the vendor was in bad faith and there was stipulation exempting the vendor from
liability in case of eviction.
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: 143. S and B entered into a contract for the sale of the car of S to B for P100,000.00. In reality,
a. the Statute of Frauds does not apply. however, B did not give any amount to S because the latter intended to donate the car to B.
b. the article object of the contract is manufactured or procured in the ordinary course of In this case:
business. a. The contract between S and B is void because the price is simulated.
c. there is usually a stock which is kept on hand and made available to anyone. b. The contract between S and B is a valid contract of donation.
d. if the article is not available, there is no change or modification of it when it is ordered by c. The contract between S and B is a void contract of donation.
the customer. d. The contract between S and B is a valid contract of sale.

138. Which of the following statements is common to both sale or return and sale on trial? 144. On July 1, Serena sold to Berbola through a private instrument a specific piano for
a. Ownership of the thing is transferred upon delivery to the buyer. P20,000.00. Simultaneous with the sale, the parties agreed that Serena would lease the
b. Ownership of the thing is transferred to the buyer at some future time. piano for one week in preparation for a concert after which Berbola could physically get the
c. Ownership of the thing may be reverted to the seller should the buyer return it within the piano. Before the week was over, Serena sold the same piano, also in a private instrument
time agreed upon. and for P25,000.00, to Jezebel who immediately loaded the piano in her van. Neither Berbola
d. In case the thing is lost through a fortuitous event after the lapse of the time to keep or nor Jezebel was aware of the sale made to the other. Who is the owner of the piano?
return it and the buyer was still in possession of it, the risk of loss is with the buyer. a. Berbola
b. Jezebel
139. The full payment of the price is a positive suspensive condition in: c. Berbola and Jezebel, as co-owners.
a. contract to sell. c. sale or return. d. Serena who retained ownership because of Berbola and Jezebel's conflicting rights.
b. contract of sale. d. sale on trial.
145. B bought two carabaos, one male and one female, from S. He paid P2,000.00 and
140. The non-payment of the price is a negative resolutory condition in: P3,000.00, respectively, for the animals which he intended to use for breeding. Later, the
a. contract to sell. c. contract of agency to sell. female carabao was found unfit for breeding because of a redhibitory defect.
b. contract of sale. d. sale on approval. a. B can rescind the sale of the female carabao only because he paid a separate price for
it.
141. When there is a stipulation exempting the vendor from the obligation to answer for eviction b. B can rescind the sale of both animals because he would not have bought the male
and the vendee made the waiver with knowledge of the risks of eviction and assumed the carabao without the female carabao.
consequences, such waiver is known as: c. B cannot rescind the sale of either animal under the "let the buyer beware" rule.
a. waiver intencionada. c. forfeiture of rights. d. B can rescind the sale of both animals only if he had paid a single price for both them.
b. waiver consciente. d. surrender of rights
146. What may the consideration consist of in an option contract in order to bind the offerer?:
142. In case of eviction, the vendor shall be liable to the vendee only for the value of the thing sold a. Monetary.
at the time of eviction in which of the following cases? b. Other things or undertakings.
 c. Either (a) or (b). 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
d. May not be a valuable consideration, i.e., may be gratuitous. 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
147. The following statements pertaining to sale by auction are presented to you: right of legal redemption.
I. The auctioneer may not withdraw the goods from the auction sale if the sale was b. C, so that he and B will have an equal share in the lot.
announced to be without reserve. c. B and C, in proportion to the share of each in the lot.
II. The auctioneer may withdraw the goods from the auction sale if the sale was d. Neither B nor C may exercise the right of legal redemption.
announced to be with reserve.
In your evaluation of the foregoing statements: 153. When is the vendor bound to deliver the thing sold?
a. Both statements are true. c. Only Statement I is true. a. If the vendee has not paid him the price.
b. Both statements are false. d. Only Statement II is true. b. If no period for the payment of the price has been fixed in the contract.
c. If the buyer has been given the benefit of the period.
