Sales: Nature and Form of Contract Articles 1458 - 1488

SALES
NATURE AND FORM OF CONTRACT
Articles 1458 -1488
Define sale?
Sale is a contract where one party (seller/vendor) obligates himself to transfer the ownership of and deliver the
determinate thing, while the other party (buyer or vendee) obligates himself to pay for said thing a price certain in
money or its equivalent. (Art. 1458)
Suppose art. 1458 didn’t specify that the seller must transfer the ownership of the object, does he still
have this obligation?
Yes, for after all, this transfer of ownership is clearly the fundamental aim of the contract. A buyer is not interested
in a mere physical transfer: he is after ownership.
What are the characteristics of the contract of sale?
A contract of sale is a.) Consensual; b.) Bilateral reciprocal; c.) Onerous; d.) Commutative; e.) Principal; f.)
Nominate
Why is the contract of sale an onerous contract?
A sale is onerous, because to acquire the rights, valuable considerations must be given.
Why is the contract of sale a consensual contract?
Sale is consensual, because the contract is perfected by mere consent.
Why is the contract of sale a bilateral reciprocal contract?
Sale is bilateral consensual, because both parties are bound by obligations dependent upon each other.
Why is the contract of sale a commutative contract?
Sale is commutative as a rule, because the values exchanged are almost equivalent to each other.
Why is the contract of sale a principal contract?
Sale is a principal contract, because for the contract to validly exist there is no necessity for it to depend upon the
existence of another valid contract.
Why is the contract of sale a nominate contract?
Sale is a nominate contract, because the Code refers to it by a special designation, i.e., the contract of sale.
Civil Law Review Project

Obligations to Quasi Contracts IV-A 260
SALES
What are elements of a contract of sale?
The elements of a contract of sale are a.) consent or meeting of the minds, b.) Determinate subject matter, c.) price
certain in money or its equivalent.
What are the stages in a contract of sale?
The stages of a contract of sale are a.) generation or negotiation, b.) perfection, c.) consummation.
Distinguish sale from a lease contract?
In a sale, the seller transfer ownership; in a lease contract, the lessor or landlord transfer merely the temporary
possession and use of the property.
Classify or give kinds of a contract of sale?
Generally, they are: 1. Absolute-when the sale is not subject to any condition, 2. Conditional- when the sale
contemplates a contingency or is subject to a certain condition.
Define natural elements of a contract of sale?
Those which are inherent in the contract, and which in the absence of any contrary provision, are deemed to exist
in the contract.
What is an accidental elements in a contract of sale?
Those which may be present or absent in the stipulation, such as place or time of payment, or the presence of a
condition.
What are the requisites of the thing which constitutes the object of sale?
1. The thing must be existing. 2. Thing must be licit or legal. 3. thing must be determinate or capable of being
determined without the need of a new contract. 4. The vendor must have a right to transfer ownership of the thing
at the time it is delivered.
When is a thing determinate?
It is determinate when the thing is particularly designated or physically segregated from all others of the same
class. But a thing is still determinate if at the time the contract is entered into, the thing is capable being more
determinate without necessity of a new further agreement of the parties. (Art. 1460)
Seller sold 500 piculs of sugar to buyer. Because seller was not able to produce 500 piculs of sugar on
said plantation he was not able to deliver. Is he liable?
Yes, because no specific lot of sugar can be pointed out as having been lost. Sugar here was still generic.

SALES
Is a sale of a future thing valid?
Yes, provided that the sale of a mere hope or expectancy is deemed subject to the condition that the thing will
come into existence.
Distinguish Rei Sperati from Emptio Spei?
Emptio rei sperati (sale of an expected thing), if the expected thing does not materialize, the sale is not
effective. While, emptio spei ( sale of the hope itself) it does not matter whether the expected thing
materialized or not; what is important is that the hope itself validly existed. (Art. 1461)
What is Emptio rei speratae?
Emptio rei speratae is a sale of a future thing certain as to itself but uncertain as to its quality or quantity. Such
sale is subject to the condition that it shall come into existence.
Give examples of things having potential existence and therefore may be objects of valid sales?
Wine which a vineyard is expected to produce; fruits to grow; milk that a cow may yield in the coming year: wool
which may grow upon a sheep.
What are future goods?
Future goods are those still to be a.) manufactured, b.) raised, c.) acquired by seller after the perfection of the
contract, d.) things whose acquisition depends upon contingency which may or may not happen. (Art. 1462)
What are the goods which may form the subject of a contract of sale?
They may either be: 1. Existing goods, 2. Future goods.
May the sole owner of a thing sell an undivided interest therein?
Yes, Art, 1463 of the civil code states: The Sole owner of a thing may sell an undivided interest therein.
What is the effect if the sole owner of a thing would sell an undivided interest in such thing?
The buyer becomes a co-owner over the thing.
May a property subject to reserva troncal be sold?
Yes, Article 1465 of the civil code states. Things subject to a resolutory condition may be the object of a contract of
sale.
Distinguish sale from agency?

SALES
In sale, the buyer pays the price; the agent delivers the price which in turn he got from his buyer. In sale, the
buyer after delivery becomes the owner; the agent who is supposed to sell does not become the owner, even if the
property has already been delivered to him.
Is there a distinction between a contract of sale and a contract to sell?
Yes. In the contract of sale, the title pass to the buyer upon delivery of the thing sold, while, in contract to sell,
ownership is reserved to the seller and is not to pass until full payment of the purchase price is made.
Y acquired a booklet of 1oo sweeptake tickets directly from PCSO. Y, paid 18,000 for the booklet, less the
customary discount. What kind of contract did Y enter into?
Y entered into a contract of purchase and sale. Y, become the agent of PCSO.
What is the rule to determine if the contract is one of sale or a piece of work?
If ordered in the ordinary course of business, Sale. If manufactured specially and not for the market it is a contract
for a piece of work. (Art. 1467)
What is a contract for a piece of work?
Contract for a piece of work- goods are to be manufactured specially for the customer and upon his special order,
and not for the general market.
If I ask someone to construct a house for me, is this a contract of sale or for a piece of work.
It is a contract for a piece of work. But, if he will construct on his own land, and I will get both the land and the
house, it would seem that this can be very well treated as a sale.
What is the rule to determine whether the contract entered into is one of sale or barter?
1st rule- intent of parties. 2nd rule- if intent does not clearly appear: 1. If thing is more valuable than money- barter,
2. 50-50- sale, 3. If thing is less valuable than money- sale. (Art. 1468)
What is barter?
By the contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the
other’s promise to give another thing.
If I give my truck worth 1 million to Sacra in consideration of Sacra’s giving to me .4 million cash, and a
car worth .6 million, is the transaction a sale or a barter?
It depends on the mutual intent of the parties. If the intent is not clear, the transaction is barter.
What are the requisites of price in the contract of sale?

SALES
Price must observe the following requisites: 1. Price must be in money or its equivalent. 2. Price must be certain or
ascertainable. 3. Price must be real not simulated.
When price is considered certain?
Price is considered certain when it is referred to another thing certain, or it will be determined by a specified
person.
Rey’s right in Y Company was sold in 3/100 of the entire net value of the business. Said value was, in
turn, to be fixed by a specified board of assessors. Is the price certain?
Yes, for there was no need of any further meeting of the minds on the price.
What is the effect of gross inadequacy of price?
As a rule, it does not affect the contract of sale, except it may indicate: 1. Defect in the consent; or 2. The parties
really intended a donation or some other forms of contract; however, if the inadequacy of price results in lesion or
badge of fraud against the creditors, then, the contract is rescissible.
May the fixing of a price left to the discretion of one of the contracting parties?
No, as a general rule. However, if the price fixed is accepted by the other party, the sale is perfected.
If the price is simulated, what is the effect on the contract of sale?
The sale is void but the act may be shown to have been in reality a donation or some other act or contract.
What is the effect if the simulated price is fictitious?
There being no price, there is no cause or consideration; hence, the contract is void as a sale.
When price is considered certain?
Price is considered certain if it could be determined with reference to another thing certain.
What could be the effect if the price of securities cannot be ascertained?
If the price cannot really be ascertained, the sale is inefficacious because what last clause of article 1472 provides is
that price must be certain.
Delia sold to Mar a fountain pen today at the price equivalent to the stock quotation two days from today
of 100 shares of Jacks Corporation. Is the sale valid?
Yes provided the stock quotation price two days later can be ascertained, otherwise if it cannot be ascertained at
the time or two days from today the sale is inefficacious.

SALES
Why price is cannot be left to the discretion of one of the contracting parties?
Price cannot be left to the discretion of one of the contracting parties for it cannot be said that the other consented
to the price he did not and could not previously know. Moreover, to be just, the price must be determined
impartially by both parties.
What is the effect if determination of price be left to the vendor?
If left to the judgment of the vendor, the transaction may be valid as donation if he can share that such was the
intention of both parties to the contract and if there are no reasons of a different nature which militate against its
validity.
Is the contract perfected if the price fixed by one party but accepted by the other?
Yes, where the price fixed by one party is accepted by the other, the contract is deemed because in this situation
there exist true meeting of minds upon the price.
Almar sold to Basty his car. It was agreed that Basty would fix the price a week later. At the appointed
time Basty named the price at P500,000.00. Almar agreed. Is the sale perfected?
Yes, for there exist a true meeting of mind between Almar and Basty when Basty accepted the price being named
by Almar.
Give the effect of failure to determine price where the contract is executor?
If the price cannot be determined in accordance with the Civil Code, or any other manner, the contract without is
without effect. Consequently, there is no obligation on the part of the vendor to deliver the thing and the part of
the vendee to pay.
What if delivery has been made what would be the effect?
If the thing or any part thereof has already been delivered or appropriated by the buyer, the latter must pay a
reasonable price therefore. The reasonable price or value of goods is generally the market price of the object of the
contract.
Ayson and Badz entered into a contract that is complete in itself, except that there was no agreement
with reference to the price. What would be the basis of the price of the object of the contract?
If the terms of sale are complete except for an agreement with reference to the price, the Law implies a price
equivalent to the reasonable value of the goods in case where the buyer has appointed the thing sold. And where
the buyer accepts the delivery knowing the price claimed by the seller, he cannot thereafter refuse to pay for it at
price even when there is no agreement as to price.
If the vendor has made use of the thing delivered, is he still not obliged to pay the vendee?
Where the goods are delivered and was used by the buyer, he should not be allowed to enrich himself unjustly at
another’s expense. So he must pay reasonable price. The seller’s price however, must be the one to be paid if the
buyer knew how much the seller was charging and there was an acceptance of the goods delivered. This implies
that there is an implied assent to the price fixed.
SALES
What are the requisites for a perfection of a Contract of Purchase or Contact of Sale?
The requisites for a perfection of a Contract of Purchase or Contact of Sale are:

1. From the moment the parties has agreed upon a determinate thing;
2. The object of the contract; and
3. Certain price whether in money or something representing it.
When is Contract of Sale perfected?
The Contract of Sale being a consensual contract is perfected by mere consent.
Give the effect of failure to pay price, or the non-delivery of the thing bought?
Valid. Failure to pay price, or the non-delivery of the thing bought will not render the contract not perfected
because Contract of sale is a consensual contract thus perfected by mere consent.
Delivery of the thing bought or payment of the price is not necessary for the perfection of the contract and failure
of the vendee to pay the stipulated price after the execution of the contract does not convert the contract into one
without cause or consideration as to vitiate the validity of the contract, it not being essential for the existence of
the cause that payment or full payment be made at the time of the contract. For lack of consideration act results at
most in default on the part of the vendee for which the vendee may exercise his legal remedies.
Give the exceptions where contract is perfected by mere delivery?
The exceptions are:

1. When by virtue of stipulation of parties or law of the sale is subject to suspensive condition, the contract is
perfected only from the fulfillment of the condition.
2. Where the contract was expressly made subject to the approval of higher authorities.
What is the effect of perfection?
One’s contract is perfected, nothing is left to the parties to do except the execution of their mutual obligation,
whereby it gives the vendee the right to compel the vendor to deliver the thing but acquire no real right over it
until the delivery is made.
When is sale by auction perfected?
The sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other
customary manner.
May the bidder retract his bid before the hammer falls?
Yes. Every bidding is merely an offer and, therefore, before it is accepted, it may be withdrawn. The assent is
signified on the part of the seller by knocking down the hammer.
May the auctioneer withdraw the goods from the sale before the fall of the hammer?

SALES
Yes, unless the auction has been announced to be without reserve. The bid is merely an offer, not an acceptance of
an offer ton sell. Therefore it can be rejected. What the auctioneer does in withdrawing is merely reject the offer.
When seller can bid in the auction?
The seller or his agent may bid in an auction sale provided:

1. Such right was reserved;
2. Notice was given that the sale is subject to a right to bid on behalf of the seller; or
3. The right to bid by the seller is not prohibited by law or stipulation.
Can the seller employ others to bid for him?
Yes, provided he has notified the public that the auction is subject to the right to bid on behalf of the seller. Notice
to public must not be fraudulent.
Who may attack the Auction sale?
Last sentence of paragraph 4, article 1476 does not limit the rest of paragraph that in case seller actually buys, he
only can complain. Objection to such sale is also available to the debtor in an auction for deficiency after the sale.
When is ownership to the thing sold transferred?
Ownership is transferred from the moment there is either actual or constructive delivery even if the price is not
fully paid, when the sale is conditional and ownership is transferred not upon delivery but payment of price.
What are the kinds of delivery?
The kinds of delivery are:

1. Actual;
2. Constructive
What is the concept of reservati domini or contractual reservation of title?
It is an stipulation where the parties agree that despite delivery, the ownership of the t ing shall remain with
the seller even the purchaser has fully paid the price.
Is the contractual reservation valid?
Yes. The parties may stipulate that despite delivery, the ownership of the thing shall remain with the seller until
the purchaser has fully paid the price.
Distinguish the concept of pactum reservati domini and contract to sell?
The distinctions are:

1. Pactum reservati domini is a form of conditional contract, while, contract to sell is a contract preparatory to
Contract of sale;
2. In the first delivery of the object of contract has been made, while in the second, there is no delivery yet;
3. In the first non-payment the injured party may file an action for specific performance or rescission of the
contract, while, in the second there can be no action , for it merely prevents execution of the Contract of Sale.

SALES
What are the kinds of promise (scope) provided in article 1479?
The scopes of article 1479 are:

1. An accepted unilateral promise to sell where the promise decides to buy;
2. An accepted unilateral promise to buy when the promise decides to buy;
3. A bilateral promise to buy where the promise decides to sell reciprocally accepted, where either party to
decides to exact compliance.
Give the effect if unilateral promise is unaccepted?
A unilateral promise or offer45 to sell or to buy a thing which is not accepted creates no juridical effect or legal
bond. Such accepted offer is called policitation.
Define option?
Option is a contract granting a person the privilege to buy or not; to buy a certain object at any time within the
agreed period at a fixed time.
What is the effect of bilateral promise (mutual promise)?
When one party accepts the other’s promise to sell, a determinate thing for a price certain, it is reciprocally
demandable. It generates a binding contract of sale.
How must acceptance of unilateral promise be done?
The acceptance of unilateral promise to sell must be plain, clear, and unconditional. Therefore, if there is a
qualified acceptance with terms different from the offer, there is no acceptance, that is no promise to buy and
there is no perfected sale.
How long is the offer bound by his promise when option is granted?
The offer is bound by his promise by the stipulation of the parties. If there is no stipulation then the Court will fix
the term.
Who bears the lost or deterioration?
a. If the thing is lost before perfection, the seller and not the one who intends to purchase bears the loss, because
there was no cause or consideration, thus, there was no contract.
b. If thing is lost at the time of perfection, the contract is void or inexistent. The legal effect is the same as when the
object is lost before the perfection of the Contract of sale.
c. If the thing is lost after perfection but before its delivery, that is, even before the ownership is transferred to the
buyer, the risk of loss is shifted to the buyer, an exception to the rule of res peruit domino.
d. If the thing is lost after delivery, the buyer bears the loss fo;;owing the general rule res peruit domino.
B bought a vessel from S on condition that S could prove he was the owner thereof by pertinent
document. Before the condition was complied with, the vessel sank in a storm. Can s demand the price?
No, S cannot demand the price. The condition was never fulfilled, therefore the Contract of Sale was never
perfected. Thus S bears the loss.
SALES
What if the condition was fulfilled. Is the Sale been perfected?
Yes. If the condition had been fulfilled, the sale would have been perfected, and B would have to pay the price even
if it had not yet been delivered to him.
Bea’s hi-lux was sold on credit. Shortly after its delivery, it was destroyed by fortuitous event. Is the
buyer still liable for the price?
Yes, because after its delivery to him, he became the owner, and therefore it is who bears the loss.
Define fungibles?
Fungibles are personal property which may be replaced with equivalent thing. It is apparently same as
consumables.
What is the coverage of article 1481?
The coverage of the article is as follows:

1. Sale of goods be description;
2. Sale of goods by sample; and
3. Sale of goods by description and sample
Define the coverage:
1. Sale of goods be description accrue where the seller sells things as being of particular kind, the buyer not
knowing whether the seller’s representations are true or false, but relying on them as true; or as otherwise
stated, where the purchaser has not seen the article sold release on the description given him by the vendor, or
has seen the goods but the want of identity do not apparent on inspection.
2. Sale of goods by sample, it is that where the seller warrants that the bulk of the goods shall correspond with
the sample in kind, quality, and character. Only the sample is exhibited. The bulk is not present and so there is
no opportunity to exercise or inspect it.
3. Sale of goods by description and sample, must satisfy all warranties appropriate to either kind of sale, and it is
not sufficient that the bulk of the goods correspond with the sample if they do not also correspond with the
description.
May the contract be rescinded if the bulk of goods do not correspond with the description?
Yes. If the bulk of goods does not correspond with the description the buyer may rescind the contract.
When may the buyer rescind a contract?
The buyer may rescind a contract when:

1. If the bulks of goods delivered do not correspond with the description;
2. If the bulks of goods delivered do not correspond with the sample.
Is it sufficient that the bulk of goods correspond with the sample, but not correspond with the
description?
SALES
No, it is not sufficient that the bulk of goods correspond with the sample, but not correspond with the description.
Define earnest money?
Earnest money is a money given by the buyer to the seller to had the bargain. It is actually a partial payment of
the purchase price and is considered proof of perfection of the contract.
Is earnest money deductable from the total price?
Yes, since earnest money constitutes advance payment it must be deducted from the total price.
What is option money?
Option money is a money given as distinct consideration for the option contract.
Distinguish earnest money and option money?
Earnest money as distinguish from option money is that:

1. the former is part of purchase while the latter is the money given as distinc consideration for the option
contract;
2. the former is given only when there is already sale, while the latter applies to a sale not yet perfected; and
3. when earnest money is given, buyer is bound to pay balance, while when the woud- buyer fives option money,
he is not required to buy.
Can option money become earnest money?
Yes, option money can become earnest money when parties so stipulate.
What is the form of a contract of Sale?
Contract of Sale may entered into in any form provided the essential requisites for its validity are present.
When statute of fraud applicable?
Statute of frauds is applicable only to executor contracts, where no performance has been done and not to
contracts which are totally or partially performed.
What is the reason for the rule that statute of fraud is applicable only to executor contracts?
The reason of the rule is that partial performance, like the writing, furnishes reliable evidence of the intention of
the parties or the existence of the contract. A contrary rule would result in injustice or unfairness to the party who
has performed his obligation.
Dan orally sold a parcel of land to Jerry. Is the sale valid?

SALES
Yes, the sale is valid but it is unenforceable but the law requires that sale of real property must be in writing to be
enforceable.
If the contract of sale is in private writing, then it is valid and binding only as between the parties and not as
against third persons without notice until sale is registered in the Registry of Property. Dan has the right to
compel Jerry to put the contract in a public document so that it be registered to effect third person.]
In a sale of real property, if made through an agent. Is it valid?
It is void, unless the agent’s authority in writing and to be effective against third person. And that it must be
registered with the Register of Deeds.
What are the limitations on the forms of a Contract of Sale?
The limitations are:

1. by the provision of the Statute of fraud; or
2. by the provision of applicable statute.
Enumerate the remedies of vendor in sale of personal property payable in installment?
The vendor of personal property payable in installments may exercise any of the following remedies:
1. elect fulfillment upon the vendee’s failure to pay;
2. cancel the sale, if the vendee shall have failed to pay two or more installment; or
3. foreclosure the chattel mortgage, if one has been constituted if the vendee shall have failed to pay two or more
installments.
Give the requisites before any of the remedies maybe applied?
The requisites are:

1. there must be a contract;
2. the contract must be one of a sale;
3. it is sale of personal property; and
4. sale must be an installment plan.
What is the purpose of the enumeration of the remedies?
The purpose is to prevent abuse of the foreclosure of chattel mortgage by selling at low price and then suing for
deficiency.
What is the nature of the remedies?
The remedies are alternative and not to be exercised cumulatively or successively and the election of one is waiver
of the right to resort to the others.
When the vendor had chosen exact fulfillment of the obligation, could he still recover from the purchaser
unpaid balance of the price?
Yes. The vendor right is not limited to the proceeds of the sale, on execution of the mortgage goods.

SALES
He may still recover from the purchaser the unpaid balance of the price, if any or the real and personal properties
of the purchase not exempt by law, from attachment or execution.
What is the remedy of the vendor who chooses cancellation of the contract for the vendee’s failure to pay
two or more installments?
The remedy of the vendor who chooses cancellation of the contract for the vendee’s failure to pay two or more
installments is to demand the return of payments already made unless there is stipulation to the contrary.
Can vendor who chooses foreclosure of chattel mortgage recover unpaid balances?
No, if the vendor has chosen the remedy of foreclosure of chattel mortgage, he shall have no further action against
the vendee for the recovery of the unpaid balance of the price and any agreement to the contrary is void.
How is foreclosure effected?
Foreclosure is effected by selling the mortgaged personal property at public auction and applying the proceeds of
the sale to the satisfaction of the claim secured by the mortgage.
Give instances that the remedies can not be applied?
Remedies not applied in:

1. Real Estate Mortgage;
2. sale of personal property on straigt terms or cash basis.
Del bought a particular automobile on installment plan. Del defaulted in the payment of one of the
installment. Has the seller Sal, the right to exact fulfillment of the obligation to pay?
Yes, specific performance does not require default in two or more installments, unlike cancellation and foreclosure
of chattel mortgage.
B bought a particular laptop, but defaulted in the payment of two installments. May the seller ask for the
cancellation of the sale?
Yes, because two installments are already in default.
What is the scope of article 1485?
It shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing.
Give the reason for the rule on Lease of Personal Property with option to buy?
The reason is that this may really considered sale of personal property in installments. Thus it is to prevent
indirect violation of the remedies of the vendor on sale of personal property when vendee fails to pay installment.

SALES
What is the meaning of the clause “when the lessor has deprived the lessee of the possession or
enjoyment of the thing?
This means that for failure to pay, the lessor is apparently exercising the right of an unpaid seller, and has taken
possession of the property. This is so even if the property had been given up in obedience to the lessor’s
extrajudicial demand, such surrender not really voluntary.
When lease construed as Sale?
Even if the word lease is employed when the sale on installment is evidently intended, it must be construed as a
Sale.
May a party stipulate that the installments or rent paid shall not be returned?
Yes, In sale of personal property by installment a lease of personal property with option to buy, the parties may
stipulate that the installment or rents paid are not to be returned. Such stipulation is valid insofar as not
unconscionable.
What is the happen if the stipulation is unconscionable?
If the stipulation is unconscionable the Court has the power to order the return of a portion of the total amount
paid in installment or rents.
What happen when the parties has no stipulations the installment or rents be returned?
If there is no stipulation that installment or rents paid be returned, the installment be returned minus reasonable
rent.
B bought a car from S on installment. It was agreed that the installments already paid should not be
returned even if then sale is cancelled. Is the stipulation valid?
Yes. The stipulation is valid unless unconscionable.
Who pays for expenses in execution and registration?
The vendor (seller) has the duty to pay not only expenses for execution of the sale, but also for the registration of
the same in the absence of any agreement between the parties.
B sells his car to C, they agree that the expenses for registration be borne by C. is the stipulation valid?
Yes. Parties may stipulate as who bears the expenses of execution and registration provided it is not
unconscionable.
Who bears the expenses incurred subsequent to the transfer of title?
Expenses incurred are to be borne by the buyer, unless caused by the fault of the seller.
What is the nature of expropriation?

