Sales - San Beda Law

San Beda College of Law
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MEMORY AID IN CIVIL LAW
SALES
SALE Commutative; In some
A nominate contract whereby one of cases, aleatory (emptio spei);
the contracting parties obligates Onerous.
himself to transfer the ownership of
and to deliver a determinate thing * Aleatory contract: one of the parties or
and the other to pay therefor a price both reciprocally bind themselves to give
certain in money or its equivalent. or to do something in consideration of
what the other shall give or do upon the
NOTES: Delivery and payment in a happening of an event which is uncertain,
contract of sale are so interrelated and or which is to occur at an indeterminate
intertwined with each other that without time. (Ex: Sale of sweepstakes ticket)
delivery of the goods there is no
corresponding obligation to pay. The two Contract to sell
complement each other. It is clear that exclusive right and privilege to
the two elements cannot be dissociated, purchase an object.
for the contract of purchase and sale is a bilateral contract whereby the
essentially a bilateral contract, as it prospective seller, while expressly
gives rise to reciprocal obligations. (Pio reserving the ownership of the
Barretto Sons, Inc. vs. Compania subject property despite delivery
Maritima, 62 SCRA 167). thereof to the prospective buyer
Neither is the delivery of the thing binds himself to sell the said
bought nor the payment of the price property exclusively to the
necessary for the perfection of the prospective buyer upon fulfilment of
contract of sale. Being consensual, it the condition agreed upon, that is,
is perfected by mere consent. full payment of the purchase price.
Elements: NOTE: Absent a proviso in the contract

Essential elements – those without that the title to the property is reserved
which, there can be no valid sale: in the vendor until full payment of the
Consent or meeting of minds purchase price or a stipulation giving the
A Determinable subject matter vendor the right to unilaterally rescind
Price certain in money or its the contract the moment the vendee
equivalent fails to pay within the fixed period, the
Natural elements – inherent in the transaction is an absolute contract of
contract, and which in the absence sale and not a contract to sell. (Dignos
of any contrary provision, are vs. CA [1988])
deemed to exist in the contract: The contract of sale by itself is not a
Warranty against eviction mode of acquiring ownership. The contact
Warranty against hidden transfers no real rights; it merely causes
defects certain obligations to arise.
Accidental elements – may be
present or absent depending on the
stipulation of the parties (e.g.: Contr ac t of Contr ac t to
conditions, interest, penalty, time Sale Sell
or place of payment, etc.) 1. Title passes to the 1. Owne rshi p is
buyer upon delivery reserved in the
Characteristics: of the thing sold seller and is not to
pass until full
Principal payment of the
Consensual; purchase price
Bilateral; Non-payment of 2. Full payment is a
Nominate; the price is a negative positive suspensive
resolutory condition condition, the
and the remedy of the failure of which is
CIVIL LAW COMMITTEE
C HAIRPERSON: Romuald Padilla ASST .C HAIRPERSON: Vida Bocar, Joy ce Vidad EDP: Alnaiza Hassiman, Dorothy Gay on
SUBJECT H EADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property ), Ma. Rhodora
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen
Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligay a Alipao(Torts and Damages), Anthony Purganan(LTD),
Ma. Ricasion Tugadi (Conf licts of Law)

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seller is to exact not a breach – Constructive 1. Third person

fulfi l m ent or to casual or serious /actual knowledge on buying the
rescind the contract but simply the part of the 2nd proper ty despite
prevents the buyer of the defect in fulfilme nt of the
obligation of the the seller’s title suspensive
vendor to convey renders him not a condition cannot
title from having registrant in good be deemed a
binding force faith. Such second buyer in bad
3. Vendor loses and 3. Title remains in buyer cannot defeat faith and
cannot recov er the vendor if the the first buyer’s title. prospective
ownershi p of the vende e does not Ratio: Fulfilment of buyer cannot
thing sold and comply with the the suspensive seek the relief of
delivered until the condition conditions affects the recon v ey an c e of
contract of sale is precedent of seller’ s title to the property.
resolved and set aside making payment at proper ty and previous Exception: If
the time specified delivery of the There was no
in the contract property automatically previ o us sale of
transfers the property.
ownership/title to the
Cond ition al Sale Contr ac t to buyer.
Sell
As to reservation of title to the subject
property OBJECTS OF SALE
In both cases the seller may reserve the Requisites:
title to the subject property until THINGS:
fulfillment of the suspensive condition i.e. determinate or determinable
full payment of the price (Arts. 1458, 1460)
As to effect of fulfillment of suspensive lawful (Arts 1347, 1409 [1,4]
condition should not be impossible (Art.
1. Upon fulfillment of 1. Upon 1348) e.g. must be within the
the suspensive fulfillment of the commerce of man
condition, the suspensive RIGHTS – must be transmissible
contract of sale is condi ti on , which Exceptions:
thereby perfected, is the full -future inheritance
such that if there had payment of the
been previous delivery purchase price, - service
of the subject ownershi p will
property to the buyer, not automatically Emptio rei Emptio spei
ownership thereto transfer to the speratae
automatically buyer although 1. Sale of an expected 1. Sale of a mere
transfers to the the property may thing hope or expectancy
buyer by operation have been that the thing will
of law without any previ ously come to existence;
furthe r act by the delivered to him. Sale of the hope
seller. The prospective itself
seller still has Sale is subject to 2. Sale produces
to convey title the condition that effect even if the
to the the thing will thing does not
exist; if it does come into
prospective
buyer by not, there is no existence, unless it
contract is a vain hope
entering into a
contract of The uncertainty is 3. The uncertainty
absolute sale. with regard to the is with regard to
quantity and quality of the existence of the
the thing and not the thing
As to effect of sale of the subject existence of the thing
property to 3rd persons 4. Object is a future 4. Object is a
thing present thing which
is the hope or
expectancy
NOTE: In case of doubt the presumption is
in favor of emptio rei speratae which is
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more in keeping with the commutative 1. Buyer receives the 1. Agent receives
character of the contract goods as owner the goods as goods
of the principal who
retains his ownership
Goods which may be Object of Sale
over them
a. Existing goods – goods owned or Buyer pays the 2. Agent delivers
possessed by the seller. price the price which in
b. Future goods – goods to be turn he got from his
manufactured, raised or acquired by buyer
the seller after the perfection of the Buyer, as a 3. Agent can return
contract. general rule, cannot the goods in case he
NOTES: return the object is unable to sell the
A sale of future goods is valid only as sold same to a third
person
an executory contract to be fulfilled
Seller warrants 4. Agent makes no
by the acquisition and delivery of the thing sold warranty for which
goods specified.
he assumes personal
While there can be sale of future liability as long as he
property, there can generally be no acts within his
donation of future property (Article authority and in the
name of the seller
751 Civil Code)
5. Buyer can deal 5. Agent in dealing
Future inheritance cannot be sold. A with the thing sold with the thing
contract of sale or purchase of as he pleases being received, must act
goods to be delivered at a future time, the owner and is bound
according to the
if entered into without the intention of
instructions of the
having any goods pass from one party principal
to another, but with an understanding
that at the appointed time, the
purchaser is merely to receive or pay Contract for Piece
Sale
the difference between the contract of Work
and the market prices, is illegal. Such 1. The thing 1. The thing
transferred is one transfe rr ed is one
contract falls under the definition of not in existence and which would have
“futures” in which the parties merely
which never would existed and would
gamble on the rise or fall in prices and have existed but for have been the
is declared null and void by law. (Art. the order of the subject of sale to
2018, NCC) (Onapal Phil. party desiring to some other person,
Commodities, Inc. vs. CA [1993]) acquire it even if the order
had not been given
2. The services 2. The pri mary
dominate the objective of the
Instances when the Civil Code
contract even contract is a sale of
recognizes sale of things not though there is a the manufactured
actually or already owned by the sale of goods item; it is a sale of
seller at the time of the sale: involved goods even though
Sale of a thing having potential the item is
existence (Article 1461) manu fac tu re d by
Sale of future goods (Article 1462) labor furnished by
the seller and upon
Contract for the delivery at a certain
price of an article which the vendor previ o us order of
the customer
in the ordinary course of the
3. Not within the 3. Withi n the
business manufactures or procures Statute of Frauds Statute of Frauds
for the general market, whether the
same is on hand at the time or not
(Article 1467)
Sale Agency to sell Rules to determine if the contract is

one of Sale or Piece of work:
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If ordered in the ordinary course of object the acquisition of the

business – sale object offered in lieu
If manufactured specially for the of the original credit
Greater freedom 4. Less Freedom in
customer and upon his special order, in determining determining the
and not for the market – piece of
the price price
work
5. Buyer still has to 5. The payment is
SCHOOLS OF THOUGHT: pay the price received by the
Massachusetts rule: If specifically debtor before
done at the order of another, this the contrac t is
is a contract for a piece of work. perfected.
(Philippine application)
New York rule: If thing already PRICE
exists-SALE; if not-WORK The sum stipulated as the equivalent
English rule: If material is more of the thing sold and also every
valuable-SALE; if skill is more incident taken into consideration for
valuable-WORK the fixing of the price, put to the
debit of the vendee and agreed to by
BARTER him.
contract whereby one of the parties
binds himself to give one thing in Requisites:
consideration of the other's promise
Certainty or
to give another thing.
ascertainable at the time of
NOTE: The only point difference
perfection
between contract of sale and barter is in
Real, not fictitious
the element which is present in sale but
In some cases, must not
not in barter, namely: price certain in
be grossly inferior to the value
money or its equivalent
of the thing sold.
Paid in money or its
NOTE: If the consideration is partly in
equivalent
money and partly in another thing,
determine:
Certainty
The manifest intention It is not necessary that the certainty
of the parties of the price be actual or determined
If the intent is not clear, at the time of the execution of the
apply the following rules: contract. The price is certain in the
If the thing is more
valuable than money – following cases:
barter If the parties have fixed
If the money and the or agreed upon a definite
thing are of equal value – amount;
sale NOTE: The fixing of the price can
If the thing is less never be left to the discretion of one
valuable than money – sale of the contracting parties. However
if the price fixed by one of the
parties is accepted by the other, the
Sale Dation in Payment sale is perfected.
1. No pre- 1. Pre-existing credit If it be certain with reference to
existing credit
Obligations are 2. Obligations are another thing certain
created extinguished If the determination of the price
3. Consideration on 3. Consi d er ati o n of is left to the judgment of a
the part of the seller the debtor is the specified person or persons even
is the price; on the extinguishment of before such determination
part of the buyer is the debt; on the part
the acquisition of the of the creditor, it is
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MEMORY AID IN C IVIL LAW
In the cases providedGENERAL RULE: Mere inadequacy of the

under Art. 1472 NCC price is not a sufficient ground for the
cancellation of the sale if property is
real.
Effect when the price is fixed by the

third person designated: EXCEPTIONS:
GENERAL RULE: Price fixed by a third Where the price is so low
person designated by the parties is as to be shocking to the moral
binding upon them. conscience, judicial sale of
EXCEPTIONS: personal property will be set
When the third person aside
acts in bad faith or by mistake In the event of a resale,
When the third person a better price can be obtained
disregards the specific
instructions or the procedure NOTE: The validity of the sale is not
marked out by the parties necessarily affected where the law gives
to the owner the right to redeem, upon
Effect when the price is not fixed by the theory that the lesser the price, the
the third person designated: easier it is for the owner to effect
If the third person redemption.
refuses or cannot fix the price,
the contract shall become Effect where price is simulated
ineffective, unless the parties If it is shown to have been in reality
subsequently agree upon the a donation or some other act or
price contract
If the third person is The sale is void but the
prevented from fixing the price act or contract may be valid as a
by the fault of the seller or donation
buyer, the party not in fault may If not
obtain redress against the party The contract is void and
in fault inexistent
Effect of Gross Inadequacy of Price: Effect of Failure to determine price:

1. Voluntary sales Where contract executory
GENERAL RULE: Mere inadequacy of the The contract is
price does not affect validity of the sale. inefficacious
A valuable consideration, however Where the thing has been delivered
small or nominal, if given or to and appropriated by the buyer
stipulated in good faith is, in the The buyer must pay a reasonable
absence of fraud, sufficient. price therefore
(Rodriguez vs. CA, 207 SCRA 553)
Future inheritance cannot be sold. Reasonable price – generally the market
price at the time and place fixed by the
EXCEPTIONS: contract or by law for the delivery of the
Where low price indicates vice of goods
consent, sale may be annulled;
or contract is presumed to be an PERFECTION OF SALE
equitable mortgage GENERAL RULE: It is perfected at the
Where the price is so low as to moment there is meeting of the minds
be “shocking to conscience”, upon a determinate thing (object), and a
sale may be set aside. certain price (consideration), even if
neither is delivered. A choice between
Involuntary or Forced sales rescission and fulfilment, with damages
in either case)
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Nonpayment only creates a right

NOTE: Sale is a consensual contract; to demand payment or to rescind
Hence, delivery and payment are not the contract, or to criminal
essential for its perfection prosecution in the case of
EXCEPTION: When the sale is subject to bouncing checks. (EDCA
a suspensive condition by virtue of law or Publishing and Distributing
stipulation. Corp. vs. Santos, 184 SCRA 614)
The terms and conditions of payment
are merely accidental, not essential EXCEPTIONS:
elements of the contract of sale except
Contrary stipulation or Pactum
where the partied themselves stipulate reservati dominii (contractual
that in addition to the subject-matter reservation of title) – a stipulation,
and the price, they are essential or usually in sales by installment,
material to the contract. whereby, despite delivery of the
property sold, ownership remains
Requirements for perfection with the seller until full payment of
When parties are face to face the price is made.
When an offer is Contract to sell
accepted without conditions or Contract of insurance – a perfected
qualifications contract of sale, even without
NOTES: delivery, vests in the vendee an
A conditional acceptance is a equitable title, an existing interest
counter-offer over the goods sufficient to be the
when negotiated thru phone it is subject of insurance
as if it is negotiated face to face
When contract is thru RULES GOVERNING AUCTION SALES
correspondence or thru telegram Sales of separate lots by auction are
When the offeror receives or has separate contracts of sale.
knowledge of the acceptance by the Sale is perfected by the fall of the
offeree hammer
NOTE: If the buyer has already Seller has the right to bid in the
accepted but the seller does not auction, provided:
know yet of the acceptance, the such right was reserved
seller may still withdraw notice was given that the sale was
When a sale is subject to a subject to a right to bid on behalf of the
suspensive condition seller
From the moment the condition right is not prohibited by law or by
stipulation
is fulfilled
Advertisements for bidders are
TRANSFER OF OWNERSHIP simply invitations to make proposals,
and the advertiser is not bound to
GENERAL RULE: While a contract of sale
accept the highest or lowest bidder,
is consensual, ownership of the thing sold
unless the contrary appears.
is acquired only upon its delivery, actual or
constructive, to the buyer. (Daus vs. Sps. EFFECT OF PROMISE TREATED UNDER
De Leon, 16 June 2003) ART. 1479 Civil Code:
This is true even if the purchase Accepted unilateral promise to sell or
has been made on credit. buy
Payment of the purchase price is Only one makes the promise, this
not essential to the transfer of promise is accepted by the other.
ownership, as long as the Example: A promises to sell to B, B
property sold has been accepts the promise, but does not in
delivered. (Sampaguita Pictures, turn promise to buy.
Inc vs. Jalwindor Manufacturers,
Inc. 93 SCRA 420)
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does not bind the promissor even if supported by a consideration, the

accepted and may be withdrawn moment it was accepted, a perfected
anytime. contract of sale resulted, applying Art.
NOTE: Pending notice of its withdrawal, 1324 of the NCC. In view of the ruling of
the accepted promise partakes the the Supreme Court, the only importance
nature of an offer to sell which if of the consideration for an option is that
accepted, results in a perfected contract the option cannot be withdrawn by the
of sale (Sanchez vs. Rigos 45 SCRA3 68). grantor after acceptance.
In other words, if the acceptance is In an option to buy, the party who has
made before withdrawal, it constitutes a an option may validly and effectively
binding contract of sale although the exercise his right by merely notifying the
option is given without consideration. owner of the former’s decision to buy
if the promise is supported by a and expressing his readiness to pay the
consideration distinct and separate stipulated price.
from the price (option money), its
acceptance will give rise to a Right of First Refusal
perfected contract. It is a right of first priority all things
and conditions being equal; there
should be identity of the terms and
Bilateral promise to buy and sell
conditions to be offered to the
One party accepts the other’s
optionee and all other prospective
promise to buy and the latter, the
buyers, with optionee to enjoy the
former’s promise to sell a
right of first priority. A deed of sale
determinate thing for a price certain
executed in favor of a third party
it is reciprocally demandable who cannot be deemed a purchaser
It requires no consideration distinct in good faith, and which is in
from the selling price violation of the of the right of first
NOTE: this is as good as a perfected refusal granted to the optionee is
sale. No title of dominion is NOT voidable under the Statute of
transferred as yet, the parties being Frauds, such contract is valid BUT
given only the right to demand rescissible under Article 1380 to
fulfillment or damages. 1381(3) of the New Civil Code
(Guzman Bocaling & Co. vs.
Policitation Bonnavie; Riviera Filipina, Inc vs. CA
An unaccepted unilateral promise to et.al. GR No. 117355, April 5, 2002).
buy or sell. Even if accepted by the The basis of the right of first refusal
other party, it does not bind the must be the current offer to sell of
promissor and maybe withdrawn the seller or offer to purchase of any
anytime. This is a mere offer, and prospective buyer. Only after the
has not yet been converted into a optionee fails to exercise its right of
contract. first priority under the same terms
and within the period contemplated
Option contract could the owner validly offer to sell
A contract granting a privilege in one the property to a third person,
person, for which he has paid a again, under the same terms as
consideration, which gives him the offered to the optionee (Paranaque
right to buy certain merchandise, at Kings Enterprises, Inc. vs. CA GR No.
anytime within the agreed period, at 111538, February 26, 1997)
a fixed price. The lessee’s right of first option to
An option without consideration is buy the leased property in case of its
sale is but a part of the bigger right
void and the effect is the same as if
to lease the said property from the
there was no option lessor. The option was given to the
However, in Sanchez vs. Rigos (1972),
lessee because she was the lessee of
even though the option was not
the subject property. It was a
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component of the consideration of GENERAL RULE: Who bears the risk

the lease. The option was by no of loss is governed by the
means an independent right which stipulations in the contract
can be exercised by the lessee. If In the absence of any
the lessee is barred by the contract stipulation:
from assigning her right to lease the First view:
subject property to any other party, Buyer bears the loss as an exception
the lessee is similarly barred to to the rule of res perit domino.
assign her first option to buy the EXCEPTIONS:
leased property to another. when object sold
(Bangayan et.al vs. CA and Lim GR consists of fungible goods for a
No.123581, August 29, 1997) price fixed according to weight,
number or measure
Earnest money – or “ARRAS” is something seller is guilty of fraud,
of value to show that the buyer was really negligence, default or violation
in earnest, and given to the seller to bind of contractual terms
the bargain. It is considered as: object sold is generic
part of the purchase price (Civil Code of the Philippines, Paras)
proof of perfection of the NOTE: This view conforms with
contract Manresa’s view. Buyer would have
*It shall be deducted from the total price. been the one to profit from the thing
had it not been lost or destroyed.
Earnest money Option money Contrary view:

1. Title passes to 1. Owne rshi p is Where the ownership is transferred by
the buyer upon reserved to the seller delivery, as in our code, the
delivery of the and is not to pass application of the axiom res perit
thing sold unti l full payme nt domino, imposes the risk of loss upon
2. In case of 2. In case of the vendor; hence, if the thing is lost
non-payment, an non-payment, there by fortuitous event before delivery,
action for specific can be action for
the vendor suffers the loss and cannot
performance or for specific performance
rescission can be recover the price from the
filed by the vendee (Commentaries and
injured party Jurisprudence on the Civil Code of
Part of the 3. M oney given as a the Philippines, Tolentino)
purchase price distinct consideration
for an option d. The thing is lost after delivery:
contract Buyer bears the loss.
4. When given, the 4. The would-be
buyer is bound to buyer is not required Question: If one does not comply,
pay the balance to buy
the other need not pay?
Given when 5. Applies to a sale
there is already a not yet perfected Answer: True. But this only applies when
sale the seller is able to deliver but does not.
RULES ON RISK OF LOSS AND EFFECT OF LOSS AT THE TIME OF SALE:

DETERIORATION: Thing entirely lost at the time
a. The thing sold is lost before of perfection: Contract is void and
perfection: Seller bears the loss. inexistent
The thing sold is lost at the time of Thing only partially lost: Vendee
perfection: Contract is void or may elect between withdrawing from
inexistent. the contract or demanding the
The thing sold is lost after remaining part, paying its
perfection, but before delivery: proportionate price
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Sale by description Sale of property not to be

A sale where a seller sells things as performed within a year from
being of a certain kind, buyer merely the date thereof
relying on the seller’s “Applicable statute” requires
representations or descriptions. that the contract of sale be in a
There is warranty that the thing sold certain form
corresponds to the representations NOTE: Statute of Frauds is applicable
or descriptions. only to executory contracts and not to
contracts which are totally or partially
performed.
Sale by sample
A sale where a small quantity of a
commodity is exhibited by the seller
as a fair specimen of the bulk, which CAPACITY TO BUY OR SELL
is not present and as to which there
GENERAL RULE: All persons who can
is no opportunity to inspect or
bind themselves also have legal capacity
examine.
to buy and sell.
NOTE: The mere exhibition of the EXCEPTIONS:
sample does not necessarily make it 1. Absolute incapacity (minors,
a sale by sample. This exhibition demented persons, imbeciles,
must have been the sole basis or deaf and dumb, prodigals, civil
inducement of the sale. interdictees) - party cannot bind
There is warranty that the bulk of themselves in any case.
the commodity will correspond in
kind, quality, and character with the Relative incapacity –
sample exhibited. incapacity exists only with
reference to certain persons or a
NOTE: In a sale by sample and by certain class of property
description, there is a two-fold warranty.
Relative Incapacity
RIGHTS OF BUYER: A. Husband and wife (Art. 1490):
Return the thing and recover the Generally, a sale by one spouse to
money paid, or another is void.
Retain the thing and sue for the The husband and wife cannot sell
breach of warranty. property to each other except:
When a separation of
PURCHASE BY MINORS: Contract is property was agreed upon by the
generally voidable but in case of spouses
necessaries, “where necessaries are sold When there has been a
and delivered to a minor or other person judicial separation of property
without capacity to act, he must pay a under Article 134 and 135 of the
reasonable price therefore. Necessaries Family Code
are those in Art. 290.”
B. Incapacity by reason of relation to
FORMALITIES OF CONTRACT OF SALE property (Art. 1491)
GENERAL RULE: Sale is a consensual The following persons cannot acquire
contract and is perfected by mere property by purchase, even at a
consent. public auction, either in person or
EXCEPTIONS: In order to be through the mediation of another:
enforceable by action, the following
(GAEP-JO)
must be in writing:
the guardian, with respect to the
Sale of personal property
property of his ward;
at a price not less than P500
agents, with respect to the
Sale of real property or
property whose administration or
an interest therein
sale may have been entrusted to
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them, unless the consent of the administrator to sell. The sale