148. Under the Maceda Law, in determining the number of installments paid by the buyer, the d. None of the foregoing.
following payments are included, except:
a. down payments. c. option money. 154. These statements concerning the double sale of an immovable are presented to you:
b. deposits. d. none of the foregoing. 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
149. Necessaries include everything indispensable for sustenance, clothing and medical sale.
attendance, and which of the following? II. In order that the second buyer may be given preference, he must possess good faith
a. Dwelling c. Transportation from the time of sale in his favor until the registration of the same. In your evaluation
b. Education d. All of the foregoing. of the foregoing statements:
a. Both statements are true. c. Only Statement I is true.
150. While her* parents were away on a visit to the province, M, 17 years old, entered into a b. Both statements are false. d. Only Statement II is true.
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? 155. A credit right is considered to be in litigation:
a. The sale of the textbooks. a. as soon as a complaint is filed by the creditor against the debtor.
b. The sale of the evening gown. b. when the debtor has filed his answer to the complaint.
c. Both (a) and (b). c. when the case is scheduled for pre-trial conference between the parties.
d. Neither (a) nor (b) because a minor is incapable of giving consent. d. when the trial has started.

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.
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. 7 Traditio constitutum 32 Legal formalities
8 Unpaid Seller 33 Necessaries
157. What does the assignor of a credit warrant?
a. The legality and existence of the credit. 9 Warranty against eviction 34 Stoppage in transitu
b. The solvency of the debtor. 10 Accion redhibitoria 35 Order document of title
c. Both (a) and (b). 11 Legal redemption 36 Right of pre-emption
d. Neither (a) nor (b).
12 Equitable mortgage 37 Warehouse receipt
158. The right of pre-emption differs from the right of redemption in that in pre-emption: 13 Document of title 38 Vendee
a. the action is directed against the buyer. 14 Bill of lading 39 Sale on trial
b. the action is directed against the seller.
c. the right arises after the sale. 15 Sale or return 40 Absolute incapacity
d. there can be a rescission of the original sale. 16 Dacion en pago 41 Payment by cession
17 Fungible goods 42 Future goods
159. The following are certain modes of acquisition of property:
18 Straight sale 43 Bearer document of title
I. Purchase
II. Dacion en pago 19 Emptio rei speratae 44 Waiver intencionada
III. Succession 20 Earnest money 45 Traditio brevi manu
IV. Donation
21 Traditio longa manu 46 Assignment of credit
Legal redemption is available when the transferee acquired the property through:
a. I or II. c. I or III. 22 Possessory lien 47 Bailee
b. Ill or IV d. II or IV. 23 Eviction 48 Redhibitory defect
24 Easement or servitude 49 Auction
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 25 Accion quanti minoris 50 Option money
when there has been a judicial separation of property.
b. When price of the sale is a moderate amount. Statements
c. When the object of the sale is a necessary such as food or clothing., A. Ownership of a thing is transferred to the creditor to settle a monetary obligation.
d: When the spouses are living separately. 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.
TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the statement C. They refer to interchangeable goods such as grain, oil, etc., that allow one to be replaced
or explains the numbered items. by another without loss of value.
1 Barter 26 Pactum commissorium 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
2 Piece of work 27 Conventional redemption the thing delivered.
3 Price 28 Vendor F. Even professional inspection is not sufficient to discover it.
4 By-bidders/puffers 29 Relative incapacity 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.
5 Policitacion 30 Waiver consciente H. It is made by the buyer with knowledge of the risk of eviction; hence, the seller will not have
6 Symbolic delivery 31 Emptio spei any liability if the buyer is evicted.
I. Ownership is transferred to buyer upon delivery but he has the option to revert such GG. The sum stipulated as the equivalent of the thing sold.
ownership to the seller. HH. The right to be subrogated upon the same terms and conditions stipulated in the contract, in
J. Ownership of the thing sold is retained by the seller despite delivery to the buyer, but the the place of one who acquires a thing by purchase or dation in payment, or by any other
latter agrees to pay the price if he finds the thing satisfactory. transaction whereby ownership is transmitted by onerous title.