SALES
Expropriation is involuntary in nature, that is, the owner may be compelled to surrender the property after all the
essential requisites have been complied with. Therefore, generally, expropriation does not result in a sale.
What is the exception to the rule?
In the case of Gutierrez v Court of Tax Appeals, May 31, 1957, the Supreme Court held that the acquisition by the
government of private properties thru the exercise of eminent domain, said properties being justly compensated,
is a sale or exchange within the meaning of the income tax laws and profits derived therefrom are taxable as
capital gain; and this is so although the acquisition was against the will of the owner of the property and there was
no meeting of the minds of the parties.
When is a transaction considered sale?
If the property owner voluntarily sells the property to the government, this would be a sale, and not an example of
expropriation.
Distinguish eminent domain from expropriation.
Eminent Domain refers to the right given to the state, whereas expropriation usually refers to the process.
What are the essentials requisites for expropriation?
The essential requisites are the following:
a. Taking by competent authority

b. Observance of due process of law
c. Taking for public use
d. Payment of just compensation
What is just compensation?
Just compensation is the market value PLUS the consequential damages, if any, MINUS the consequential
damages, if any, MINUS the consequential benefits if any. However, the benefits may be set off only against the
consequential if any. However, the benefits may be set off only against the consequential damages, and not against
the basic value of the property.
What is market value?
It is the price which the property will bring w is brought hen it is offered for sale by one who desires but is not
obliged to sell it, and is bought by one who is under no necessity of having it.
Province of Camarines Sur v. CA
41 SCRA 388, 1993

SALES
The fixing of just compensation in expropriation proceedings shall be made in accordance with rule 67 of the
Rules of Court and not on the basis of the valuation declared in the tax declaration of the subject property by the
owner or assessor which has been declared unconstitutional.
CAPACITY TO BUY OR SELL
Articles 1489 – 1492
Incapacity to buy may be absolute or relative. Distinguish.
Absolute incapacity is when a party cannot bind himself in any case. Whereas, relative incapacity is when certain
persons, under certain circumstances, cannot buy certain property.
What is the effect of purchase by minors?
When minors buy, the contract is generally voidable, but in the case of necessaries, “where necessaries are sold
and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor.
Castillo v. Castillo
L-18238, Jan. 22, 1980
If the deed of sale of the land lists as purchasers both the husband and the wife, the presumption is that it is
paraphernal property.
Godinez v. Fong
120 SCRA 223, 1983
If a Filipino sells a parcel of land to a Chinese who later sells the same to another Filipino, the second sale is
VALID because the purpose of the Constitution of preserving the land in favor of Filipinos has not been frustrated.
What is the reason why generally a husband and wife cannot sell to each other?
The reasons are:
a. to avoid prejudice to third persons

b. to prevent one spouse from unduly influencing the other
c. to avoid by indirection the violation of the prohibition against donations
What are the exceptions wherein a husband and wife can sell property to each other during the
marriage?
1. When a separation of property was agreed upon in the marriage settlements; or

2. When there has been a judicial separation of property.

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In relation to the preceding question, what is the effect of sale?
Generally, a sale by one spouse to another is void. However, not everybody can assail the validity of the
transaction. Thus, creditors who became such after the transaction cannot assail its validity for the reason that
they cannot be said to have been prejudiced. But prior creditors as well as the heirs of either spouse may invoke
the nullity of the sale. When the proper party brings the actions, the sale should be declared void by the courts.
The spouse themselves, since they are parties to an illegal act, cannot avail themselves of the illegality of the sale.
The law will generally leave them as they are.
A husband and his wife were living together under the conjugal partnership system. May the husband
sell his own parcel of land to his wife?
No, because such sale expressly prohibited by law and is, therefore, considered VOID.
In the preceding problem, who can attack the validity of the sale?
Although the sale is void, not everybody is given the right to assail the validity of the transaction. For instance, the
spouses themselves, since they are parties to an illegal act, cannot avail themselves of the illegality of the sale, the
law will generally leave them as they are. And also, the creditors who became such only after the transaction
cannot attack the validity of the sale for the reason that they cannot be said to have been prejudiced. Thus, only
people who can question the sale are the following: heirs of either spouse, as well as prior creditors.
A husband sold his land to his wife. Later, he borrowed money from C. The loan matured. When C
discovered that the husband did not have any cash or any property, he decided to question the sale that
had previously been made in favor of the wife. Can the creditor go after such property?
No, for he was not yet a creditor at the time the transaction took place. Therefore, it cannot be said that he had
been prejudiced by the sale.
A husband and wife were living under the conjugal partnership system. Later, because of a quarrel, the
wife left the husband, without judicial approval. They have thus been living apart for the last 10 years. Do
you think that they can now sell the property to each other?
They still cannot, for they are still husband and wife, and there has been no separation of property agreed before
the marriage, nor a judicial separation of property elected during the marriage.
Would your answer to the preceding problem be the same if there has been legal separation?
No, the answer will not be the same. One of the effects of legal separation is the dissolution of the conjugal
partnership. Once the conjugal partnership ends, the system that will prevail is the separation of property system,
and here the sale can be validly done.
May a husband validly sell the wife’s property for her?

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Yes, but only if he acts as an agent for her, with a specific or special power of attorney to effectuate the sale.
What is the reason for a relative incapacity to buy?
Public policy prohibits the transactions in view of the fiduciary relationship involved.
What is purchase thru another?
“Through the mediation of another”- this must be proved, that is, that there was really an agreement between the
intermediary and the person disqualified; otherwise, the sale cannot be set aside.
What is purchase by agent himself?
An agent is not allowed, without his principal’s permission, to sell to himself what he has been ordered to buy; or
to buy for himself what he has been ordered to sell. The fiduciary relations between them estop the agent from
asserting a title adverse to that of the principal. And therefore such a sale to himself would be ineffectual and void
because it is expressly prohibited by law.
What is purchase by attorney?
A lawyer is not allowed to purchase the property of his client which is in litigation. To do otherwise would be a
breach of pre7ofessional conduct and would constitute malpractice. But assigning the amount of the judgment by client to
his attorney, who did not take any part in the case where said judgment was rendered is valid.
Meaning of “Any others specially disqualified by law”
This refers to those prohibited by reason of the fiduciary relationship involved. This is so by the principle of
“ejusdem generis”. While aliens cannot buy land because of the Constitution, they do not fall under the phrase “
any others specially disqualified by law”.
What is the status of sale under Art. 1491?
Generally, sales entered into in disregard of the prohibition under this article are not void but they are merely
voidable.
At a mortgage foreclosure sale carried out as a result of a judicial proceeding, A, attorney for the
mortgage creditor bought the mortgaged real estate. If A had bought the property for himself, is the sale
void or voidable?
The sale is void. This is so, because it is a contract prohibited by law.

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If A had bought the property for his client, did he violate the absolute terms of Art.1491 of NCC?
If A bought the property for his client, there would be no violation of the prohibition stated in Art. 1491 because
then there would be no breach of trust or confidence in such a case. He would be merely acting as agent of his
client; and under the law, such client is not prohibited from buying the property.
Suppose that a client executed a deed of assignment of the property which was the object of litigation in
favor of his lawyer who handled his case in said litigation, may such deed of assignment be ratified?
The nullity of such prohibited contract is definite and permanent and cannot be cured by ratification. In this
aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs
from the first thee cases of guardians, agents and administrators, as to whose transactions, it has been opined that
they may be ratified by means of and in the form of a new contract, in which case its validity shall be determined
only by the circumstances at the time of the execution of the contract.
Republic v Court of Appeals
L-59447, Dec. 27, 1982
The Iglesia ni Kristo, a corporation sole, is not a natural person and has no nationality, cannot acquire alienable
lands of the public domain, and cannot therefore register the same in its name under an Original Certificate of
Title. It may, however, get a Transfer Certificate of Title since the land covered by this is no longer “public land”.
The INK should be allowed because the true owners are natural persons.
Maharlika Publishing Corp v. Tagle
GR 65594, July 9, 1986
The wife of the Chief of the Retirement Division of the GSIS is prohibited from bidding for the purchase of land
foreclosed by the GSIS. The sale to her of such property, after a public bidding is void.
What is the Applicability of Relative Incapacity to Legal Redemption, Compromises and Renunciation?
If a ward’s property is sold, the guardian, even if he be an adjacent owner, and even if all the other requisites for
legal redemption are present, cannot exercise the right of legal redemption.
What is Cross reference?
Refer to the following articles:
a. Legal redemption (Art. 1619, NCC);

b. Compromises (Art. 2028, NCC);
c. Renunciation (Arts. 6 and 1270, NCC).
EFFECTS OF THE CONTRACT WHEN THE

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THING SOLD HAS BEEN LOST
What is the effect of Loss of Object before sale?
This refers to a case of loss of the object even before the perfection of the contract. It is evident that there would be
no cause or consideration; hence, the contract is void. Observe that it is the seller here who naturally will have to
bear the loss.
Give an illustration.
I sold to Maria my house in Baguio which, unknown to both of us, had been completely destroyed last night. The
sale is null and void. There is, thus, no need of annulling the contract because there is nothing that has to be
annulled.
Distinguish Complete Loss from Partial Loss.
Note the difference in the rules –
a. When the object has been COMPLETELY LOST;

b. When the object has been PARTLY or PARTIALLY LOST;
What are the available remedies in the preceding problem?
a. Withdrawal (or rescission);

b. Specific performance as to remainder by payment of proportional price.
What are the remedies in case of Loss of Specific Goods?
The remedies are:
a. Cancellation (avoidance);
b. Or Specific performance as to the remaining existing goods (if the sale was divisible).
OBLIGATIONS OF THE VENDOR
Articles 1495 -1581
What are the obligations of the vendor?
The following are the obligations of the vendor:
a. To transfer ownership (cannot be waived)

b. To deliver (cannot be waived)
c. To warrant the object sold (this can be waived or modified since the warranty is not an essential element of the
contract of sale)
d. To preserve the thing from perfection to delivery, otherwise he can be held liable for damages (Art. 1163, NCC).

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What are the effects of failure to deliver on time?
The effects of failure to deliver on time are:
a. If the seller promised to deliver at a stipulated period, and such period is of the essence of the contract, but did not
comply with his obligation on time, he has no right to demand payment of the price. As a matter of fact, the vendee-
buyer may ask for the rescission or resolution of the sale.
b. If failure by seller to deliver on time is not due to his fault, as when it was the buyer who failed to supply the necessary
credit for the transportation of the goods, delay on the part of the seller may be said to be sufficiently excused.
What is the effect of non- delivery?
If the seller fails to deliver, and the buyer has no fault, the latter may ask for the resolution or rescission of the
contract.
What is the duty to deliver at execution sales?
When the property is sold at an execution sale, the judgment debtor is not required to deliver the property sold
right away.
What is the reason behind?
The reason is because of the redemption period. The judgment debtor has a period of one year within which to
redeem the property. In the meantime, the buyer should not take actual possession of the property. If he does so,
an action of forcible entry may be brought against him.
What is the remedy of the judgment debtor if the buyer takes actual possession of the property within the
redemption period?
The judgment debtor would be entitled to get damages as well as possession of the property, unless the period of
redemption has already expired , in which case he can only get damages.
When does the period of redemption commence?
The period of redemption commences to run not from the date of the auction or tax sale but from the day the sale
was registered in the office of the Register of Deed, so that the delinquent registered owner or third parties
interested in the redemption may know that the delinquent property has been sold.
How is ownership transferred?
As a rule, in the absence of agreement, ownership is not transferred, even if sold, unless there has been a delivery.
A sold his piano to B, who immediately paid the price. Because the piano was at the repair shop at the
time the contract was perfected, no delivery was made. Before delivery could be made, C, a creditor of A,
who has filed a suit against him, attached the piano. What right has B over the piano?

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The piano not having been delivered to him by A, B has only a personal right to demand its delivery – for it is
generally only delivery that transfers the real right of ownership.
In the preceding problem, may B oppose the attachment levied by C?
Not having any right or ownership over the piano, B may not legally oppose the attachment levied thereon by C.
What is the effect of delivery to buyer (Who used another money)?
In general, delivery of the property to a person who has purchased the property in his own name will give title to
said purchaser, and not to the owner of the money used.
What is the effect if ownership is not transferred despite delivery?
The delivery of the sugar to the warehouse of the buyer transfers ownership provided that the sale had already
been perfected but ownership in not transferred, although there has been perfection and delivery, if it was
intended that no such transfer of ownership will take place until full payment of the price.
What is the meaning of tradition?
Tradition, or delivery, is a mode of acquiring ownership, as a consequence of certain contracts such as sale, by
virtue of which, actually or constructively, the object is placed in the control and possession of the vendee.
Albert v. University Publishing Co.
L-9300, Sept. 17, 1958
FACTS: The Plaintiff, author of a text in Criminal Law, promised to deliver the manuscript of his book to the
defendant, his publisher, on or before Dec. 31, 1948. On Dec 16, 1948, plaintiff wrote a letter to the company
stating that the manuscript was already at its disposal, and ready for printing should the company desire to
publish it the next month; that he was however keeping the manuscript in his office because of fear of loss,
destruction, or copying by others, and because he desired to add new decisions of the Supreme Court that might
be published from time to time before the manuscript would be actually sent to the printer. He also stated,
however, that if the company insisted on having the manuscript right away, it should let him know because he
would then actually deliver it immediately.
ISSUE: Was there already delivery?
HELD: Yes, for the above-mentioned facts constitute a delivery of the manuscript. Delivery indeed does not
necessarily mean physical or material delivery. It may be constructive, as when it is placed at the disposal of the
other.

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Roque v. Lapuz
L-32811, March 31, 1980
The fact that a formal deed of conveyance was not made indicates very strongly that the parties did not intend to
immediately transfer the ownership. What they intended was to transfer ownership only after full payment of the
price.
What are the different kinds of delivery or tradition?
The different kinds of delivery are:
a. Actual or real
b. Legal formalities
1. Legal formalities
2. Symbolical tradition or traditio simbolica
3. Traditio longa manu
4. Traditio brevi manu
5. Traditio constitutum possessorium
c. Quasi-tradition
What is an example of Symbolical tradition or traditio simbolica?
An example is the delivery of the key of the place where the movable sold is being kept.
What is Traditio longa manu?
This is by mere consent or agreement that if the movable sold cannot yet be transferred to the possession of the
buyer at the time of the sale.
What is Traditio brevi manu?
If the buyer had already the possession of the object even before the purchase, as w en the tenant of the car
buys the car, that is, his possession as an owner.
What is Traditio constitutum possessorium?
This is the opposite of tradition brevi manu. The possession as owner has changed, for example, to possession as a
lessee.
What is an example of traditio constitutum possessorium?
I sold my car but continued to possess it as a lessee of the purchaser.

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What is Quasi-tradition?
It is the delivery of rights, credits or incorporeal property made by:
a. Placing titles of ownership in the hands of a lawyer;

b. Or allowing the buyer to make use of the rights.
Vitorias v. Leuenberger and CA
GR 31189, March 31, 1987
Where there is no express provision that title shall not pass until payment of the price and the thing sold has been
delivered, title passes from the moment the thing sold is placed in the possession and control of the buyer.
Delivery produces its natural effects in law, the principal and most important of which being the conveyance of
ownership without prejudice to the right of the vendor to claim payment of the price.
What is the effect of sale that is made through a public instrument?
When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the
thin which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.
What is constructive delivery?
With regard to movable property, its delivery may also be made by the delivery of the keys of the place or
depository where it is stored or kept.
What are the two kinds of constructive delivery?
The two kinds of constructive delivery are:
a. Legal formalities – This applies to real and personal property since the law does not distinguish.
b. Tradition simbolica
Power Commercial & Industrial Corp v CA
Spouses Reynaldo & Angelito R Quimbao, and PNB
GR 119745, June 20, 1997
84 SCAD 67
Symbolic delivery, as species of constructive delivery, effects the transfer of ownership thru the execution of a
public document. Its efficacy can, however, be prevented if the vendor does not possess control over the thing
sold, in which case this legal fiction must yield to reality.

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The key word is control, not possession of the land.
In constructive delivery, what are the three requisites in order that ownership may be transmitted?
1. The seller must have control over the thing; otherwise how can he put another in control?
2. The buyer must be put under control
3. There must be the intention to deliver the thing for purposes of ownership( not, for example, of merely allowing the
ownership or examination of the keys, nor for the purpose of having said keys repaired).
What are the rules on Constructive Delivery?
a. If a seller has no actual possession, he cannot transfer ownership by constructive delivery. The reason is that in every
kind of delivery, the transferee should have control, but here control cannot be had since it is in the possession of
another.
b. There can be no constructive delivery by means of a public instrument if there is a stipulation to that effect. Hence the
Supreme Court has held that if there is a clause to the effect that the buyer “will take possession after four months,” at
the end of 4 months it cannot be said that there is an automatic delivery. At said time, there must still be a delivery.
The same is true in a case of a sale by installment, where it is stipulated that title should not be transferred till after the
payment of that last installment; or where the vendor reserves the right to use and enjoy their property until the
gathering of the crops still growing.
c. The Civil Code does not provide that the execution of the deed is a conclusive presumption of the delivery of
possession. What it says is that the execution thereof shall be equivalent to delivery which means that the disputable
presumption established can be rebutted by clear and convincing evidence, such as evidence of the fact that the buyer
did not really obtain the material possession of the building. Hence, it may be said that the execution of the contract is
only presumptive delivery.
What is the effect of non-payment of the price?
Execution of the deed of sale, in the absence of any defect, transfers delivery, even if the selling price, in whole or
in part has not yet been paid, for it is not payment that transfers ownership.
Puatu v Mendoza and David
64 Phil. 457
FACTS: Puatu sold a parcel of land to Mendoza for P39,000 in public instrument. The amount of P14,200 was paid,
leaving a balance of P24,800. The land was mortgaged to Puatu as security for the balance. Puatu sued for the balance.
Mendoza claimed that the sale was not absolute since not all the purchase price has been paid and that therefore he should
be refunded what he had already paid.
HELD: The sale was consummated and absolute, and the defendant must now pay the balance. The plaintiff has done all
he is required to do in the contract of sale. The land has already been delivered by the execution of the public instrument.
The buyer must now comply with his obligations.
What does delivery thru execution of a quedan mean?

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If the parties in a sale intended that the copra sold should be placed then and there under the control of the buyer
the issuance of a quedan, delivery is effected upon the execution of thje quedan, and the subsequent loss of the
thing sold should be borne by the purchaser.
A sold a piano to B by private instrument for P500,000. Who had ownership of the piano at the moment
next after B had paid the P500,000 to A? Explain.
At the moment next after B had paid the P500,000 to A, ownership over the piano still resided in A, the execution
of the private instrument not being a mode of transferring ownership. Payment of the price without tradition or
delivery is not a mode of acquiring ownership over the piano.
A person bought in Iloilo a tractor for a certain price. It was agreed that delivery of the tractor should be
made within a certain time at the warehouse of the purchaser in Manila, and the balance of the price
should be paid at the moment of delivery. While enroute to Manila, the tractor was delivered by the
vendor to a third person to secure a loan obtained by him for his personal convenience. Do you think that
the purchaser can recover the tractor from the third person? Why?
No, because no delivery was ever made to the buyer, hence he never became the owner of the tractor. Not being
the owner he had no real right over the property, so he cannot bring an action to recover if from an individual in
lawful possession of the tractor.
If the thing sold cannot be transferred to the possession of the vendee at the time of the sale, what is the
remedy?
The delivery of movable property may likewise be made by the mere consent or agreement of the contracting
parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter
already had it in his possession for any other reason.
What is the basis of traditio constitutum possessorium?
The basis of is traditio constitutum possessorium consent.
What is the effect if the seller continues to occupy the land as tenant?
Where a seller continues to occupy the land as tenant, the possession, by fiction of law, is deemed to be
constituted in the buyer.
How are incorporeal properties delivered?
The incorporeal properties are delivered by:
1. Constructive tradition- execution of public instrument

2. Quasi-tradition – placing of titles of ownership in the possession of the buyer, or the use by the buyer of his rights,
with the seller’s consent.

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What is the effect of delivery of land title deeds?
The delivery of land title deeds is equivalent to a delivery of the property itself.
What is transaction “on sale or return”?
When goods are delivered to the buyer "on sale or return" to give the buyer an option to return the goods instead
of paying the price, the ownership passes to the buyer of delivery, but he may revest the ownership in the seller by
returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a
reasonable time.
What kind of sale is the above-stated problem?
This is a sale that depends on the discretion of the buyer; it is a sale with a resolutory condition.
What are transaction “on approval or on trial or satisfaction”?
When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the
ownership therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time
has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
What kind of sale is the above-stated problem?
This is a sale really dependent on the quality of the goods; it is a sale with suspensive condition. Here, the buyer
may in time become the owner under the conditions specified in the law; otherwise, he seller is still the owner.
(A) S delivered to b a refrigerator “on sale or return”. Did B become owner upon delivery?
Yes, in view of the delivery. Of course, B may revest the ownership in S by returning or tendering the refrigerator
to him within the time fixed in the contract; or if no time has been fixed, within a reasonable time.
In the preceding problem, can B return the goods even if he finds nothing wrong with the quality of the
goods?
Yes, for discretion here is with the buyer.

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In letter (A), if B does not return the refrigerator in due time, what will be the consequences of his
inaction?
The sale will be considered absolute, and the price may be recovered since after all, delivery had been made.
In letter (A), if B had not yet returned the goods, does he have to pay for them even if the refrigerator has
been destroyed by a fortuitous event?
Yes, for ownership has been transferred to him, and being the owner, he bears the loss.
In a case of “on sale or return”, does the buyer has the right to return if the thing is abused?
In case of “on sale or return”, the buyer has no right to return if he has materially abused the condition of the
thing. The sale in this case becomes absolute.
What about if the objects deteriorate without the fault of the buyer?
In case of “on sale or return”, if the objects deteriorate without the fault of the buyer, the buyer can still return,
provided the reasonable period for returning has not yet lapsed.
Give the difference between a contract “on sale or return” and a delivery of property with option to
purchase.
In the first, ownership is transferred at once; in the second, there is no transfer of ownership till the owner agrees
to buy.
X, the owner of a certain jewelry, entrust them to Y for sale or return of the jewelry upon a specified
period of time. Y sells the jewelry to Z, but retains the price. Can X obtain possession of the jewelry from
Z? Why?
This problem calls for a distinction in view of the use of the words “ for sale or return,” a phrase which has
technical signification in the law of SALES although of course the phrase used in SALEs in “on sale or return” but
there’s no such technical meaning in the law of AGENCY.
What are some rules on Sale “on approval or trial or satisfaction”
Some of the rules are:
1. The risk of loss remains with seller, although there has been delivery, until the sale becomes absolute.
2. Risk of loss remains with seller although there has been delivery, if the sale has not yet become absolute.
3. Buyer must give goods a trial except when it is evident that it cannot perform the work intended.
4. Period within which buyer must signify his acceptance commences to run only when all the parts essential for the
operation of the object have been delivered.

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5. If it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid, but the third person
must be in good faith. If refusal to accept is not justified, seller may still sue.
6. Generally, the sale and delivery to a buyer who is an expert on the object purchased is NOT obviously a sale on
approval, trial, or satisfaction.
What is the exception in the second paragraph of the above-mentioned rules?
The exceptions are:
1. If buyer is at fault;
2. If buyer had expressly agreed to bear loss.
What is reservation of ownership despite delivery?
This applies only to the sale of “specific goods. Although delivery has been made, seller may reserve ownership till
certain conditions are fulfilled. Of course, the most important controlling element is the intention.
Chrysler Phil. Corp. v Court of Appeals
L-55684, Dec. 19, 1984
As a general rule, the seller, as the owner, bears the risk of loss in line with the principle of “res perit domino”
(owner bears the loss).
What are the instances when seller is still owner despite delivery?
The instances are:
1. Express stipulation.
2. If under the bill of lading the goods are deliverable to seller or agent or their order.
3. If bill of lading, although stating that the goods are to be delivered to buyer or his agent, is kept by the seller of his
agent.
4. When the buyer although the goods are deliverable to order of buyer, and although the bill of lading is given to him,
does not honor the bill of exchange sent along with it. But of course innocent third parties (innocent holders and
purchasers for value) should not be adversely affected.
What is an example?
S sold B a radio; the radio was shipped on board a carrier. The bill of lading stated that the radio is deliverable to
the order of B. The bill of lading was sent to B, accompanied by a bill of exchange which B was supposed to honor.
If B does not honor the bill of exchange, but wrongfully retains the bill of lading, ownership remains with the
seller. If B sells the bill of lading to X, X can obtain ownership of the goods if he is an innocent purchaser.
Who bears the risk of loss of specific goods?
The risk of loss of specific goods shall be borne by the seller.