principal has been given; was indubitably illegal, irregular
executor or administrator, with and fictitious, and the court’s
respect to the property of the approval of the assailed
estate under administration; compromise agreement violated
public officers and employees, Article 1491 and cannot work to
with respect to the properties of ratify a fictitious contract which
the government, its political is non-existent and void from
subdivisions, or GOCCs, that are the very beginning
entrusted to them; With respect to nos. 4 to
judges, justices, prosecuting 6: the sale is NULL AND VOID.
attorneys, clerks of courts, etc., Reason: violation of public policy
with respect to the property in cannot be subject to ratification
custogia legis; and
OBLIGATIONS OF THE VENDOR: (WPD-
any other person specially TT)
disqualified by law. Transfer ownership (cannot be
Examples of persons especially waived)
disqualified by law: Deliver the thing sold (cannot be
Aliens who are disqualified to waived)
purchase agricultural lands Warrant against eviction and against
An unpaid seller having a right hidden defects (can be waived or
of lien or having stopped the goods modified since warranty is not an
in transitu, who is prohibited from essential element of the contract of
buying the goods either directly or sale)
indirectly in the resale of the Take care of the thing, pending
same, at public or private sale delivery, with proper diligence
which he may make (Article 1163)
The officer holding the Pay for the expenses of the deed of
execution, or his deputy. sale, unless there is stipulation to
NOTE: While those disqualified the contrary
under Arts. 1490 and 1491 may
not become lessees (Art. 1646), DELIVERY
still aliens may become lessees Is a mode of acquiring ownership, as
even if they cannot buy lands. a consequence of certain contracts
such as sale, by virtue of which,
Effect of violation: actually or constructively, the object
With respect to nos. 1 to is placed in the control and
3: the sale is VOIDABLE. possession of the vendee.
Reason: only private rights,
which are subject to ratification Delivery of the thing together
are violated with the payment of the price,
NOTE: In the case of Lao vs. marks the consummation of the
Genato, 137 SCRA 77, the contract of sale(PNB vs. Ling, 69
Supreme Court found that the Phil. 611)
sale by the administrator of
certain properties of the estate In all forms of delivery, it is
in order to settle the existing necessary that the act of
obligations of the estate was delivery be coupled with the
made to the administrator’s son intention of delivering the thing.
for a grossly low price. The act without the intention is
Furthermore, the said sale was insufficient. (Norkis Distributor,
not submitted to the probate Inc. vs. CA, 195 SCRA 694)
court for approval as mandated
by the order authorizing the Kinds:
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Actual or real – placing the thing If no period for payment has been
under the control and possession of fixed in the contract
the buyer. Even if a period for payment has
Legal or constructive – delivery is been fixed in the contract, if the
represented by other signs or acts vendee has lost the right to make
indicative thereof use of the same.
a.delivery by the execution
of a public instrument. Sale or return
NOTE: Gives rise only to a prima Property is sold, but the buyer, who
facie presumption of delivery which becomes the owner of the property
is destroyed when actual delivery is on delivery, has the option to return
not effected because of a legal the same to the seller instead of
impediment (Ten Forty Realty vs. paying the price.
Cruz, 10 Sept. 2003)
traditio symbolica - to
effect delivery, the parties make NOTES:
use of a token or symbol to It is a kind of sale with a
represent the thing delivered condition subsequent.
traditio longa manu – The buyer must comply with the
seller pointing out to the buyer express or implied conditions
the things which are transferred, attached to the return privilege;
which at the time must be in otherwise, the sale becomes
sight.
absolute.
traditio brevi manu –
Buyer, being the owner, bears
buyer simply continues in
possession of the thing but under the risk of loss
title of ownership.
traditio constitutum Sale on trial, approval, or satisfaction
possessorium – seller continues in A contract in the nature of an option
possession but under a different to purchase if the goods prove to be
title other than ownership. satisfactory, the approval of the
Quasi-tradition – delivery of rights, buyer being a condition precedent.
credits or incorporeal property,
made by: Rules:
placing titles of ownership in the 1. title remains in the seller
hands of buyer 2. risk of loss remains with seller
allowing buyer to make use of rights except when the buyer is at fault or
Tradition by operation of law has agreed to bear the loss
buyer must give goods a trial, except
Constructive delivery requires three
where it is evident that it cannot
things before ownership may be perform the work
transferred:
period within which buyer must
The seller must have control over signify his acceptance runs only
the thing when all the parts essential for the
The buyer must be put under control operation of the object have been
There must be the intention to delivered.
deliver the thing for purposes of if it is stipulated that a third person
ownership must satisfy approval or satisfaction,
the provision is valid, but the third
When is the vendor not bound to person must be in good faith. If
deliver the thing sold:
refusal to accept is not justified,
If the vendee has not paid him the
seller may still sue.
price Generally, the sale and delivery to a
buyer who is an expert on the object
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purchased is not a sale on approval, Owner is estopped or

trial, or satisfaction. precluded by his conduct
When sale is made by the
Sale or return Sale on Trial registered owner or apparent
Subject to a 1. Subject to a owner in accordance with
resolutory condition suspensive condition recording or registration laws
2. Depends entirely 2. Depen ds on the Sales sanctioned by judicial or
on the will of the character or quality of
buyer the goods
statutory authority
Purchases in a merchant's
3. Ownershi p passes 3. Ownership remains
to the buyer on in the seller until buyer store, fairs or markets
delivery and signifies his approval or When a person who is
subsequent return acceptance to the not the owner sells and delivers
reverts ownership in seller a thing, subsequently acquires
the seller
title thereto (Art. 1434)
4. Risk of loss or 4. Risk of loss remains When the seller has a
injury rests upon with the seller voidable title which has not
the buyer
been avoided at the time of the
Instances where Seller is still the sale (Art. 1506)
Owner despite Delivery: * “Unlawful deprivation” is no longer
Sale on trial, approval or satisfaction limited to a criminal act. There is
Contrary intention appears by the Unlawful Deprivation where there is no
term of the contract; valid transmission of ownership.
Implied reservation of ownership
(Article 1503) Place of delivery of goods
If under the bill of lading, the Where there is an agreement, place
goods are deliverable to seller or of delivery is that agreed upon
agent or their order; Where there is no agreement, place
If the bill of lading, although of delivery determined by usage of
stating that the goods are to be trade
delivered to the buyer or his Where there is no agreement and no
agent, is kept by the seller or his prevalent usage, place of delivery is
agent; the seller’s place
a. When the buyer, although the In any other case, place of delivery
goods are deliverable to order of is the seller’s residence
buyer, and although the bill of In case of specific goods, which to
lading is given to him, does not the knowledge of the parties at the
honor the bill of exchange sent time the contract was made were in
along with it. some other place, that place is the
place of delivery, in the absence of
Transfer of ownership where goods agreement or usage of trade to the
sold delivered to carrier contrary
General Rule: Delivery to the carrier is
deemed to be delivery to the buyer Time of delivery of goods
Exception: Where the right of possession Stipulated time
or ownership of specific goods sold is In the absence thereof, within a
reserved reasonable time
SALE OF GOODS BY A NON-OWNER NEGOTIABLE DOCUMENT OF TITLE (NDT)

GENERAL RULE: Buyer acquires no title A document of title in which it is
even if in good faith and for value under stated that the goods referred to
the maxim Nemo dat quid non habet therein will be delivered to the
(“You cannot give what you do not bearer, or to the order of any person
have”). named in such document.
EXCEPTIONS: (SMERVS) May be negotiated by delivery or
indorsement.
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The document is negotiable if: RULES WHEN QUANTITY IS LESS THAN

The goods are deliverable to the AGREED UPON:
bearer; or Buyer may reject; or
If the goods are deliverable to the Buyer may accept what
order of a certain person has been delivered, at the
contract rate
Persons who may negotiate NDT:
The owner; or RULES WHEN QUANTITY IS MORE THAN
Any person to whom the possession or AGREED UPON:
custody thereof has been entrusted by Buyer may reject all; or
the owner, if by the terms of the Buyer may accept the
document the bailee issuing the goods agreed upon and reject
document undertakes to deliver the the rest; or
goods to the order of the person to Buyer may accept all and
whom the possession or custody of the must pay for them at the
document has been entrusted or if at contract rate
the time of such entrusting the NOTE: Acceptance, even if not express
document in such form that it may be may be implied when the buyer exercises
negotiated by delivery. acts of ownership over the excess goods.
If the holder of a negotiable document RULES WHEN GOODS MIXED WITH

of title (deliverable to bearer) entrusts GOODS OF DIFFERENT DESCRIPTION:
the document to a friend for deposit, Buyer may accept the goods which
but the friend betrays the trust and are in accordance with the contract
negotiates the document by delivering it and reject the rest
to another who is in good faith, the said
owner cannot impugn the validity of the NOTE: If the subject matter is
negotiation. As between two innocent indivisible, in case of delivery of larger
persons, he who made the loss possible quantity of goods or of mixed goods, the
shall bear the loss, without prejudice to buyer may reject the whole of the goods
his right to recover from the wrongdoer.
DELIVERY TO THE CARRIER
RIGHTS OF PERSON TO WHOM GENERAL RULE: Where the seller is
DOCUMENT HAS BEEN NEGOTIATED: authorized or required to send the goods
The title of the person negotiating the to the buyer, delivery to the carrier is
document, over the goods covered by delivery to the buyer.
the document; EXCEPTIONS:
The title of the person (depositor or 1. When a contrary intention
owner) to whose order by the terms of appears
the document the goods were to be
Implied reservation of
delivered, over such goods;
ownership under pars. 1,2,3 of
The direct obligation of the bailee to
Art. 1503
hold possession of the goods for him, as
if the bailee had contracted to him Kinds of Delivery to the Carrier
directly NOTE; Mere transferee does not
acquire directly the obligation of the C.I.F. (cost, insurance,
bailee (in Art. 1513). To acquire it, he freight) – signify that the price
must notify the bailee. fixed covers not only the costs of
the goods, but the expense of
WHO CAN DEFEAT RIGHTS OF the freight and the insurance to
TRANSFEREE: be paid by the seller
Creditor of transferor F.O.B. (free on board) –
Transferor goods are to be delivered free of
Subsequent purchaser expense to the buyer to the point
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where they are F.O.B. The point Vendor is obligated to deliver all the
of F.O.B., either at the point of land included within the boundaries,
shipment or the point of regardless of whether the real area
destination, determines when should be greater or smaller
the ownership passes. Ordinarily, there can be no rescission
NOTE: the terms C.I.F. and F.O.B. or reduction or increase whether the
merely make rules of presumption
area be greater or lesser, unless
c. C.O.D. (collect on delivery) – there is gross mistake.
the carrier acts for the seller in NOTE: The Civil Code presumes that the
collecting the purchase price, purchaser had in mind a particular piece
which the buyer must pay to of land and that he ascertained its area
obtain possession of the goods. and quality before the contract of sale
was perfected. If he did not do so, or if
having done so he made no objection
SELLER’S DUTY AFTER DELIVERY TO and consented to the transaction, he can
CARRIER blame no one but himself (Teran vs.
To enter on behalf of buyer into such Villanueva Viuda de Riosa 56 Phil 677).
contract reasonable under the What is important is the delivery
circumstances of all the land included in the boundaries.
To give notice to buyer regarding
necessity of insuring the goods DOUBLE SALE (Art. 1544)
PAYMENT OF THE PURCHASE PRICE Requisites: VOCS
GENERAL RULE: The seller is not bound two or more transactions must constitute
to deliver the thing sold unless the valid sales;
purchase price has been paid. they must pertain exactly to the same
EXCEPTION: The seller is bound to object or subject matter;
they must be bought from the same or
deliver even if the price has not been
immediate seller; AND
paid, if a period of payment has been
two or more buyers who are at odds over
fixed.
the rightful ownership of the subject
Sale of Real Property by Unit matter must represent conflicting
interests.
Entire area stated in the contract
must be delivered
Rules of preference:
When entire area could not be Personal Property
delivered, vendee may: a. first possessor in good faith
Enforce the contract Real Property
with the corresponding decrease first registrant in good
in price faith
Rescind the sale: first possessor in good
a. If the lack in area is at faith
least 1/10 than that stated person with oldest title
or stipulated in good faith
b. If the deficiency in quality
specified in the contract NOTES:
exceeds 1/10 of the price Purchaser in Good Faith – one who
agreed upon buys the property of another without
If the vendee would not notice that some other person has a
have bought the immovable right to or interest in such property
had he known of its smaller and pays a full and fair price for the
area of inferior quality same at the time of such purchase or
irrespective of the extent of before he has notice of the claim or
lack of area or quality interest of some other person in the
property (Veloso vs. CA).
Sale for a Lump Sum (A Cuerpo Cierto)
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Registration requires actual perfection of a contract and a condition