K. Delivery that takes place when the buyer who was in possession of the thing sold at the time II. Seller's undertaking that the buyer shall enjoy legal and peaceful possession of the thing
of sale continues in possession of the same as an owner. sold.
L. Negotiated by indorsement. JJ. A stipulation in a contract of sale involving an immovable that the sale is automatically
M. Sale of property to the highest bidder. rescinded upon failure of the buyer to pay the price.
N. The party in a contract of sale who is obligated to transfer the ownership of and to deliver a KK. Delivery of the keys of the place where a movable is kept or stored.
determinate thing. LL. Contract for the storage of goods for a compensation.
O. The consideratipn paid for the purpose of holding one to his promise to buy or sell a MM. Buyer's remedy which involves the proportionate reduction in the price of the thing
determinate thing for a certain period of time, which consideration is separate and distinct purchased.
from the purchase price. NN. A unilateral promise to buy or sell a thing which is not accepted by the promissee.
P. Applies to persons who, under certain circumstances, cannot purchase certain property. OO. An unpaid seller's right to retain the goods for the price while he is in possession of them.
Q. The person obligated to pay the price of the thing purchased. PP. Remedy of buyer to withdraw from the sale and ask for damages.
R. Delivery of a movable by mere agreement of the parties if the thing cannot be transferred to QQ. An encumbrance imposed upon an immovable for the benefit of another immovable
the vendee at the time of sale. belonging to a different owner.
S. Negotiated by mere delivery. RR. A person employed by the seller or auctioneer to raise the price in an auction sale.
T. It is made by the buyer without knowledge of the risk of eviction. SS. A document issued by a common carrier acknowledging the receipt of the goods and
U. The consideration of the contract is another thing. agreeing to transport and deliver them to a specified place.
V. Applies to persons who cannot bind themselves in a contract including a contract of sale. TT. Right of seller to repurchase the thing sold and the exercise of which was reserved by the
W. A document used as proof of the possession or control of the goods, or authorizing or seller at the time of sale.
purporting to authorize the possessor of the document to transfer or receive, either by UU. Delivery that takes place when the seller continues in possession of the thing sold after the
indorsement or by delivery, the goods represented by such document. sale but as lessee, depositary or otherwise.
X. Right given to an adjoining owner of an urban land to purchase the same ahead of others if VV. The creditors are given the right to sell the debtor's properties and apply the proceeds to their
such land is he'd for speculation. respective claims.
Y. Delivery through the execution of a public document. WW. It has for its purpose the transfer to another person of the right to collect the debt.
Z. The deprivation by final judgment of the vendee of the whole or a part of the thing sold based XX. Sale of an expected thing.
on a right prior to the sale or an act imputable to the vendor. YY. None of the foregoing.
AA. Refer to goods to be manufactured, raised or acquired by the seller.
BB. The sale of hope or expectancy. TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word "FALSE"
CC. Includes one who has received as conditional payment for the goods a negotiable instrument if the statement is false.
but the condition has been broken by reason of the dishonor of the instrument or the 1. Warranty against eviction is inherent in a contract of sale; hence, it is an essential element
insolvency of the buyer. thereof.
DD. Include everything indispensable for sustenance, dwelling, clothing, medical attendance, 2. Dacion en pago partakes of the nature of a sale; hence, there is more freedom in fixing the
education and transportation. price of the thing conveyed.