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A agreed to sell to B his cat. Before the actual sale takes place, the cat dies thru no fault of A. Is A liable to
B for the price?
No, the destruction of the cat before ownership passed excuses performance. If the dog had died after ownership
had passed, the loss would be B’s even though there was no delivery yet.
A sold to B a cat for 200.00. It was agreed that B will pay for and get the animal the next day. Before B
can pay the purchase price, the dog dies through fortuitous event. Must B still pay for the animal?
Yes, since he was already the owner even if there was delivery yet. Under American law, there is no need for
delivery to transfer ownership insofar as specific goods are concerned if the contract is one of sale, and not a
contract to sell.
Who between the vendor and the vendee must bear the risk of loss after the contract of sale has been
perfected, but before the thing sold has been delivered?
If the object of a contract is lost before delivery, it is the vendor who is still the owner and must bear the loss and
not the vendee. This is in conformity with the principle of res perit domini. The owner of the thing must bear the
risk of loss.
What did the buyer acquires after the seller sold the thing to the former?
As a general rule, the buyer acquires only the rights which would the seller have over the thing sold to him. This
rule was based on the principle “nemo dat quod non habet”.
Are there any exceptions to the rule?
Yes, as when, the owner of the goods by his conduct precluded from denying the seller’s authority and under the
second paragraph (1, 2, 3) of art. 1505.
A sells a parcel of land to B with the consent of the owner C. Can C declare the sale to be null and void
because A has no authority to sell such property?
No, C is stopped from denying A’s authority to sell.
A bought a pair of shoes from a shoe store and repair shop. It was later discovered, however, that the
shoes did not did not belong to the store but to a customer who had left it there for repair. Did A acquire
good title to the shoes?
Yes, although the store was not the owner of the shoes. The shoes were purchased at a merchant’s store. A
contrary rule would retard commerce.
B, in good faith, has purchase a diamond ring from C, his friend. C gave B a bill of sale. Later on, A
identified the ring as one she had lost about a year ago. There is no question as to the veracity of O’s

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claim. In the meantime, C has disappeared. What advice would you give B in reference to O’s demand
that the ring be returned to him?
I would advise B to return the ring to O, and not expect to be reimbursed by O the amount he had paid C. the law
says that one who has lost any movable may recover it from the person in possession of the same, without such
possessor being entitled to reimbursement, except if the acquisition in good faith had been at the public sale or
auction, or at a merchant’s store, fair, or market.
What is a store?
It is the place where goods are kept and sold by one engaged in buying and selling.
A bought a car from B, an insane person, and in turn sold the car to C who is in good faith. Was the sale
valid?
Yes, the sale is valid. C becomes the owner of the car after it has been delivered to him. However, considering that
the contract between A and B is concerned, the contract between them is considered as voidable contract. Hence,
the contract between A and C can only be valid before the original contract has been annulled.
Can a buyer acquire title from a theft, a person who stole and then sold the goods to him?
No, because the owner has been unlawfully deprived of the thing. Hence, the true owner can get it back without
reimbursement.
How about if the buyer acquired the stolen automobile in good faith at a public auction? Does he have a
legal title over it?
No, under the law, even if he acquired it at a public auction in good faith, he acquires nothing over it. The true
owner of the thing can get it back however the buyer is entitled for reimbursement.
What are the documents included by art. 1507?
The documents referred to by art. 1507 are a) any bill of lading b) dock warrant c) quedan d) warehouse receipt or
order e) any other document used as proof of possession or as authority to transfer the goods represented by the
document.
When are the documents considered to be negotiable?
The documents are negotiable if the goods are deliverable to bearer or to the order of a certain person.
What is the effect of an error or the incorrectness in the description of the goods?
A mere typographical error or grammatical error does not affect the negotiability of the document, for what
should be considered is the intent. And also a mere incorrectness in the description of the goods will not destroy
the negotiability of the document

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How negotiable document of title is negotiated?
It is negotiated by mere delivery or endorsement plus delivery.
When a mere delivery is sufficient?
A mere delivery is sufficient if deliverable to bearer or if deliverable to the order of a certain person and that
person has indorse it in blank by putting his name at the back of the document and by signing his name at the
back of the document.
What is the effect of indorsement and delivery?
Indorsement and delivery of a negotiable quedan ipso facto transfer possession and ownership of the property
referred to therein.
What is the effect of undated indorsement?
It is not necessary to date an endorsement because no additional protection is given thereby to businessman. As a
matter of fact, to require dating would be to impede business transactions.
The document says “deliver to the order of Mr. X.” In order to negotiate it, what would be the proper way
of doing it?
Mr. X must sign his name at the back and then deliver. Mere delivery without signing is not sufficient.
What is a non-negotiable instrument?
A non-negotiable instrument is an instrument which is not negotiable, an instrument which does not meet the
requirements laid down to qualify an instrument as a negotiable one, or an instrument which in its inception was
negotiable but has lost its negotiability.
A negotiable document of title was mark “non-negotiable” by a warehouseman. Is it still negotiable?
Yes, insofar as the various holders of the note are concerned, the note is still negotiable. Regarding the intent and
the liability of the maker, this article does not deal with the same.
What is the effect of delivery when the document cannot be negotiated by mere delivery?
The effect is that a non-negotiable document cannot be negotiated and the indorsement of such document gives
the transferee no additional right.
A document of title was non-negotiable. Mat it still be given or assigned to another?
Yes, but this does not have the effect of a negotiation. It is a mere transfer or assignment.
A document of title contained the words “deliver to Mr. X.” May it be negotiated?

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No, but it may be transferred.
Suppose it is indorsed by Mr. X?
The indorsement is useless and does not give the indorse any additional right. There is in this case only a
transferor assignment.
What are the requirements so that a document is considered negotiable?
An instrument to be negotiable must conform to the following requirements:

a) It must be in writing and signed by the maker and drawer;
b) Must contain an unconditional promise or order to pay a sum certain in money;
c) Must be payable in demand or at a fixed or determinable future time;
d) Must be payable to order or bearer; and
e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.
Who may negotiate negotiable document of title?
The owner of the document may negotiate or by any person to whom the possession or custody of the document
has been entrusted by the owner .
A document of title contained the following words. “deliver to the order of X or to the order of the person
to whom this document has been entrusted by X.” Later, X entrusted the document to Y. May Y negotiate
the same by indorsement?
Yes, (see art.1512, No. 2, 1st paragraph )
Who bears loss in case of unauthorized negotiation?
If the owner of negotiable document of title entrusts the document to a friend for deposit, but the friend betrays
the trust and negotiates the document by delivering it to another in good faith, the said owner cannot impugn the
validity of the negotiation. As between the two innocents persons, he who made the loss possible should bear the
loss, without prejudice to his right to recover from the wrongdoer.
What are the rights which are acquired by a person to whom a negotiable document of title has been duly
negotiated?
A person to whom a negotiable document of title has been duly negotiated acquires thereby:
a) Such title to the goods as the person negotiating the document to him had or had the ability to convey to the
purchaser in good faith for value and also such title to he goods as the person to whose order the goods were to be
delivered by the terms of the document had or had the ability to convey to purchaser in good faith for value; and
b) Those mentioned in no.2 of article 1513.
What constitute a holder in due course?

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A holder in due course is a holder who has taken the instrument under the following conditions:
a) That it is complete and regular upon its face;
b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored,
if such was the fact;
c) That he took it in good faith and for value;
d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument, or defect in title of
the person negotiating it.
What are the rights of a person to whom document has been transferred?
The rights of a person to whom a negotiable document of title has been transferred, or of the transferee of a non-
negotiable document are as follows:
a) The title to the goods as against the transferor;
b) The right to notify the bailee of the transfer thereof; and
c) The right to acquire the obligation of the bailee to hold the goods for him.
Are these rights of a transferee absolute?
No, the right if the transferee is not absolute as it is subject to the terms of any agreement with the transferor. He
merely steps into the shoes of the transferor.
What is the effect of attachment of goods covered by non-negotiable document?
If it is a non-negotiable document of title, it does not effect the delivery of the goods covered by it. Accordingly,
before notification, the bailee is not bound to the transferee whose right may defeated by a levy of an attachment
or execution upon the goods by the creditor of the transferor or by a notification to such bailee of the subsequent
sale of the goods.
What is the effect of attachment of goods covered by negotiable document?
If the document is negotiable, the goods cannot be attached or be levied under an execution unless the documents
be first surrender to the bailee of its negotiation enjoined.
What is the right of a transferee?
A mere transferee does not acquire directly the obligation of the bailee to hold for him.
What should the transferee must do in order to acquire direct obligation?
The transferee, in order to acquire direct obligation, he must notify the bailee.
When shall a negotiation be made?
A negotiation shall take effect as of the time when the indorsement is actually made.
What is the rule where the document is subsequently indorsed?

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For the purpose of determining whether the transferee is a purchaser for value in good faith without notice, the
negotiation shall take effect as of the time when the indorsement is actually made, not at the time the document is
delivered.
What are the rights of a person to whom an order document of title has been delivered which is not
properly negotiated by mere delivery?
The following are his or her rights:

a) The rights to the goods as against the transferor; and
b) The right to compel the transferor to indorse the document.
Are these rights absolute?
No, if the intention of the parties is that the document should be merely transferred, the transferee has no right to
require the transferor to indorse the document.
What are the implied warranties of the person who negotiates a document of title by indorsement or
delivery?
A person who for value negotiates or transfers a document of title by indorsing or delivery, including one who assigns
for value a claim secured by a document of title unless a contract intention appears, warrants:
a) That the document is genuine;
b) That he has legal right to negotiate or transfer it;
c) That he has knowledge of no fact which would impair its validity;
d) That he has a right to transfer the title if the goods and that the goods are merchantable or fit to a particular
purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer
without a document of title of the goods represented thereby.
What are the liability of a person negotiating or transferring a document which he knows that the
document was a forgery or he had stolen it, or he had the knowledge that that the document was invalid
for want of consideration, or the goods has been damaged?
The liability of that person is limited only to a violation of the four warranties set forth in Article 1516. One who
assigns for value a claim secured by a document of title is also liable for violation of any of the for warranties.
What is the effect of indorsee’s knowledge of fraud indorsement?
If the indorsee knows that any of the former indorsements is a forgery, he does not acquire a valid title to the
document.
What is the rule for failure of the bailee to comply with his obligation?
The bailee upon failure to comply with their obligations does not make the present indorsers liable because
indorser warrants only the things mentioned in article 1516.
When negotiation is not impaired by fraud, mistake, duress, lost, theft, accident, or conversion?

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A negotiable document maybe negotiated by any person in possession of the same , however such possession may
have been acquired. In other words, it may be negotiated even by theft or finder and the holder thereof would
acquire a good title thereof if he paid the value therefor in good faith without notice of the seller’s defect of title.
A document of title contained the words “deliver to bearer.” The document was stolen by T.J
subsequently indorse it to C.J, a purchaser in good faith. Is the negotiation to C.J valid?
Yes, notwithstanding the theft by T.J, C.J is a purchaser in good for value in good faith; that is, C.J did not know
that the document had been stolen by T.J.
Was the theft of the goods would invalidate the transaction?
No, under article 1518, the rule speaks of a theft document and not the theft of goods itself.
What is the rule with regards to the attachment or levy upon the goods covered by negotiable document
in possession of the bailee?
The rule is that, while the goods are in the possession of the bailee, the goods cannot be attached or levied under an
execution unless:
a) The document must be first surrender; or
b) Its negotiation is enjoined; or
c) The document is impounded by the court.
What is the effect if the depositor is not the owner?
The provisions of article 1519 do not apply if the person depositing is not the owner of the goods or one who has
no right to convey the title to the goods binding the owner. This prohibition is for the protecti0n of the bailee since
he could be made liable to a subsequent purchaser for value in good faith.
Can they compel the bailee to surrender the goods?
No, the bailee cannot be compelled to surrender the goods except:

a) If the document is surrendered to him;
b) Or if the document is impounded by the court.
What is the right given to a creditor whose debtor is the owner of a negotiable document of title?
Under Article 1520 of the Civil Code, a creditor whose debtor is the owner of a negotiable document of
title shall be entitled to such aid from the courts of appropriate jurisdiction by injunction and otherwise in
attaching document in satisfying the claim by means thereof as is allowed at law or in equity in regard to property
which cannot readily be attached or levied upon by ordinary legal process.
May the document of title of the debtor in regard to property which cannot readily be attached or levied
upon by ordinary legal process, nevertheless, be the subject of an injunction or attachment?
Yes, provided the debtor is the owner of a negotiable document of title. In this case, the creditor shall be
entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such
document or in satisfying the claim by means thereof as is allowed at law or in equity. (Article 1520)
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X is the creditor of Y, the owner of a negotiable document of title covering goods delivered to a bailee by
the latter. Generally there can be no attachment or levy over the goods except in those instances provided
under Article 1519 of the Civil Code. In the event that attachment or levy is allowed, what is the protection
given to X as the creditor of Y?
A creditor of the owner of a negotiable document of title, like X, has the protection provided under Article
1520 of the Civil Code. X shall be entitled to such aid from courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity.
X is the creditor of Y, the owner of a document of title covering goods subject of attachment or levy. X is
now claiming the protection of a creditor under Article 1520 of the Civil Code. Is X correct?
No, X is not correct. The protection granted under Article 1520 applies only to the creditor of the owner of
a negotiable document of title covering goods subject of attachment or levy under Article 1519.
What is the requirement so that the creditor of the owner of a document of title covering goods subject of
attachment or levy is protected under Article 1520 of the Civil Code?
It is required that the debtor is the owner of a negotiable document of title.
Angelina lent money to Brad, the owner of a negotiable document of title covering goods delivered to a
bailee by the latter. Generally there can be no attachment or levy over the goods except in those instances
provided under Article 1519 of the Civil Code. If the bailee is forced to surrender the goods, what is the
remedy available to Angelina.
A creditor of the owner of a negotiable document of title, like X, has the protection provided under Article
1520 of the Civil Code. X shall be entitled to such aid from courts of appropriate jurisdiction by injunction and
otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity.
Angelina is the creditor of Brad, the owner of a document of title covering goods which are now being
surrendered to by Jennifer, the depositary, because the document of title has been impounded by the
court. Angelina is now claiming the protection of a creditor under Article 1520 of the Civil Code. Is
Angelina correct?
No, Angelina is not correct. The protection granted under Article 1520 applies only to the creditor of the
owner of a negotiable document of title covering goods subject of attachment or levy under Article 1519. The
given problem does not mention that the document of title covering the goods is negotiable
What is the condition so that the creditor of the owner of a document of title covering goods subject of
attachment or levy may avail of the protection of injunction from the courts?
Under Article 1520 of the Civil Code, it is required that the debtor is the owner of a negotiable document
of title.
If the debtor of a creditor is the owner of a negotiable document of title, what are his remedies under the
law if the goods covered by the document is being subjected to attachment?

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Under Article 1520 of the Civil Code, a creditor whose debtor is the owner of a negotiable document of
title shall be entitled to such aid from the courts of appropriate jurisdiction by injunction and otherwise in
attaching document in satisfying the claim by means thereof as is allowed at law or in equity in regard to property
which cannot readily be attached or levied upon by ordinary legal process.
May the document of title of the debtor in regard to property which cannot readily be attached or levied
upon by ordinary legal process, nevertheless, be the subject of an injunction?
Yes, provided the debtor is the owner of a negotiable document of title. In this case, the creditor shall be
entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such
document or in satisfying the claim by means thereof as is allowed at law or in equity. (Article 1520)
What will govern as to the place of delivery of the goods subject of a contract of sale?
Under Article 1521 of the Civil, it is the agreement of the parties, express or implied, which shall govern
the place of delivery of the goods. In the absence of an agreement, it shall be based on the usage of trade. If there
is no such usage, the buyer must get them at the seller’s business of place or residence.
Is there an exception to the rule that in the absence of an agreement, express or implied, as well as usage
of trade, the buyer must get the goods at the seller’s business of place or residence?
Yes, if the goods that are the subject of sale are specific and the parties know when the contract was
made that such goods were in some other place, then the delivery shall be in the place where the specific goods are
found. (Art 1521)
What prevails in case there is a disagreement as to the place of delivery of the goods, the agreement of
the parties or the usage of trade or business?
Based on the Obligatory Force of Contracts, the agreement of the parties, whether express or implied, as
to the place of delivery of the goods subject of the contract of sale shall prevail over the usage of trade or business.
(Art 1521)
Will there be sufficient delivery if the goods were delivered at a place near the original location agreed
upon by the parties?
Generally, there will be no sufficient delivery in this case. Article 1521 provides that what governs is the
agreement between the parties, whether express or implied as to the place of delivery. However, the Supreme
Court has ruled in one case that there is sufficient delivery when a fortuitous event prevents delivery at the
actual place agreed upon, forcing a delivery at a place near the original one. (Bean, Admr. v. The Cadwallader Co.,
10 Phil. 606)
If delivery was made at a different place agreed upon and the buyer accepted the goods without
complaint, can the buyer later on claim that there no “delivery” contemplated under the law?
No, the buyer cannot later on claim breach of the obligation under the contract of sale. In Sullivan v. Gird,
1921, 22 Ariz. 332, it was held that there is sufficient delivery when the original place is changed, but the buyer
accepted the goods at a different place without complaint so long as the seller was in good faith.

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If the contract of sale does not state the time when the seller shall send the goods to the buyer, when
must the seller send said goods?
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending
them is fixed, the seller is bound to send them within a reasonable time. (Art. 1521, par 2)
What are the circumstances that may be considered when no time has been fixed for the delivery of the
goods subject of a contract of sale?
The seller must send the goods “within a reasonable time” considering the following factors: 1) character
of the goods; 2) purpose intended; 3) ability of seller to produce the goods; 4) transportation facilities; 5) distance
thru which the goods must be carried; and 6) usual course of business in that particular trade. (Smith, Bell and Co.
v. Sotelo Matti, 44 Phil. 874).
What is the effect on the seller’s obligation to deliver the goods if the same are in the hands of a third
person?
Article 1521 of the Civil Code provides, “where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person
acknowledges to buyer that he holds the goods on the buyer’s behalf.” However, this rule applies only to sale of
goods already existing at the time of the sale, but in the hands of a third party, not when the goods are still to be
manufactured.
Who shall shoulder the expenses for putting the goods in a deliverable state?
The seller, unless otherwise agreed, shall shoulder the expenses (Art. 1521, last par.) This rule also applies
even if the buyer has the duty to take delivery.
In a contract of sale, when must demand or tender of delivery be made?
In the absence of agreement, demand or tender of delivery shall be made at a reasonable hour.
What may the buyer do if the seller delivers a quantity of goods less than what was contracted?
Under Art 1522, par. 1 of the Civil Code, the buyer may reject the goods. However, the buyer may also
accept the goods delivered at the contract rate.
If the seller delivers a quantity of goods less than what was contracted and the buyer accepts or retains
such goods knowing that the seller is not going to perform the contract in full, at what rate must the
buyer pay for the goods?
Article 1522 provides that the buyer must pay the goods delivered at the contract rate.
If the seller delivers a quantity of goods less than what was contracted and the buyer has used or
disposed of the goods delivered before knowing that the seller is not going to perform his contract in full,
at what rate must the buyer pay for the goods?
In this case, the buyer shall not be liable for more than the fair value to him of the goods so received. (Art
1522, par. 1, 2nd sentence)
SALES
Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. She sold 5 bottles to her
friends thinking that the others were coming. However, Brad is unable to deliver the remaining 3 bottles.
What price must Angelina pay for the bottles?
Since Angelina has disposed of the goods delivered before he knows that the seller is not going to perform
his contract in full, she shall not be liable for more than the fair value to him of the goods received. (Art 1522, par.
1, 2nd sentence)
What may the buyer do if the seller delivers a quantity of goods larger than what was contracted?
Under Art 1522, par. 2 of the Civil Code, the buyer may accept the goods agreed upon and reject the rest.
However, the buyer may choose to accept all the goods but he must pay for them at the contract rate.
Angelina bought from Brad 500 cans of sardines at Php 12.00 each. 1000 cans were delivered Brad. What
are the rights of Angelina?
Angelina may accept the 500 and return the other 500 cans. She may also choose to accept all but she
must pay for them at the contract price of Php 12.00 per can.
If a buyer agrees to purchase a designated amount but actually orders a lesser amount, can the seller
complain if he decided to deliver the lesser quantity?
No, the seller cannot complain, this is a clear case of a waiver. (Quiroga v. Parsons Phil. 501).
When is there “implied acceptance” of excess goods delivered?
Acceptance, even if not express, is implied when the buyer exercises acts of ownership over the excess
goods.
What may the buyer do if the seller delivers the goods agreed upon mixed with goods of a different
description?
Under Article 1522, par 3, the buyer may accept the goods which are in accordance with the contract and
reject the rest.
When may the buyer reject all the goods delivered in case what was delivered is of larger quantity or of a
different quality?
Under Article 1522, par. 4, the buyer may reject the whole of the goods delivered in these instances if the
subject matter is indivisible.
When is delivery to a carrier considered as delivery to buyer?
Generally, delivery to a carrier is deemed delivery to the buyer if it is the duty of the seller to send the
goods to the buyer. This rule, however to some conditions provided under Article 1523 of the Civil Code.

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Is the seller required to enter into a contract with the carrier on behalf of the buyer to have the effect of
the required delivery?
Article 1523, par 2 of the Civil Code states that if the carrier is not authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of
the goods and the other circumstances of the case.
What is the effect if the seller fails to make the contract with the carrier on behalf of the buyer if the
latter has not authorized said carrier?
The 2nd sentence of Article 1523, par 2 states that if the seller omits to make such contract when required
to do so, and the goods are lost or destroyed in course of transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller responsible in damages.
What is the duty of the seller in case the circumstances of the delivery would usually require the goods to
be insured during their transit?
Article 1523, par 3 states that unless otherwise agreed, where goods are sent by the seller to the buyer
under circumstances in which the seller knows or ought to know that it is usual to insure, the seller must give such
notice to the buyer as may enable him to insure them during their transit.
What are the consequences if the seller fails to notify the buyer of the need to insure the goods during
their transit?
The goods shall be deemed to be at the risk of the seller during such transit. (Art. 1253, par 3)
What are the two kinds of Delivery to Carrier? Explain each.
Delivery to carrier may be: 1) C.I.F. (cost, insurance, freight) where the selling price includes insurance
and freight and shall be shouldered by the seller; or 2) F.O.B. (free on board) where the property passes as soon
as the goods are delivered aboard the carrier and the buyer as the owner of the goods is to bear all expenses after
they are so delivered.
What are the different kinds of F.O.B. sale and what are the consequences of each kind?
The F.O.B. sale may be: 1) f.o.b. at the place of shipment (the buyer must pay the freight); 2) f.o.b.
alongside the vessel (from the moment the goods are brought alongside the vessel, the buyer must pay for the
freight or expenses); or 3) f.o.b. at the place of destination (the seller must pay the freight since the contract
states “free on board till destination”).
What are the obligations of the seller and the buyer in contracts of “c.i.f.” sale? In “f.o.b.” sale?
In “c.i.f.” (cost, insurance, freight) sales of goods, the buyer pays a fixed price, while the seller pays the
insurance and freight up to the place of destination. In other words, the seller is responsible for all expenses, such
as insurance and freight, pays for all charges, such as export taxes and other charges or fees, and be responsible
for the goods up to the point of destination. The buyer, on the other hand, who paid a fixed price, shall accept
delivery of the goods at the point of destination, pays all charges, such as taxes and duties at such point, and be
responsible for the goods once the seller’s responsibility ceases.

