I.

1. Spouses Macario and Bonifacia Dakila entered into a contract to sell with Honorio Cruz over a
parcel of industrial land in Valenzuela, Bulacan for a price of Three Million Five Hundred Thousand
Pesos (P3,500,000.00). The spouses would give a downpayment of Five Hundred Thousand Pesos
(P500,000.00) upon the signing of the contract, while the balance would be paid for the next three (3)
consecutive months in the amount of One Million Pesos (P1,000,000.00) per month. The spouses paid
the first two (2) installments but not the last installment. After one (1) year, the spouses offered to pay
the unpaid balance which Honorio refused to accept.

The spouses filed a complaint for specific performance against Honorio invoking the application of
the Maceda Law. If you are the judge, how will you decide the case? (4%)

SUGGESTED ANSWER:

I will rule in favor of Honorio. The invocation of the Maceda Law is misplaced. The law applies only to
sale or financing of realty on installment payments including residential units or residential
condominium apartments and does not apply to sales of industrial units or industrial lands like in the
case presented. Another reason why the Maceda law will not apply is that, the sale in the case at
bar is not the sale on installment as contemplated by the law. The sale on installment covered by the
Maceda Law is one where the price is paid or amortized over a certain period in equal installments.
The sale to the Spouses Dakila is not a sale on installment but more of a straight sale where a down
payment is to be made and the balance to be paid in a relatively short period of three months.

2. On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the
same land to Jose. Who has a better right if:

a) the first sale is registered ahead of the second sale, with knowledge of the latter. Why? (3%)

b) the second sale is registered ahead of the first sale, with knowledge of the latter? Why? (5%)

SUGGESTED ANSWER:

(a) The first buyer has the better right if his sale was first to be registered, even though the first buyer
knew of the second sale. The fact that he knew of the second sale at the time of his registration does
not make him as acting in bad faith because the sale to him was ahead in time, hence, has a priority
in right. What creates bad faith in the case of double sale of land is knowledge of a previous sale.

b) The first buyer is still to be preferred, where the second sale is registered ahead of the first sale but
with knowledge of the latter. This is because the second buyer, who at the time he registered his sale
knew that the property had already been sold to someone else, acted in bad faith. (Article 1544,
C.C.)
3. Bert offers to buy Simeon’s property under the following terms and conditions: P1 million purchase
price, 10% option money, the balance payable in cash upon the clearance of the property of all
illegal occupants. The option money is promptly paid and Simeon clears the property of all illegal
occupants in no time at all. However, when Bert tenders payment of the balance and asks Simeon for
the deed of absolute sale, Simeon suddenly has a change of heart, claiming that the deal is
disadvantageous to him as he has found out that the property can fetch three times the agreed
purchase price. Bert seeks specific performance but Simeon contends that he has merely given Bert
an option to buy and nothing more, and offers to return the option money which Bert refuses to
accept.

A. Explain the nature of an option contract. (2%) 


B. Will action for specific performance prosper? Explain. (4%) 


C. May justify his refusal to proceed with the sale by the fact that the deal is 
 financially
disadvantageous to him? Explain. (4%)

SUGGESTED ANSWER:

A. An option contract is one granting a privilege to buy or sell within an agreed time and at a
determined price. It must be supported by a consideration distinct from the price. (Art. 1479 and
1482, NCC)

B. Bert’s action for specific performance will prosper because there was a binding agreement of sale,
not just an option contract. The sale was perfected upon acceptance by Simeon of 10% of the
agreed price. This 3mount is in reality earnest money which, under Art. 1482, “shall be considered a3
part of the price arid as proof of the perfection of the contract.” (Topacio v. CA, 211 SCRA 291[1992j;
Villongco Realty v. Bormaheco, 65 SCRA 352 [1975]).

C. Simeon cannot justify his refusal to proceed with the sale by the fact that the deal is financially
disadvantageous to him. Having made a bad bargain is not a legal ground for pulling out of a
binding contract of sale, in the absence of some actionable wrong by the other party (Vales v. Villa,
35 Phil. 769 [1916]), and no such wrong has been committed by Bert.

