I. NATURE AND FORM OF THE CONTRACT
Nominate - the contract is given a special
Sources of the Law on Sales
Sales are governed by the provisions of the Civil
Code:
1. Book IV, Title VI, Articles 1458-1637 (Sales)
2. Title I, Arts. 1156-1422 (Obligations and Contracts)
3. Opinions of Commentators
4. Jurisprudence
Concept of Contract of Sale
The contract of sales is an agreement whereby one of
the parties (called the seller or vendor) obligates
himself to deliver something to the other (called the
buyer or purchaser or vendee) who, on his part,
hinds himself to pay therefore a sum of money or its
equivalent (known as the price).
The transfer of title to property or the agreement to
transfer title for a price paid or promised, not mere
physical transfer of the property, is the essence of
sale.
Characteristics of a Contract of Sale
1. Consensual - perfected by mere consent of the
parties without further acts.
2. Bilateral - both the contracting parties are
bound to fulfill correlative
obligations towards each other
(the seller to deliver and transfer
ownership of the thing sold, and
the buyer to pay the price).
3. Onerous - the thing sold is conveyed in
consideration of the price and vice
versa.
4. Commutative - the thing sold is considered the
equivalent of the price paid and
vice versa.
5. Aleatory - in the case of sale of hope, one
of the parties or both reciprocally
bind themselves to give or to do
something in consideration of
what the other shall give or do
upon the happening of an event
which is uncertain, or which is to
occur at an indeterminate time.
6.
name or designation in the Civil
Code.
7. Principal - the contract does not depend for
its existence and validity upon
another contract.
Essential Requisites of a Contract of Sale
1. Consent or meeting of the minds – refers to the
conformity of the parties to the terms of the contract,
the acceptance by one of the offer made by the
other. As a bilateral contract, the acceptance of
payment by a party is an indication of his consent to
a contract of sale, thereby precluding him from
rejecting its binding effect [Clarin vs. Rulova, 127
SCRA 512].
 There may be a sale against the will of the
owner in case of expropriation and the three
different kinds of sale under the law –
ordinary execution sale, judicial foreclosure
sale, and extra-judicial foreclosure sale.
2. Object or subject matter – refers to the
determinate thing which is the object of the contract;
 Even a future thing not existing at the time the
contract is entered into may be the object of
sale, provided it has a potential or possible
existence, that is, it is reasonably certain to
come into existence as the natural increment
or usual incident of something in existence
already belonging to the seller, and the tile
will vest the buyer the moment the thing
comes into existence (Art. 1461).
Emptio rei speratae Rei spetae
(sale of thing expected)
- the sale of a thing not - the sale of hope itself that
yet in existence, subject the thing will come into
to the condition that the existence, where it is agreed
thing will exist and on that the buyer will pay the
failure of the condition, price even if the thing does
the contract becomes not eventually exist;
ineffective and hence, the
buyer has not obligation
to pay the price;
- the future thing is - like the sale of a
certain as to itself but sweepstake ticket, it is not
uncertain as to its certain that the thing itself
quantity and quality; (winning a prize) will exist,
much less it quantity and
 quality; Contract of Sale Distinguished from Contract to Sell

- contract deals with a - contract relates to a thing Contract of Sale Contract to Sell
future thing; which exists or is present –
the hope or expectancy; Transfer of - passes to the buyer - remains with the
title: upon delivery of the seller until full
- sale is subject to the - produces effect even thing sold. payment of the
condition that the thing though the thing does not agreed price.
should exist, so that if it come into existence
does not, there will be no because the object of the Payment of - non-payment of the - full payment is a
contract by reason of the contract is the hope itself, price: price is a negative positive suspensive
absence of an essential unless it is a vain hope or resolutory condition, condition, the failure
element. expectancy (like the sale of and the remedy is to of which is not a
a falsified sweepstakes exact fulfillment or breach, casual or
ticket which can never to rescind the serious, of the
win). contract. contract but simply
an event that
3. Cause or consideration – refers to the price prevents the
certain in money or its equivalent. obligation of the
vendor to convey
Natural Elements – those which are deemed to exist title from acquiring
in certain contracts, in the absence of any contrary binding force.
stipulations, like warranty against eviction;
Ownership - vendor loses and - title remains in the
Accidental Elements – those which may be present or of vendor: cannot recover vendor until full
absent depending on the stipulations of the parties, ownership of the payment of price.
like conditions, interest, penalty, time or place of thing sold and
payment. delivered, actually or
constructively until
Kinds of a Contract of Sale
and unless the
1. As to presence or absence of conditions contract of sale itself
is resolved and set
Absolute – where the sale is not subject to any aside.
condition whatsoever and where the title passes to
the buyer upon delivery of the thing sold.