recording; if the property was never imposed merely on the performance of
really registered as when the an obligation. The failure to comply with
registrar forgot to do so although he the first condition would prevent the
has been handed the document, juridical relation itself from coming into
there is no registration. existence, while failure to comply with
Possession is either actual or the second merely gives the option
constructive since the law made no either to refuse or proceed with the sale
distinction (Sanchez vs. Ramos 40 or to waive the condition.
Phil614)
The mere fact that the second
Possession in Art.1544 includes not
contract of sale was perfected in
only material but also symbolic
good faith is not sufficient if, before
possession (Ten Forty Realty vs.
title passes, the second vendee
Cruz, 10 Sept. 2003.) acquires knowledge of the first
Title means title because of sale, transaction. The good faith or
and not any other title or mode of innocence of the posterior vendee
acquiring property (Lichauco vs. needs to continue until his contract
Berenguer 39 Phil 642) ripens into ownership by tradition or
Hernandez vs. Katigbak Rule: When registration. (Palanca vs. Dir. Of
the property sold on execution is Lands, 46 PHIL 149)
registered under Torrens, registration
is the operative act that gives validity
to the transfer or creates a lien on the
EFFECT IF BUYER HAS ALREADY SOLD
land, and a purchaser on execution
THE GOODS:
sale is not required to go behind the
General Rule: The unpaid seller’s right
registry to determine the conditions of
to lien or stoppage in transitu remains
the property. Exception: Where the
even if buyer has sold the goods.
purchaser had knowledge, prior to or
Except:
at the time of the levy, of such
When the seller has given consent
previous lien or encumbrance, his
thereto, or
knowledge is equivalent to
When the buyer is a purchaser in good
registration.
faith for value of a negotiable document
of title.
CONDITION
Effect of Non-fulfillment of Condition WARRANTY
If the obligation of either a statement or representation made
party is subject to any condition
and such condition is not fulfilled, by the seller of goods,
contemporaneously and as a part of
such party may either:
the contract of sale, having
refuse to proceed with
reference to the character, quality,
the contract
or title of the goods, and by which
proceed with the
he promises or undertakes to insure
contract , waiving the
that certain facts are or shall be as
performance of the
he then represents.
condition.
If the condition is in the
nature of a promise that it Kinds:
should happen, the non- EXPRESS – any affirmation of fact or
performance of such condition any promise by the seller relating to
may be treated by the other the thing if the natural tendency of
party as breach of warranty. such affirmation or promise is to
induce the buyer to purchase the
NOTE: A distinction must be made same and if the buyer purchases the
between a condition imposed on the thing relying thereon
CIVIL LAW COMMITTEE
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Leas e), John Stephen

128
at the instance of the vendee;

NOTE: A mere expression of opinion, no AND
matter how positively asserted, does not no waiver of warranty by
import a warranty unless the seller is an the vendee.
expert and his opinion was relied upon
by the buyer. Vendor's liability shall consist of:
Total eviction: (VICED)
IMPLIED - that which the law derives Value of the thing at the
by implication or inference from the time of eviction;
nature of the transaction or the Income or fruits if he has
relative situation or circumstances of been ordered to deliver them to
the parties, irrespective of any the party who won the suit;
intention of the seller to create it. Costs of the suit;
Warranty against eviction Expenses of the contract;
Warranty against hidden AND
defects Damages and interests if
Warranty as to Fitness the sale was in bad faith.
and Merchantability
NOTE: An implied warranty is a natural, Partial eviction:
not an essential element of a contract,
to enforce vendor’s
and is deemed incorporated in the liability for eviction (VICED);
contract of sale. It may however, be OR
waived or modified by express to demand rescission of
stipulation. (De Leon) contract.
There is no implied warranty as to the
condition, adaptation, fitness or Question: Why is rescission not a remedy
suitability or the quality of an article in case of total eviction?
sold as a second-hand article. But such Answer: Rescission contemplates that
articles might be sold under such the one demanding it is able to return
circumstances as to raise an implied whatever he has received under the
warranty. contract. Since the vendee can no longer
A certification issued by a vendor that restore the subject-matter of the sale to
a second-hand machine was in A-1 the vendor, rescission cannot be carried
condition is an express warranty binding out.
on the vendor. (Moles vs. IAC [1989])
The suit for the breach can be directed
A. Warranty against eviction only against the immediate seller, not
Warranty in which the seller sellers of the seller unless such sellers
guarantees that he has the right to had promised to warrant in favor of later
sell the thing sold and to transfer buyers or unless the immediate seller
ownership to the buyer who shall not has expressly assigned to the buyer his
be disturbed in his legal and own right to sue his own seller.
peaceful possession thereof. NOTE: The disturbance referred to in
the case of eviction is a disturbance in
Elements: law which requires that a person go to
vendee is deprived, in the courts of justice claiming the thing
whole or in part, of the thing sold, or part thereof and invoking
purchased; reasons. Mere trespass in fact does not
the deprivation is by give rise to the application of the
virtue of a final judgment; doctrine of eviction.
the judgment is based on
a prior right to the sale or an act Vendor’s liability is waivable but any
imputable to the vendor; stipulation exempting the vendor
the vendor was summoned from the obligation to answer for
in the suit for eviction
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129
eviction shall be void if he acted in it must Exist at the time of the

bad faith. sale;
Kinds of Waiver: vendee must give Notice of the
Consciente – voluntarily defect to the vendor within a
made by the vendee without reasonable time;
theknowledgeand action for rescission or reduction
assumption of the risks of of price must be brought within
eviction the proper Period (within 6 mos.
NOTE: vendor shall pay only the from delivery of the thing or 40
value which the thing sold had at days from date of delivery in
the time of eviction case of animals); and
Intencionada – made by the no Waiver of the warranty.
vendee with knowledge of
the risks of eviction and Remedies of the Vendee:
assumption of its Accion redhibitoria (rescission)
consequences Accion quanti minoris (reduction of
EFFECT: vendor not liable the price)
NOTE: Every waiver is presumed to be NOTES:
consciente. To consider it intencionada, Hidden faults or defects pertain only
it must be accompanied by some to those that make the object unfit
circumstance which reveals the for the use for which it was intended
vendor’s knowledge of the risks of at the time of the sale.
eviction and his intention to submit to
This warranty in Sales is applicable in
such consequences.
Lease (Yap vs. Tiaoqui 13Phil433)
WHERE IMMOVABLE SOLD ENCUMBERED Effect of loss of thing on account of
WITH NON-APPARENT BURDEN hidden defects:
Right of vendee If vendor was aware of hidden
recission, or defects, he shall bear the loss and
indemnity vendee shall have the right to
recover: (PED)
When right cannot be exercised: the price paid
if the burden or servitude is expenses of the contract
apparent damages
if the non-apparent burden or If vendor was not aware, he shall be
servitude is registered obliged to return: (PIE)
if vendee had knowledge of the price paid
encumbrance, whether it is registered interest thereon
or not expenses of the contract
When action must be brought if paid by the vendee
within ONE YEAR from the
execution of the deed of sale Effect if the cause of loss was not the
hidden defect
Warranty against hidden defects If the thing sold had any hidden
Warranty in which the seller fault at the time of the sale, and
guarantees that the thing sold is free should thereafter be lost by a (1)
from any hidden faults or defects or fortuitous event OR (2) through the
any charge or encumbrance not fault of the vendee:
declared or known to the buyer. the vendee may demand of the
vendor the price which he paid
Elements: (SHENPW) less the value of the thing at the
time of its loss.
defect must be Serious or
NOTE: the difference between the
important;
price paid and the value of the thing
it must be Hidden;
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130
at the time of its loss represents the Sale by virtue of authority in fact or
damage suffered by the vendee and law
the amount which the vendor
enriched himself at the expense of Caveat Venditor (“Let the seller
the vendee beware”): the vendor is liable to the
If the vendor acted in bad faith: vendee for any hidden faults or defects
vendor shall pay damages to the in the thing sold, even though he was
vendee not aware thereof.
Caveat Emptor (“Let the buyer

Implied Warranties of
beware”): requires the purchaser to be
Quality Warranty of Fitness
Warranty in which the seller aware of the supposed title of the vendor
guarantees that the thing sold is and one who buys without checking the
reasonably fit for the known vendor’s title takes all the risks and losses
particular purpose for which it was consequent to such failure.
acquired by the buyer
RULES IN CASE OF SALE OF ANIMALS
When two or more animals have been
GENERAL RULE: There is no implied sold at the same time and the
warranty as to the quality or fitness for redhibitory defect is in one, or some of
any particular purpose of goods under a them but not in all, the general rule is
contract of sale that the redhibition will not affect the
EXCEPTIONS: others without it. It is immaterial
1. Where the buyer, expressly or whether the price has been fixed for a
by implication manifests to the lump sum for all the animals or for a
seller the particular purpose for separate price for each.
which the goods are required No warranty against hidden defects
of animals sold at fairs or at public
Where the buyer relies auctions, or of livestock sold as
upon the seller’s skill or condemned. This is based on the
judgment assumption that the defects must have
been clearly known to the buyer.
Warranty of Merchantability Sale of animals shall be void when:
Warranty in which the seller animals sold are suffering from
guarantees, where the goods were contagious disease
bought by description, that they are if the use or service for which
reasonably fit for the general they are acquired has been stated in the
purpose for which they are sold contract, and they are found to be unfit
It requires identity between what is therefor
described in the contract AND what Limitation of the action: 40 days from
is tendered, in the sense that the the date of their delivery to the vendee
latter is of such quality to have some Vendor shall be liable if the animal
value should die within 3 days after its
purchase if the disease which caused the
Instances where implied warranties are death existed at the time of the contract
inapplicable:
As is and where is sale - vendor OBLIGATIONS OF THE VENDEE:
makes no warranty as to the quality A. Principal Obligations:
or workable condition of the goods, To accept delivery
and that the vendee takes them in To pay the price of the thing sold in
the condition in which they are legal tender unless another mode has
found and from the place where they been agreed upon
NOTE: A grace period granted the vendee
are located.
Sale of second-hand articles in case of failure to pay the amount/s due
is a right not an obligation.
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131
The grace period must not be likened to If there is no stipulation as to the