EE. The balance is payable in its entirety after the payment of an initial sum. 3. A contract for a piece of work must comply with the Statute of Frauds. Accordingly, it must be
FF. A contract for the delivery at a certain price of an article to be manufactured specially for the in writing to be enforceable if the price is P500.00 or more.
customer and upon his special order, and not for the general market. 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 20. D 50. D 80. D 110. B
trespass on the thing. 21. D 51. B 81. C 111. A
45. A stipulation that the sale of an immovable is automatically rescinded upon the default of the 22. B 52. A 82. C 112. A
buyer in the payment of the price is valid. 23. D 53. B 83. C 113. A
46. In conventional redemption, the creditors of the vendor may make use of the right of 24. C 54. D 84. D 114. A
redemption against the vendee although they have not exhausted the properties of the 25. A 55. C 85. B 115. B
vendor. 26. B 56. B 86. D 116. C
47. In case of doubt, a contract purporting to be a sale with a right to repurchase shall be 27. D 57. D 87. D 117. A
construed as an equitable mortgage, 28. C 58. C 88. A 118. B
48. For an assignment of credit to be binding against third persons if a movable property is 29. D 59. C 89. B 119. C
involved, the same must be in a public instrument and recorded in the Registry of Property. 30. B 60. B 90. D 120. D
49. A debtor who has paid his creditor before he learns of the assignment of his debt shall be 121. C 131. A 141. A 151. A
released from his liability to the assignee. 122. B 132. C 142. B 152. D
50. The debtor's consent is required for the validity of the assignment of the credit made by his 123. D 133. B 143. B 153. C
creditor to another person. 124. A 134. D 144. A 154. A
125. B 135. C •145. B 155. B
ANSWERS TO DIAGNOSTIC EXERCISES 126. A 136. B 146. C 156. C
SALES 127. A 137. A 147. A 157. A
TEST I - MULTIPLE CHOICE 128. C 138. D 148. D 158. B
129. D 139. A 149. D 159. A
1. B 31. D 61. A 91. B 130. C 140. B 150. A 160. A
2. D 32. D 62. B 92. A
3. B 33. C 63. D 93. C TEST II -MATCHING TYPE
4. D 34. A 64. B 94. D 1. U 11. HH 21. R 31. BB 41. W
5. D 35. C 65. D 95. D 2. FF 12. B 22. 00 32. Y 42. AA
6. D 36. B 66. A 96. D 3. GG 13. W 23. Z 33. DD 43. S
7. D 37. B 67. C 97. C 4. RR 14. SS 24. QQ 34. G 44. H
8. B 38. B 68. C 98. C 5. NN 15. I 25. MM 35. L 45. K
9. C 39. A 69. D 99. C 6. KK 16. A 26. JJ 36. X 46. WW
10. C 40. D 70. A 100. B 7. UU 17. C 27. TT 37. LL 47. E
11. B 41. A 71. A 101. C 8. CC 18. EE 28. N 38. Q 48. F
12. B 42. C 72. C 102. A 9. II 19. XX 29. P 39. J 49. M
13. C 43. D 73. C 103. D 10. PP 20. D 30. T 40. V 50. O
14. B 44. A 74. C 104. C
15. B 45. D 75. C 105. A TEST III-TRUE OR FALSE
16. B 46. D 76. C 106. D 1. FALSE 11. TRUE 21. FALSE 31. TRUE 41. FALSE
17. C 47. C 77. B 107. A 2. FALSE 12. FALSE 22. TRUE 32. TRUE 42. FALSE
18. A 48. C 78. B 108. A 3. FALSE 13. TRUE 23. TRUE 33. FALSE 43. TRUE
19. B 49. B 79. A 109. A 4. FALSE 14. TRUE 24. TRUE 34. FALSE 44. FALSE
5. TRUE 15. TRUE 25. TRUE 35. TRUE 45. FALSE
6. TRUE 16. TRUE 26. TRUE 36. TRUE 46. FALSE
7. TRUE 17. FALSE 27. FALSE 37. TRUE 47. TRUE
8. TRUE 18. TRUE 28. TRUE 38. TRUE 48. FALSE
9. TRUE 19. TRUE 29. TRUE 39. FALSE 49. TRUE
10. TRUE 20. FALSE 30. FALSE 40. TRUE 50. FALSE