Conditional – where the sale contemplates a Sale Distinguished from Dation in Payment:
contingency and where the contract is subject to
Sale Dation in Payment
certain conditions, usually in the case of the vendee,
for the full payment of the agreed purchase price. - no pre-existing credit - there is pre-existing credit
2. Other kinds - gives rise to obligation - extinguishes obligation
As to the nature of the subject matter – real or - cause or consideration is - cause of consideration is
personal, tangible or intangible the price, or the extinguishment of the debt
acquisition of title to the (from the point of view of
As to the manner of payment – cash or installment
property the offeror), and the
As to its validity – valid, rescissible, unenforceable, acquisition of the object
void offered (from the point of
view of the creditor) in
lieu of the original credit

- there is greater freedom - less freedom

in the determination of
the price
- giving of the price may - the giving of the object in
generally end the lieu of the credit may
obligation of the buyer extinguish completely or
partially the credit
(depending on the
agreement)
Sale of goods by Sale of goods by sample
description
- occurs where the
purchaser has not seen
the article sold and relies - the parties contracted
on the description given solely with reference to the
him by the vendor, or has sample, with the
seen the goods but the understanding that the bulk
want of identity is not was like it.- the vendor
apparent on inspection.- warrants that the thing sold
If the bulk of the and to be delivered by him
goods delivered does not shall conform with the
sample in kind, charater,
correspond with the
description, the contract and quality.
may be rescinded. (Art.
1481.)
Form of Contract of Sale
Generally, a contract may be entered into in any
form provided all the essential requisites for its
validity are present (Art. 1356). It may be in writing,
oral, or partly in writing and party oral. It may even
be inferred from the conduct of the parties, since sale
is a consensual contract that is perfected by mere
consent.
However, in case the contract of sale should be
covered by the Statute of Frauds, the law requires
that the agreement be in writing subscribed by the
party charged, or by his agent; otherwise, the
contract cannot be enforced by action [see Art.
1403].
 Under the Statute of Frauds (Art. 1403 [2, a,
d, e].) of the Civil Code, the following
contracts must be in writing to be enforceable:
(a) sale of personal property at a price not less than
P500;
(b) sale of real property or an interest therein
regardless of the price involved; and
(c) sale of property not to be performed within a
year from the date thereof regardless of the nature of
the property and the price involved.
 The Statute Frauds specifies three (3) ways in
which contracts of sales of goods within its
terms may be made binding:
(a) the giving of a memorandum;
(b) acceptance and receipt of part of the goods (or
things in action) sold and actual receipt of the same
(Art. 1585); and
(c) payment or acceptance at the time some part of
the purchase price.
 The Statute of Frauds is applicable only to
executory contracts (where no performance,
i.e., delivery and payment, has as yet been
made by both parties), and not to contracts
which are totally consummated or partially
performed [Vda. De Espiritu vs. CFI of Cavite,
47 SCRA 354].
Recto Law (Art. 1484) – Remedies of Vendor in Sale
of Personal Property Payable in Installments:
(a) elect fulfillment upon the vendee’s failure to
pay;
(b) cancel the sale, if the vendee shall have failed to
pay two or more installments;
(c) foreclose the chattel mortgage, if one has been
constituted, if the vendee shall have failed to pay two
or more installments.
 These remedies are alternative and are not to
be exercised cumulatively or successively and
the election of one is a waiver of the right to
resort to the others [Pacific Commerial Co. vs
De la RAma, 62 Phil. 380; Nonato vs. IAC,
140 SCRA 255].
 In transactions involving the sale of financing
of real estate on installment payments,
including residential condominium
apartments, the following are the rights given
to the buyer who has paid at least two (2)
years of installments in case he defaults in the
payment of succeeding payments
(a) to pay without additional interest the unpaid
installments due within the total grace period earned
by him fixed at the rate of one-month grace period
for every one year of installment payments made –
this right shall be exercised by him only once in every
five (5) years of the life of the contract and its
extension, if any; and
(b) if the contract is cancelled, the seller shall refund
to the buyer the cash surrender value of the payments
on the property equivalent to 50% of the total
payments made and, after 5 years of installments, an
additional 5% of every year but not to exceed 90%
of the total payments made. [Sec. 3, RA 6552 or the