an obligation, the non-payment of time and place of payment and
which, under Article 1169 of the Civil delivery, the vendee is bound to pay
Code, would still generally require at the time and place of delivery
judicial or extra-judicial demand before In the absence of stipulation as to
“default” can be said to arise (Bricktown the place of delivery, it shall be
Dev’t Corp vs. Amor Tierra Dev’t Corp. made wherever the thing might be
57SCRA437) at the moment the contract was
perfected (Article 1251)
B. Other Obligations If only the time for delivery has been
To take care of the goods without fixed in the contract, the vendee is
the obligation to return, where the required to pay even before the
goods are delivered to the buyer and thing is delivered to him; if only the
he rightfully refuses to accept time for payment has been fixed,
the vendee is entitled to delivery
NOTES: even before the price is paid by him
The buyer in (Article 1524)
such a case is in the position of a
bailee who has had goods thrust Ways of accepting goods:
upon him without his assent. He Express acceptance
has the obligation to take Implied acceptance
reasonable care of the goods but When buyer does an act which
nothing more can be demanded only an owner can do,
of him. Failure to return goods after
The goods in reasonable lapse of time
the buyer’s possession under
these circumstances are at the NOTES:
seller’s risk The retention of goods is strong
To be liable as a depositary if he evidence that the buyer has
voluntarily constituted himself as accepted ownership of the goods.
such Delivery and acceptance are two
To pay interest for the period separate and distinct acts of
between delivery of the thing and different parties
the payment of the price in the
Delivery is an act of the
following cases:
vendor and one of the vendor’s
Should it have been stipulated
obligations; vendee has nothing
Should the thing sold and
to do with the act of delivery by
delivered produce fruits or
the vendor
income
Should he be in default, from Acceptance is an
the time of judicial or extra- obligation of the vendee;
judicial demand for the payment acceptance cannot be regarded
of the price as a condition to complete
delivery;
Pertinent Rules: seller must comply with
The vendor is not required to deliver the obligation to deliver
the thing sold until the price is paid although there is no acceptance
nor the vendee to pay the price yet by the buyer
before the thing is delivered in the Acceptance by the buyer may
absence of an agreement to the precede actual delivery; there may
contrary (Article 1524). be actual receipt without
If stipulated, the vendee is bound to acceptance and there may be
accept delivery and to pay the price acceptance without receipt
at the time and place designated;
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132
Unless otherwise agreed upon, 5. if the vendee has fully paid the price
acceptance of the goods by the REMEDIES FOR BREACH OF CONTRACT
buyer does not discharge the seller
from liability for damages or other Remedies of the seller
legal remedy like for breach of any Action for payment of the price (Art.
promise or warranty 1595)
Action for damages for non-
When vendee may suspend payment of acceptance of the goods (Art. 1596)
the price: Action for rescission (Art. 1597)
If he is disturbed in the possession or Remedies of the buyer
ownership of the thing bought Action for specific performance (Art.
If he has well-grounded fear that his 1598)
possession or ownership would be Action for rescission or damages for
disturbed by a vindicatory action or breach of warranty (Art 1599)
foreclosure of mortgage
A. REMEDIES OF THE SELLER FOR
NOTES: BREACH OF CONTRACT
If the thing sold is in the possession of IN CASE OF MOVABLES
the vendee and the price is already in Ordinary Remedies
the hands of the vendor, the sale is a Movables in General –
consummated contract and Article Failure of the vendee to appear
1590 is no longer applicable. Article to receive delivery or, having
1590, presupposes that the price or appeared, failure to tender the
any part thereof has not yet been paid price at the same time, unless, a
and the contract is not yet longer period for its payment has
consummated. been stipulated
Under Article 1590, the vendee has action to rescind the
no cause of action for rescission sale (Art. 1593)
before final judgement, otherwise Sale of Goods –
the vendor might become a victim of action for the price (Art.
machinations between the vendee 1595)
and the third person action for damages (Art.
Disturbance must be in possession 1596)
and ownership of the thing acquired Unpaid Seller
If the disturbance is caused by the Types:
existence of non-apparent servitude, The seller of the goods
the remedy of the buyer is rescission, who has not been paid or to
not suspension of payment. whom the price has not been
tendered
The seller of the goods,
When vendee cannot suspend payment in case a bill of exchange or
of the price even if there is other negotiable instrument has
disturbance in the possession or been received as conditional
ownership of the thing sold: payment, AND the condition on
if the vendor gives security for the which it was received has been
return of the price in a proper case broken by reason of the dishonor
if it has been stipulated that of the instrument, insolvency of
notwithstanding any such the buyer or otherwise.
contingency, the vendee must make Remedies:
payment (see Article 1548 par.3) Possessory lien over the
if the vendor has caused the goods
disturbance or danger to cease Right of stoppage in
if the disturbance is a mere act of transitu after he has parted with
trespass
CIVIL LAW COMMITTEE
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John S tephen

133
the possession of the goods and Foreclosure of the chattel

the buyer becomes insolvent mortgage on the thing sold if
Special Right of resale vendee shall have failed to pay
Special Right to rescind two or more installments. In this
the sale case, there shall be no further
Action for the price action against the purchaser to
Action for damages recover unpaid balance of the
price.
Article 1484 or Recto Law
Remedies of vendor in sale of NOTES:
personal property by installments Further recovery barred only from
Requisites: the time of actual sale at public auction
Contract of sale conducted pursuant to foreclosure
Personal property (Macondray vs. Tan.)
Payable in installments Other chattels given as security
In the case of the second cannot be foreclosed if they are not
and third remedies, that there subject of the installment sale (Ridad vs.
has been a failure to pay two or Filipinas investment and Finance Corp.
more installments GR 39806, Jan. 28, 1983)
NOTE: Apply likewise to contracts If the vendor assigns his right to a
purporting to be leases of personal financing company, the latter may be
property with option to buy regarded as a collecting agency of the
Art. 1484 does not apply to a sale: vendor and cannot therefore recover any
Payable on straight deficiency from the vendee (Zayas vs.
terms (partly in cash and partly Luneta Motors Co.)
in one term) When the vendor assigns his credit to
Of Real property another person, the latter is likewise
Remedies: bound by the same law. Accordingly,
Specific performance upon when the assignee forecloses on the
vendee’s failure to pay mortgage, there can be no further
NOTE: Does not bar full recovery for recovery of the deficiency and the
judgment secured may be executed vendor-mortgagee is deemed to have
on all personal and real properties renounced any right thereto (Borbon II
of the buyer which are not exempt vs. Servicewide Specialist, Inc.
from execution (Palma v. CA.) 258SCRA658)
Rescission of the sale if NOTE: However, Article 1484(3) does
vendee shall have failed to pay NOT bar one to whom the vendor has
two or more installments assigned on with a recourse basis his
NOTES: credit against the vendee from
Nature of the remedy – which recovering from the vendor the
requires mutual restitution – bars assigned credit in full although the
further action on the purchase vendor may have no right of recovery
price (Nonato vs. IAC.) against the vendee for the deficiency
GENERAL RULE: cancellation of (Filipinas Invest. & Finance Corp. vs.
sale requires mutual restitution, Vitug, Jr. 28SCRA658)
that is all partial payments of
price or rents must be returned NOTE: Remedies are alternative and
EXCEPTIONS: a stipulation that exclusive
the installments or rents paid
shall not be returned to the IN CASE OF IMMOVABLES
vendee or lessee shall be valid Ordinary Remedies
insofar as the same may not be a. In case of anticipatory breach
unconscionable under the –
circumstan-ces (Article 1486). rescission (Article 1591)
CIVIL LAW COMMITTEE


134
Failure to pay the Actual cancellation can

purchase price – only take place after 30 days from
rescission upon judicial receipt by the buyer of the notice
or notarial demand for of cancellation OR demand for
rescission (Article 1592) rescission by a notarial act AND
the vendee may pay, upon full payment of the cash
even after the expiration of surrender value to the buyer
the period, as long as no (Olympia Housing vs. Panasiatic,
January 2003.)
demand for rescission has
NOTE: The seller shall refund to
been made upon him the buyer the cash surrender value
NOTE: Article 1592 does not of the payments on the property
apply to: equivalent to 50% of the total
Sale on instalment of real payments made. After five
estate
(5) years of installments, there
Contract to sell
shall be an additional 5% every
Conditional sale
year but not to exceed 90% of
Cases covered by RA 6552:
the total payments made
Realty Installment buyer
The buyer shall have the
protection act
right to sell his rights or assign
R.A. No. 6552 or Maceda Law the same to another person OR
to reinstate the contract by
An Act to Provide
updating the account during the
Protection to buyers of Real Estate
grace period and before actual
on Installment Payments cancellation of the contract
Law governing sale or The buyer shall have the
financing of real estate on right to pay in advance any
installment payments installment or the full unpaid
Requisites: balance of the purchase price any
transactions or contracts time without interest and to have
involving the sale OR financing of such full payment of the purchase
real estate on installment price annotated in the certificate
payments, including residential of title covering the property.
condominium apartments; and
buyerdefaultsin If Buyer has paid less than 2 years
payment of succeeding of installments
installments. The seller shall give the buyer a grace
period of NOT less than 60 days
Rights of the buyer: from the date the installment
A. If Buyer has paid at least two became due. If the buyer fails to
(2) years of installments pay the installments due at the
The buyer must pay, expiration of the grace period, the
without additional interest, the seller may cancel the contract
unpaid installments due within the after 30 days from receipt by the
total grace period earned by him. buyer of the notice of cancellation
There shall be one (1) month grace or the demand for rescission of
period for every one contract by a notarial act.
(1) year of installment payments
made Same No. 3 and 4 paragraph A
NOTE: This right shall be above
exercised by the buyer ONLY
once in every 5 years of the life NOTE: Down payments, deposits or
of the contract AND its options on the contract shall be included
extensions. in the computation of the total number
of installment payments made
CIVIL LAW COMMITTEE

135
Seller must bear the

Remedies of Unpaid Seller expenses of delivery of the goods
Possessory Lien after the exercise of the right
When may be exercised:
Where the goods have GOODS ARE CONSIDERED IN TRANSITU:
been sold without any stipulation after delivery to a carrier or other
as to credit bailee and before the buyer or his agent
When the goods have takes delivery of them; and
been sold on credit, but the If the goods are rejected by the
term of credit has expired buyer, and the carrier or other bailee
Where the buyer continues in possession of them
becomes insolvent
When lost: GOODS ARE NO LONGER CONSIDERED IN
TRANSITU:
Delivery of the goods to
after delivery to the buyer or his
a carrier or bailee for the
agent in that behalf;
purpose of transmission to the
if the buyer or his agent obtains
buyer without reserving
possession of the goods at a point before
ownership or right of possession
the destination originally fixed;
When the buyer lawfully
if the carrier or the bailee
obtains possession of the goods
acknowledges to hold the goods on
By waiver of the lien
behalf of the buyer; and
NOTE: Possessory lien is lost after the
if the carrier or bailee wrongfully
seller loses possession but his lien as an
refuses to deliver the goods to the buyer
unpaid seller remains; hence he is still an
unpaid creditor with respect to the price
Effects of the exercise of the right
of specific goods sold. His preference can
only be defeated by the governments claim The goods are no longer in transit.
to the specific tax on the goods themselves The contract of carriage ends;
(Arts. 2247 and 2241). instead the carrier now becomes a
NOTE: The bringing of an action to mere bailee, and will be liable as
recover the purchase price is not one of such.
the ways of losing the possessory lien. An The carrier should not deliver
unpaid seller does not lose his lien by anymore to the buyer or the latter’s
reason that he has obtained a money agent; otherwise he will clearly be
judgement or decree for the price of liable for damages.
goods (Art. 1529, last paragraph). The carrier must redeliver to, or
according to the directions of the
Stoppage of goods in transitu seller.
Requisites:
WAYS OF EXERCISING THE RIGHT TO
Seller must be unpaid
STOP:
Buyer must be insolvent
By taking actual possession of the
Goods must be in transit
goods
Seller must either: By giving notice of his claim to the
actually take possession
carrier or bailee
of the goods sold OR
give notice of his claim
Special Right of Resale
to the carrier or other
May be exercised only when the
person in possession
unpaid seller has either a right of
Seller must surrender
lien OR has stopped the goods in
the negotiable document of
transitu AND under ANY of the
title, if any, issued by the carrier
following conditions:
or bailee
Where the goods are
perishable in nature
CIVIL LAW COMMITTEE

Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dum ama(Sales and Lease), John Stephen

136
Where the right to resell If the goods are not yet

is expressly reserved in case the identified at the time of the
buyer should make a default contract or subsequently
Where the buyer delays REMEDIES OF THE BUYER FOR
in the payment of the price for BREACH OF CONTRACT
an unreasonable time
Action for specific performance
IV. Rescission (Art. 1598)
Types: W
Special Right to Rescind here the seller has broken the