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In “f.o.b.” (free on board) sales of goods, the goods are shipped by the seller to a certain point without any
expense to the buyer, but after delivery at such point all subsequent expenses incident to the transportation and
delivery shall be paid by the buyer. Thus, if the sale is “f.o.b.” at the place of shipment, the buyer must pay the
freight, if “f.o.b.” at the place of destination, the seller must pay the freight.
What are the kinds of contract of sale when the seller is obliged to pay the freight when goods are
delivered through a carrier?
The seller is obliged to pay the freight if the sale is either 1) “c.i.f.” sale or 2) “f.o.b.” at the place of
destination.
Angelina in Baguio agrees to ship goods to Brad at Dagupan City, “F.O.B. Dagupan City.” Before the
goods reach Dagupan City, they are destroyed by a fortuitous event. Who bears the loss?
Angelina bears the loss because ownership (title) does not pass till the goods reach Dagupan City. Hence,
the seller bears the loss. If the price has been given him, he must return the same. If no payment has yet been
made, he cannot successfully demand the price from the buyer.
When is the vendor not bound to deliver the goods subject of a Contract of Sale?
Under Article 1524 of the Civil Code, the vendor shall not be bound to deliver the things sold if the vendee
has not paid him the price or if no period for the payment has been fixed in the contract.
If the vendee has not paid the vendor the price, is the latter obliged to deliver the things sold to the
former?
No, the vendor is not bound to deliver the things sold if the vendee has not paid him the price. (Art 1524)
If no period for the payment has been fixed, is the vendor bound to deliver the things sold?
No, the vendor is not bound to deliver the things sold if no period has been fixed for the period of
payment. (Art 1524)
What is the reason why the vendor shall not be bound to deliver the things sold if the vendee has not paid
him the price or if no period for the payment has been fixed in the contract?
The reason is because a sale is a reciprocal contract giving rise to reciprocal obligations.
If a period for the payment has been fixed by the parties, can the seller refuse to deliver the things sold
until the period of payment arrives?
No, the seller must deliver the things sold even if said period has not yet arrived (Florendo v. Foz, 20 Phil.
388). He will then have to wait for the end of the period before he can demand the price, except if the buyer has
lost the benefit of the term (see Article 1198 – instances when the debtor shall lose every right to make use of the
period).
If a period for the payment has been fixed by the parties, can the seller nevertheless refuse to deliver the
things sold until the period of payment arrives?
SALES
Generally, no, the seller must deliver the things sold and wait for the period of payment to arrive.
However, the seller may refuse to deliver the things if the vendee has lost the right to make use of the period and
still refuses to pay (see Arts 1536 and 1198).
If a period for payment has been agreed upon in a contract of sale, the vendor cannot avail of the right
under Article 1524. Is there an exception to this rule such that the vendor can nevertheless refuse to
deliver the things sold until period of payment arrives?
Yes, the exception is provided under Articles 1536 and 1198. The seller may refuse to deliver the things if
the vendee has lost the right to make use of the period and still refuses to pay
On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. No agreement was
made as to the day of payment. Angelina, despite not giving Brad any payment, is asking for the delivery
of the vehicle claiming that Brad is obliged to deliver since the sale was perfected by mere consent. Is
Angelina correct?
No, Angelina is not correct. Under Article 1524 of the Civil Code, the vendor is not bound to deliver the
thing sold if no period has been fixed for the period of payment.
Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. Angelina, despite not giving Brad any
payment, is asking for the delivery of the vehicle claiming that Brad is obliged to deliver even if no
payment has been made yet since the sale was perfected by mere consent. Is Angelina correct?
No, Angelina is not correct. Under Article 1524 of the Civil Code, the vendor is not bound to deliver the
thing sold if the vendee has not paid him the price. Since a sale is a reciprocal contract, the delivery and
payment are reciprocal obligations.
On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. They agreed that
payment shall be made a week later. On December 6, 2010 Angelina, despite not giving Brad any
payment, is asking for the delivery of the vehicle. Brad refused to deliver the car claiming that he is not
bound to deliver the thing sold because no payment has yet been made. Is Brad correct?
No, Brad must deliver the vehicle because Article 1524 of the Civil Code does not apply when a period for
payment has been agreed upon in the contract of sale and said period has not yet arrived (Florendo v. Foz, 20
Phil. 388). He will then have to wait for the end of the period before he can demand the price from Angelina,
except if the latter has lost the benefit of the term (see Article 1198 – instances when the debtor shall lose every
right to make use of the period).
When is the seller deemed to be an “unpaid seller”?
The seller is deemed to be an unpaid seller in the following instances: 1) when the whole price has not
been paid or tendered; and 2) when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has been broken by reason of dishonor of the
instrument, the insolvency of the buyer, or otherwise (Article 1525, 1 st par).
What does the term “seller” in Articles 1525-1535 include?

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The term “seller” includes any person who is in the position of the seller, such an agent of such seller to
whom the bill of lading has been indorsed, or a consignor or agent who has himself, paid, or is directly responsible
for the price (Article 1525, 2nd par).
If only a part of the price has been paid or tendered, is the seller still an “unpaid seller”?
Yes, he is still an unpaid seller. Article 1525 provides that a seller who has not been paid the whole price
is deemed an unpaid seller.
When is the holder of a negotiable instrument deemed an “unpaid seller”?
If the negotiable instrument has been received as conditional payment, and the condition on which it was
received has been broken by reason of dishonor of the instrument, the insolvency of the buyer, or otherwise, the
holder of such negotiable instrument shall be deemed as an unpaid seller.
When is the agent of the seller to whom a bill of lading has been indorsed deemed an “unpaid seller”?
If the bill of lading has been received as conditional payment and the condition on which it was received
has been broken by reason of dishonor of the instrument, the insolvency of the buyer, or otherwise, the agent of
the seller to whom a bill of lading has been indorsed shall be deemed as an unpaid seller.
What is the reason why mere delivery of a negotiable instrument does not extinguish the obligation of the
buyer to pay?
The obligation to pay is not extinguished because the seller may still be an unpaid seller if the
negotiable instrument is dishonored.
What happens if a negotiable instrument that has been received as conditional payment was
subsequently dishonored?
The obligation to pay is not extinguished because the seller becomes an unpaid seller (Article 1525).
If a negotiable instrument has been received as conditional payment and the condition on which it was
received has been broken by reason of the insolvency of the buyer, what happens to the obligation of the
buyer to pay?
The obligation to pay is not extinguished because the seller becomes an unpaid seller (Article 1525).
On December 4, 2010, Angelina agreed to buy the Toyota Innova (ABC 123) of Brad for the price of Php
350,000.00. On the agreed date for payment, Angelina only paid Php 250,000.00. Is Brad deemed an
“unpaid seller” in this case?
Yes, Brad is still an unpaid seller. Article 1525 provides that a seller who has not been paid the whole
price is deemed an unpaid seller. Therefore, unless Brad receives the balance of the purchase price, he is deemed
an unpaid seller.
350,000.00. On the agreed date for payment, Angelina issued a negotiable instrument in favor of Brad as
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payment. However, the negotiable instrument was subsequently dishonored. Is Brad deemed an “unpaid
seller” in this case?
Yes, Brad is an unpaid seller. If a negotiable instrument has been received as conditional payment, and
the condition on which it was received has been broken by reason of dishonor of the instrument, the insolvency of
the buyer, or otherwise, the holder of such negotiable instrument shall be deemed as an unpaid seller.
What are the rights of an unpaid seller if ownership has already passed to the buyer?
Notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of
goods, as such, has the following remedies: 1) possessory lien in the nature of a pledge; 2) right of stoppage
in transitu if the seller has parted with the possession; 3) right or resale; and 4) right to rescind the sale
(Article 1526)
What are the remedies of an unpaid seller if ownership has not yet passed to the buyer?
Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his
other remedies, a right of withholding delivery similar to and co-existent with his rights of lien and stoppage in
transitu where the ownership has passed to the buyer (Art 1526, last paragraph).
When is the right of possessory lien available to an unpaid seller?
The right of possessory lien is available to the unpaid seller when the ownership has already passed to the
buyer but the seller still has possession over the goods.
What is the effect to the possessory lien if the unpaid seller losses possession of the goods?
The possessory lien is lost after the seller loses possession of the goods but his lien (no longer possessory)
as an unpaid seller remains; hence he is still a preferred creditor with respect to the price if the specific goods sold
(Article 2241, no. 3).
When is the right of stoppage in transitu available to an unpaid seller?
The right of stoppage in transitu is available to an unpaid seller if the buyer is insolvent and the seller has
already parted with the possession over the goods subject of the sale (Article 1526, no. 2)
350,000.00. On the agreed date for payment, Angelina only paid Php 250,000.00. Can Brad withhold
delivery of the vehicle?
Yes, Brad is an unpaid seller in this case. Under the second paragraph of Article 1526, an unpaid seller has
the right of withholding the delivery of the goods subject of the sale.
received has been broken by reason of the insolvency of the buyer, may the seller exercise the right of
stoppage in transitu?
The right of stoppage in transitu is available to an unpaid seller if the buyer is insolvent and the seller has
already parted with the possession over the goods subject of the sale (Article 1526, no. 2). In the given problem,
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the seller is deemed an unpaid seller under the provision of Article 1525. Therefore, the remedies under Article
1526 are available to him.
350,000.00. On the agreed date for payment, Angelina only paid Php 250,000.00. Claiming the right of
possessory lien available to an unpaid seller, Brad refuses to deliver the vehicle and retains it while he is
in possession of said car. Is Brad correct?
Yes, Brad is correct. Under Article 1525, he is still an unpaid seller. Article 1526 provides that the right of
possessory lien is available to the unpaid seller when the ownership has already passed to the buyer but the seller
still has possession over the thing sold.
When is the right to retain the goods available to the unpaid seller?
The unpaid seller of goods who is in possession of them is entitled to retain possession of them until
payment or tender of the price in the following cases: 1) where the goods have been sold without any stipulation as
to credit; 2) where the goods have been sold on credit, but the term of credit has expired; and 3) where the buyer
becomes insolvent (Article 1527, 1st par).
May the seller exercise his right of lien or retention even if he is in possession of the goods as a mere
agent or bailee for the buyer?
Yes, he may exercise his right or retention notwithstanding that he is in possession of the goods as agent
or bailee for the buyer (Article 1527, 2nd par).
May an unpaid seller still exercise the right to retain possession of the goods sold on credit?
Yes, under Article 1527, even if the goods were sold on credit, the unpaid seller may still exercise the right
to retain possession of the goods if the term of credit has already expired.
received has been broken by reason of the insolvency of the buyer, may the seller exercise the right of
lien or retention of the goods?
Yes, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until
to credit; 2) where the goods have been sold on credit, but the term of credit has expired; and 3) where the buyer
becomes insolvent (Article 1527, 1st par).
350,000.00. On the agreed date for payment, Angelina only paid Php 250,000.00. Can Brad withhold
delivery of the vehicle?
to credit; 2) where the goods have been sold on credit, but the term of credit has expired; and 3) where the
buyer becomes insolvent (Article 1527, 1st par).

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Angelina agreed to buy the Toyota Innova (ABC 123) of Brad. They made no arrangements as to credit.
Angelina, despite not giving Brad any payment, is asking for the delivery of the vehicle claiming that Brad
is obliged to deliver even if no payment has been made yet since the sale was perfected by mere consent.
Is Brad justified in withholding delivery of the vehicle?
payment or tender of the price in the following cases: 1) where the goods have been sold without any
stipulation as to credit; 2) where the goods have been sold on credit, but the term of credit has expired; and 3)
where the buyer becomes insolvent (Article 1527, 1 st par).
Angelina sold Brad a specific diamond ring to be paid 6 months later. By mutual agreement, Brad is
made already the owner, but Angelina will act as the depositary of the ring in the meantime. If the term
expires, and Brad has not yet paid, may Angelina still continue possessing the ring even if she is no
longer the owner?
Yes, for she has not been paid. Her no longer being the owner is not important, for the law says: “The
seller may exercise his right or retention notwithstanding that he is in possession of the goods as agent or bailee
for the buyer” (Article 1527, 2nd par).
What is the condition for the possessory lien under Article 1527 to be available to an unpaid seller?
This possessory lien, however, remains only so long as the property is still with the vendor.
Can the possessory lien of an unpaid seller be exercised if there has already been partial delivery of the
goods?
Yes. Under Article 1528, where an unpaid seller has made part delivery of the goods, he may exercise his
right on the remainder, unless such part delivery has been made under such circumstances as to show an intent to
waive the lien or right of retention.
Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. Since Angelina has not yet
fully paid the purchase price, may Brad exercise his right of possessory lien over the remaining 3 bottles
of perfume?
Yes. Under Article 1528, where an unpaid seller has made part delivery of the goods, he may exercise his
right on the remainder, unless such part delivery has been made under such circumstances as to show an intent to
waive the lien or right of retention.
Angelina bought 10 bottles of perfume from Brad, only 7 of which arrived. Since Angelina has not yet
fully paid the purchase price, Brad exercised his right of possessory lien over the remaining 3 bottles of
perfume Angelina claims that Brad can no longer withhold delivery of the remainder because the right of
possessory lien is available only if the goods are still in the possession of the seller. Is Angelina correct?
No, Angelina is not correct. Brad has the right to withhold delivery of the remaining 3 bottles because
under Article 1528, where an unpaid seller has made part delivery of the goods, he may exercise his right on the
remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the
lien or right of retention.
Under what circumstances is the unpaid seller no longer allowed to exercise the right of retention over
the remainder of the goods where partial delivery has already been made?
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The right of lien over the remainder of the goods where partial delivery has been made is no longer
available if such part delivery has been made under such circumstances as to show an intent to waive the lien or
right of retention (Article 1528).
When does the unpaid seller lose his lien on or right of retention over the goods?
The unpaid seller loses his right of lien or retention in the following cases: 1) when he delivers the goods to a
carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods or the
right to the possession thereof; 2) when the buyer or his agent lawfully obtains possession of the goods; and 3) by waiver
thereof (Article 1529)
Is the lien of an unpaid seller over the goods sold lost if he obtains judgment for the price of the goods?
No, such lien is not lost. Under Article 1529, last paragraph, the unpaid seller of goods, having a lien
thereon, does not lose his lien by reason only that he has obtained judgment for the price of the goods.
Can an unpaid seller waive his possessory lien on or right of retention over the goods sold?
Yes, waiver is one of the instances that would result in the loss of the possessory lien or right of retention
that the unpaid seller has over the goods (Article 1529, no. 3)
Under the circumstances mentioned under Article 1529, the possessory lien of an unpaid seller is lost. Is
the vendor’s lien also lost?
No, under the circumstances mentioned in Article 1529, the lien lost is only the possessory lien and not
the vendor’s lien.
Angelina delivered the goods to the carrier for transmission to the buyer, Brad. She, however, reserved
her right to the ownership in the goods. Does she lose her possessory lien?
No, she does not lose her possessory lien in view of the reservation. Under Article 1529, one of the
instances when the unpaid seller’s possessory lien is lost is when he delivers the goods to a carrier or other bailee
for the purpose of transmission to the buyer without reserving the ownership in the goods or the right to the
possession thereof.
An unpaid seller who is still in possession of the goods sold brought an action to get the purchase price.
Does he lose his lien?
No, the bringing of an action is not one of the ways of losing the possessory lien. As a matter of fact, even
if he has already obtained a money judgment in his favor, the possessory lien still remains with him (Article 1529).
Brad, an unpaid seller who is still in possession of the goods sold brought an action against Angelina to
get the purchase price. Does he lose his lien by virtue of the filing of the collection complaint?
No, the bringing of an action is not one of the ways of losing the possessory lien. As a matter of fact, even
if Brad has already obtained a money judgment in his favor, the possessory lien still remains with him (Article
1529).

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An unpaid seller, who possessed the goods through a warehouseman, delivered to the buyer a negotiable
warehouse receipt. Does the unpaid seller still have a possessory lien?
Not anymore. Under Article 1529, no. 2, an unpaid seller’s possessory lien is lost when the buyer or his
agent lawfully obtains possession on the goods. The negotiable warehouse receipt automatically transferred both
title and right of possession to the goods in the buyer.
What is meant by the right of stoppage in transitu?
The right of stoppage in transitu refers to the right of the unpaid seller to resume possession of the goods
at anytime while they are in transit by virtue of which he will then be entitled to the same rights in regard to the
goods as he would have had if he had never parted with the possession (Article 1530).
When is the right of stoppage in transitu available to the unpaid seller?
This right is available to the unpaid seller when he has already parted with the possession of the goods
and the buyer is or becomes insolvent (Article 1530).
The unpaid seller may exercise his right of stoppage in transitu when he has already parted with the
possession of the goods and the buyer is or becomes insolvent. What is the right of stoppage in transitu?
The right of stoppage in transitu refers to the right of the unpaid seller to resume possession of the goods
at anytime while they are in transit by virtue of which he will then be entitled to the same rights in regard to the
goods as he would have had if he had never parted with the possession (Article 1530).
What is the effect if the unpaid seller exercises his right of stoppage in transitu?
Upon exercise of the right of stoppage in transitu, the unpaid seller will then be entitled to the same rights
in regard to the goods as he would have had if he had never parted with the possession (Article 1530).
When will the buyer’s insolvency give rise to the unpaid seller’s right of stoppage in transitu?
The seller’s right of stoppage in transitu exists whether the buyer is insolvent at the time of or after the
sale. This is because Article 1530 provides that the right if stoppage in transitu available when the seller has
already parted with the possession of the goods and the buyer is or becomes insolvent.
Under Article 1530 of the Civil Code, the right of stoppage in transitu is available to the seller when he
has already parted with the possession of the goods and the buyer is or becomes insolvent. What is the
meaning of INSOLVENCY under this provision?
The insolvency need not be judicially declared. It is enough that the obligations exceed a man’s assets
(Paras).

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Angelina bought 100 cases of Manila Beer from Brad with the understanding that the goods will be
delivered by ship from Manila to Cebu. While the goods were being transported, Brad learns that
Angelina has become insolvent. Can Brad stop the delivery of the goods and resume possession thereof?
Yes, Brad can exercise his right of stoppage in transitu. Under Article 1530, when the buyer of goods is or
becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping
them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, and he
will then become entitled to the same rights in regard to the goods as he would have if he had never parted with
the possession.
Angelina bought 100 cases of Manila Beer from Brad with the understanding that the goods will be
delivered by ship from Manila to Cebu. While the goods were being transported, Brad learns that
Angelina has become insolvent. Brad wants stop the delivery of the goods and resume possession
thereof. Angelina, on the other hands, claims that the right of stoppage in transitu is not available to
Brad because she has not yet been judicially declared insolvent. Is Angelina correct?
No, Angelina is not correct and Brad can exercise his right of stoppage in transitu. Under Article 1530,
when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the
goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time
while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would
have if he had never parted with the possession. The insolvency need not be judicially declared. It is enough
that the obligations exceed a man’s assets (Paras).
When are goods considered “in transit”?
Goods are in transit within the meaning of Article 1530 in the following instances: 1) from the time when
they are delivered to a carrier by land, water, or air, or other bailee for the purpose of transmission to the buyer,
until the buyer, or his agent in that behalf, takes delivery of them from such carrier or other bailee; or 2) if the
goods are rejected by the buyer, and the carrier or other bailee continues in possession of them, even if the seller
has refused to receive them back (Article 1531).
When are goods no longer considered “in transit”?
Goods are no longer in transit within the meaning of Article 1530 in the following instances: 1) if the
buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination; 2)
if, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer
or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or
his agent; and it is immaterial that further destination for the goods may have been indicated by the buyer; or 3) if
the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf (Article
1531).
If the goods already reached the place of destination, can they still be considered “in transit”?
Yes, goods that have reached the place of destination are still considered” “in transit” if the good are
rejected by the buyer and the carrier or other bailee continues in possession of them (Article 1531).
If the goods are rejected by the buyer but the seller refuses to receive them back, are the goods
considered “in transit”?

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Yes, goods that have reached the place of destination are still considered” “in transit” if the good are
rejected by the buyer provided the carrier or other bailee continues in possession of them, even if the
seller has refused to receive them back (Article 1531).
Despite not having arrived at the appointed place of destination, can the goods, nevertheless, be
considered as no longer “in transit”?
Yes, goods that have not yet reached the place of destination may already be considered as no longer “in
transit” if the buyer, or his agent in that behalf, has obtained delivery of the goods (Article 1531).
If the goods have arrived at the appointed destination but the carrier or other bailee continues
possession of them, are the goods still “in transit”?
Not necessarily. If, after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them
as bailee for the buyer or his agent, the goods are no longer “in transit” (Article 1531).
If the goods have arrived in the appointed destination and the carrier or other bailee continues
possession of them as bailee for the buyer or his agent but the buyer has indicated a further destination,
are the goods still “in transit”?
Not anymore. Under Article 1531, if, after the arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his agent; and it is immaterial that further destination for the
goods may have been indicated by the buyer.
If upon arrival of the goods the buyer unjustifiably refuses to receive the goods, may the seller still
exercise the right of stoppage in transitu?
Yes, because in this instance, the goods are still considered “in transit” and therefore, the seller may still
exercise the right of stoppage.
If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, are the goods
still considered “in transit” or not anymore?
Under Article 1531, if the goods are delivered to a ship, freight train, truck, or airplane chartered by the
buyer, it is a question depending on the circumstances of the particular case, whether they are in possession of the
carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent in that behalf, is the right of
stoppage in transitu still available to the unpaid seller?
Yes, the remainder of the goods may be stopped in transitu, unless such part delivery has been under such
circumstances as to show an agreement with the buyer to give up possession of the whole of the goods (Article
1531).
How is the right of stoppage in transitu exercised?

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The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of
the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are (Article
1532, 1st par).
What is required in the exercise of the right of stoppage in transitu?
There must be intent to repossess the goods (Paras).
If the right of stoppage in transitu is exercised by giving a notice of the claim, to whom should the unpaid
seller give such notice?
The notice must be given either 1) to the person on actual possession of the goods; or 2) to his principal
(Article 1532, 1st par).
If the notice of the seller’s exercise of the right of stoppage in transitu is given to the principal, what is the
condition required by law?
If the notice is given to the principal, it must be given at such time and under such circumstances that the
principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer (Article 1532, 1 st par).
If notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the
goods, what is the obligation of the latter?
Upon receipt of the notice of stoppage in transitu, the carrier, or other bailee in possession of the goods,
must deliver the goods to, or according to the directions of, the seller (Article 1532, 2nd par).
Who shall bear the expenses if the goods are delivered back to the seller exercising his right of stoppage
in transitu?
The expenses for such delivery must be borne by the seller (Article 1532, 2nd par).
If a negotiable document of title representing the goods has been issued by the carrier or other bailee,
what is required for the unpaid seller to exercise his right of stoppage in transitu and order the
redelivery of the goods?
Under the last sentence of Article 1532, if a negotiable document of title representing the goods has been
issued by the carrier or other bailee, he shall not be obliged to deliver or justified in delivering the goods to the
seller unless such document is first surrendered for cancellation.
What are the effects of the exercise of the right of stoppage in transitu?
After the exercise of the right of stoppage in transitu, the consequential effects are: 1) the goods are no
longer in transitu; 2) the contract of carriage ends and the carrier now becomes a mere bailee and he will be liable
as such; 3) the carrier should not deliver anymore to the buyer or the latter’s agent; otherwise, he will be liable for
damages (Paras); and 4) the carrier must redeliver to, or according to the directions of, the seller (Article 1532, 2 nd
par).
When is the right of resale available to the unpaid seller?