Realty Installment Buyer Protection Act; see Layug vs.
IAC, 67 SCRA 627].
(c) The buyer has the right to sell his right or assign
the same before actual cancellation of the contract
and to pay in advance any unpaid installment
anytime without interest and to have such full
payment of the purchase price annotated in the
certificate of title covering the property.
II. CAPACITY TO BUY OR SELL
Persons Who May Enter Into a Contract of Sale
As a general rule, all persons, whether natural or
juridical, who can bind themselves, have the legal
capacity to buy and sell.
Persons Who Are Incapacitated to Enter Into a
Contract of Sale
1. Absolute Incapacity – pertains to persons who
cannot bind themselves
(a) Minor
(b) Insane or demented persons
(c) Deaf-mutes who do not know how to read and
write
 Contracts entered into by a minor and other
incapacitated persons are voidable. However,
where the necessaries are sold and delivered
to him (without the intervention of the parent
or guardian), he must pay a reasonable price
therefor. The contract is therefore valid, but
the minor has the right to recover any excess
above a reasonable value paid by him.
 Sale of real property by minors who have
already passed the ages of puberty and
adolescence and are now in the adult age,
when they pretended to have already reached
their majority, while in fact they have not,
is valid, and they cannot be permitted
afterwards to excuse themselves from
compliance with the obligations assumed by
them or to seek their annulment. This is in
accord with the doctrine of estoppel[Mercado
and Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity – where it exists only with
reference to certain persons or class of property (Art.
1490-1491). The prohibition extends to sales by
virtue of legal redemption, compromises, and
renunciations.
(a) Husband and wife to each other – except when
a separation of property was agreed upon in the
marriage settlements, or when there has been a
judicial separation of property
(b) Guardian – as to the property of his ward
(c) Agents – as to the property whose
administration or sale has been entrusted to them,
unless consent of the principal is given
(d) Executors or administrators – as to the state
under their administration
(e) Public officers and employees – as to the
property of the State or any subdivision thereof, or of
the government-owned or controlled corporations,
the administration of which is entrusted to them
(f) Judges and government experts who take part
in the sale of the property and rights under litigation
 The prohibition is based on the fiduciary
relationship (based on trust), to prevent fraud
and undue and improper influence.
 With respect to (b) to (d), the sale shall only
be voidable because in such cases only private
interests are affected. The defect can be cured
by ratification by the seller. With respect to
(e) and (f), the sale shall be null and void,
public interests being involved therein.
(g) Aliens who are disqualified to purchase private
agricultural lands under Art. XII, Secs. 3 and 7 of the
Constitution
(h) Unpaid seller having a right of lien or having
estopped the goods in transitu
(i) Officer holding the execution or his deputy
III. EFFECTS OF THE CONTRACT WHEN THE
THING SOLD HAS BEEN LOST
 Where the thing is entirely lost at the time of
perfection, the contract is inexistent and void
because there is no object. There being no
contract, there is no necessity to bring an
action for annulment.
  Where the thing is only partially lost, the
vendee may elect between withdrawing from
the contract and demanding the remaining
part, paying its proportionate price.
 The thing is lost when it perishes or goes out
of commerce or disappears in such a way that
its existence is unknown or it cannot be
recovered.
IV. OBLIGATIONS OF THE VENDOR
Principal Obligations of the Vendor
to transfer the ownership of the determinate thing
sold (Art. 1495);
 The vendor need not be the owner of the
thing at the time of perfection of the contract;
it is sufficient that he has a right to transfer the
ownership thereof at the time it is delivered
(Art. 1459).
 If the seller promised to deliver at a stipulated
period and such period is of the essence of the
contract but did not comply with his
obligation on time, he has no right to demand
payment of the price. The vendee-buyer is
fact may ask for the rescission or resolution of
the sale.
 If the failure of the seller to deliver on time is
not due to his fault, as when it was the buyer
who failed to supply the necessary credit for
the transportation of the goods, delay on the
part of the seller may be said to be sufficiently
excused.
to deliver the thing, with its accessions and
accessories, if any, in the condition in which they
were upon the perfection of the contract (Art. 1537);
to warrant against eviction and against hidden defects
(Arts. 1495, 1547);
to take care of the thing, pending delivery, with
proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless
there is a stipulation to the contrary (Art. 1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of
acquiring ownership by virtue of which one has the
right and intention to alienate a corporeal thing,
transmits it by virtue of a just title to one who accepts
the same.
 Duty to Deliver at Execution Sale: a judgment
debtor is not obliged to deliver right away; he
has one (1) year within which to redeem the
property.
Kinds of Delivery or Tradition
1. Actual or Real (Art. 1497) – the thing sold is
placed in the control and possession of the
vendee or his agent. This involves the
physical delivery of the thing and is usually
done by the passing of a movable thing from
hand to hand.
2. Legal or Constructive (Arts. 1498-1501) –
through the execution of a public instrument
Legal formalities – applies to real and personal
properties, where the delivery is made through the
execution of a public document;
Traditio simbolica – to effect delivery, the parties
make use of a token symbol to represent the thing
delivered;
Traditio longa manu – movable property is delivered
by mere consent by the contracting parties if the thing
sold cannot be transferred to the possession of the
vendee at the time of the sale;
Traditio brevi manu – the vendee already has the
possession of the thing sold by virtue of another title
as when the lessor sells the thing leased to the lessee;
Constitotum possessorium – the vendor continues in
possession of the property sold not as owner but in
some other capacity (e.g., as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) – delivery of
rights, credits or incorporeal real property, made by
placing the titles of ownership in the hands of the
vendee or lawyer, by execution of a public
instrument, or by allowing the vendee to use his
rights as new owner with the consent of the vendor.
 Requisites in constructive delivery before
ownership may be transferred:
(a) Seller must have control over the thing;
otherwise, can he put another in control?
(b) Buyer must be put under control;
(c) There must be the intention to deliver the thing
for purposes of ownership.
 Rules of constructive delivery:
1. If a seller has an actual possession, he cannot
transfer ownership by constructive delivery.
2. There can be no constructive delivery by means of
a public instrument if there is a stipulation to the
contrary.
3. The execution of a deed or contract is only
presumptive delivery.
An Unpaid Seller is one who has not been pair or
rendered the whole price or who has received a bill
of exchange or other negotiable instrument as
conditional payment and the condition on which it
was received has been broken by reason of the
dishonor of the instrument.
Rights of an unpaid seller:
1. A lien on the goods or right to retain them for the
price while in his possession
2. A right of stopping the goods in transitu in case of
insolvency of the buyer; requisites:
(a) the seller must be unpaid;
(b) the buyer must be insolvent;
(c) the goods must be in transit;
(d) the seller must either actually take possession of
the goods sold or give notice of his claim to the
carrier or other person in possession;
(e) the seller must surrender the negotiable
document of title, if any, issued by the carrier or
bailee; and
(f) the seller must bear the expenses of delivery of
the goods after the exercise of the right.
3. A right of resale
4. A right to rescind the sale
Rules in case of loss, deterioration, or improvement
of thing before delivery
1. If the thing is lost without the fault of the
debtor, the obligation shall be extinguished.
2. If the thing is lost through the fault of the
debtor, he shall be obliged to pay damages, if
is understood that the thing is lost when it
perishes, or goes out of commerce, or
disappears in such a way that its existence is
unknown or it cannot be recovered.
3. When the thing deteriorates without the fault
of the debtor, the impairment is to be borne
by the creditor.
4. If it deteriorates through the fault of the
debtor, the creditor may choose between the
rescission of the obligation and its fulfillment,
with indemnity for damages in either case.
5. If the thing is improved by its nature, or by
time, the improvement shall inure to the
benefit of the creditor.
6. If it is improved at the expense of the debtor,
he shall have no other right than that granted
to the usufructuary.
Rules as to preference of ownership in case of double
sale
1. If the property sold is movable, the ownership
shall be acquired by the vendee who first
takes possession in good faith [Villa Rey
Transit, Inc. vs Ferrer, 25 SCRA 861].
2. If the property sold is immovable, the
ownership shall belong to:
(a) the vendee who first registers the sale in good
faith in the Registry of Deeds has preferred right over
another vendee who has not registered his title even
if the latter is in actual possession of the immovable
property – governed by the principle prius tempore,
patior jure (first in time, stronger in right) –