4. Nante, a registered owner of a parcel of land in Quezon City, sold the property to Monica under a
deed of sale which reads as follows:

"That for and in consideration of the sum of P500,000.00, value to be paid and delivered to me, and
receipt of which shall be acknowledged by me to the full satisfaction of Monica, referred to as
Vendee, I hereby sell, transfer, cede, convey, and assign, as by these presents, I do have sold,
transferred, ceded, conveyed and assigned a parcel of land covered by TCT No. 2468 in favor of the
Vendee."

After delivery of the initial payment of P100,000.00, Monica immediately took possession of the
property. Five (5) months after, Monica failed to pay the remaining balance of the purchase price.
Nante filed an action for the recovery of possession of the property. Nante alleged that the
agreement was one to sell,which was not consummated as the full contract price was not paid. Is the
contention of Nante tenable?

SUGGESTED ANSWER:

The contention of Nante is not tenable. The deed itself states that for consideration received, he sells,
transfers, and conveys the land to Monica and there was delivery of the property to the latter. The
contract is clearly one of sale as there was no reservation of ownership on the part of the seller
Nante. The non-payment of the price in a contract of sale would only entitle the seller to rescind the
contract but it does not thereby prevent the transfer of ownership particularly so as in this case,
where there was already delivery to the buyer.

II.

1. What are the characteristics of the contract of sale?

The following are the characteristics of the contract of sale?

a. Consensual
b. Bilateral
c. GR: Commutative; XPN: Aleatory
d. Principal
e. Onerous
f. Nominate

2. Why is the contract of sale an onerous contact?

The contract of sale is onerous because the thing sold is conveyed in consideration of the
purchased price, and vice versa.

3. Why is the contract of sale a consensual contract?

The contract of sale is a consensual contract because a sale is perfected by mere consent,
manifested by the meeting of the minds to the offer and acceptance on the subject matter,
price and terms of payment.

4. Why is the contract of sale a bilateral reciprocal contract?

The contract of sale is a bilateral reciprocal contract because the seller will deliver and
transfer a determinate thing to the buyer and the latter will pay an ascertained price (or its
equivalent).

5. Why is the contract of sale a commutative contract?

The contract of sale is a commutative contract because the thing sold is considered the
 equivalent of the price paid and the price paid is equivalent of the thing sold.

6. Define the natural elements of a contact of sale.

The natural elements of a contract of sale are those which are inherent in the contract, and
which in the absence of any contrary provision, are deemed to exist in the contract.

7. What is an accidental element in a contract of sale?

An accidental element in a contract of sale is dependent on parties’ stipulations.

Example of those are as follows:

a. Conditions;
b. Interest;
c. Time and place of payment; and
d. Penalty.

8. What are the requisites of the thing which constitute the object of sale?

The following are the requisites of the thing which constitute the object of sale:

a. Consent – meeting of the minds to transfer ownership in exchange for the price;
b. Determinate subject matter – determinate thing which is the object of the contract;
and
c. Consideration – price certain in money or its equivalent.

9. Distinguish Emptio Rei Speratae from Emptio Spei.

The following are the distinctions between Emptio Rei Speratae and Emptio Spei:

a. In Emptio Rei Speratae, the uncertainty is with regard to quantity and quality, while in
Emptio Speo, the uncertainty is with regard to existence of thing.
b. In Emptio Rei Speratae, the contract deals with future thing, while in Emptio Speo, the
contract deals with present thing – hope or expectancy.
c. In Emptio Rei Speratae, the sale is valid only if the expected thing will exist, while in
Emptio Spei, the sale is valid even though expected thing does not come into existence
as long as the hope itself validly existed.

10. What is Emptio Rei Speratae?

Emptio Rei Speratae is the sale of thing having potential existence.

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

Yes, there is a distinction between a contract of sale and a contract to sell.

The following are the distinctions between a contract of sale and a contract to sell:
a. In contract of sale, ownership is transferred to the buyer upon delivery of the object to
him, while in contract to sell, ownership is transferred upon full payment of the purchase
price.
b. In contract of sale, there is only one contract executed between the seller and the
 buyer, while in contract to sell, there are two contracts: the contract to sell and the
deed of absolute sale.
c. In contract of sale, the non-payment of the price is a resolutory condition, while in
contract to sell, the full payment of the price is a positive suspensive condition.
d. In contract of sale, the remedies available includes specific performance, rescission, or
damages, while in contract to sell, only rescission, or damages are available.