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The right of resale is available to the unpaid seller of goods in the following cases: 1) where the goods are
of perishable nature; 2) where the seller has expressly reserved the right of resale in case the buyer should make
default; and 3) where the buyer has been in default in the payment of the price for an unreasonable time. It is,
however, essential before the resale can be made that the unpaid seller should have a right of lien or should have
stopped the goods in transitu (Article 1533, 1 st par).
What are the preconditions before the unpaid seller may exercise the right of resale in the instances
allowed by law?
In the exercise of the right of resale, Article 1532, 1 st paragraph requires that the unpaid seller should have
a right of lien or should have stopped the goods in transitu.
What is the effect of a resale under Article 1533?
Where a resale is made, as authorized under Article 1533 (par 2), the buyer acquires a good title as against
the original buyer.
What is the rule regarding any deficiency in the price after the resale?
The deficiency in the price may be obtained as damages from the buyer, as when the resale price is lower
than the original selling price.
Is notice of an intention to resell the goods essential to the validity of a resale?
Notice of an intention to resell the goods is not essential to the validity of the resale. However, where the
right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of
sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before the resale was made (Article 1533, 3rd paragraph).
Is notice of the time and place of the resale of goods essential to the validity of such resale?
No, it is not essential to the validity of a resale that notice of the time and place of such resale should be
given by the seller to the original buyer (Article 1533, 4th paragraph).
May the seller buy the goods subject of the resale?
No, the seller cannot, directly or indirectly, buy the goods (Article 1533, last paragraph).
When is the right to rescind the sale available to an unpaid seller?
The right to rescind the transfer of title is available when an unpaid seller has the right of lien or has
stopped the goods in transitu and if he expressly reserved to do so in case the buyer should be in default or where
the buyer has been in default for an unreasonable time (Article 1534, 1st paragraph).
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What is the effect of the exercise of the right to rescind?
The buyer who exercises the right to rescind the transfer of title shall resume the ownership in the goods.
What should be done in order to rescind the transfer of title?
The unpaid seller must manifest by notice to the buyer or by some other overt act an intention to rescind
(Article 1534, 2nd paragraph).
Is it necessary that the overt act showing an intention to rescind be communicated to the buyer?
It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to
give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before the right of rescission was asserted (Article 1534, 2 nd
paragraph).
What is the effect of any sale or disposition of the goods by the buyer on the unpaid seller’s right of lien
or stoppage in transitu?
Generally, the unpaid seller’s lien or stoppage in transitu remains even if the buyer has sold or otherwise
disposed of the goods. The exceptions are when the unpaid seller has given his consent thereto or when the
purchaser or buyer is a purchaser for value in good faith of a negotiable document of title.
If the buyer has already sold the goods, may an unpaid seller still exercise his right of lien or stoppage in
transitu over the goods?
Yes, the unpaid seller may still exercises right of lien or stoppage in transitu over said goods. This is
because under Article 1535, the unpaid seller’s right of lien or stoppage in transitu is not affected by any sale, or
other disposition of the goods which the buyer may have made, unless the seller has assented thereto.
May the unpaid seller’s right of lien or stoppage in transitu still be exercised if a negotiable document of
title has been issued in favor of a purchaser for value in good faith?
No. Under Article 1535, 2nd paragraph, if a negotiable document of title has been issued for goods, no
seller’s lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom
such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the
carrier or other bailee who issued such document, of the seller’s claim to a lien or right of stoppage in transitu.
If a negotiable document of title has been issued for goods and has been negotiated in favor of a
purchaser for value in good faith subsequent to the notification to the bailee of the unpaid seller’s claim
to a lien, which shall prevail, the unpaid seller’s right of lien or the purchaser’s right under the negotiable
document of title?
The right of the purchaser in good faith for value shall prevail over the unpaid seller’s right of lien. Under
the second paragraph of Article 1535, if a negotiable document of title has been issued for goods, no seller’s lien or
right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document
has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier or other
bailee who issued such document, of the seller’s claim to a lien or right of stoppage in transitu.
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When shall the debtor lose every right to make use of the period?
The debtor shall lose every right to make use of the period when:
1. When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for
the debt or price;
2. When he does not furnish to the creditor the guaranties or securities which he has promised;
3. When by his own act he has impaired said guaranties or securities after their establishment, and when through
fortuitous event they disappear, unless he emmediately gives ones equally satisfactory;
4. When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
5. When the debtor attempts to abscond.
A purchased goods from B. A promised to give certain securities, as a result of which, A was given one
year within which to pay. A failed to give the securities. Can B be compelled to deliver?
No. for failure of A to give the securities he loses the right to make use of the period. But if B so desires, he may
voluntarily deliver.
Sam sold to Muel a car on credit. Does Sam have the right to withhold the delivery of the car?
Yes, Sam may withhold delivery, unless Muel gives sufficient guaranty or security.
Give other instances where seller may withhold delivery of the thing sold?
1. Seller promise to mortgage his house to secure the purchase price and he fails to furnish said security as promised;
2. If the payment of the purchase price is secured by a mortgage on the house of buyer, but the house was partially
burned because of the buyer’s fault;
3. Where the buyer shows intent not to pay the price after the thing is delivered to him.
Define accessions and accessories?
Accessions are fruits of a thing; or additions or improvements upon a thing such as the young of an
animals, house or trees on a land.
Accessories are anything attached to the principal thing for its completion, ornament,or better use such as picture
frame, key of a house.
What is the duty of the vendor in delivering the thing sold?

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The vendor is bound to deliver the thing sold in the condition in which they were upon the perfection of the
contract including its accessions and accessories. The vendor is, therefore obliged to preserve the thing pending its
delivery.
Who owns the fruit after the contract is perfected?
All the fruits shall pertain to the vendee from the day on when the contract was perfected, but it is evident that a
contrary stipulation may be agreed upon, or a later date may be set.
***The term fruits include natural, industrial, and civil fruits.
Give the effect of loss, deteriorstion or improvement before delivery?
It is that from the time of perfection to delivery, risk is to be borne by the buyer.
What are t6he rules in case of loss, deterioration or improvement of the thing before delivery?
The following rules shall be observed:
1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
2. If the thing is lost through fault of the debtor, he shall be obliged to pay damages to damages; it is understood that
the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is
unknown or cannot be recovered;
3. When the thing deteriorates without t5he fault of the debtor, the impairment is to be borne by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation
and its fulfillment, with indemnity for damages in either case;
5. If the thing is improved by its nature, or by time, the improvement shsll inure to the benefit of the creditor;
6. If it is improve at the expense of the debtor, he shall have no other right than that granted to the usufructuary.
S sold to B a car. Before delivery the car was lost without the fault of S. Is the obligation to deliver
extinguished?
Yes. The obligation to deliver is extinguish and b shall be oblige to pay the price if he has paid the same.
How sale of Real Estate by unit is should be made?
Sale of real property by unit shall be made with the statement of its area, at the rate of certain price for a unit of
measure or number, the caused of the contract with respect to the vendee is the number of such units, and that the
entire area stated in contract must be delivered.
What are the rules if;
a. The delivery is less than what is stated:

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1. Proportional reduction in the price regardless of the extent of deficiency.

2. Rescission of contract:
*if deficiency is at least 1/10 of area stated
*regardless of the extent of deficiency, if the buyer would not have bought the property had he
known that the area was smaller.
b. Delivery of inferior quality:
1. Proportional reduction in the price, regardless of extent of inferiority.

2. Rescission of contract:
*if inferior value exceeds 1/10 of the price agreed upon;
* regardless of extent of inferiority (inferior value), if the buyer would not have bought the
property had he known the inferiority.
Alvin buys from Dale a piece of land supposed to contain 1,000 square meters at the rate of P10,000 a
square meter, but the land has only 800 sq.m. Can Dale ask for rescission?
Yes, 200 sq.m. is 2/10 of 1,000. The additional 200 must be given to Dale should he demand them, otherwise Dale
may pay only P 8 million (for 800 sq. m.) or rescind the contract.
What is the right of the buyer if there is greater area or number of real property stated in the contract?
1. Accept the area included in the contract and reject the rest
2. Accept all at a contract price
Sally buys from Garry a piece of land to contain 1,000 sq. m. at the rate of P1,000 a sq. m. but the land
really contains 1,599 sq. m. What can Sally do?
Sally may accept 1,000 sq.m. and reject the extra 500, in which case he will pay only P10 million. However, sally is
allowed to accept all of the 1,500 sq. m., but he must pay P15 million. Sally is in no case allowed to rescind the
contract, for such a remedy is not allowed him under this article.
Where is the right of the buyer when immovable sold is lack in area, or is of inferior quality, or is greater
than that stated in the contract applicable?
It is applicable to both private and judicial sales when immovable sold is lack in area, or is of inferior quality, or is
greater than that stated in the contract.
Give the rule when sale of real estate is made through lump sum (Cuerpo Cierto or Por Precio Alzado)?
In the sale of real estate, made for a lump sum and not at a rate of a certain sum for a unit measure or number,
there shall be no increase or decrease in the agreed price whether actual area is greater or lesser than that stated
area.
Enumerate the guidelines in a sale real estate made for a lump sum?
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The guidelines are:
▪ What is mentioned are the boundaries, e.i., the technical description of the property which is
indispensable requirement in the sale of real property.
▪ If area or number should likewise be designated, all the area designated within the boundaries either
actually greater in number of area sated should be delivered.
▪ If the area with in boundaries is smaller than that stated, vendor should deliver only that included in
the boundaries
For failure to deliver all area within the boundaries even is said area is more than that stated, what is the
remedy of the buyer?
The remedies of the buyer are:
1. Reduction in price proportionate to the area not delivered; or
2. Rescission of the contract.
Jun buys a piece of land a cuerpo cierto. The contract states certain number of square meters but the
land included in the boundaries happen to be Less. Is jun entitled to pay reduced price?
No. the law presumes that the purchaser had in mind a determinate piece of land and that he ascertained its area
and quality before the contract was perfected. If he did nit do so, or if having done so, he made no objection and
consented to the transaction, he can blame no one but himself.
When action for sale of real estate by unit or lump sum commenced?
In action of real estate by unit or lump-sum, action arising therefrom should be commenced within six (6) months
from the day of delivery real or constructive.
Give the rules as to preference of ownership in case double or multiple sale?
The rules are:
1. If the property is sold by the movable (personal property), the ownership shall be acquired by the vendee who
first takes possession in good faith.
2. If property sold is immovable (real property), the ownership shall belong to:
• The vendee who first registers the sale in good faith in the Registry of Property (registry of Deeds);
• In the absence of registration, the vendee who first takes possession in good faith; and
• In the absence of both registration and possession, the vendee who presents the oldest title ( who first
bought the property) in good faith
*** These applies also to double donation
As with regards to the provision of Civil code what is meant by:
a. Registration – refer to registration under the Torrens System. requires the actual recording. If the property
was never registered as when the registrar forgot to do so although he has been handed the document, there is no
registration.

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b. Possession – either actual or constructive.
c. Title – means title because of the sale, and not any other tirtle or mode of acquiring property.
What is the basis of the right or priority of the first buyer?
The basis that prius tempore, potior jure or first in time, stronger in right. The rule can be invoked by the first
buyer only. In order to preserve this right, he must register the deed of sale with the registry of Property ahead of
any registration in good faith by a second or subsequent buyer.
Who is a buyer in good faith?
He is one who buys the property of another without notice that some other person has a right or interest in such
property and pays a full and fair price for the same at the time of such purchase or before he has notice of the
claim or interest of some other person in the property.
Good faith is innocence or lack of knowledge of the first sale until his contract ripens into full ownership through
registration.
Enumerate the application of mirror doctrine on the law on double sale?
The applications of the mirror doctrine are:
1. The mirror doctrine will apply where person purchased a lot with knowledge of facts and circumstances that
should have put him upon inquiry and investigation as might be necessary to acquint him with the defects in
the title of the owner.
2. A purchaser cannot close his eyes to facts that should put reasonable man on his guard and then claim that he
acted in good faith under the belief that there was no defect in the title of the vendor.
3. His mere refusal to believe that such defect exists or the willful closing of eyes to the possibility of the
existence of a defect in the vendor’s title will not make him an innocent purchaser for value if afterwards it
develops that the title is in fact defective and it appears that he has such notice of the defects as would have
led to its discovery had he acted with the measure of precaution which may reasonably be required of a
prudent man in like situation.
4. Actual possession of land by person other than the vendor would have been enough to arouse the suspicion as
to the ownership of the land about the purchased.
5. A buyer of a real property which is in possession other than a seller must be wary and should investigate the
rights of those in possession. Without such inquiry, the buyer can hardly be regarded as in good faith.
6. As a general rule, buyer’s can rely on the face of the title. This is, however, inapplicable especially when the
property is in possession of a person or persons other than the vendor. In this case, the mirror doctrine
applies.
Is double sale applicable to unregistered lands?
No. Since properties are of unregistered lands, subsequent buyer thereof bought the properties at their peril. The
object of double sale must be registered so that the good faith can be invoked. For this turns out that seller did not
own the property at the time of the sale.
One who buys from unregistered owner is not a purchaser in good faith.

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Define Condition Sale?
Condition Sale condition upon which the obligation of either party in a contract of sale depends, when not
performed.
What is the effect of the condition?
1. If conditions are not fulfilled the party may either:
• Refuse to proceeds with the contract; or

• Proceed with the contract, waiving the performance of the condition
2. If the condition is in the nature of a promise that it should happen, the non-fulfillment of such condition may be
treated by the other party as breach of warranty.
What is condition as used in article 1545?
Conditions means uncertain event or contingency on the happening of which the obligation of the contract
depends.
What is express warranty?
Express warranty is any affirmation of facts or any promise by the seller relating to the thing, the natural tendency
of which is to induce the buyer to purchase the thing, and the buyer thus induced, thus purchased the same. It
includes all warranties derived from the language of the contract, so long as the language is express.
When is there a warranty?
The good tests on warranties are:
a. If the buyer is ignorant, there is warranty;

b. If the buyer is expected to have an opinion and the seller has no special opinion, there is no warranty
Give the effect of expression of opinion?
Dealer’s talk like “excellent” cannot be considered as an express warranty. Sales talk like “little exaggerations
allowed under by the law as a concession to human nature. This is in accordance with the civil law maxim
“simplex commendation non obligat” or the principle of caveat emptor (let the buyer beware).
Give the natural element of a contract of sale?
Natural element of a contract of sale is implied to be part of the contract unless otherwise expressly stipulated or
waived.
When actions based on implied warranties prescribed?

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The actions based on implied warranties prescribe in 10n years since these obligation are imposed by7 law.
When is implied warranty not applicable?
It is not applicable in:
1. The sale where the phrase is “as is and Where is”.

2. Sale of second-hand articles.
3. Sale by virtue of authority in fact or law.
What does the seller warrant in
a. Warranty against eviction?
Seller warrants:
1. His right to sell at the time the ownership is to pass

2. Buyer will have to enjoy legal and peaceful possession of the thing.
b. Warranty against hidden defects?
1. Free from any hidden faults or defects

2. Free from any charge or encumbrance not declared or known to the buyer.
Define eviction?
Eviction is defined as the judicial process whereby the vendee is deprived of the whole or part of the thing
purchased by virtue of a final judgment based on a right based on a right prior to the sale or an act imputable to
the vendor.
Enumerate the essential elements of the warranty against eviction?
The essential elements are:
1. The vendee is deprived in whole or in part of the thing purchased;

2. He is so deprived by virtue of a final judgment;
3. The judgment is based on a right prior to the sale or an act imputable to the vendor;
4. The vendor was summoned in the suit for eviction at the instance to the vendee; and
5. There is no waiver on the part of the vendee.
Is seller liable for violation of warranty against eviction in case of double sale?
Yes, the fact that he sold the same land twice makes him responsible for his fraud or bad faith in depriving any of
the purchasers. Provided, however, that the deprivation be upon final judgment byb a court of competent
authority.
May a warranty against eviction be waived?

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Yes. It could be:
• Consciente where renunciation without knowledge of the risk, seller pays only the value of the thing at
the time of eviction.
• Intencionada where renunciation with knowledge.
** if waiver is unclear, it is presumed to be consciente. Intencionada must be proved.
** waiver is void if seller acted in bad faith.
Is government liable for the eviction of the purchaser at a tax sale?
No. government is not liable for the eviction of the purchaser at a tax sale but still the owner of the property sold
under execution at the instance of the judgment creditor is liable for the eviction, unless otherwise decreed in the
judgment.
Neshia sells a parcel of land to Fe. Subsequently, Fernando files an action for the recovery of possession
claiming that he is the owner of the land. At the instance of Fe, Neshia was summoned to defend his
title. The court renders final judgment declaring that Fernando has a better right. Fe is evicted. Is Neshia
liable to Fe?
Yes, Neshia is liable to Fe for failure to comply with his warranty against eviction. Here, the judgment is based on
a right of third person prior to the sale.
What are the responsibilities of the seller?
The seller is responsible for:
1. His own acts;

2. Those of his predecessors-in-interest.
He is not responsible for:
1. Acts imputable to the buyer himself;

2. Fortuitous event.
Is there a need for a vendee to appeal from decision in order that vendor be held liable?
No. the vendee need not appeal from the decision in order that the vendor may become liable for eviction.
Therefore, vendee can sue vendor for damages. Provided, however, that the decision is final.
Give the effect of prescription?
By prescription, one acquires ownership and the other real rights through the lapse of time in the manner and
under the conditions prescribed by law. In the same way, rights and actions are lost by prescription.
What can the vendee enforce in case of prescription if:
a. Completed before sale?

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The vendee may lose the thing purchased to a third person who has acquired title thereto by prescription. When
prescription has commenced to run against the vendor and was completed before the sale, the vendee can enforce
the warranty against eviction. In this case, the deprivation is based on a right prior to the sale and an act
imputable to the vendor.
b. Completed after sale?
Even if prescription has started before the sale but has reached the limit prescribed by law after the sale, the
vendor is not liable for eviction. The reason is because the vendee could easily interrupt the running of the
prescriptive period by bringing the necessary action.
Is the vendor liable for eviction when the property is sold for non-payment of taxes due and not made
known to the vendee?
Yes. If the property is sold for non-payment of taxes due and not made known to the vendee before the sale the
vendor is liable for eviction.
A sells a land to B, the taxes of the land was not paid. The land was sold at a public auction for non-
payment of taxes. B is evicted. Is A liable?
Yes. A is responsible to B, provided, however, that at the time of the Sale, the non-payment of taxes was not
known to B, the vendee.
In case of failure of title, what is the remedy of the purchase in good faith?
It has been held universally that in case of failure of title, a purchaser in good faith at a judicial sale is entitled to
recover the purchase one from the officer if the funds are still in his hands or from the judgment debtor (Banzon &
Standard Oil Co, v Osorio, 27 Phil 142).
What are the effects of this article:
In Bobis v. Provincial Sheriff of Camarines Norte, it states as follows:
(1) A buyer at an execution sale acquires nothing if the judgment debtor had already assigned or transferred the
property to another before the levy or execution;
(2) A sheriff who merely adheres to the terms or a writ of execution is not liable for damages. The same is true of
the buyer at the public auction,
(3) The buyer at an execution sale is a purchaser in bad faith (and not for value) if he had prior knowledge of a
third party claim filed with the sheriff before the scheduled execution sale.
What are the effects of stipulation waiving liability for eviction?
The effects are:

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(1) If seller was in good faith – the exemption is valid, but without prejudice to Art. 1554
(2) If seller was in bad faith – the stipulation is VOID
What is the rule regarding cost of suit?
Paragraph 3 does not include transportation and other incidental expenses.
Is the right to hold the vendee liable for eviction waivable?
Yes, waiver is allowable. Waiver of evection may partake of two forms, namely:
(1) Waiver consciente – without knowledge of eviction;
(2) Wiaver intencionada – without knowledge of the risk of eviction
What is the presumption in waivers ?
The presumption that the waiver was only in consciente. The waiver intencionada must be clearly proved.
In waiver consciente, what value should be returned?
The value at the time of eviction should be returned. This is a case of solution indebiti, “undue payment.”
In waiver intencionada, what value should be returned?
Nothing need be returned. This is aleatory in nature, and buyer assumes the consequences. This is so even if
there is a stipulation that the warranty against eviction exist, provided that said stipulation is understood by the
parties mere pro forma.
What are the requisites for reasonable in hidden defects? (redhibitory defects)
The requisites are:
(1) The defects must be hidden (not known and could not have been known)
(2) The defect must exist at the time the sale was made;
(3) The defect must ordinarily have been excluded from the contract;
(4) The defect must be important;
(5) The action must be instituted within the prescribed time – i.e., six months from the delivery of the thing sold or
within 40 days form the date of delivery in case of animals, and
(6) There must be no waiver of warranty on the part of the vendee.

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Under the law, warranty against eviction may be waived. What are the two kinds of warranty against
eviction and what are their effects?
The waiver may be “consciente” or “intencionada”. In the first, there is merely a voluntary renunciation made by
the vendee of the right to warranty in case of eviction. The effect of such renunciation is that the liability of he
vendor in case of eviction shall extend only to the payment of the value of the thing sold at the time of eviction. In
the second, there is a voluntary renunciation by the vendee of the right to warranty against eviction, with
knowledge of the risk of eviction and assuming the consequences thereof. The effect of such renunciation in case
of eviction is to relieve the vendor of any liability whatsoever. (Art 1554 NCC)
What is the effect of stipulation waiving liability for Eviction?
The effects are:
(1) If seller is in good faith – the exemption is valid, but without prejudice to Art 1554,
(2) If seller was in good faith – the stipulation is VOID.
What must the seller give in case of eviction?
V I C E D : Value, Income ( or fruits), costs, expenses and damages (and interest and ornamental expenses) if
seller was in bad faith.
What is the rule as to income or fruits?
If the court does not order the buyer to deliver the income or fruits to the winner, said buyer would be entitled to
them. This is fair for after all, in the meantime, the seller was using the price money without interest.
If there is no agreement with regard to warranty in case of eviction, what is the extent of the liability of
the vendor?
When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the
vendee shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the eviction be it greater or less than the price of the
sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
(3) The cost of the suit which caused the eviction and, in a proper case, those of the suit brought against the vendor
for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, ornamental expenses, if the sale was made in bad faith (Art 1555, CC).
Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole
that he would not have bought it without said part, he may demand the rescission of the contract; but with the

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obligation to return the thing without other encumbrances that those which it had when he acquired it. He may
exercise this right of action, instead of enforcing the vendor’s liability for eviction.
The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate
price for each of them, if it should clearly appear that the vendee would have purchased one without the other (Art
1556, CC).
What is the rule regarding damages?
The interest in paragraph 5 refers to interest on costs, expenses, and damages. The sale must have been made in
BAD FAITH, which must be proves (Pascual v Lesaca, May 30, 1952)
Why is rescission not a remedy in case of TOTAL eviction?
The remedy of rescission contemplates that the one demanding is able to return whatever he has received under
the contract; and when this cannot be done, rescission cannot be carried out. It is for this reason that the law on
sales does not make rescission a remedy incase the vendee is totally evicted from the thing sold, for he can no
longer restore the subject matter of the sale to the vendor. Of course, incase of partial eviction, rescission may still
be allowed with respect to the subjected matter that remains, as in the case contemplated in Art 1556.
What is the remedy of the vendee in case of partial eviction?
The vendee’s remedy is either:
(1) Rescission, or
(2) Enforcement of warranty.
Are there any other remedies to be attached with rescission?
If he chooses rescission, there should be no new encumbrances, like a “mortgage.” (Andaya v Manansala, April
30, 1960).
When is enforcement of the warranty the proper remedy?
If the circumstances set forth in paragraph 1 of Art 1556 are not present (as when there are new encumbrances),
the only remedy is to enforce the warranty
When is judgment deemed to be final and what is its necessity?
A judgment becomes final if on appeal, the decision decreeing the eviction is affirmed; or if within the period
within which to appeal, no appeal was made. It should be noted that under Art 1549 CC, the vendee need not

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appeal from the decision of the lower court. Thus, it is sufficient that the judgment be FINAL before the warranty
can be enforced.
What is the necessity for summoning the seller in the suit for the eviction of the buyer?
The importance are:
(1) This is the preparation for the suite – a condition sine qua non;
(2) It is immaterial whether or not the seller has good defense or means of defense. The summons and notice
must nevertheless be given. Once this is done, the buyer has done all that he had to do;
(3) The notice must be the notice for the suit fir eviction, NOT the notice in the suit for breach of warranty. The
notice need not be given in a case where the buyer is an applicant for registration in land registration
proceedings. Here it is sufficient that the buyer notifies the seller of: (a) his application; (b) any opposition
thereto.
What is the reason for summoning?
Its object is to give the vendor opportunity to show that the action against the buyer is unjust.
The seller was notified but did not appear. The buyer won in the suit filed by the third person. Can the
buyer recover expenses?
No, because there really was no breach of warranty.
In an eviction suit, is it permissible for the buyer to file a cross claim against the seller?
Yes, it is permissible for the buyer to file a cross claim against the seller for the enforcement of the warranty
should the buyer likes. This can be done in some cases to save time and to prevent inconvenience. The suit
against the seller may be in the form of a third party complaint if the vendor has not been made a co-defendant.
What is the rule in registration proceedings?
This article applies only when the buyer is the defendant, hence when the buyer is the petitioner in a registration
proceedings and he loses, the formal notice here is not a condition precedent. It is enough that he advice the seller
of the application for registration and the opposition thereto.
How does the Rules of Court apply?
The buyer can make use of the Rules of Court in bringing the seller to the case.
What is the rule in case of non-apparent servitudes?