knowledge by the first buyer of the second sale
cannot defeat the first buyer’s right except when the
second first registers in good faith the second sale;
(b) in the absence of registration, the vendee who
first takes possession in good faith; and
(c) in the absence of both registration and
possession, the vendee who presents the oldest title
(who first bought the property) in good faith.
 Article 1544 has no application to lands not
registered with the Torrens system.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency
on the happening of which the obligation (or right)
of the contract depends.
Warranty is a statement or representation made by
the seller of goods, contemporaneously and as a part
of the contract of sale, having reference to the
character, quality, or title of the goods, and by which
he promises or undertakes to insure that certain facts
are or shall be as he then represents them.
If the obligation of either party is subject to any
condition and such condition is not fulfilled, such
party may either (1) refuse to proceed with the
contract, or (2) proceed with the contract, waiving
the performance of the condition.
If the condition is in the nature of a promise that it
should happen, the non-performance of such
condition may be treated by the other party as a
breach of warranty.
Implied warranty as to seller’s title (Art. 1548) – that
the seller guarantees that he has a right to sell the
thing sold and to transfer ownership to the buyer
who shall not be disturbed in his legal and peaceful
possession thereof.
Implied warranty against hidden defects or unknown
encumbrance (Art. 1562) – that the seller guarantees
that the thing sold is reasonably fit for the known
particular purpose for which it was acquired by the
buyer or, where it was bought by description, that it
is of merchantable quality.
Essential elements of warranty against eviction
1. the vendee is deprived in whole or in part of
the thing purchased;
2. the vendee is so deprived by virtue of a final
judgment ;
3. the judgment is based on a right prior to the
sale or an act imputable to the vendor;
4. the vendor was summoned in the suit for
eviction at the instance of the vendee; and
5. there is no waiver on the part of the vendee.
Kinds of waiver of eviction
1. Consciente – the waiver is voluntarily made
by the vendee without the knowledge and
assumption of the risks of eviction. If the
waiver was only conscious, the vendor shall
pay only the value which the thing sold had
at the time of eviction – this is a case of
solution indebiti – the effect is to deprive the
purchaser of the benefits mentioned in Nos. 2,
3, 4 and 5 of Article 1555.
2. Intencionada – the waiver is made by the
vendee with knowledge of the risks of
eviction and assumption of its consequence.
The vendor is exempted from the obligation
to answer for eviction, provided he did not
act in bad faith [Andaya vs. Manansala, 107
Phil. 1151].
Rights of the vendee against the vendor in case
eviction occurs (Art. 1555)
1. return of the value of the thing sold at the
time of eviction;
2. income or fruits if he has been ordered to
deliver them to the party who won the suit
against him;
3. costs of the suit;
4. expenses of the contract;
5. damages and interests and ornamental
expenses if the sale was made in bad faith.
Redhibition Redhibitory action Redhibitory vice
or defect
- the avoidance - an action instituted - a defect in the
of a sale on to avoid a sale on article sold
account of some account of some vice against which
vice or defect in or defect in the thing defect the seller is
the thing sold, sold which renders its bound to
which renders its use impossible, or so warrant. The
use impossible, orinconvenient and vice or defect
so inconvenient imperfect that it must must constitute
and imperfect be supposed that the an imperfection,
that it must be buyer would not a defect in its
supposed that thehave purchased it nature, of certain
buyer would not had he known of the importance; and
have purchased it vice. The object is a minor defect
had he known of the rescission of the does not five rise
the vice. contract. If the object to redhibition.
is to procure the The mere
return of a part of absence of a
 the purchase price certain quality in thing sold was lost, he shall b) the contract; and
paid by the vendee, the thing sold bear the loss because he
the remedy is known which the vendee acted in bad faith. In such (c) damages.
as accion thought it to case, the vendee has the
minoris orestimatoris.contain is not right to recover:
necessarily a
redhibitory If the vendor was not (a) the price paid
defect. One aware of them, he shall be
obliged only to return: (b) interest thereon; and
thing is that is
positively suffers (c) expenses of the
from certain contract if paid by the
defects. vendee. He is not made
liable for damages because
Doctrines of caveat venditor and caveat emptor
he is not guilty of bad
Caveat venditor Caveat emptor faith.