12. Y acquired a booklet of 100 sweepstakes tickets directly from PCSO. Y, paid P18,000 for the
booklet, less the customary discount. What kind of contract did Y enter into?

Y entered into a contract of sale with the PCSO. The essential elements, consent, determinate
subject matter, and consideration, are present in this case. There is a meeting of the minds to
transfer ownership in exchange for the price, there is a determinate thing which is the booklet
of 100 sweepstakes ticket and there is also a price certain in money which is P18,000.

13. 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, the sale is perfected.

Perfection of the contract of sale takes place when the parties agree upon the essential
elements of the contract.

In this case, all the essential elements are present and are agreed upon by the parties. There is
a meeting of the minds to transfer ownership in exchange for the price, which tantamount to
consent. The determinate thing is the car of Almar. This is equivalent to the determinate
subject matter. There is also a price certain in money which is set at P500,000 – the
consideration.

14. Give the effects of failure to determine price where the contract is executory.

15. Give the effect of failure to pay price, or the non-delivery of the thing bought to the contract of
sale.

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

The concept of pactum reservati in domini or contractual reservation of title is of the

agreement that ownership will remain with seller until full payment of price.

17. Is the contractual reservation (reservati domini) valid?

Yes, the contractual reservation is valid.

There is no prohibition under the law on Sales regarding this agreement.

18. Distinguish the concept of pactum reservati domini and contract to sell?*
 The following are the distinctions between pactum reservati and contract to sell:

a. Pactum reservati is the agreement, while contract to sell is the contract which pactum
reservati may be incorporated.
b. In re: delivery
c. In re: exclusive selling of the property to the buyer

19. 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, the buyer is still liable for the price.

The contract of sale is already consummated. The ownership has already been transferred to
the buyer in this case. . . .

20. 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 storm. Can S demand
the price?

No, S cannot demand the price.

The contract is not yet consummated in this case. The condition should be complied first in
order for the contract of sale to be valid. In this case, it is as if there is no contract of sale.

21. Define earnest money.

Earnest money is the money given to the seller by the prospective buyer to show that the latter
is truly interested in buying the property, and its aim is to bind the bargain.

It is actually a partial payment of the purchase price and is considered as proof of he

perfection of the contract.

22. What is option money?

Option money is the distinct consideration in case of an option contract. It does not form part
of the purchase price hence, it cannot be recovered if the buyer did not continue with the
sale.

23. Distinguish earnest money and option money.

The following are the distinctions between earnest money and option money:
a. Earnest money forms part of the purchase price, while option money is the money
given as distinct consideration for an option contract;
b. Earnest money is given only when there is already a sale, while option money applies to
a sale not yet perfected;
c. Earnest money, when given, the buyer is bound to pay the balance, while in option
money, prospective buyer is not required to buy;
d. In earnest money, if the sale did not materialize, it must be returned, while in option
money, if the buyer does not decide to buy, it cannot be recovered.
e. In earnest money, the title passes to the buyer upon delivery of the things sold, while in
option money, the ownership is reserved to the seller and is not to pass until full
payment;
f. In earnest money, remedies regarding non-payment are specific performance and
 rescission, while in option money, the remedy is only specific performance.

24. Dan orally sold a parcel of land to Jerry. Is the sale valid?

No, the sale is not valid.

Under Statute of Frauds, a sale of a real property or an interest therein, must be in writing.

25. In a sale of real property, if made through an agent, is it valid?

Yes, a sale of real property, if made through an agent, is valid.

A sale of real property can be made through an agent as long as the agent has acted within
the bounds of authority given to him.