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The defect contemplated in this Article is really a sort of “hidden defect” but remedy is similar to that provided in
the case of eviction. The servitudes contemplated are not legal easements for these exist by virtue of the law.
Therefore, it cannot be claimed that the buyer was ignorant thereof.
What are the remedies if made within one year?
The remedies are:
(1) rescission;
(2) damages.
What is the remedy if made after one year?
The remedy is only Damages.
What is the effect if burden or easement is registered?
There is not remedy if burden is registered except if there is an express warranty that the thing is free from all
burdens and encumbrances.
What is the effect of form of sale?
This article is applicable whether sale is:
(a) in public instrument;
(b) in private instrument;
(c) made orally.
There is not need to first compel the seller to execute a public instrument before the action is brought.
What are the requisites to recover because of hidden defects?
The requisites are:
(1) The defects must be hidden (not known and could not have been known)
(2) The defect must exist at the time the sale was made;
(3) The defect must ordinarily have been excluded from the contract;
(4) The defect must be important (renders thing UNFIT or considerably decreases FTINESS);
(5) The action must be instituted within the prescribed time – i.e., six months from the delivery of the thing sold
or within 40 days form the date of delivery in case of animals, and
(6) There must be no waiver of warranty on the part of the vendee.

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What is the meaning o “unfit for the use intended”
The use must have been stated in the contract itself, or can be inferred from the nature of the object or from the
trade or occupation of the buyer.
What is the meaning of “hidden”
“Hidden” means:
(a) What may be hidden with respect to one person may not be hidden with respect to another;
(b) Just because there is a difference in grade or quality, it does not necessarily mean that the defect is hidden;
(c) Defects are sometimes referred to as “redhibitory defects”
What is the effect of long inaction?
If the buyer examines the tobacco at time of purchase, and questions only after 3 years, and the seller has not
made any misrepresentation, there is no breach of warranty. In fact under Art 1571, the action prescribes in six
months.
A lease purchase agreement was entered into between Filinvest and Philrock over a rick crushing
machine. It was agreed that after payment of the price, Philrock would become the owner of the same.
After testing the machine, Philrock complained that it could process only 5 tons of rock a day instead of
the agreed 10 to 20 tons a day, hence it demanded that Filinvest should make good of the same. Philrock
went to court seeking for rescission of the lease, damages and injunction. Filinvest contented that it is
not liable for warranty. Decide.
Filinvest is not liable. Philrock inspected and tested the machine, and it is more knowledgeable, if not, and expert
on the object of the contract; hence, Philrock cannot hold Filinvest liable for damages. It is true that Art 1561,
NCC, vendor shall be responsible for warranty against hidden defects which the thing sold may have should they
render the thing unfit for the use it is intended or diminish its fitness for such use, yet the law likewise states that
the vendor shall not be answerable for patent defects or those which are visible or for those which are not visible if
the vendee is an expert who, by reason of his trade or profession, should have known them. (Art 1561, NCC).
What are the requisites of the warranty against hidden encumbrances?
The requisites for this warranty are:
(1) The encumbrance must be so important;
(2) The encumbrance is not registered;
(3) The vendee has no knowledge of such encumbrance; and
(4) Action brought within the reglementary period – one year from the execution of the deed of sale. (Art 1561
CC)

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When is defect deemed to be important?
The defect is important when:
(1) It renders the thing sold unfit for the use for which it is intended;
(2) If it diminishes or decreases its fitness to such an extent that the vendee would not have acquired it had he
been aware or would have given a lower price for it.
In what cases where the vendor may not be held liable for the defects of the thing sold?
When the defects are so patent or those which may be visible or for those which are not visible if the vendee is an
expert who by reason of his trade or profession, he should have known them (Art 1561 CC).
Raymundo sold a parcel of land to IDI for P122,769.00 payable in three installments, the last installment
ot be paid within one year from the date of issuance of the Original Certificate of Title over the property
which Raymundo obligated himself to secure. After the OCT was issued, the TCT was issued in the name
if IDI. IDI later sold the land to Agencia for P456,000. As a result, the TCT was issued in the name of
Agencia. The land was later transferred to Aguirre. In the meantime, the tenant on the property was
forced to stop cultivating the land because of the buildozing caused by the present owner. The tenant
sued IDI and Aguirre for disturbance compensation. IDI in turn filed a cross-claim against Raymundo in
case of a judgment adverse to it. Agencia and Aguirre filed a cross-claim against IDI. The trial court
rendered judgment in favor of the tenant and ordered Aguirre to pay the tenant disturbance
compensation in the amount of P24,000. It also ordered IDI to pay Aguirre P24,000 as damages. Hence
this appeal. If you were the ponente, how would you decide? Why?
I would decide against the petitioner. The SC had the occasion to hold that “hidden faults or defects” pertain only
to those that make the object of sale until for use for which it was intended at the time of the sale. If the object of
the sale is an agricultural land, the existing tenancy relationship with respect to the land cannot be a “hidden fault
or defect”. It is not a lien or encumbrance that the vendor’s warrant did not exist at the time of the sale. It is a
relationship which any buyer of agricultural land would reasonable expect to be present and which it is its duty to
specifically look into and provide for.
If a person sells a second-hand motor vehicle, is he liable for damages in case there are defects or it is
unfit for the purpose intended? Is there any exception?
Explain.
Generally, in the sale of a designated and specific article sold as second hand, there is no implied warranty as to
its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the sale. On
the other hand, there is also authority that in sale of articles, there may be, under some circumstances, an implied
warranty of fitness for the ordinary purpose of the article sold for the particular purpose of the buyer.
There is no implied warranty as to the condition, adaption, fitness, or suitability for the purpose for which a thing
was made or the quality of an article sold as and for a second-hand article.
The exception to the rile is found in Art 1562, NCC, which provides that in sale of goods, there is an implied
warranty or condition as to the quality or fitness of the goods as follows: where the buyer, expressly or by
implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears
that the buyer relies on the seller’s skill or judgment (whether he be a\the grower or manufacturer or not), there is
an implied warranty that the goods shall be reasonably fit for such purpose.

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What is the meaning of merchantible quality?
For general purpose of a thing, and not necessarily the particular purpose for which it has been acquired.
What is the effect of sale under patent name or trade name?
There is generally NO warranty as to the article’s fitness for any particular purpose.’
What is the significance of the usage of trade?
The parties are presumed to be acquainted with the usages of trade.
In the case of a contract of sale by sample, is there an implied warranty the goods shall be free from any
hidden defect rendering them unmerchantable which would not be apparent or reasonable examination
of the sample?
Yes, if the seller is a dealer in goods old by sample. (Art 1565 CC)
Why is the seller responsible for hidden defects even if he is in good faith?
Because he has to repair the damage done. The object of the law is reparation, not punishment. Thus for
example, the seller of an unworthy vessel is liable for hidden defects even if he did not know of them.
Seller and buyer agreed that seller would be exempted from hidden defects. But seller knew of hidden
defects. Would seller be liable?
Yes, because of his bad faith. To hold otherwise would be to legalize fraud.
Who is a purchaser in good faith and for value?
A purchaser in good faith and for value is one who buys property of another, without notice that some other
person has a right to or interest in such property and pays a full and fair price for the same, at the time of such
purchase or before he has notice of the claim or interest of some other person in the property.
What does good faith consist of?
Good faith consist of an honest intention to abstain from taking unconscientious advantage of another. Good faith
is the opposite of fraud and of bad faith, and its non-existence must be established by competent proof. One
cannot be said to be a buyer in good faith if he had notices of the claim of third person aside from the claim or
right of the registered owner, especially if the claims were annotated on the title are the lots which were shown to
be they buyer together with the decision of the Court of Appeals, and the buyers were fully aware that the subject
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were under litigation. A purchaser of a valued price of property cannot just close is eyes to facts which should put
a reasonable man upon his guard and then claim that he acted in good faith under the belief that there were no
defect in the title of the vendors.
X is the owner of a parcel of land. He sold it to Y who did not register the deed of sale. Later on, X
mortgaged the same land to Z. Between the two contracts, which shall prevail? Explain.
An unrecorded sale shall prevail because the owner has already parted with his property at the time of the
mortgage, and the mortgage is always subject to the better rights of third parties.
Spouses Victoriano and Crisanta dela Rosa were the registered owners of a parcel of land. On May 4,
1931, Victoriano sold ½ of the land to Juliana Salazar who constructed a house. The document was not
registered. On June 6, 1961, the children of the spouses sold the entire land to Nuguid. It was registered
on March 10, 1964 and a title was issued. Between the first and the second buyer, who has a better right?
Why?
The ownership should belong to the vendee who in good faith first recorded it in the Registry of Property.
Although the second sale was made by the heirs of Dela Rosa, the said heirs are deemed the continuation of the
personality of the decedent. Hence, the second buyer is the owner. Petitioner was a purchaser in good faith and
for value. The title was free from any annotation or encumbrance. If the property sold is registered land, the
purchase in good faith has a right to rely on the certificate of the title and is under no duty to go behind it to look
for laws, for previous registration is required to be coupled with good faith.
In action for annulment of documents and reconveyance with damages, Francisco Veloso contended that
he never authorized anyone to sell his real property. He alleged that his wife was in possession of the
title; but when his wife went abroad, he found out that his title was missing. He discovered that there
was a sale by his wife over the said property supported by a General Power of Attorney. His title was
cancelled under the name Aglaloma Escario. Can he recover the property? Why?
No because she was a buyer in good faith and for value. She relied on the power of attorney presented by the wife
of the plaintiff. Being the wife if the owner and having with her the title of the property, there was no reason for
the private respondent not to believe in her authority. Moreover, the power of attorney was notarized and as such
carried with it the presumption of its due execution. This, having had no inkling on any irregularity and having
not participation thereof, private respondent was a buyer in good faith . It has been consistently held that a
purchaser in good faith is one who buys property of another without notice that some other person has a right to ir
interest in such property and pays a full and fair price of the same, at the time of such purchase, or before he has
notice of the claim or interest of some other person in the property.
A property was mortgaged but there was an annotation of the right of usufruct. The obligation was not
paid, hence, there was foreclosure of the mortgage. Finally, there was sale. Is the morgagee-buyer, a
buyer in good faith? Why?
Yes, it is well-established rule that every person dealing with registered land may safely rely on the correctness of
the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the
condition of the property. An innocent purchaser for value ins one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair price for the same
at the time of such purchase or before he has notice of the claim of another person. The annotation of
usufructuary rights does not impose upon the mortgagee-buyer the obligation to investigate the validity of its

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mortgagor’s title. Usufruct have a right to enjoy the property of another with the obligation of preserving its form
and substance.. (Art 562).
Can a forged or fraudulent document vest title? Why?
Yes, in Spouses Romulo and Sally Eduarte vs CA, it was said that the rights of an innocent purchase for value must
be respected and protected notwithstanding the fraud employed by the seller in securing his title.
Define “accion redhibitoria” and “accion quantu minoris”
“Accion redhibitoria” is an action instituted by the vendee against the vendor to avoid a sale on account of some
vice or defect in the thing sold which renders it unfit for the use intended or which will diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, he would hot have acquired it. “accion quantu
minoris”, on the other hand, is an action to procure him return of a part of the purchase price paid by the vendee
to the vendor by reason of such defect. (Arts 1561, 1562, 1564, 1565, 1567, CC)
If there is a breach by the vendor of the implied warranty against hidden defects of or encumbrances
upon the thing sold, what are the remedies of the vendee? What is the period of prescription for such
remedies?
The vendee may elect between withdrawing from the contract (accion redhibitoria) and demanding a
proportionate reduction of the price (accion quantu minoris), with dames in either case (Art 1567, CC). Generally,
the period of prescription is six months (Art 1571, CC). However, in redhibitory actions based on the faults or
defects of animals, the period is forty days (Art 1577, CC). Whether six months or forty days, the period must be
counted from the date of delivery to the vendee.
What are the remedies in case of hidden defects?
The remedies are:
(1) Withdrawal or rescission (accion redibitoria) plus damages;
(2) Proportionate reduction (accion quanti minors o estimatoria) – reduction in the price, plus damages.
Is this warranty applicable in lease?)
Yes, this warranty in sales is applicable to lease. (Yap v. Tiaoqui)
On June 10,2010, S sold to B a specific a car which S acquired from a friend last June 1, 2010. On August
10, 2010, the car was totally destroyed which was traced to a crack in the engine block. S was not aware of
the defect. Is S, the seller, liable to B?
a. No, because S was innocent and a seller in good faith.
b. No, because S has all the opportunity to examine the car before buying it.

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c. Yes, S is liable to return the price and expenses incurred by B.
d. Yes, S is liable to return the price, expenses and damages actually suffered by B.
On February 15, 2010, A sold to B a specific car. On March 3, 2010, the car was totally destroyed which
was traced to a crack in the engine block. A, the vendor, was aware of the defect. Is A, the vendor, liable
to B?
Yes, A shall bear the loss and is liable to return the price, expenses and damages actually suffered by B.
Statement No. 1: If the thing sold should be lost in consequence of the hidden faults, and the vendor was
aware of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of
the contract, with damages.
Statement No.2: If the vendor was not aware of the hidden defects , he shall only return the price and
interest thereon, and reimburse the expenses of the contract which the vendee might have paid.
a. Both are true
b. Both are false
c. No. 1 is true, No. 2 is false
d. No. 1 is false, No. 2 is true
What is the effect of loss of thing on account of hidden defects when the vendor was aware of such hidden
defects?
The vendor shall bear the loss and the vendee hall have the right to recover the price paid, expenses of the
contract, with damages.
What is the effect of loss of thing on account of hidden defects when the vendor was not aware of such
hidden defects?
The vendor shall be obliged to return the price paid, interest thereon and expenses of the contract if paid by the
vendee.
If the thing sold was lost on account of hidden defects and the vendor was aware of such hidden defects,
the vendee can recover the following except:
a. the price paid
b. interest thereon
c. expenses of the contract
d. damages
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If the thing sold was lost on account of hidden defects and the vendor was not aware of such hidden
defects, the vendee can recover the following except:
a. the price paid
b. interest thereon
c. expenses of the contract if paid by the vendee
d. damages
Statement No. 1: If the thing sold was lost on account of hidden defects and the vendor was aware of such
hidden defects, the vendee can recover the price paid, interest thereon, expenses of the contract, with
damages.
Statement No.2: If the thing sold was lost on account of hidden defects and the vendor was not aware of
such hidden defects, the vendee can recover the price paid, interest thereon, and expenses of the contract
if paid by the vendee.
a. Both are true
b. Both are false
If the thing sold should be lost in consequence of the hidden faults and the vendor was aware of them.
The following are his obligations except:
a. he shall bear the loss
b. he shall be obliged to return the price
c. he shall refund the expenses of the contract, with damages
d. he shall return the price and interest thereon, expenses of the contract which the vendee might
have paid.
If the thing sold should be lost in consequence of the hidden faults and the vendor was not aware of
them. The following are his obligations except:
a. he shall return the price
b. he shall return the interest thereon
c. he shall reimburse the expenses of the contract which the vendee might have paid
d. he shall return the price and refund the expenses of the contract, with damages

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If the thing sold has hidden faults at the time o f sale and should thereafter be lost by a fortuitous event
or through the fault of the vendee, the vendor has the following obligation:
a. the vendor pays the price which the vendee paid as is
b. the vendor pays the price which the vendee paid less the value which the thing had when it was
lost
c. the vendor pays only the value which the thing had when it was lost
d. the vendor pays damages to the vendee regardless of whether or not the vendor had acted in bad faith
Statement No. 1: If the thing sold has hidden faults at the time o f sale and should thereafter be lost by a
fortuitous event or through the fault of the vendee, the vendor has the obligation to pay only the value
which the thing had when it was lost.
Statement No. 2: If the thing sold has hidden faults at the time o f sale and should thereafter be lost by a
fortuitous event or through the fault of the vendee, the vendor pays damages to the vendee regardless of
whether or not the vendor had acted in bad faith.
a. Both are true
b. Both are false
S sold a car for P300,000 to B. Unknown to B, the car then had a cracked engine block, the replacement
of which would cost P75,000. Despite his knowledge of this defect, S obtained a waiver from B of the
latter’s right under the warranty against hidden defects. Subsequently, the car was wrecked due to the
recklessness of B who only then discovered the defects. What right, and to what extent, if any, has B
against S?
B can recover approximately P75,000, which may represent the difference between the purchase price and the
true value. The waiver is void because S knew of the defect.
S sold a car for P300,000 to B. Unknown to B, the car then had a cracked engine block, the replacement
of which would cost P75,000. Despite his knowledge of this defect, S obtained a waiver from B of the
latter’s right under the warranty against hidden defects. Subsequently, the car was wrecked due to the
recklessness of B who only then discovered the defects. Which of the following statements is true?
a. S still liable to reimbursed B of P75,000 the difference between the purchase price and true
value.
b. The waiver is void because B has no knowledge of the defect.
c. S is not liable anymore because the car got loss due to the recklessness of B.
d. The liability of S remains to be 300,000 because of breach of warranty against hidden defects.

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If the thing with hidden defect was lost through fortuitous event or through the fault of the vendee, what
right, and to what extent, if any, has the vendee against the vendor?
The vendee may demand of the vendor the price which he paid, less the value which the thing had when it was
lost. If the vendor acted in bad faith, he shall pay damages to the vendee.
What is the effect if the thing with hidden defect was lost due to fortuitous event or fault of the vendee
and the vendor has no knowledge of such hidden defect?
The vendor is liable to return the difference between the price paid and the value of the thing when it was lost.
Such that, if the price is P10,000 and at the time of the loss of the thing sold as only P8,000, the vendee may still
recover from the vendor P2,000.
Statement No. 1: If the thing with hidden defect was lost through fortuitous event or fault of the vendee
and the vendor has no knowledge of such hidden defect, the vendor is obliged to return the price paid
less the value which the thing had when it was lost.
Statement No.2: If the vendor acted in bad faith (with knowledge of the hidden defect), the vendor shall
pay damages to the vendee.
a. Both are true
b. Both are false
If the thing with hidden defect was lost through fortuitous event or fault of the vendee and the vendor has
no knowledge of such hidden defect, the vendor is obliged to return:
a. the price paid less the value which the thing had when it was lost
b. the price paid, expenses of the contract, with damages
c. price paid, interest thereon and expenses of the contract if paid by the vendee
d. the original price paid only
Antonio sold a car for P200,000 to Bartolome. Unknown to Bartolome, the car then had a break defect,
the replacement of which would cost P15,000. Despite his knowledge of this defect, Antonio obtained a
waiver from Bartolome of the latter’s right under the warranty against hidden defects. Subsequently, the
car was wrecked due to the recklessness of Bartolome who only then discovered the defects. What right,
and to what extent, if any, has Bartolome against Antonio?
Bartolome can recover approximately P15,000, which may represent the difference between the purchase price
and the true value. The waiver is void because Antonio knew of the defect.

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Allan sold a car for P200,000 to Bart. Unknown to Bart, the car then had a break defect, the replacement
of which would cost P15,000. Subsequently, the car was wrecked due to the recklessness of Bart who only
then discovered the defects. What right, and to what extent, if any, has Bart against Allan?
a. the vendor pays the price which the vendee paid as is
b. the vendor pays the price which the vendee paid less the value which the thing had when it was
lost
c. the vendor pays only the value which the thing had when it was lost
d. the vendor pays damages to the vendee regardless of whether or not the vendor had acted in bad faith
Do the provisions under Articles 1561 to 1569 of the Civil Code applicable also to judicial sales?
Yes, under Article 1570 of the Civil Code, the provisions under articles 1561 to 1569 of the Civil Code shall be
applicable to judicial sales, except that the judgment debtor shall not be liable for damages.
What are the actions that shall be barred after six months from the delivery of the thing sold?
The following are the actions that shall be barred after six months from the delivery of the thing sold:
1. breach of warranty against hidden defects
2. rescission of contract because of hidden defects
3. proportionate reduction in the price because of hidden defects
The following are the actions that shall be barred after six months from the delivery of the thing sold.
Which is the exception?
a. breach of warranty against hidden defects
b. rescission of contract because of hidden defects
c. proportionate reduction in the price because of hidden defects
d. redhibitory action, based on the frauds or defects of animals
For what causes of action, if any, does the new Civil Code provide a period of limitation of six months?
The following causes of action have a period of limitation of six months:
1. breach of warranty against hidden defects
2. rescission of contract because of hidden defects
3. proportionate reduction in the price because of hidden defects

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What is the prescriptive period for actions arising from breach of warranty against hidden defects,
rescission of contract because of hidden defects, and proportionate reduction in the price because of
hidden defects?
The prescriptive period for actions arising from breach of warranty against hidden defects, rescission of contract
because of hidden defects, and proportionate reduction in the price because of hidden defects is six months from
delivery of the thing sold.
B bought from S two carabaos for P50,000 to be used for breeding purposes. The male carabao in
infected with mouth and foot disease (not contagious), while the female carabao is in sound state. What
right, and to what extent, if any, has B against A?
The right of B is to ask for the rescission of the contract because the two carabaos are bought in “set” for breeding
purposes. However if these carabaos will not be used for breeding purposes, the only right of B is to ask for
rescission or reduction in the price pertaining to the male carabao, or unless it is shown that he would not have
bought the sound animal without the other.
What is the effect of sale of two or more animals when one of the animals has redhibitory defect?
In sale of animals, the redhibitory defect of one animal shall give rise only to its redhibition and this will not apply
to the other sound animal, unless the buyer could prove that he would not have purchased the sound animal or
animals without the defective one. This proof is unnecessary when animals are bought as team, yoke, pair or set,
even if a separate has been fixed for each one of them.
In sale of animals, the redhibitory defect of one animal shall give rise only to its redhibition and this will
not apply to the other sound animal, unless the buyer could prove that he would not have purchased the
sound animal or animals without the defective one. What are the exceptions when proof by the buyer
that he would not have purchased the sound animal or animals without the defective one is not
necessary?
The exceptions are when the animals are bought as team, yoke, pair or set, even if a separate has been fixed for
each one of them.
If two or more animals are sold together, does the redhibitory defect of one shall only give rise to its
redhibition, and not of the others whether the price was a lump sum?
Yes, under Article 1572 of the Civil Code, if two or more animals are sold together, whether for a lump sum or for a
separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not of the
others; unless it should appear that the vendee would not have purchased the sound animal or animals without
the defective one.
Statement No. 1: If two or more animals are sold together, the redhibitory defect of one shall only give
rise to its redhibition, and not of the others when the animals are bought only for a separate price for
each of them and not for a lump sum.
Statement No. 2: In sale of animals, the redhibitory defect of one animal shall give rise only to its
redhibition and this will not apply to the other sound animal, regardless of whether or not the buyer
could prove that he would not have purchased the sound animal or animals without the defective one.
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a. Both are true
b. Both are false
Is Article 1572 of the Civil Code applicable also to sale of other things?
Yes, under Article 1573 of the Civil Code, it provides that the provisions of the preceding article (article 1572) with
respect to the animals shall in like manner be applicable to the sale of other things.
What are the instances when there is no warranty against hidden defects of animals sold?
The following are the instances when there is no warranty against hidden defects of animals sold:
1. Animals sold at fairs
2. Animals sold at public auctions
3. Livestock sold as condemned, declared known to the buyer
In three of the following there is no warranty against hidden defects of animals. Which is the exception?
a. Animals sold at fairs
b. Animals sold at public auctions
c. Livestock sold as condemned, declared known to the buyer
d. Livestock sold as is
Which of the following statements is not true?
a. There is no warranty against hidden defects of animals sold at fairs.
b. Ther e is no warranty against hidden defects of animals sold at public auctions.
c. There is no warranty against hidden defects of livestock sold as condemned regardless of

whether or not communicated to the buyer.
d. There is no warranty against hidden defects of livestock sold as condemned provided it is communicated to the
buyer.
Which of the following statements is true?
a. There is warranty against hidden defects of animals sold at fairs.

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b. Ther e is warranty against hidden defects of animals sold at public auctions.
c. There is warranty against hidden defects of livestock sold as condemned regardless of whether or not
communicated to the buyer.
d. There is warranty against hidden defects of livestock sold as condemned when such fact is not
communicated to the buyer.
What are the two kinds of void sales with respect to animals?
The two kinds of void sales with respect to animals are the following:
1. Sale of animals suffering from contagious disease
2. Sale of animals which are found to be unfit for the use or service stated in the contract for which they are
acquired
Statement No. 1: The sale of animals suffering from contagious disease shall be void.
Statement No. 2: A contract of sale of animals shall also be void if the use or service for which they are
acquired has been stated in the contract, and they are found to be unfit therefor.
a. Both are true
b. Both are false
a. The sale of animals suffering from contagious disease shall be void.
b. The sale of animals suffering from contagious disease shall be voidable.
c. The sale of animals which are found to be unfit for the use stated in the contract for which they are acquired
shall be void.
d. The sale of animals which are found to be unfit for the service stated in the contract for which they are acquired
shall be void.
a. The sale of animals suffering from any disease whether contagious or not shall be void.
b. The sale of animals suffering from contagious disease shall be voidable.
c. The sale of animals which are found to be unfit for the use or service stated in the contract for
which they are acquired shall be void.