Under Art. 1534 – If the seller has contract to deliver specific or
either the right of lien OR a right ascertained goods
to stop the goods in transitu AND T
under either of 2 situations: he judgment or decree may be
Where the right to unconditional, or upon such terms
rescind on default has been and conditions as to damages,
expressly reserved payment of the price and otherwise
Where the buyer has as the court may deem just
been in default for an
unreasonable time Remedies of buyer for breach of
Under Art. 1597 warranty by seller (Art. 1599):
(“technical rescission”) Recoupment – accept the goods and
set up the seller’s breach to reduce
Action for the price or extinguish the price
When may be exercised: Accept the goods and maintain an
action for damages for breach of
Where the ownership has
warranty
passed to the buyer AND he
Refuse to accept the goods and
wrongfully neglects OR refuses
maintain an action for damages for
to pay for the price
breach of warranty
Where the price is
Rescind the contract by returning or
payable on a day certain AND he
offering the return of the goods, and
wrongfully neglects OR refuses to
recover the price of any part thereof
pay for the price, irrespective of
the delivery or transfer of title NOTE: These are alternative remedies.
Where the goods cannot
When rescission by buyer not allowed:
readily be resold for a
if the buyer accepted the goods
reasonable price AND the buyer
knowing of the breach of warranty
wrongfully refuses to accept
without protest
them even before the ownership
if he fails to notify the seller within a
of the goods has passed, if
reasonable time of his election to rescind
Article 1596 is inapplicable.
if he fails to return or offer to return
VI. Action for damages the goods in substantially as good
When may be exercised: condition as they were in at the time of
the transfer of ownership to him
In case of wrongful neglect or
refusal by the buyer to accept or EXTINGUISHMENT OF SALE
pay for the thing sold (Art. 1596 Same causes as in all other
par.1) obligations
In an executory contract, where Conventional Redemption
the ownership in the goods has Legal Redemption
not passed, and the seller cannot
maintain an action to recover CONVENTIONAL REDEMPTION
the price (Art 1595) The right which the vendor reserves
to himself, to reacquire the property
CIVIL LAW COMMITTEE


137
sold provided he returns to the NOTE: In the cases referred to in Arts.

vendee: 1602 and 1604, the apparent vendor may
the price of the sale; ask for the reformation of the
expenses of the contract; instrument.
any other legitimate payments Remedy of Reformation: To correct the
made therefore and; instrument so as to make it express the
the necessary and useful true intent of the parties.
expenses made on the thing
sold; and Redemption Period
fulfills other stipulations which a. if there is an agreement: period
may have been agreed upon. agreed upon cannot exceed 10 years
if no agreement as to the period: 4
years from the date of the contract
A sale with conventional redemption is
the vendor who fails to repurchase
deemed to be an equitable mortgage
the property within the period
in any of the following cases: (IPERTOD)
agreed upon may, however, exercise
Unusually Inadequate purchase price; the right to repurchase within 30
Possession by the vendor remains, as days FROM the time final judgment
lessee or otherwise; was rendered in a civil action on the
Extension of redemption period after basis that the contract was a true
expiration; sale with right of repurchase
Retention by the vendee of part of This refers to cases involving a
the purchase price; transaction where one of the
Vendor binds himself to pay the parties contests or denies that
Taxes of the thing sold; the true agreement is one of sale
Any Other case where the parties with right to repurchase; not to
really intended that the transaction cases where the transaction is
should secure the payment of a debt conclusively a pacto de retro
or the performance of any sale. Example: Where a buyer a
obligation; or retro honestly believed that he
When there is Doubt as to whether entered merely into an Equitable
contract is contract of sale with Mortgage, not a pacto de retro
right of repurchase or an equitable transaction, and because of such
mortgage. belief he had not redeemed
within the proper period.
Equitable Mortgage NOTE: Tender of payment is
One which lacks the proper sufficient to compel redemption, but
formalities, form of words, or other is not in itself a payment that
requisites prescribed by law for a relieves the vendor from his liability
mortgage, but shows the intention of to pay the redemption price (Paez
the parties to make the property vs. Magno.)
subject of the contract as security
for a debt and contains nothing LEGAL REDEMPTION
impossible or contrary to law The right to be subrogated, upon the
(Cachola vs. CA 208SCRA496) same terms and conditions
stipulated in the contract, in the
When can there be presumption as to place of one who acquires a thing by
Equitable Mortgage? (1) purchase or (2) dation in
Parties must have entered into a payment, or (3) by any other
contract denominated as a contract of transaction whereby ownership is
sale transferred by onerous title.
The intention of the parties was to
May be effected against movables or
secure an existing debt by way of
immovables.
mortgage
CIVIL LAW COMMITTEE
Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligay a Alipao(Torts and Damages), Ant hony Purganan(LTD),

138
It must be exercised within thirty 3. Redemption of homesteads

(30) days from the notice in writing
by the vendor.\ Redemption in tax sales
Redemption by an
agricultural tenant of land sold
NOTE: Written notice under Article 1623 by the landowner
is mandatory for the right of redemption
to commence (PSC vs. Sps. Valencia 19
August 2003.) ASSIGNMENT OF CREDIT
a contract by which the owner of a
BASIS OF LEGAL REDEMPTION: Not on credit transfers to another his rights
any proprietary right, which after the and actions against a third person in
sale of the property on execution, leaves consideration of a price certain in
the judgment debtor and vests in the money or its equivalent
purchaser, but on a bare statutory
privilege to be exercised only by the NOTE: Transfer of rights by assignment
persons named in the statute. takes place by the perfection of the
contract of assignment without the
Tender of payment is not necessary; necessity of delivering the document
offer to redeem is enough. evidencing the credit.
this rule does not apply to
negotiable documents and
PRE-EMPTION REDEMPTION
documents of title which are
1. arises before 1. arises after sale
sale governed by special laws.
no rescission 2. there can be
because no sale as rescission of the Effects of Assignment:
yet exists original sale transfers the right to collect the full
3. the action is 3. action is directed value of the credit, even if he paid a
directed against against the buyer price less than such value
the prospective
seller transfers all the accessory rights
debtor can set up against the
assignee all the defenses he could
Instances of legal redemption:
A. Under the Civil Code (legal have set up against the assignor
redemption):
Effect of payment by the debtor after
Sale of a co-owner of his
assignment of credit
share to a stranger (Article 1620)
Before Notice of the assignment
When a credit or other
Payment to the original
incorporeal right in litigation is
sold (Article 1634) creditor is valid and debtor shall
be released from his obligation
Sale of an heir of his
hereditary rights to a stranger After Notice
(Article 1088) Payment to the original
Sale of adjacent rural creditor is not valid as against
lands not exceeding one hectare the assignee
(Article 1621) He can be made to pay
Sale of adjacent small again by the assignee
urban lands bought merely for
speculation (Article 1622) Warranties of the assignor of credit:
Under special laws: a. He warrants the existence of
An equity of redemption the credit
in cases of judicial foreclosures He warrants the legality
A right of redemption in of the credit at the perfection of
cases of extra-judicial the contract
foreclosures
CIVIL LAW COMMITTEE


139
NOTE: There is no warranty as to the

solvency of the debtor unless it is
expressly stipulated OR unless the
BARTER
insolvency was already existing and of
public knowledge at the time of the BARTER
assignment contract whereby one of the parties
binds himself to give one thing in
NOTE: The seller of an inheritance consideration of the other's promise
warrants only the fact of his heirship but to give another thing (Article 1638)
not the objects which make up his
inheritance. NOTE: Barter is similar to a sale with the
only difference that instead of paying a
Liabilities of the assignor of credit for price in money, another thing is given in
violation of his warranties lieu of the purchase price
Assignor in good faith
Liability is limited only PERFECTION and CONSUMMATION
to the price received and to the Perfected from the moment there is
expenses of the contract, and a meeting of minds upon the things
any other legitimate payments promised by each party in
by reason of the assignment consideration of the other
Assignor in bad faith
Liable not only for the Consummated from the time of
payment of the price and all the mutual delivery by the contracting
expenses but also for damages parties of the things promised
Legal Redemption in Sale or Credit or NOTES:

other incorporeal right in litigation Where the giver of the thing
Requisites: bartered is not the lawful owner
There must be a sale or assignment thereof, the aggrieved party cannot
of credit be compelled to deliver the thing
There must be a pending litigation at which he has promised and is also
the time of the assignment entitled to damages.
The debtor must pay the assignee: Where a party is evicted of the thing
price paid by him exchanged, the injured party is given
judicial cost incurred by him;
the option, either to recover the
AND property he has given in exchange
interest on the price from the
with damages or only claim an
date of payment
indemnity for damages.
The right must be exercised by the As to matters not provided for by the
debtor within 30 days from the date provisions on barter, the provisions
the assignee demands (judicially or on sales will apply suppletorily
extra-judicially) payment from him
BULK SALES LAW (Act No. 3952)
SALE OF CREDIT OR OTHER When Sale or Transfer in Bulk:
INCORPOREAL RIGHTS IN LITIGATION Any sale, transfer, mortgage, or
GENERAL RULE: Debtor has the right of assignment:
legal redemption in sale of credit or Of a stock of goods, wares,
incorporeal rights in litigation merchandise, provisions, or
EXCEPTIONS: materials otherwise than in the
Sale to a co-heir or co- ordinary course of trade and the
owner regular prosecution of business; or
Sale to a co-owner Of all or substantially all, of the
Sale to the possessor of business or trade; or
property in question
CIVIL LAW COMMITTEE

140
Of all or substantially all, of the The remedy of the

fixtures and equipment used in the creditor is not against the goods
business of the vendor, mortgagor, but to prosecute the seller
transferor or assignor (section 2) criminally
With knowledge or imputed
When sale or transfer in bulk not knowledge of buyer
covered by Bulk Sales Law: The vendee accepts it at his peril
If the sale or transfer is in the The sale is valid only as between
ordinary course of trade and the the vendor and the vendee but
regular prosecution of business of void against the creditors
the vendor;
If it is made by one who produces With names of certain creditors
and delivers a written waiver of the without notice are omitted from
provisions of the Bulk Sales Act from the list
his creditors The sale is void as to such
If it is made by an executor, creditors, whether the omission
administrator, receiver, assignee in was fraudulent or not,
insolvency, or public officer, acting With respect to an innocent
under judicial process (Section 8); purchaser for a value from the
and original purchaser
If it refers to properties exempt An innocent purchaser for value
from attachment or execution (Rules from the original purchaser is
of Court, Rule 39, Section 12) protected
However if the circumstances are
Protection Accorded to Creditors by such as to bind the subsequent
Bulk Sales Law:
purchaser with constructive
It requires the vendor, mortgagor, notice that the sale to the vendor
transferor or assignor to deliver to (original purchaser) was
the vendee, mortgagee, or to his or fraudulent, the property will be
its agent or representative a sworn liable in his hands to creditors of
written statement of names and the original vendor
addresses of all creditors to whom Effect of violation of law on Transfer:
said vendor, etc. may have been As between the parties
indebted together with the amount
The Bulk Sales Law does not in
due or to be due (Section 3)
any way affect the validity of
It requires the vendor, mortgagor, the transfer as between the
transferor or assignor, at least 10 intermediate parties thereto
days before the sale, transfer, A sale not in compliance with the
mortgage, assignment to make a full Bulk Sales Law is valid against all
detailed inventory showing the persons other than the creditors.
quantity and the cost of price of
As against creditors
goods, and to notify every creditor
of the price terms and conditions of A purchaser in violation of the
the sale, etc. (Section 5) law acquires no right in the
property purchased as against
Effects of False Statements in the the creditors of the seller
Schedule of Creditors: His status is that of a trustee or
Without knowledge of buyer receiver for the benefit of the
If the statement is fair creditors of the seller; as such,
upon its face and the buyer has he is responsible for the
no knowledge of its disposition of the property
incorrectness and nothing to put
him on inquiry about it, he will Remedies Available to creditors:
be protected in its purchase The proper remedy is one
against the goods to subject them to
the payment of the debt, such as
CIVIL LAW COMMITTEE