(Let the seller beware) (Let the buyer beware) VI. OBLIGATIONS OF THE VENDEE

- the vendor is liable to - applies in sheriff’s sale, sales  The vendee is obliged to (1) accept delivery;
the vendee for any of animals, and tax sales, for and (2) pay the price of the thing sold.
hidden faults or defects there is no warranty of title
 The following rules must be borne in mind:
in the thing sold, even or quality on the part of the
though he was not seller in such sales. 1. In contract of sale, the vendor is not required to
aware thereof (Art. deliver the thing sold until the price is paid nor the
1566).- Based on the - Also applies in double sales
vendee pay the price before the thing is delivered in
principle that a sound of property where the issue
the absence of an agreement to the contrary [La Font
price warrants a sound is who between two vendees
vs. Pascacio, 5 Phil. 591].
article. has a better right to the
property . 2. If stipulated, then the vendee is bound to accept
delivery and to pay the price at the time and place
- Requires the purchaser to
designated.
be aware of the supposed
title of the vendor and one 3. If there is no stipulation as to the time and place of
who buys without checking payment and delivery, the vendee is bound to pay at
the vendor’s title takes all the time and place of delivery.
the risks and losses
consequent to such 4. In the absence also of stipulation, as to the place of
failure [Solvoso vs. Tanega, delivery, it shall be made wherever the thing might
87 SCRA 349]. be at the moment the contract was perfected (Art.
1251).
Alternative remedies of the buyer to enforce
warranty (Art. 1567): 5. If only the time for delivery of the thing sold has
been fixed in the contract, the vendee is required to
1. Accion redhibitoria – to withdraw from the pay even before the thing is delivered to him; if only
contract the time for payment of the price has been fixed, the
vendee is entitled to delivery even before the price is
2. Accion quanti minoris – demand a
paid by him (Art. 1524).
proportionate reduction of the price, with a
right to damages in either case Instances when the vendee may suspend the payment
of the price:
Effect of loss of thing sold on account of hidden
defects (Art. 1568) a) should he be disturbed in the possession or
ownership of the thing sold;
If the vendor was aware of (a) the expenses of the
the hidden defects in price paid
consequence of which the
b) should he have reasonable grounds to fear such
disturbance by a vindicatory action or by a
foreclosure of mortgage;
These rights do not exist in the following cases:
(a) should there be a stipulation to that effect; or
(b) should the vendor give security for the return of
the price; or
(c) should the vendor have caused the disturbance
or danger to cease; or
(d) should the disturbance consist only of a mere
act or trespass.
VII. ACTIONS FOR THE BREACH OF CONTRACT
OF SALE OF GOODS
Goods – include all chattels personal but not things in
action or money of legal tender in the Philippines.
The term includes growing fruits or crops.
Actions available for breach of the contract of sale of
goods:
Action by the seller for payment of the price (Art.
1595)
Action by the seller for damages for non-acceptance
of the goods (Art. 1596)
Action by the seller for rescission of the contract for
breach thereof (Art. 1597)
Action by the buyer for specific performance (Art.
1598)
Action by the buyer for rescission or damages for
breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has
been guilty of a breach of promise or warranty (Art.
1599):
1 Recoupment - accept the goods and set up the
seller’s breach to reduce or extinguish the price.The
theory of recoupment is that the seller’s damages
are cut down to an amount which will compensate
him for the value of what he has given.
2 Set-off or Counterclaim for damages - accept the
goods and maintain an action for damages for the
breach of the warranty. Both sides of the contract
are enforced in the same litigation. The buyer
(defendant) does not seek to avoid his obligation
under the contract but seeks to enforce the seller’s
(plaintiff’s) obligation and to deduct it from his
liability for the price for breach of warranty.
3 Action for damages – refuse to accept the goods
and maintain an action for damages for the breach
of the warranty.
4 Rescission - rescind the contract of sale by returning
or offering the return of the goods, and recover
the price or any part thereof which has been paid.
This remedy is not available in the following cases:
(a) if the buyer accepted the goods knowing of
the breach of warranty without protest;
(b) if he fails to notify the seller within a
reasonable time of his election to rescind; and
(c) if he fails to return or offer to return the
goods in substantially as good condition as they
were in at the time of the transfer of ownership to
him. But where the injury to the goods was
caused by the very defect against which the seller
warranted, the buyer may still rescind the sale.
VIII. EXTINGUISHMENT OF SALE
Classification of modes or causes of extinguishing the
contract of sale:
Common – those causes which are also the means of
extinguishing all other contracts like payment, loss of
the thing, condonation, etc. (Art. 1231).
Special – those causes which are recognized by the
law on sales (those covered by Arts. 1484, 1532,
1539, 1540, 1542, 1556, 1560, 1567, and 1591).
Extra-special – conventional redemption and legal
redemption.
Conventional Redemption Legal Redemption
(Arts. 1601-1618) (Arts. 1619-1623)
It is the right which the It is the right to be
vendor reserves to himself, to subrogated, upon the
reacquire the property sold same terms and
provided her returns to the conditions stipulated in
vendee the price of the sale, the contract, in the
the expenses of the contract, place of one who
any other legitimate payments acquires a thing by