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d. The sale of animals which are found to be unfit for the use or service stated in the contract for which they are
acquired shall be voidable.
B manifested to S that he is buying a male carabao for breeding purposes. S offered to B his carabao for
P20,000, a “tested bore” for breeding. However, it turns out that the carabao is castrated. What is the
effect of such sale?
The sale is void because the carabao will be unfit for breeding purposes. Under Article 1575 of the Civil Code, a
contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the
contract, and they are found to be unfit therefor.
What is a redhibitory defect?
It is a defect of such a nature that expert knowledge, even in case of professional inspection, is not sufficient to
discover.
What is the nature of the defect to be redhibitory?
To be redhibitory, it is not sufficient if the defect was not discovered by an expert. What is required is that the
defect would not have been discovered even with the aid of an expert. However, if the expert through ignorance
failed to discover it, or through bad faith, failed to reveal the same to the vendee, he shall be held liable for
damages.
B bought from S a male carabao for P20,000 to be used for breeding purposes. The service of a
veterinarian was engaged to check if the carabao was in good condition for breeding purposes.
Unfortunately, the carabao has a redhibitory defect. What is the liability, if any, of the veterinarian?
The veterinarian shall be liable for damages if through ignorance or bad faith has failed to discover or disclose the
defect to the vendee.
For what causes of action, if any, does the new Civil Code provide a period of limitation of forty (40)
days?
The redhibitory action, based on faults or defects of animals, must be brought within forty (40) days from the date
of their delivery to the vendee.
What is the action that shall be barred after forty (40) days from the delivery of the thing sold?
The redhibitory action, based on faults or defects of animals, shall be barred after forty (40) days from the date of
their delivery to the vendee.
What is the prescriptive period for redhibitory action based on faults or defects of animals?

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The prescriptive period for redhibitory action based on faults or defects of animals is forty (40) days from the date
of their delivery to the vendee.
When can redhibitory action be exercised?
Redhibitory action can only be exercised with respect to faults and defects which are determined by law or
by local customs.
Statement No. 1: The redhibitory action, based on faults or defects of animals, must be brought within
forty (40) days from the date of their delivery to the vendee.
Statement No. 2: Redhibitory action can only be exercised with respect to faults and defects which are
determined by law or by local customs.
a. Both are true
b. Both are false
a. The redhibitory action, based on faults or defects of animals, must be brought within six (6) months from the
date of their delivery to the vendee.
b. The redhibitory action, based on faults or defects of animals, must be brought within forty (40)
days from the date of their delivery to the vendee.
c. Redhibitory action can only be exercised with respect to faults and defects which are stipulated by the parties.
d . The redhibitory action, based on faults or defects of animals, must be brought within forty (40) days from the
date of payment of the price.
a. The redhibitory action, based on faults or defects of animals, must be brought within six (6)
months from the date of their delivery to the vendee.
b. The redhibitory action, based on faults or defects of animals, must be brought within forty (40) days from the
date of their delivery to the vendee.
c. Redhibitory action can only be exercised with respect to faults and defects which are determined by law.
d. Redhibitory action can only be exercised with respect to faults and defects which are determined by local
customs.
What are the requisites to concur before the vendor is liable in sale of animals?
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The following are the requisites to concur before the vendor is liable in sale of animals:
1. Existence of the disease at the time of sale.
2. That disease must have been the cause of death.
3. Death of the animal should take place within three days after purchase.
What is the effect if the animal should die within three days after its purchase?
If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause
the death existed at the time of the contract.
The vendor shall be liable for the death of animal after its purchase when the following requisites are
present. What is the exception?
a. Existence of the disease at the time of sale.
b. That disease must have been the cause of death.
c. That disease must have been contagious.
d. Death of the animal should take place within three days after purchase.
Is the vendor liable if the animal should die after its purchase?
The vendor shall be liable only if the animal should die within three days after its purchase and the disease which
causes the death of the animal existed at the time of the contract.
What is the effect if the sale of the animal is rescinded?
If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the
vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect.
What is the liability of the vendee if the sale of the animal is rescinded?
If the sale be rescinded, the vendee shall be answerable for any injury due to his negligence, and not arising from
the redhibitory fault or defect.
If the sale of animal be rescinded, what is the condition of the animal when it shall be returned?
If the sale be rescinded, the animal shall be returned in the condition, in which it was sold and delivered.

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a. If the sale be rescinded, the animal shall be returned in the condition in which it was sold.
b. If the sale be rescinded, the animal shall be returned in the condition in which it was delivered.
c. If the sale be rescinded, the vendee shall be answerable for any injury due to his negligence, and not arising
from the redhibitory fault or defect.
d. If the sale be rescinded, the vendee shall not be answerable for any injury.
What are the remedies of buyer of animals with redhibitory defects?
The following are the remedies of buyer of animals with redhibitory defects:
1. withdrawal or rescission (plus damages)
2. proportionate reduction in price (plus damages)
What is the prescriptive period for the remedies of buyer of animals with redhibitory defects?
The prescriptive period shall be 40 days from the date of delivery to the buyer.
What shall govern the form of sale of large cattle?
The form of sale of large cattle shall be governed by special laws.
OBLIGATIONS OF THE VENDEE
What are the principal obligations of the buyers?
The following are the principal obligations of the buyers:
1. to accept the delivery of the thing sold
2. to pay the price of the sale
On January 5, A sold and delivered his truck, together with the corresponding certificate of public
convenience to B for the sum of P600,000, payable within sixty (60) days. Two weeks after the sale, and
while the certificate of public convenience was still in the name of A, it (the certificate) was revoked by
the Public Service Commission through no fault of A. Upon the expiration of the ^0-day period, A
demanded payment of the price from B. B refused to pay, alleging that the contract of sale was void for
the reason that the certificate of public convenience which was the main consideration of the sale no
longer existed. Is the contention of B tenable? Reasons.
Under the circumstances, the contention of B is not tenable.
(a) Firstly, it cannot be correctly contended that the sale is void, since the consideration actually existed at the
time of the perfection of the sale. The subsequent revocation of the certificate thru no fault of A is immaterial.
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(b) Secondly, what B should have done immediately after the sale was to take steps to have the Public Service
Commission transfer the certificate to his name. (Serrano v. Miave, et al., L-14678, March 31, 1965)
(c) Thirdly, while the Public Service Law requires that the sale or assignment of a certificate of public convenience,
together with the property used in the operation of the same, should be approved by the Public Service
Commission – for the protection of the public, still as between A and B, the contract is efficacious as all the
essential requisites of the contract were present at the time of perfection thereof.
What is the effect of delivery when no time has been fixed for payment of the price?
If the seller has delivered but no time has been fixed for the payment of the price, the seller may require the
payment to be made at anytime after delivery. The buyer here has the duty to pay the price immediately upon the
demand. (Ocejo v. Int. Bank, 37 Phil. 631)
What is the effect of deviations from the provisions of the contract of sale?
If the seller is forced to deviate from the provision of the contract, but the purchaser consents or agrees to such
deviations, the purchaser should still pay the price. ( Engel v. Velasco & Co., 47 Phil. 15)
Statement No. 1: The vendee is bound to accept delivery and to pay the price of the thing sold at the time
and place of stipulated in the contract.
Statement No. 2: If the time and place should not have been stipulated, the payments must be made at the
time and place of the delivery of the thing sold.
a. Both are true
b. Both are false
A sold to B the former’s horse for P5,000. No date is fixed by the parties for the performance of their
respective obligations. The obligation of A is
a. to deliver the horse immediately as there is a perfected contract
b. to deliver the horse upon payment by B of P5,000
c. to deliver the horse upon within a reasonable time of two months from the contract date
d. to rescind the contract as there is no time fixed for the delivery and payment
Where and when must payment be made in the absence of any stipulation?
If the time and place should not have been stipulated, the payment must be made at the time and place of the
delivery of the thing sold. (Art. 1583)

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What is the obligation of the vendee when the thing is sold to him?
The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the
contract.(Art. 1583)
Why is there no delivery if payment is made in installments?
The reason is because performance must generally be complete. (Art. 1583)
Is the buyer of goods bound to accept delivery thereof by installments?
No, he is not bound to accept delivery thereof by installments unless otherwise stipulated.
What is the effect in case when there is a separate price for each installment and there is a breach thereof
by any of the parties?
Breach in any installment affects the whole contract. The injured party may sue for breach of entire contract. (Art.
1583)
What is the rule in the case of installment deliveries and there is a separate price for each installment?
If the breach affects the whole contract, the injured party may sue for breach of entire contract when seller makes
defective or incomplete deliveries; or buyer wrongfully neglects or refuses to accept delivery; or buyer fails to pay
any installment. If breach is severable, only claim for compensation for particular breach may be allowed. (Art.
1583)
What is the effect when the goods are delivered to the buyer without him having previously examined
them?
Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining
whether they are in conformity with the contract if there is no stipulation to the contrary. (Art. 1583)
In what instance/s is the buyer is deemed to have accepted the goods which he has not previously
examined?
Where goods are delivered to the buyer, which he has not

previously examined, he is deemed to have accepted them if he has had a reasonable opportunity of examining
them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to
the contrary. (Art. 1584)

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Is the seller bound to afford the buyer a reasonable opportunity to inspect the goods for the purpose of
ascertaining whether they are in conformity with the contract?
Yes, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity
with the contract, unless otherwise agreed. (Art. 1584)
What are the buyer’s rights in relation to the examination of goods?
Upon ACCEPTANCE, the buyer may assent to become owner of the specific goods when delivery of them
is offered to the buyer.
Upon EXAMINATION , examination is a condition precedent to transfer ownership. (Art. 1584)
Is the vendor bound to offer the thing for examination before delivery without the request of the vendee?
Examination before delivery should be made by request. Vendor is not bound to offer the thing for examination
before delivery without the request of the vendee. (Art. 1584)
When is the thing considered accepted?
When the thing is delivered, the thing is considered accepted if the vendee has examined it or has
reasonable opportunity to examine it. (Art. 1584)
What is the rule in case of COD (collect on delivery)?
The buyer is not entitled to examine until payment is made, EXCEPT when there is an agreement or that the usage
of trade permits the same. In COD, goods are not to be delivered by the carrier to the buyer unless the latter pays.
(Art. 1584)
When does the buyer have the right to examine?
Generally, the buyer is entitled to examine the goods prior to delivery. This is true even if the goods are shipped
“free on board”.
In what instances does the buyer have no right to examine?
The buyer has a right to examine if there is a stipulation to this effect and when the goods are delivered C.O.D-
unless there is an agreement or usage of trade permitting such examination.
When is there acceptance of the goods?
There are three ways of acceptance of goods:

a.) express acceptance of goods
b.) when buyer does an act which only an owner can do
c.) failure to return after reasonable lapse of time (Art. 1585)
When a buyer accepted goods despite delay and also promised later on to pay, may the buyer
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subsequently ask for damages on account of delay?
No, the buyer is stopped because of the acceptance without reservation at the time of acceptance. (Art. 1585)
What are the modes of manifesting acceptance?
The modes of manifesting acceptance are:

1. EXPRESS ACCEPTANCE – the buyer intimates to the seller that he accepts the thing
2. IMPLIED ACCEPTANCE – may be either of the following:
a. Buyer does an act inconsistent with the seller’s ownership; or
b. Buyer’s retention of goods without intimating rejection after the lapse of reasonable time.
Does acceptance of the goods by the buyer discharge the seller from liability in damages or other legal
remedy for breach of any promise or warranty in the contract of sale?
No, acceptance is not a bar to action for damages. However, notice must be given to the seller within a reasonable
time. (Art. 1586)
When is the buyer’s refusal to accept justified?
He is justified in refusing to accept when the risk of loss is still with the seller. (Art. 1586)
In a contract of sale is the buyer is liable as a depositary?
Buyer is not liable as DEPOSITARY unless he voluntarily constitutes himself as such.
What are the effects if the buyer justifiably refuses to accept the delivery?
The buyer has no duty to return the goods to the seller. Mere notification to seller of refusal will suffice but the
buyer may make himself a voluntary depositary-in which case he must safely take care of them in the
meantime.(Art. 1587)
What is the effect if the buyer unjustifiably refuses to accept the delivery?
Title passes to the buyer the moment it is placed at his disposal.
What is the exception to the rule that title passes to the buyer when he unjustifiably refuses to accept
delivery?
The exception is when there is a contrary stipulation or when the seller reserves the ownership as a sort of security
for the payment of the price. (Art. 1588)
When is the vendee liable for interest on the price?
The vendee is liable for interest on the price in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income; and
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(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. (Art.
1589)
When is the buyer said to be in default with regards to legal interest?
If the buyer fails to give the money after the contract is notarized, although he had previously promised to
do so, there is default with liability for legal interest. (Art. 1589)
If it has been stipulated that vendee shall owe interest, is demand still necessary?
No demand is needed. Fruits or income is sufficient to warrant the payment of interest. (Art. 1589)
Should it have been so stipulated that the vendee shall owe interest for the period between the delivery of
the thing and the payment of the price, must the stipulation be in writing?
The stipulation on interest may be oral. Interest which must be in writing refers only to loan.
When may the buyer suspend the payment of the price?
The buyer may suspend payment of the price when:

a) there is well-grounded fear
b) the fear is because of:
1. a vindicatory action or action to recover
2. foreclosure of mortgage (Art. 1590)
When may the vendee suspend the payment of the price?
The vendee may suspend the payment of the price in the following cases:
1) Should he be disturbed in the possession or ownership of the thing sold; or
2) Should he have reasonable grounds to fear such disturbance by a vindicatory action or by a
foreclosure of mortgage. (Art. 1590)
SS sold and delivered to BB a parcel of land for 2 Million pesos payable within 30 days from the date of
contract. Soon after the sale, XX claims ownership over the land by virtue of a prescriptive title. May BB
suspend the payment of the price?
Yes, B may suspend the payment of the price because of a reasonable fear that an action reinvidicatoria
will be brought against him. It is not necessary that the vindicatory action has already been brought: reasonable
fear thereof is sufficient.(Art. 1590)
What are the exceptions to the right of a vendee to suspend payment of the price?
The exceptions are:

1) Should there be a stipulation to that effect;
2) Should the vendor give security for the return of the price;
3) Should the vendor have caused the disturbance or danger to cease; or
4) Should the disturbance consist of only of a mere act of trespass. (Art. 1590)

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A sold a parcel of land to B. Thereafter, C filed a suit against A and B for quieting of title. During
pendency, may B suspend payment?
Yes. B has reasonable ground to fear that his possession or ownership would be disturbed by a vindicatory
action. (Art. 1590)
Suppose in the problem aforementioned, C only claims for a part of the land. May there be suspension of
payment?
Yes, B may still suspend payment for the entire amount.
Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, may the vendee recover what has already been paid?
No, the vendee may retain only the price that has not been paid to the vendor. He is not entitled to recover
what has already been paid.
May the seller immediately sue for the rescission of the sale?
The seller must have reasonable grounds to fear the loss of the immovable property and the loss of the
price. (Art. 1591)
What are the requisites in order for the vendor to rescind sale of immovable property or in cases of
anticipatory breach?
The REQUISITES are :
(a) There is delivery of immovable property

(b) Vendee has not paid the price
(c) Vendor has reasonable ground to fear the:
a. LOSS of PROPERTY; AND
b. LOSS of PRICE
What is the rule if in the previous question neither ground exists?
The provisions of Article 1191 shall apply. The article says:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is
understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.
A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a
public document on1 July 2010, and B bound himself to pay on 31 December 2010. B did not pay A on 31
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December 2010. What is/are the remedy/ies of A?
A may choose between fulfillment and rescission of the obligation with payment of damages in either case on
the ground that B does not comply with what is incumbent upon him (Article 1191). Should there be a reasonable
ground to fear the loss of property sold and its price, A may immediately sue for rescission of the sale. (Article
1591)
A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a
public document on 1 July 2010, and B bound himself to pay on 31 December 2010. A real estate
mortgage was constituted on the property, having A as the mortgagee. B did not pay A on 31 December
2010. May A rescind the sale?
No. Upon the constitution of Real estate mortgage, the contract has been changed into one of payment of a loan.
On July 1, AA sold BB a piece of land, payment and delivery to be made on July 15. It was stipulated that
should payment not be made on July 15, the contract would automatically be rescinded. On July 20, can
BB still pay?
Yes, as long as there has been no judicial or notarial demand for the rescission of the contract. But if, for
example on July 18, AA had made a notarial demand for such a rescission then BB will not be allowed o pay
anymore, and the court may not grant him a new term. (Art. 1592)
What is the demand needed for the rescission of the contract after expiration of the term agreed upon?
The demand is not for the payment f the price inasmuch as the seller precisely desires to rescind the contract. It
is, therefore a demand for rescission; the term having expired, the seller does not want to continue with the
contract. (Art. 1592)
May the vendee still pay even if there is no judicial or notarial demand?
Yes, the vendee may still pay when there is no judicial or notarial demand Offer to pay is sufficient to defeat
vendor’s prerogative. (Art. 1592)
Is the vendor’s right to rescind absolute?
No, the vendor’s right to rescind is not absolute. Art. 1191, par. 3 provides that the court may grant vendee a
new term. However, if there is already a demand, the court may no longer fix a term.
In what instances may the vendee no longer pay the price after the expiration of the time agreed upon
although no demand has yet been made upon him by suit or notarial act?
The vendee may no longer pay the price in the following instances:
1. Sale on installment of real estate (Caridad Estates vs Santero)– governed by Maceda Law
2. Mere promise to sell real estate / Conditional sale– there can be no rescission in contract to sell
3. Cases under RA 6552 (RA 6552 recognizes the vendor’s right to cancel unqualifiedly in case of industrial lots,
commercial buildings, etc. with a refund of certain percentages of payments made on account of cancelled
contract)

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Does Article 1592 apply to a promise to sell?
No, it does not apply to a promise to sell. Article 1592 speaks only of the rescission of contracts of sale of real
property and does not apply to contracts to sell real property on installments. (Roque vs. Lapuz, March 31, 1980)
AA failed to pay the price of a parcel of land within the agreed period. BB cancelled the contract before
the period to pay arrived. Is AA guilty of failure to pay the price of land within the period agreed upon?
No, Article 1592 contemplates of a situation where the buyer who fails to pay the price at the time agreed upon,
may still pay, even after the expiration of the period, as long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act.
What are the rights of the vendor where automatic rescission of sale of movable property is stipulated?
Vendor can rescind the contract as a matter of right if the vendee does not:
(a) Accept; or
(b) Pay unless credit period for payment is stipulated. (Art. 1593)
ACTIONS FOR BREACH OF CONTRACT
OF SALE OF GOODS
What actions are available to the seller in case of breach of contract of sale of goods?
His remedies are:

1.Action for the price / Specific performance (Art. 1595)
(a) when the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods
according to the terms of the contract;
(b) when price is payable on certain day, irrespective of delivery or transfer of title, and the buyer wrongfully neglects or;
refuses to pay [BUT: it is a defense to such action that seller has manifested an inability or lack of interest to perform his
obligation before judgment]
(c) if goods cannot readily be resold for a reasonable price, although transfer of ownership has not passed– seller may
offer to deliver the goods to the buyer; if buyer refuses to receive, seller may notify the buyer that he holds the goods as
bailee for the buyer. Thereafter, the seller may treat the goods as buyer’s and may maintain an action for the price.
When may a seller institute an Action for Damages in case of breach of contract of sale of goods?
A seller may institute an action for damages when buyer wrongfully neglects or refuses to ACCEPT and PAY for
the goods.
The measure of damages should be the estimated loss directly and naturally resulting in the ordinary course of
events from the buyer’s breach.
When may a seller rescind in case of breach of contract of sale of goods?
When there is no delivery of goods yet the seller may totally rescind by giving notice of his election to do so to
the buyer if:
(1) Buyer has repudiated the contract of sale;

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(2) Buyer has manifested his inability to perform obligations; or

(3) Buyer committed a breach (Art. 1597)
What is the measure of damages when there is an available market?
The MEASURE OF DAMAGES (WHEN THERE IS AVAILABLE MARKET) should be the difference between the
contract price and the market or current price at the time the goods ought to have been accepted, or at the time of
refusal to accept when there is no time fixed.
The seller and the buyer agreed that payment and delivery would be made on July 15, at the buyer’s
house. What is the consequence if f the buyer does not appear on said day, or having appeared, he
should not have tendered the prices at the same time?
The sale can be considered as automatically rescinded.
SS sold BB a piano. What is SS's remedy if B wrongfully refuses to accept and pay for the goods?
SS may bring an action against him for damages for non-acceptance. (Art. 1596)
What is the measure of damages where the buyer wrongfully neglects or refuses to accept and pay for the
goods ?
The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events
from the buyer's breach of contract. (Art. 1596)
What actions are available to the seller of the goods?
His remedies are:

1. Maintain an action for damages.
2. Hold the goods as bailee for the buyer and bring an action for the price.
3. Ask for the resolution of the contract for failure of the buyer to fulfill his obligations.
Is there such thing as an automatic rescission?
Yes, but such rescission requires notice thereof to the buyer.
What are the instances when seller may totally rescind the contract of sale?
The buyer may totally rescind the contract where the goods have not been delivered to the buyer, and the buyer
has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has
committed a breach thereof.
How does Technical Rescission take place?
Technical rescission takes place when the seller may totally rescind by giving notice of his election to do so to the
buyer provided there is no delivery of goods yet. (Art. 1597)

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What is the remedy of the buyer in case the seller has broken a contract to deliver a specific or
ascertained goods?
Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of
the buyer, direct that the contract shall be performed specifically, without giving the seller the option of retaining
the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and otherwise, as the court may deem just. (Art. 1598 NCC)
What is the remedy of the buyer when there is a breach of warranty by the seller?
Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in
diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return
them or offer to return them to the seller and recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter
be granted, without prejudice to the provisions of the second paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty
when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning
or offering to return the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon
returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be
liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after
an offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the
buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but
subject to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by Article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing
proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery
to the buyer and the value they would have had if they had answered to the warranty. (Art. 1599 NCC)
Can the buyer exercise all the remedies granted to him under Article 1599?
No, under Article 1599, the law provides when the buyer has claimed and been granted a remedy in anyone of
those enumerated, no other remedy can thereafter be granted, without prejudice to the provisions of the second
paragraph of Article 1191.