141
execution, attachment, garnishment, Goods which are

or by a proceeding in equity not necessary for life maintenance
An ordinary action against the and whose demand is generated in
purchaser to obtain money large part by the higher income
judgement will not lie, unless the groups
purchaser has sold or otherwise Shall include but
disposed of, or dealt with the not limited to: jewelry, branded or
property, so as to become personally designer clothing and footwear,
liable to creditors for value of it. wearing apparel, leisure and sporting
Acts Punished by Bulk Sales Law: goods, electronics and other
Knowingly or wilfully making or personal effects
delivering a statement required by
NOTE: A natural-born citizen of the
the Act which does not include the
Philippines who has lost his citizenship
names of all the creditors of the
but who resides in the Philippines shall
vendor, etc. with the correct
be granted the same rights as Filipino
amount due or to become due or
citizens
which contains any false or untrue
statement; and
Foreign Equity Participation:
Transferring title to any stock of
goods, wares, merchandise, Foreign-owned partnerships,
provisions or materials sold in bulk associations and corporations formed
and organized under the laws of the
without consideration or for nominal
Philippines may, upon registration
consideration (Section 7)
with SEC and DTI, or in case of
RETAIL TRADE LIBERALIZATION ACT Foreign-owned single proprietorship
with the DTI, engage or invest in
(RA 8762)
retail trade business, subject to the
following categories:
Retail Trade
Any act occupation or calling of Category A:
habitually selling direct to the Paid-up capital of the
equivalent in Philippine Peso of:
generalpublicmerchandise,
commodities or goods for < $2,500,000 US Dollars
consumption, but the restrictions of Reserved exclusively for
this law shall not apply to the Filipino citizens and corporations
following: wholly owned by citizens
Sales by manufacturer, processor, Category B:
laborer, or worker, to the general Minimum paid-up capital
public the products manufactured, of the equivalent in Philippine
processed produced by him if his Peso of $2,500,000 US Dollars,
capital does not exceed P100,000; but <$7,500,000
Sales by a farmer or agriculturalist May be wholly owned by
selling the products of his farm foreigners except for the first
Sales in restaurant operations by a two years after the effectivity of
hotel owner or inn-keeper irrespective this Act wherein foreign
of the amount of capital; provided participation shall be limited to
that the restaurant is incidental to the not > 60% of total equity.
hotel business; and
Category C:
Sales which are limited only to
Paid-up capital of the
products manufactured, processed or
equivalent in Philippine Peso of:
assembled by a manufacturer
$7,500,000 US Dollars or more
through a single outlet, irrespective
of capitalization May be wholly owned by
foreigners
High-End or Luxury Goods NOTE: In no case shall the
investments for establishing a
CIVIL LAW COMMITTEE


142
store in Categories B and C be 5 retailing branches or franchises in

less than the equivalent in operation anywhere around the
Philippine Peso of: US $830,000 world unless such retailer has at
Category D: least 1 store capitalized at a
Enterprises specializing in minimum of $25,000,000 US Dollars
high-end or luxury products with 5-year track record in retailing; and
paid-up capital of the equivalent Only nationals from, or juridical
in Philippine Peso of: $250,000 entities formed or incorporated in
US Dollars per store Countries which allow to engage in
May be wholly owned by retail trade in the Philippines
foreigners
PD 957 (SUBDIVISION AND

NOTES:
CONDOMINIUM BUYERS’ PROTECTIVE
Foreign investor shall be required to DECREE
maintain in the Philippines the FULL
amount of the prescribed minimum Registration of Projects
capital, UNLESS the foreign investor The registered owner of a parcel of
has notified the SEC and the DTI of its land who wishes to convert the same
intention to repatriate its capital and into a subdivision project shall submit
cease operations in the Philippines his subdivision plan to the HOUSING
Failure to maintain the full amount AND LAND-USE REGULATORY BOARD,
of the prescribed minimum capital which shall act upon and approve the
prior to notification of the SEC and same, upon a finding that the plan
the DTI shall subject the foreign complies with the Subdivision
investors to penalties or restrictions Standards' and Regulations
on any future trading enforceable at the time the plan is
activities/business in the Philippines submitted. The same procedure shall
be followed in the case of a plan for
NOTE: Foreign Investors Acquiring Shares a condominium project except that,
of Stock of existing retail stores whether or in addition, said Authority shall act
not publicly listed whose net worth is in upon and approve the plan with
excess of the Peso equivalent of US respect to the building or buildings
$2,500,000 may purchase only up to the included in the condominium project
maximum of 60% of the equity thereof in accordance with the National
within the first 2 years, and thereafter, Building Code (R.A. No. 6541).
they may acquire the remaining The subdivision plan, as so approved,
percentage consistent with the allowable shall then be submitted to the Director
foreign participation as herein provided of Lands for approval in accordance
with the procedure prescribed in
NOTE: All retail Trade enterprises under Section 44 of the Land Registration Act
categories B and C in which foreign (Act No. 496, as amended by R.A. No.
ownership exceeds 80% of equity shall 440): Provided, that it case of complex
offer a minimum of 30% of their equity subdivision plans, court approval shall
to the public through any stock no longer be required. The
exchange in the Philippines within 8 condominium plan as likewise so
years from the start of the operations approved, shall be submitted to the
Register of Deeds of the province or
Qualification of Foreign Retailers city in which the property lies and the
Minimum of $200,000,000 US Dollars same shall be acted upon subject to
net worth in its parent corporation the conditions and in accordance with
for Categories B and C and the procedure prescribed in Section 4
$50,000,000 net worth in its parent of the Condominium Act (R.A. No.
corporation for Categories D 4726).
CIVIL LAW COMMITTEE


143
Does not conduct his business in

National Housing authority (now accordance with law or sound
Housing and Land Use Regulatory business principles.
Board) has the exclusive jurisdiction
to regulate the real estate trade and
business. LEASE
License to sell LEASE
Such owner or dealer to whom has consensual, bilateral, onerous, and
been issued a registration certificate commutative contract by virtue of
shall not, however, be authorized to which one person binds himself to
sell any subdivision lot or grant temporarily the use of the thing
condominium unit in the registered or to render some service to another
project unless he shall have first who undertakes to pay some rent.
obtained a license to sell the project Kinds of Leases (From the view point of
within two weeks from the the subject matter
registration of such project. Lease of things
Lease of service
Exempt transactions Lease of work
A license to sell and performance
bond shall not be required in any of NOTE: Since lease is consensual and is
the following transactions: not imposed by law, only the lessor has
Sale of a subdivision lot resulting the right to fix the rents. However, the
from the partition of land among co- increasing of the rent is not an absolute
owners and co-heirs. right on the part of the lessor.
Sale or transfer of a subdivision lot
by the original purchaser thereof and Characteristics or Requisites for Lease
any subsequent sale of the same lot. of Things
Sale of a subdivision lot or a Consensual
condominium unit by or for the Principal
account of a mortgagee in the Nominate
ordinary course of business when Purpose is to allow enjoyment or use
necessary to liquidate a bona fide of a thing (the person to enjoy is
debt. the lessee; the person allowing
the enjoyment by another is the
Grounds for Revocation of registration lessor
certificate and license to sell of owners Subject matter must be within the
or dealers commerce of man
Is insolvent; or Purpose to which the thing will be
Has violated any of the provisions of devoted should not be immoral
this Decree or any applicable rule or Onerous (there must rent or price
regulation of the Authority, or any certain)
undertaking of his/its performance Period is Temporary (not perpetual,
bond; or hence, the longest period is 99
Has been or is engaged or is about to years)
engage in fraudulent transactions; or Period is either definite or indefinite
Has made any misrepresentation in If no term is fixed, we should
any prospectus, brochure, circular or apply Art.1682 (for rural leases)
other literature about the and Art. 1687 (for urban leases)
subdivision project or condominium If the term is fixed but
project that has been distributed to indefinite, the court will fix the
prospective buyers; or
Is of bad business repute; or
CIVIL LAW COMMITTEE


144
term under the law of lessor has to 2. lessor has to

obligations and contracts deliver the perform some
10. Lessor need not be the owner thing leased work or service
3. in case of 3. in case of breach,
NOTE: A usufructuary may thus lease breach, there no acti o n for
can be an action specific
the premises in favor of a stranger,
for specific performance
such lease to end at the time that performance
the usufruct itself ends
Lease of Contract for a
Rent Services Piece of Work
The compensation either in (locatio (locatio operas)
money, provisions, chattels, or operatum)
labor, received by the lessor 1. the 1. the important
from the lessee. important object is the
object is the work done
labor
NOTES: performed by
When a student boards and lodges in the lessor
a dormitory, there is no contract of the result is 2. the result is
lease. The contract is not designated gener ally generally
specifically in the Civil Code. It is an not important;
important, generally, the
innominate contract. It is however,
hence the price is not
believed that the contract can be laborer is payable until
denominated as the contract of entitled to the work is
board and lodging. be paid even completed, and
There is a contract of lease when if there is said price
destruction cannot be
the use and enjoyment of a safety
deposit box in a bank is given for a of the work lawfully
through demanded if
price certain. This is certainly not a
fortuitous the work is
contract of deposit. event destroyed
A lease of personal property with before it is
option to buy (at a nominal amount) finished and
at the end of the lease can be accepted
considered a sale.
LEASE SALES Lease of Agency

only use or 1. ownership is Services
enjoyment is transferred
transferred It is based on It is based on
employment – representation –
2. transfer is 2. transfer is the lessor of agent represents his
temporary permanent services does not principal and enters
3. lessor need not 3. seller must be represent his into juridical acts.
be the owner the owner at the employer nor
time the property
does he execute
is delivered juridical acts.
4. the price of the 4. usually, the Principal Preparatory
object, selling price is contract contract
distinguished from mentioned
the rent, is usually
not mentioned Rule for Lease of Consumable Goods
GENERAL RULE: Consumable goods
Lease of Lease of Services cannot be the subject matter of a
Thin gs contract of lease of things.
Why? To use or enjoy hem, they will have
1. object of 1. objec t is
contract is a some work or to be consumed. This cannot be done by a
thing service lease since ownership over them is not
CIVIL LAW COMMITTEE

145
transferred to him by the contract of LEASE

lease. 1. there are two 1. there is only one
EXCEPTIONS: leases and two juridical
If they are merely distinc t juridical relationship, that of
relati o nshi p s the lessor and the
exhibited
If they are accessory to although assignee, who is
imme di ately converted into a
an industrial establishment
connected and lessee
related to each
RECORDING OF LEASE OF PERSONAL other
PROPERTY 2. the personality 2. the personality of
GENERAL RULE: Lease of real property of the lessee does the lessee
is personal right not disappear disapp ea rs
EXCEPTIONS: Lease partakes of the
nature of real right if: 3.the lessee does 3. the lessee
not transmit transmits absolutely
Lease of real property is absolutely his his rights to the
more than 1 year rights and assignee
Lease of real property is obligations to the
registered regardless of duration sublessee
4. the sublesse e, 4. the assignee has a
NOTE: Lease of personal property cannot generally, does direct action against
be registered. To be binding against not have any the lessor
third persons, the parties must execute direct action
against the lessor
a public instrument.
Lease may be made orally, but if the RIGHTS OF LESSOR IF SUBLEASE

lease of Real Property is for more PROHIBITED BUT ENTERED INTO BY
than 1 year, it must be in writing LESSEE:
under the Statue of Frauds. Rescission and damages, or
Damages only (Contract will be
Persons Disqualified to be Lessees allowed to remain in force)
Because Disqualified to Buy Ejectment
A husband and a wife cannot lease to
Instances when sublessee is liable to
each other their separate properties
the lessor:
except:
if separation of property was All acts which refer to
the use and preservation of the
agreed upon
if there has been judicial thing leased in the manner
stipulated between the lessor
separation of property
Persons referred to in Art. 1491 are and the lessee
The sublessee is
disqualified because of fiduciary
subsidiarily liable to the lessor
relationships
for any rent due from the lessee.
NOTE: The sublessee shall not be
SUBLEASE
responsible beyond the amount of rent
A separate and distinct contract of
due from him.
lease wherein the original lessee
becomes a sublessor to a sublessee.
Accion Directa: direct action which the
Allowed unless expressly prohibited. lessor may bring against a sublessee who
The sublessee is subsidiarily liable for misuses the subleased property.
any rent due. The lessor has an
accion directa against the sublessee OBLIGATIONS OF THE LESSOR (DnM)
for unpaid rentals and improper use Delivery of the object
of the object. (cannot be waived)
Making of necessary
repairs
SUBLEASE ASSIG NM EN T OF
CIVIL LAW COMMITTEE
Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), J ohn Stephen