26. Can a vendor who chooses foreclosure of chattel mortgage recover unpaid balances?

27. 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?
28. B bought a particular laptop, but defaulted in the payment of two installments. May the seller
ask for the cancellation of the sale?
29. B bought a car from S on installment. It was agreed that the installment already paid should
not be returned even if the sale is cancelled. Is the stipulation valid?
30. 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?
31. State the basic difference (only in their legal effects) –
32. Can service be a valid object of sale?
33. S gives to B the exclusive distributorship of his beds. Under the contract, S will send the number
of beds, which B will order. The price of each bed is the invoice price with a discount of 20%.
Payment is to be made within the first 5 days of the succeeding month. Is the contract an
agency to sell?
34. S sold his car to B. The price to be paid is the price X paid for the car he bought one week ago
as specified in the invoice thereof. Is there price certain?
35. What is “puffing” or “by-bidding”?
36. What is the status of a contract to sell executed by an heir of real property involved in testate
proceedings entered into without the approval of the probate court?
37. When is a contract of sale perfected?
38. Where shall ownership of the thing sold transfer to the vendee or buyer?
39. What is “Policitacion”?
40. If A promise to sell his car for P50,000to B and B promised to buy A’s specific car for P50,000, is
there a perfected contract of sale?
41. So that ownership is transferred must the vendor have ownership at the time of perfection of
the contract?
42. Who is considered an unpaid seller?
43. On January 2, 1980, A and B entered into a contract whereby A sold to B a parcel of land for
and in consideration of P10.000.00. 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. 1)
Until when must A exercise his right of repurchase? 2) If A fails to redeem the property within
the allowable period, what would you advise B to do for his better protection?

SUGGESTED ANSWER:
1) A can exercise his right of repurchase within four (4) years from the date of the contract
(Art. 1606, Civil Code).

SUGGESTED ANSWER:
2} I would advise B to file an action for consolidation of title and obtain a judicial order of
consolidation which must be recorded in the Registry of Property (Art. 1607. Civil Code).

44. Knowing the car had a hidden crack in the engine. X sold it to Y without informing the latter
about it. In any event, the deed of sale expressly stipulated that X was not liable for hidden
defects. Does Y have the right to demand from X a reimbursement of what he spent to repaid
the engine plus damages?
a) Yes, X is liable whether or not he was aware of the hidden defect.
b) Yes, since the defect was not hidden, X knew of it but he acted in bad faith in not
disclosing the fact to Y.
c) No, because Y is in estoppel, having changed engine without prior demand.
d) No, because Y waived the warranty against hidden defects.

45. Under what circumstances does an unpaid seller of goods lose his lien thereon?
46. Under what cases is a resale of the goods allowed?
47. When is the vendee entitled to rescind the sale?
48. A warrant inherent in a contract of sale, whether or not mentioned in it, is known as the:
a) Warrant on quality
b) Warranty against hidden defects
c) Warranty against eviction
d) Warranty in merchantability

49. Are there cases where the vendor shall not be liable for eviction?

50. When is a contract a contract of sale and when is it a contract for piece of work?

It is a contract of sale if it is ordered in the ordinary course of business. On the other hand, it is a
contract for piece of work if manufactured specially and not for the market.

51. What is the warranty against eviction?

In a contract of sale, unless a contrary intention appears, there is an implied warranty on the
part of the seller that he has the right to sell the thing at the time when the ownership is to
pass, and that the buyer shall from that time have and enjoy the legal and peaceful
possession of the thing.

52. Define conventional redemption.

Seller reserves the right to repurchase thing sold coupled with obligation to return the
purchase price of the sale, expenses incurred under the contract, other legitimate payments
and, necessary & useful expenses made on the thing sold.
53. What is the effect of the stipulation that the installments or rents paid shall be forfeited by the
vendee or lessee in the event the contract of sale is rescinded?

Such forfeiture is not allowed. Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency interests, with interest
thereon at the legal rate.