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Can the buyer rescind the sale if the goods have been delivered?
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty
when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning
or offering to return the goods to the seller and rescinding the sale. (Art. 1599 NCC)
When the buyer is entitled to rescind the sales and elects to do so, is he still liable for the price of the
thing delivered?
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon
returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be
liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after
an offer to return the goods in exchange for repayment of the price. . (Art. 1599 NCC)
What is the remedy of the buyer in case he is entitled to rescind the sale and elects to do but the seller
refuses to accept an offer of the buyer to return the goods?
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the
buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but
subject to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by Article 1526. (Art. 1599 NCC)
How can you determine loss in case of breach of warranty of quality in the absence of special
circumstances showing proximate damage of greater amount?
In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate
damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered to the warranty. (Art. 1599 NCC)
EXTINGUISHMENT OF SALE
Articles 1600 -1623
How can sales are extinguished?
Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this
Title, and by conventional or legal redemption. (Art. 1600 NCC)
When does conventional redemption take place?
Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with
the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed
upon. (Art. 1601 NCC)

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What is the obligation of the vendor to the vendee in case of conventional redemption?
The vendor is obligated to return the price delivered as well as the expenses of the contract and necessary and
useful expenses made on the thing.
Is it necessary that the right to repurchase be reserved in the same instrument of sale? Why?
Yes, the right to repurchase must be reserved in the same deed of sale. If it is reserved in a separate instrument,
then the document is not a sale with right to repurchase. The same is merely a promise to sell which is
discretionary on the part of the vendee a retro. ( Sy vs. CA, 131 SCRA 116).
What is the effect of reserving the right to repurchase in a separate instrument instead of reserving it in
the same instrument?
If it is reserved in a separate instrument, then the document is not a sale with right to repurchase. The same is
merely a promise to sell which is discretionary on the part of the part of the vendee a retro. ( Sy vs. CA, 131 SCRA
116).
The contract of sale with right to repurchase provided that the repurchase price shall be P 14,000.00
plus all costs of money equivalent to 30%, real estate and documentary stamps, and other incidental
expenses. The question is whether the amount to be paid in case of repurchase is limited to those under
Art. 1616, NCC.
As a rule, yes, unless otherwise agreed upon. In fact, Art 1601, NCC provides:
“Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with
the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed
upon.”
It is clear, therefore, that the provisions of Art. 1601 require petitioner to “comply with xxx the other stipulations”
agreed upon.
May a check be tendered when the vendor a retro exercise the right to repurchase? Why?
Yes, because the exercise of the right to repurchase is a right not an obligation. The tender of a check is sufficient
to compel redemption, but it is not in itself a payment that relieves the redemptioner from his liability to pay the
redemption price. (Fortunato, et al. vs. CA, et al., G. R. no. 78566, April 25, 1991).
When is a contract deemed to be an equitable mortgage?
The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of redemption is granted or an agreement granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;

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(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the usury laws. (Art. 1602 NCC)
A contract of sale over a parcel of land was entered into by and between the parties for only P80,000.00.
It was being questioned, as the intention was one of equitable mortgage. It was found out that the
payments amounted to P120,000.00, but evidence was shown that the amount of P 80,000.00 was
placed in the contract to reduce the documentary stamps, transfer tax, etc.
Is the conveyance one of sale or merely a security for the payment of a loan?
It is one of sale. The presumption of equitable mortgage will apply only if it is clearly shown that the
consideration was unusually inadequate such that the mind revolts at it and such that a reasonable man would
neither directly nor indirectly be likely to consent to it. ( Vda. De Alvarez vs. CA, et al., G.R. no. 110970, March 16,
1994, 49 scad 663)
When can a contract be a presumption that a contract of sale is one of equitable mortgage?
They are:
1. The parties must have entered into a contract denominated as a contract of sale;
2. The intention of the parties was to secure an existing debt by way of mortgage. (Lustan vs. CA, et al.,
G.R. no. 111924, January 27, 1997, 78 scad 351).
X and Y entered into a contract of sale with right to repurchase over a parcel of land. Despite the sale, X,
the seller, retained possession. The contract also provides for a monthly escalation of the repurchase
price. What is the nature of the contract? Why?
It is an equitable mortgage. In Bundalian vs. CA, 129 SCRA 645, it was said that an equitable mortgage exists
where vendors are given the right to possess property pending redemption. In the same case, the SC said that
monthly escalation of repurchase price indicates a loan transaction secured by an equitable mortgage.
How can you a construe a contract purporting to be a sale with a right to repurchase?
In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable
mortgage. (Art. 1603 NCC)
What rule shall apply to a contract purporting to be an absolute sale?
The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. (Art. 1604 NCC)

SALES
What is the effect of the execution of contract extending a contract of sale with right to repurchase?
The extension can be construed as indicative of an equitable mortgage. (Claravall vs. CA, 190 SCRA 439).
What is the remedy of the vendor in cases referred to in Articles 1602 and 1604?
In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the
instrument. (Art. 1605 NCC)
Within what period should the vendor a retro repurchase the property?
The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of
the contract. Should there be an agreement the period cannot exceed ten years. (Art. 1606 NCC)
Should there be an agreement regarding the period of right to repurchase, what is the maximum period
allowed by law?
Should there be an agreement, the period cannot exceed ten years. (Art. 1606 NCC)
What is the essence of a sale with right to repurchase? Explain
The essence of a sale with right to repurchase is that title and ownership of the property sold are immediately
vested in the vendee a retro subject to the resolutory condition of repurchase by the vendor a retro within the
period stipulated. Failure to perform said resolutory condition vests upon the vendee by operation of law absolute
title or ownership over the property sold.
Failure of the vendee a retro to consolidate ownership does not impair such title, for the method prescribed under
article 1607 is merely for the purpose of registration of the consolidated title.
Can the vendor still exercise the right to repurchase after a finality of a judgment declaring the contract
one with right to repurchase?
Yes, the law provides that the vendor may still exercise the right to repurchase within thirty days from the time
final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.
(Art. 1606 NCC)
Under article 1606, NCC, the vendor may still exercise the right to repurchase within 30 days from the
finality of a judgment declaring the contract one with right to repurchase. How does this apply?
The rule applies where the party denies that the sale is one with right to repurchase, not in those cases where the
contract is conclusively a sale with right to repurchase. ( Adorable vs. Inacala, 103 Phil. 481)
On January 02, 1980, A and B entered into a contract whereby A sold to B a parcel of land for and in
consideration of P 10,000.00 with A reserving to himself the right to repurchase the same. Because they
were friends, no period was agreed upon for the repurchase of the property.
Until when must A exercise his right of repurchase?

SALES
A must exercise the right to repurchase within four (4) years from the execution of the contract because there was
no contract providing for the period to repurchase. (Art. 1606 NCC)
X sold a parcel of land to Y a retro providing that X should exercise the right within two years from the
execution of the contract. One month after the expiration of the period, X filed a suit to compel Y to resell
the parcel of land. The RTC of Manila ruled in favor of X holding that the contract is a sale with right
repurchase; hence, X was allowed to repurchase within 30 days from the finality of the decision. Y
appealed. If you were the ponente on appeal, how would you decide the case? Explain.
I would reverse the decision of the lower court. The right to repurchase has already expired. To allow the vendor a
retro to exercise the right to repurchase would set a naught a pacto de retro or resurrect an expired right of
repurchase by simply instituting an action to reform the contract. It would thus be made a tool to spawn, protect,
and even reward fraud and bad faith, a situation never contemplated by law. ( Felimen vs. Orias, G.R. No. L-
33182, December 18, 1987).
What is the effect of failure of the vendor to comply with the provisions of Art. 1616 in case of
consolidation of ownership in the vendee with respect to real property?
In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to
comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial
order, after the vendor has been duly heard. (Art. 1607 NCC)
The seller a retro failed to redeem within the period agreed upon, hence, the buyer a retro filed a petition
for registration of the consolidation of ownership, but did not name the respondents.
What is the effect of the failure to redeem and to name and notify the respondents? Explain.
In case of failure to redeem, there shall be consolidation of ownership in the vendee a retro. Consolidation is a
matter of law. ( Art 1607, NCC; BAyquen vs. Balaoro, L- 28161, August 13, 1986). Such failure results in the loss of
the right to repurchase. ( Cruz vs. Leis, et al., G.R. No. 125233, March 09, 2000)
Registration of the consolidated ownership requires a judicial order after the vendor shall have been notified.
On January 02, 1980, A and B entered into a contract whereby A sold to B a parcel of land for and in
consideration of P 10,000.00 with A reserving to himself the right to repurchase the same. Because they
were friends, no period was agreed upon for the repurchase of the property. If A fails to redeem the
property within the allowable period, what would you advise B to do for his better protection?
I would advise B to consolidate his ownership and file a petition in court for the registration of the consolidated
ownership with notice to A. (Art. 1607 NCC)
Can the vendor bring his action against every possessor whose right is derived from the vendee even if in
the second contract no mention should have been made of the right to repurchase?
Yes, The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the
second contract no mention should have been made of the right to repurchase, without prejudice to the provisions
of the Mortgage Law and the Land Registration Law with respect to third persons. (Art. 1608 NCC)
What is the effect of legal redemption with respect to the vendee?

SALES
The vendee is subrogated to the vendor’s rights and actions. (Art. 1608 NCC)
When can the creditor make use of the right of redemption against the vendee?
The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have
exhausted the property of the vendor. (Art. 1610 NCC)
In a sale with a right to repurchase, can the vendee compel the vendor to redeem the whole property?
In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole
thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to
make use of the right of redemption. (Art. 1611 NCC)
If several persons, jointly and in the same contract, should sell an undivided immovable with a right of
repurchase, can anyone of them exercise this right for more than their respective share?
No, If several persons, jointly and in the same contract, should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more than his respective share. (Art. 1612NCC)
Can the heirs of the person who sold an immovable redeem more than what they may have acquired?
No, The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each
of the latter may only redeem the part which he may have acquired. (Art. 1612 NCC)
Can a vendee compel a co-owner to redeem the whole of the property sold?
A vendee cannot compel the co-owner to redeem the whole property sold because each one of the co-owner may
independently exercise the right repurchase.
May a co-owner exercise his right to repurchase independently from the co-owner?
Yes, he may exercise his right to repurchase independently as regards his own share.
Can an action of redemption be bought against all the heirs of the vendee should he leave several heirs?
No, the redemption should pertain only to each share of the heir.
Can the vender avail the right of repurchase without returning the price of the sale?
No, the vender must return the amount of the price to avail the right to repurchase as well as the expenses on the
contract and the necessary expenses made.
What is a legal redemption?

SALES
It is the right to be subrogated upon the terms and conditions stipulated in the contract in one who acquires the
thing by purchase or dation in payment or other transaction whereby ownership is transferred by onerous title.
Can a co-owner of a thing exercise the right of redemption in case the shares of the other co-owner are
sold to third person?
Yes, a co-owner may exercise the right to redemption in case the share of other co-owner are sold to third person.
When is the right of legal redemption be exercised?
It must be exercised within 30 days from notice in writing by the prospective vendor or by the vendor as the case
maybe.
ASSIGNMENT OF CREDITS
AND OTHER INCORPOREAL RIGHTS
Articles 1624 -1635
When is assignment of credit deemed perfected?
It is deemed perfected from the moment there is meeting of the minds between the parties.
Is an assignment of credit in a private document binding?
An assignment of credit to be binding must appear in a public instrument.
Is a debtor be released from his obligation should he pays his creditor before knowledge of assignment of
credit?
Yes a debtor is released from obligation should he pay his creditor before knowledge of assignment of credit.
What does the assignment of credit includes?
It includes all the accessory rights such as guarantee mortgage, pledge or preference.
Can an action for redemption be enforced against all the heir in case the inheritance has been divided
and the thing sold has been awarded to one of the heirs?
The action for redemption may be instituted only to the heir where the thing sold is awarded.
Is the vendor who recovers the thing sold be liable from all charges and mortgages constituted by the
vendee?
SALES
The vendor shall be free from all charges and mortgages constituted by the vendee.
What is the extent of the co-owners’ right of redemption in case both wants to redeem the property co-
owned?
They can only do so to the extent of the share they own in the co-owned property.
Is the assignment of credit that involves real property requires to be binding registration with the
registry of property?
Yes, it must be registered with the registry of property to be binding.
Is mortgage and pledge included in the assignment of credit?
The assignment of credit includes all accessory rights such as mortgages and pledges.
What are the kinds of warranties in the assignment of credit?
The following are the kinds of warranties:

1) The existence and legality of credit;
2) The solvency of the debtor.
Distinguish between the liabilities of the seller in food faith and the seller in bad faith.
The vendor in good faith shall be liable for the price received and for the expenses of the contract and any other
legitimate payments made by reason of the sale, and the necessary and useful expenses made on the thing sold;
while, the vendor in bad faith shall be answerable for the payment of all expenses and for damages.
Alt owes Ben. Ben assigns the credit to Cozy. Ben is in good faith. But Alt is insolvent. Is Ben liable?
No, unless it was so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.
Suppose the credit really did not exist anymore at the time of assignment. Is Ben still liable?
Yes, unless the credit was sold as doubtful, such as a credit in litigation.
What does the creditor warrants when he assigns his credit?
The creditor warrants only the existence and legality of the credit at the perfection of the contract.
D owes C P10,000.00 which represents the purchase price of a car bought by D. C assigns the credit to T.
If at the time of the assignment, the credit has already prescribed or has already been paid and its nullity
is subsequently declared, is C liable to T?
Yes because C warrants the existence and legality of the credit.

SALES
What are the rules on the duration of the warranty for the debtor’s solvency?
The following are the rules on the duration of the warranty for the debtor’s solvency:
1) Within the time agreed upon;
2) If no time was agreed upon-
a) One year from assignment if debt was already due.
b) One year from maturity if debt was not yet due.
If the assignor acted in bad faith, are the rules on the duration of the warranty for the debtor’s solvency
applicable?
No, article 1629 on the duration of assignor’s liability does not apply if the assignor acted in bad faith.
D owes C P10,000.00 payable on May 10,2010.C assigns his credit to T with C making himself responsible
for the solvency of D for one year from May 10,2010, When shall the guaranty of debtor’s solvency last?
The guaranty of C’s liability for the solvency of D shall last within one year as agreed upon between C and T.
What if there is no stipulation and the assignment is made on June 22, 2010. What is the duration of the
assignor’s liability?
The liability is limited to one year from assignment.
R owes S. S assigns the credit to L. S is in good faith. It was agreed that S would be responsible for R’s
solvency. The party did not agree on the duration of the liability. If the debt was due June 22, 2010 and
the assignment was made July 10, 2010, until when is the guaranty?
Until July 10, 2011. The law says, “one year from the time of the assignment” if the period has already expired.
What if the debt was due June 22, 2010 and the assignment was made May 10, 2010, is the one year
counted from the time of assignment?
No. The one year will be counted from the time when the debt becomes due. Hence, the liability shall cease one
year after the maturity, which is on June 22, 2011.
What is the rule as to the sale of an enumerated list of future inheritance?
As a rule, the sale of an enumerated list of future inheritance is prohibited.
Can an heir sell his share of the common estate even prior to judicial approval of the partition?
Yes. As a matter of fact, the part of an estate assigned to an heir by the will of the deceased can be sold by such heir
even before the partition of the estate is approved by the court. Indeed there is no legal provision which prohibit
such heir from selling to a stranger his share of the common estate.
Is the sale of future inheritance without specification of the properties, valid?

SALES
Yes. If the future inheritance is sold without specification of the properties, this would only be a sale of future
hereditary rights, and hence, permissible.
In the sale of an inheritance, what does the seller warrants?
The seller of an inheritance warrants only the facts of his heirship but he does not warrant the objects which
makes up his inheritance.
What is the liability of a seller of an inheritance?
One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for
his character as an heir.
X and Y are the heirs of the estate left by Z. Before partition and without specifying his definite share in
the inheritance, X sold his share to B for P100,000.00. If upon partition, X’s share is onlyP75,000.00, is
he liable to B for his balance?
No. In this case, X only warrants the fact that he is an heir of Z. He is not liable for B should his share after
partition be less than P100,000.00
What is the subject matter in the sale of the whole of certain rights, rents, or products for a lump sum?
The subject matter is the totality of such rights, rents, or products.
What does the vendor warrants in the sale of such rights, rents, or products?
The vendor warrants only the legitimacy of the whole and not the various parts of which it may be composed.
Is there an exception to the rule that the vendor is not liable for eviction of each of the various parts of
the rights, rents, or products?
Yes and that is if the eviction involves the whole or the part of greater value.
S is a partner in a partnership. He sells all his interest to B for a lump sum of P150,000.00.Upon
dissolution of the partnership, B received the share of S in its assets consisting of P50,000, some office
equipment, and a car. Subsequently, the car was recovered by C, a creditor of the partnership. Is S liable
to B?
No, S is not liable to B because S does not warrant each of the various parts of his interest in the partnership but
only the legitimacy of his rights as partner taken as a whole.
In the above-stated case, what if the value of the car exceeds P75,000.00. Is S liable to B?
Yes. S will be liable because B is evicted from the part of greater value.
Are the fruits of an inheritance included in the sale?

SALES
Yes, unless otherwise stipulated, the fruits of an inheritance are included in the sale.
What are the rules with regard to the obligation of the vendor regarding the fruits of an inheritance?
The following are the rules regarding the obligation of the vendor as to the fruits of an inheritance:
1) If the vendor merely received the fruits he must deliver them to the vendee.
2) If the fruits were consumed by the vendor, he must reimburse the vendee.
3) If the fruits were sold by the vendor, he is obliged to deliver the price to the vendee.
What is the rule as to the liability of the vendor for anything received from the inheritance sold?
The liability of the vendor for anything received from the inheritance sold is subject to any contrary
agreement.
What is the obligation of the vendee after the vendor has paid for the debts and charges of the estate?
The vendee is required to reimburse the vendor for all that the latter may have paid for the debts and charges on
the estate and satisfy the credits he may have against the same.
Is an agreement between the vendor and the vendee that the latter may not reimburse the former, valid?
Yes, because the liability of the vendee for the debts and charges is subject to any agreement to the contrary.
In what instance is Article 1634 applicable?
Article 1634 applies only to a claim in litigation, the meaning of which is not a claim open to litigation but one
which is actually litigated, that is to say, disputed or contested which happens only after an answer is interposed in
a suit. (Robinson vs. Garry, 8 Phil. 275)
In what contract does Article 1634 applies to?
Article 1634 applies only in the case of sale. Hence, it does not apply to a barter or a donation.
Can a credit or other incorporeal right sold in litigation, be redeemed?
Yes, a credit or other incorporeal right sold in litigation can be redeemed by the debtor.
What kind of redemption does the debtor exercise when he redeems a credit or other incorporeal right
sold in litigation?
When the debtor redeems a credit or other incorporeal right sold in litigation he is exercising his right of legal
redemption.
What are the requisites before the right of legal redemption can be exercised?
The following are the requisites before the right of legal redemption can be exercised:
1) There must be a sale or assignment of a credit;

SALES
2) There must be a pending litigation at the time of the assignment. The complaint by the assignor must have
been filed, and answered by the debtor before the sale of the credit;
3) The debtor must pay the assignee of all his expenses required by law;
4) The right must be exercised by the debtor within 30 days from the date the assignee demands payment from
him.
What are the expenses that the debtor must pay the assignee when the former exercises his right of legal
redemption?
The debtor must pay the assignee:

1) The price paid by him;
2) The judicial costs incurred by him; and
3) The interest on the price from the date of payment.
X sues Y to recover a credit of P1M. Pending litigation, X sells the credit to a 3 rd party A for P300,000.00.
Can Y redeem the credit from A?
Yes, Y may redeem the credit from A by paying A the sum of P300,000.00
Within what period should Y exercise his right of legal redemption?
Within 30 days from the time A demands payment of the P1M.
What is the purpose of the law in granting the right of legal redemption to the debtor?
The purpose of the law in granting the right of redemption to the debtor is equity and to avoid the purchase by a
3rd person of credits in litigation merely for speculation.
When is a credit or other incorporeal right be considered in litigation?
A credit or other incorporeal right shall be considered in litigation from the complaint concerning the same is
answered.
Can the debtor exercise the right of redemption even if the credit was sold not in litigation?
No. The debtor cannot redeem if the credit is not in litigation when the same is sold.
What are the instances when legal redemption is denied?
When the assignment or sale was made to:

1) A co-debtor or co-owner of the right assigned;
2) A creditor in payment of his credit;
3) A possessor of a tenement or piece of land which is subject to the right in litigation assigned.
Why does the law prohibit redemption of the sale made to co-heir or co-owner?
The law prohibit redemption of the sale made to co-heir or co-owner because the law does not favor co-ownership
or pro-indivision.
SALES
Give an example when the debtor is prohibited from redeeming the property conveyed to a co-heir or co-
owner.
D is indebted to B and C in the amount of P50,000.00. For failure to pay his debt, B sues D. If B transfers his
credit to C during the pendency of the litigation, D cannot redeem.
What is the reason of the law in not allowing the debtor to exercise his right of redemption when the
assignment or sale was made to a creditor?
The reason is that there is a lawful basis for the assignment as the assignee cannot be considered as a vendee of a
right in litigation and as a speculator.
What is the reason for the exception of the right of the debtor to exercise redemption in case of
assignment of credit?
The reason for the exception is that the assignee is moved by a desire to preserve the property and not to speculate
at the expense of the debtor.
Give an example of the 3rd exception.
An example is where a vendee (assignee) of a property subject to a mortgage acquires the mortgage credit of the
assignor (mortgage-creditor) against the vendor (mortage-debtor).
D owes P P50,000.00. Which is secured by a mortgage on a land owned by D. If D sells the land to C and P
assigns his credit in litigation to D against B to C, is D entitled to redeem?
No, D is not entitled to redeem. A debtor cannot redeem the assignmentmade to the possessor of a tenement or
piece of land which is subject to the right in litigation assigned.
GENERAL PROVISIONS
What does the “document of title to goods” include?
Document of title to goods include any bill of lading, dock warrant, quedan, or warehouse receipt or order for the
delivery of goods or any other document used in the ordinary course of business in the sale or transfer of goods, as
proof of the possession or control of the goods, as authorizing or purporting to authorize the possessor of the
document to transfer or receive either by indorsement or by delivery, goods represented by such document.

SALES
What does the term “goods” include?
“Goods” includes all chattels personal but not things in action or money of legal tender in the Philippines. The
term includes growing fruits or crops.
What is an “order”?
“Order” relating to documents of title means an order by indorsement on the documents.
What does “quality of goods” include?
“Quality of goods” includes their state or condition.
What is meant by “specific goods”
“Specific goods” means goods identified and agreed upon at the time a contract of sale is made.
What constitute value?
An antecedent or pre-existing claim, whether for money or not, constitutes “value” where goods or documents of
title are taken either in satisfaction thereof or as a security thereof.
When is a person insolvent?
A person is insolvent if he has ceased to pay his debts in the ordinary course of business or cannot pay his debts as
they become due, whether insolvency proceedings have been commenced or not.
When are goods in a “deliverable state”
Goods are in a “deliverable state” when they are in such a state that the buyer would, under the contract, be bound
to take delivery of them.
What is a thing or chose in action?
A “thing or chose in action” is any claim or right which may be pleaded in a suit at law, such as claim of reparation
for a tort (civil wrong) or right guaranteed under certain types of contract.
What is legal tender?
Legal tender is that currency which a debtor can legally compel a creditor to accept in payment of a debt in money
when tendered by the debtor in the right amount.
What laws govern the registration of document or title pertaining to immovable property?
Immovable property is subject to the rule laid down by the Mortgage Law and the Land Registration Law.


Sales: Nature and Form of Contract Articles 1458 - 1488

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SALES

NATURE AND FORM OF CONTRACT

Articles 1458 -1488

What are the characteristics of the contract of sale?

Why is the contract of sale an onerous contract?

Why is the contract of sale a consensual contract?

Sale is consensual, because the contract is perfected by mere consent.

Why is the contract of sale a bilateral reciprocal contract?

Why is the contract of sale a commutative contract?

Why is the contract of sale a principal contract?

Why is the contract of sale a nominate contract?

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What are elements of a contract of sale?

What are the stages in a contract of sale?

Distinguish sale from a lease contract?

Classify or give kinds of a contract of sale?

Define natural elements of a contract of sale?

What is an accidental elements in a contract of sale?

When is a thing determinate?

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Is a sale of a future thing valid?

Distinguish Rei Sperati from Emptio Spei?

What is Emptio rei speratae?

What are future goods?

They may either be: 1. Existing goods, 2. Future goods.

May the sole owner of a thing sell an undivided interest therein?

The buyer becomes a co-owner over the thing.

May a property subject to reserva troncal be sold?

Distinguish sale from agency?

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Is there a distinction between a contract of sale and a contract to sell?

What is a contract for a piece of work?

What are the requisites of price in the contract of sale?

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When price is considered certain?

What is the effect of gross inadequacy of price?

If the price is simulated, what is the effect on the contract of sale?

What is the effect if the simulated price is fictitious?

When price is considered certain?

What could be the effect if the price of securities cannot be ascertained?

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What is the effect if determination of price be left to the vendor?

What if delivery has been made what would be the effect?

The requisites for a perfection of a Contract of Purchase or Contact of Sale are:

When is Contract of Sale perfected?

The Contract of Sale being a consensual contract is perfected by mere consent.

Give the exceptions where contract is perfected by mere delivery?

The exceptions are:

What is the effect of perfection?

When is sale by auction perfected?

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When seller can bid in the auction?

The seller or his agent may bid in an auction sale provided:

Can the seller employ others to bid for him?

Who may attack the Auction sale?

When is ownership to the thing sold transferred?

What are the kinds of delivery?

The kinds of delivery are:

What is the concept of reservati domini or contractual reservation of title?

Is the contractual reservation valid?

Distinguish the concept of pactum reservati domini and contract to sell?

The distinctions are:

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