made therefore and the purchase or dation in
necessary and useful expenses payment, or by any
made on the thing sold, and other transaction
fulfills other stipulations which whereby ownership is
transmitted by onerous
may have been agreed upon. title. exercise the right of Instances of Legal
redemption necessarily is Redemption:
Nature: Nature: (a) theowner of the property sold
identical with and not any third
(a) it is conventional party [Gallar vs. Husain, 20
purely contractual because it is redemption, except for (a) Under the Civil
SCRA 186];
a right created, not by the source of the right Code, those found in
mandate of the law, but by – conventional (i) it gives rise to reciprocal Arts. 1620-1622, 1634,
virtue of an express redemption arises from obligationthat of returning the and 1088;
contract[Ordoñez vs. the voluntary price of sale and other
Villaroman, 78 Phil. 116]; agreement of the expenses, on the part of the
parties; legal vendor, and that of delivering (b) Under special
(b) it is
redemption proceeds the property and executing a laws:
an accidental stipulation and,
from law; deed of sale therefore, on the
therefore, its nullity cannot
part of the (1) redemption by
affect the sale of itself since (b) it is not vendee [Pandaquilla vs. Gaza, owner of real property
the latter might be entered predicated on 12 Phil. 663]. sold for delinquent
into without said proprietary right but taxes – period is within
stipulation [Alojado vs. Lim on a bare statutory
1 year from date of
Siongco, 51 Phil. 339]; privilege to be sale;
exercised only by the
(c) it is a real right when
person named in the (2) repurchase by
registered, because it binds
statute – the statute homesteader of
third persons [Mortera vs.
does not make actual homestead sold under
Martinez, 14 Phil. 541];
ownership at the time the Public Land Act –
(d) it is a resolutory of sale or redemption period is 5 years
condition because when a condition precedent, [Tupas vs. Damasco,
exercised, the right of the right following the 132 SCRA 593];
ownership acquired by the person and not the
(3) redemption by
vendee is extinguished[Aquino property[Magno vs.
Viola and Sotto, 61 judgment debtor or
vs. Deal, 63 Phil. 582];
Phil. 80]; redemptioner or real
(e) it is potestative because property sold on
it depends upon the will of (c) it is in the nature execution – period is
the vendor; of a mere 12 months;
privilegecreated partly
(f) it is for reason of public (4) redemption by
a power or privilege, not an policy and partly for mortgagor after
obligation, that the vendor the benefit and mortgaged property
has reserved for convenience of the has been judicially
himself [Ocampo vs. redemptioner to afford foreclosed and sold –
Potenciano, CA 48 OG 2230]; him a way out of what period is 90 days but
might be a before confirmation of
(g) it is reserved at the disagreeable or sale by the court (in all
moment of the perfection of inconvenient cases of extra-judicial
the contract for if the right to association into which foreclosure sale, the
repurchase is agreed upon he has been thrust – it mortgagor may
afterwards, there is only a is intended to redeem the property
promise to sell which minimize co-ownership within 1 year from the
produces different rights and [Basa vs. Aguilar, 117 date of registration of
effects and is governed by Art. SCRA 128; Tan vs. CA, the sale);
1479 [Diamante vs. CA, 206 172 SCRA 660].
SCRA 52]; (5) redemption by
an agricultural lessee of
(h) the person entitled to landholding sold by
 the landowner – 2. when the vendor remains in possession as
period is 180 days lessee or otherwise;
from notice in writing
which shall be served 3. when upon or after the expiration of the right
by the vendee on all to repurchase another instrument extending
lessees affected by the period of redemption or granting a new
DAR upon the period is executed;
registration of the sale.
4. when the purchaser retains for himself a part
An equitable mortgage is one which lacks the proper of the purchase price;
formalities, form of words, or other requisites
5. when the vendor binds himself to pay the
prescribed by law for a mortgage, but shows the
taxes on the thing sold;
intention of the parties to make the property subject
of the contract as security for a debt and contains 6. in any other case where it may be fairly
nothing impossible or contrary to law [Cachola vs. inferred the real intention of the parties is that
CA, 208 SCRA 496]. the transaction shall secure the payment of a
debt or the performance of any other
Dacion en pago is the transmission of the ownership
obligation; and
of a thing by the debtor to the creditor as the
accepted equivalent of the performance of an 7. when there is a doubt as to whether the
obligation. contract is a contract of sale with right or
repurchase or an equitable mortgage.
Pacto de retro Mortgage
Requisites before legal redemption can be
Ownership is transferred Ownership is not
exercised:
but the ownership is transferred but the property
subject to the condition is merely subject to a charge 1 There must be a sale or assignment of credit. The
that the seller might or lien as security for the concept of sale must be understood in its restricted
recover the ownership compliance of a principal sense. The right cannot be exercised if the
within a certain period of obligation, usually a loan. transaction is exchange or donation.
time.
2 There must be a pending litigation at the time of
If the seller does not The mortgagor does not the assignment. The complaint by the assignor
repurchase the property lose his interest in the must have been filed and answered by the creditor
upon the very day property if he fails to pay before the sale of the credit.
named in the contract, the debt at its maturity.
he loses all interest 3 The debtor must pay the assignee (a) the price paid