146
Maintenance in peaceful Alternative remedies of Aggrieved

and adequate possession party (Lessor/Lessee) in case of Non-
fulfillment of duties:
OBLIGATIONS OF THE LESSEE (R 2EN2U) Rescission and damages
to pay rent Damages only, allowing the contract
to use thing leased as a to remain in force – Specific
diligent father of a family, Performance
devoting it to the use stipulated NOTE: Damages Recoverable in ejectment
to pay expenses for the cases are the rents or the fair rental value
deed of lease of the premises. The following cannot be
to notify the lessor of successfully claimed:
usurpation or untoward acts Profits plaintiff could
to notify the lessor of have earned were it not for the
need for repairs possible entry or unlawful
to return the property detainer
leased upon termination of the Material injury to the
lease premises
Actual, moral, or
Effect of Destruction of the Thing exemplary damages
Leased:
Total destruction by a fortuitous Immediate termination of lease under
event Art. 1660 applies:
Lease is extinguished
only to dwelling place or any other
building intended for human
habitation
even if at the time the contract was
perfected, the lessee knew of the
Partial destruction dangerous condition or waived the
Proportional reduction of the right to rescind on account of this
rent, or condition
Rescission of the lease Rules on Alteration of the Form of the
When lessee may suspend payment of Lease
rent: The Lessor can alter provided there
lessor fails to undertake necessary is no impairment of the use to which
repairs the thing is devoted under the terms
lessor fails to maintain the lessee in of the lease
peaceful and adequate enjoyment of Alteration can also be made by the
the property leased Lessee so long as the value of the
property is not substantially impaired
NOTE: “Suspend”- for the intervening
period, the lessee does not have to pay
the rent. Rules in case of Urgent Repairs
The lessee is obliged to tolerate the
EFFECTIVITY OF THE SUSPENSION: work although it may be very
The right begins: annoying to him and although during
In the case of repairs, from the time the same time he may be deprived
he made the demand for said repairs, of a part of the premises
and the demand went unheeded. If repairs last for more than 40 days:
In the case of eviction, from the time Lessee cannot act for reduction of
the final judgment for eviction becomes rent or rescission
effective. If 40 days or more: lessee can ask for
proportionate reduction
NOTE: In either case, rescission may be
availed of if the main purpose is to
CIVIL LAW COMMITTEE


147
provide a dwelling place and the If rent is paid daily: lease is from day
property becomes uninhabitable. to day
If rent is paid weekly: lease is from
Effects if Lessor fails to make Urgent week to week
Repairs If rent is paid monthly: lease is from
Lessee may order repairs at the month to month
lessor’s cost If rent is paid yearly: lease is from
Lessee may sue for damages year to year
Lessee may suspend the payment of
the rent RULES ON EXTENSION OF THE LEASE
Lessee may ask for rescission, in PERIOD:
case of substantial damage to him If a lease contract for a definite term
allows lessee to extend the term, there
TRESPASS IN LEASE: is no necessity for lessee to notify lessor
Trespass in fact (perturbacion of his desire to so extend the term,
de mere hecho): unless the contrary is stipulated.
physical “May be extended” as stipulation:
enjoyment is reduced lessee can extend without lessor’s
Lessor will not consent but lessee must notify lessor.
“May be extended for 6 years agreed
be held liable.
upon by both parties” as stipulation: This
Trespass in law (perturbacion must be interpreted in favor of the lessee.
de derecho): Hence, ordinarily the lessee at the end of
A third person claims the original period may either:
legal right to enjoy the premises leavethe
Lessor will be held liable premises; or
remainin
NOTE: While the Japanese Occupation possession
was a fortuitous event, the lessor is still In co-ownership, assent of all is
not excused from his obligation to needed; otherwise, it is void or
warrant peaceful legal possession. Lease ineffective as against non-consenting co-
is a contract that calls for prestations owners.
both reciprocal and repetitive; and the Where according to the terms of the
obligations of either party are not contract, the lease can be extended only
discharged at any given moment, but by the written consent of the parties
must be fulfilled all throughout the term thereto, no right of extension can rise
of the contract. (Villaruel vs. Manila without such written consent.
Motor Co.)
Rule if Lessor Objects to the Lessee’s
Duration of Lease continued Possession:
Lease made for a determinate Requisites:
time or fixed Period Contract has expired
Lease will be for the said Lessee continued enjoying the thing
period and it ends on the day Lessor Objected to this enjoyment If
fixed without need of a demand the three requisites are present, the
lessee shall be considered a
If there is no fixed period possessor in bad faith
For Rural Lands (Article 1680)
it shall be for all time IMPLIED NEW LEASE (Tacita
necessary for the gathering of Reconducion)
fruits which the whole estate lease which arises if at the end of the
may yield in 1 year, or which it contract the lessee should continue
may yield once enjoying the thing leased for 15 days
For Urban Lands (Article 1687) with the acquiescence of the lessor,
CIVIL LAW COMMITTEE


148
unless a notice to the contrary had which provides that “the lease contract
previously been given by either party. shall continue for an indefinite period
provided that the lessee is up-to-date in
Requisites: the payment of his monthly rentals” for
the term of the original the contract is one with a period subject
contract has expired to a resolutory condition.
the lessor has not given
the lessee a notice to vacate PURCHASE OF THE LEASED PROPERTY
the lessee continued GENERAL RULE: Purchaser of thing
enjoying the thing leased for at leased can terminate lease.
least 15 days with the EXCEPTIONS:
acquiescence of the lessor lease is recorded in
Registry of Property
When there is no implied new lease: there is stipulation in
When before or after the the contract of sale that
expiration of the term, there is a purchaser shall respect the lease
notice to vacate given by either purchaser knows the
party. existence of the lease
When there is no definite fixed sale is fictitious
period in the original lease contract as sale is made with right
in the case of successive renewals. of repurchase
Effects: GROUNDS FOR EJECTMENT UNDER ART.

1673: (ELVU)
The period of the new
Expiration of the period agreed upon
lease is not that stated in the
or the period under Arts. 1682 and
original contract but the time in
1687;
Articles 1682 and 1687.
Lack of payment of the price
Other terms of the
stipulated;
original contract are revived.
Violation of any of the conditions
agreed upon in the contract; and
NOTE: Terms that are revived are only
Unauthorized use or service by the
those which are germane to the
lessee of the thing leased.
enjoyment of possession, but not those
with respect to special agreements
which are by nature foreign to the right

RENTAL REFORM ACT OF 2002
of occupancy or enjoyment inherent in a
(R.A. No. 9161)
contract of lease – such as an option to
Effectivity: January 1,
purchase the leased premises (Dizon vs.
Magsaysay GR No. 23399, May 31,1974) 2002. Coverage:
All residential units of NCR and other
Perpetual Lease highly urbanized cities, the total
A lease contract providing that the monthly rental for each of which
lessee can stay in the premises for as does not exceed P7,500;
long as he wants and for as long as he All residential units in other areas
can pay the rentals and its increases. the total monthly rental for each of
This is not permissible; it is a purely which does not exceed P4,000 as of
potestative condition because it 1/1/02, without prejudice to pre-
leaves the effectivity and enjoyment existing contracts.
of leasehold rights to the sole and
exclusive will of the lessee Grounds for judicial ejectment:
SANORE
NOTE: In Jespajo Realty vs. CA, 27 Sept.
2002, the SC upheld a lease contract,
CIVIL LAW COMMITTEE

149
Assignment of lease or subleasing of

residential units including the TERMINATION OF THE LEASE
acceptance of boarders or If made for a determinate time, it
bedspacers without written consent ceases upon the day fixed without
of the owner or lessor; the need of a demand.
Arrears in payment of rent for a By the expiration of the period
total of 3 months; By the total loss of the thing
Legitimate needs of the owner or By the resolution of the right of the
lessor to repossess for his own use or lessor
for the use of any immediate By the will of the purchaser or
member of his family as a residential transferee of the thing
unit, provided: By rescission due to non-performance
owner or immediate member not of the obligation of one of the parties
being owner of any other available
residential unit within the same city Special Provisions for Rural Lands
or municipality; Effect of loss due to fortuitous
lease for a definite period has
event:
expired;
Ordinary fortuitous event – no
lessor has given lessee formal
reduction
notice 3 months in advance; and
Extraordinary fortuitous event
owner or lessor is prohibited
if more than ½ of the fruits were
from leasing the residential unit or
lost, there shall be a reduction,
allowing its use by a third person for
unless there is a stipulation to
at least 1 year.
the contrary
Absolute ownership by the lessee of if ½ or less, there shall be no
another dwelling unit in the same
reduction
city or municipality which may be
Lease duration: If not fixed, it shall
lawfully used as his residence
be for all time necessary for the
provided lessee is with formal notice
gathering of fruits which the whole
3 months in advance;
estate may yield in 1 year, or which
Need of the lessor to make necessary
repairs in the leased premises which it may yield once.
is the subject of an existing order of
condemnation by appropriate Special Provisions for Urban Lands
authorities concerned in order to Repairs for which urban lessor is
make said premises safe and liable:
habitable; and special stipulation
Expiration of period of the lease if none, custom of the place
contract. in case of doubt, the repairs are
chargeable against him
NOTE:
Except when the lease is for a
definite period, the provisions of Lease duration:
Art. 1673(1) of the Civil Code (CC), If there is a fixed period, lease will be
insofar as they refer to residential for said period.
units, shall be suspended during the If no fixed period, apply the following
effectivity of R.A. 9161, but other rules:
provisions of the CC and the Rules of If rent is paid daily: day
Court on lease contracts insofar as to day
they are not in conflict with the If rent is paid weekly:
provisions of R.A. No. 9161 shall week to week
apply. If rent is paid monthly:
No increase in monthly rental by month to month
more than 10% is allowed. If rent is paid yearly:
year to year
CIVIL LAW COMMITTEE

Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lea se), John Stephen

150
Please study the following uploaded

materials:
1. Study Notes (Pleadings)
2. Study Notes (Appeal Briefs)
3. Quotations by Prof. Rick Bales

CIVIL LAW COMMITTEE

151
Appellate Briefs -- A Reader's

Perspective by David E. Sorkin
Winning with the Facts by David

E. Sorkin
De Liano v. Court of Appeals
People v. Cortez
Additional reading materials and

assignment to be upoaded/posted.
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MEMORY AID IN CIVIL LAW

Elements: NOTE: Absent a proviso in the contract

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

seller is to exact not a breach – Constructive 1. Third person

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

Sale Agency to sell Rules to determine if the contract is

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

If ordered in the ordinary course of object the acquisition of the

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN C IVIL LAW

In the cases providedGENERAL RULE: Mere inadequacy of the

Effect when the price is fixed by the

Effect of Gross Inadequacy of Price: Effect of Failure to determine price:

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

Nonpayment only creates a right

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

does not bind the promissor even if supported by a consideration, the

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

component of the consideration of GENERAL RULE: Who bears the risk

Earnest money Option money Contrary view:

RULES ON RISK OF LOSS AND EFFECT OF LOSS AT THE TIME OF SALE:

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

Sale by description Sale of property not to be

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

them, unless the consent of the administrator to sell. The sale

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

purchased is not a sale on approval, Owner is estopped or

SALE OF GOODS BY A NON-OWNER NEGOTIABLE DOCUMENT OF TITLE (NDT)

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

The document is negotiable if: RULES WHEN QUANTITY IS LESS THAN

If the holder of a negotiable document RULES WHEN GOODS MIXED WITH

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

Registration requires actual perfection of a contract and a condition

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

at the instance of the vendee;

Ma. Ricasion Tugadi (Conf licts of Law)

MEMORY AID IN CIVIL LAW

eviction shall be void if he acted in it must Exist at the time of the

CIVIL LAW COMMITTEE

Ma. Ricasion Tugadi (Conf licts of Law)