thereon. by him, (b) the judicial costs incurred by him, and
(c) the interests on the price from the date of
There is no obligation It is the duty of the payment.
resting upon the mortgagee to foreclose the
purchaser to foreclose; mortgage if he wishes to 4 The right must be exercised by the debtor within
neither does the vendor secure a perfect title 30 days from the date the assignee demands
have any right to redeem thereto, and after the (judicially or extra-judicially) payment from him.
the property after the maturity of the debt secured
maturity of the debt. by the mortgage and before
foreclosure, the mortgagor
Redemption Pre-emption
has a right to
redeem [Basilio vs. 1 The sale to a third person The sale to a third
Encarnacion, 5 Phil. 360]. has already been perfected person has not yet been
perfected
Instances when conventional redemption is presumed
to be an equitable mortgage: 2 Has a much broader scope Narrower in scope –
may be exercised only
1. when the price of a sale with right to
where there is a
repurchase is unusually inadequate;
 prospective resale of a
small piece of urban
land originally bought
by the prospective
vendor merely for
speculation
3 Directed against the third Directed against the
person who bought the prospective vendor who
property is about to resell the
property
4 Effect is to extinguish a Effect is to prevent the
contract that has already birth or perfection of a
been perfected or even contract
consummated
IX. ASSIGNMENT OF CREDITS AND OTHER
INCORPOREAL RIGHTS
Assignment of credit – a contract by which the owner
of a credit transfers to another his rights and actions
against a third person in consideration of a price
certain in money or its equivalent (Art. 1458).
Assignment of credit and other incorporeal rights are
consensual, bilateral, onerous, and commutative or
aleatory contracts. The assignment involves no
transfer of ownership but merely effects the transfer
of rights which the assignor has at the time to the
assignee [Casabuena vs. CA, 286 SCRA 594].
It may be done gratuitously, but if done onerously, it
is really a sale. Thus, the subject matter is the credit
or right assigned; the consideration is the price paid
for the credit or right; and the consent is the
agreement of the parties to the assignment of the
credit or right at the agreed price.
Renunciation – the abandonment of a right without a
transfer to another.
Agency – involves representation, not transmission
wherein the agent acts for the principal.
Substitution – the change of a new debtor for the
previous debtor with the credit remaining in the same
creditor.
Subrogation – the change in the person of the
creditor with the credit being extinguished.
Binding effects of assignment:
1 As between the parties, the assignment is valid
although it appears only in a private document so
long as the law does not require a specific form for
its validity.
2 To affect third persons, the assignment must
appear in a public instrument, and in case it
involves real property, it is indispensable that it be
recorded in the Registry of Deeds [Lopez vs.
Alvarez, 9 Phil. 28].
3 The assignee merely steps into the shoes of the
assignor, the former acquiring the credit subject to
defenses (fraud, prescription, etc.) available to the
debtor against the assignor. The assignee is
deemed subrogated to the rights as well as to the
obligations of the seller. He cannot acquire greater
rights than those pertaining to the assignor. [Koa vs
CA, 219 SCRA 541].
X. BARTER OR EXCHANGE
Barter – a contract whereby one person transfers the
ownership of non-fungible things to another with the
obligation on the part of the latter to give things of
the same kind, quantity, and quality.
The contract is perfected from the moment there is a
meeting of the minds upon the things promised by
each party in consideration of the other. It is
consummated from the time of mutual delivery by
the contracting parties of things they promised.
Effect where the giver is not the lawful owner of the
thing delivered: the aggrieved party cannot be
compelled to deliver the thing he has promised. He
is entitled to claim damages (Art. 1639). [Biagtan vs.
Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given
the option to recover the property he has given in
exchange with damages or only claim an indemnity
for damages. The right to recover is, however,
subject to the rights of innocent third persons (Art.
1640).
XI. THE BULK SALES LAW
Purpose of the law (Act No. 3952) is to prevent the
defrauding of creditors by the secret sale or disposal
or mortgage in bulk of all or substantially all of a
merchant’s stock of goods.
The general scheme is to declare such bulk sales
fraudulent and void as to creditors of the vendor, or
presumptively so, unless specified formalities are
observed, such as the demanding and the giving of a
list of creditors, the giving of actual and constructive
notice to such creditors, by record or otherwise, and
the making of an inventory.

A sale and transfer in bulk under the Bulk Sales Law is

any sale, transfer, mortgage, or assignment –

(a) of a stock of goods, wares, merchandise,

provisions, or materials otherwise than in the
ordinary course of trade and the regular prosecution
of the business; or

(b) of all or substantially all, of the business or trade;

or

(c) of all or substantially all, of the fixtures and

equipment used in the business of the vendor,
mortgagor transferor, or assignor.

Acts punished by the law:

1. knowingly or willfully making or delivering a

statement as required by the Act which does
not include the names of all the creditors of
the vendor, etc. with the correct amount due
and to become due or which contains any
false or untrue statement; and

2. transferring title to a any stock of goods,

wares, merchandise, provisions or materials
sold in bulk without consideration of for a
nominal consideration only