54. What requisites must be present for a co-owner to exercise the right of legal redemption?

The following are the requisites

55. Is it essential that the thing object of a contract of sale be always determinable?
56. What are the principal obligations of the vendor?
57. What is the effect of gross inadequacy of price?
58. Define contract of sale.
59. What is an affirmation of the value of the thing or the seller’s expression of opinion considered
express warranty?
60. How is the ownership of the thing transferred to the vendee?
61. Who are granted the right if legal redemption?
62. What is an equitable mortgage?
63. If a co-owner sells his share to another co-owner, can the other co-owners exercise the right of
redemption?
64. How is a contract of sale extinguished?
65. Sergio is the registered owner of a 500-square meter land. His friend, Marcelo, who has long
been interested in the property, succeeded in persuading Sergio to sell it to him. On June 2,
2012, they agreed on the purchase price of P600,000 and that Sergio would give Marcelo up to
June30, 2012 within which to raise the amount. Marcelo, in a light tone usual between them,
said that they should seal their agreement through a case of Jack Daniels Black and P5,000
“pulutan” money which he immediately handed to Sergio and which he immediately handed
to Sergio and which the latter accepted. The friends then sat down and drank the first bottle
from the case of bourbon.

On June 15, 2013, Sergio learned of another buyer, Roberto, who was offering P800,000 in
ready cash for the land. W hen Roberto confirmed that he could pay in cash as soon as Sergio
could get the documentation ready, Sergio decided to withdraw his offer to Marcelo, hoping
to just explain matters to his friend. Marcelo, however, objected when the withdrawal was
communicated to him, taking the position that they have a firm and binding agreement that
Sergio cannot simply walk away from because he has an option to buy that is duly supported
by a duly accepted valuable consideration. Does Marcelo have a cause of action against
Sergio?

SUGGESTED ANSWER:

Yes. Marcelo has a cause of action against Sergio.

Under Art. 1324, when the offerer has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such withdrawal,
except when the option is founded upon consideration, as something paid or promised.
 An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding
upon him if the promise is supported by a consideration distinct from the price (Art. 1479).

Consideration in an option contract may be anything of value,, unlike in sale where it must be
the price certain in money or its equivalent (San Miguel Properties Inc. v. Spouses Huang, G.R.
No. 137290, July 31, 2000).

Here, the case of Jack Daniels Black and the P5,000.00 “pulutan” money was a consideration
to “seal their agreement,” an agreement that Marcelo is given until June 30, 2012 to buy the
parcel of land. There is also no showing that such consideration will be considered part of the
purchase price. Thus, Sergio’s unilateral withdrawal of the offer violated the Option Contract
between him and Marcelo.

66. In question No. 65, Can Sergio claim that whatever they might have agreed upon cannot be
enforced because any agreement relating to the sale of real property must be supported by
evidence in writing and they never reduced their agreement to writing?

SUGGESTED ANSWER:

No. Sergio’s claim has no legal basis.

The contract at issue in the present case is the option contract, not the contract of sale for the
real property. Therefore, Art. 1403 does not apply.

The Statute of Frauds covers an agreement for the sale of real property or of an interest
therein. Such agreement is unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, (Art. 1403 (e), Civil Code). Here, Marcelo and Sergio
merely entered into an Option Contract, which refers to a unilateral promise to buy or sell,
which need not be in writing to be enforceable (Sanchez v. Rigos, G.R. No. L-25494, June 14,
1972, citing Atkins, Kroll and Co. Inc. v. Cua Hian Tek and Southwestern Sugar & Molasses Co.
v. Atlantic Gulf & Pacific Co.).

67. What is the effect of a stipulation in a contract of sale of immovable property authorizing
automatic rescission of the sale?
68. What is meant by delivery through tradition constitutum possessorium?
69. When may the seller sue for rescission of the contract?
70. Within what time shall the right of pre-emptive or redemption be exercised?
71. Define express warranty.
72. In the exercise of the right to repurchase, against whom shall the vendor bring his action to
repurchase?
73. Define legal redemption.
74. In case of doubt, how shall a contract purporting to be a sale with right to repurchase be
construed?
75. What is the remedy in case of the parties really intended a mortgage but the instrument states
that it is an absolute sale or with a right to repurchase?
76. In case a person sells an immovable alone with a right to repurchase dies before exercising his
right of redemption, leaving several heirs, may the heirs exercise his right of redemption and is
 there a limitation?
77. What are the two rights that owners of adjoining urban lands may avail of in the case of sale
or urban land?
78. Which phrase must accurately completes the statement – if at the time the contract of sale is
perfected, the thing which is the object of the contract has been entirely lost:
79. A warrant inherent in a contract of sale, whether or not mentioned in it, is known as the:
a) Warrant on quality
b) Warranty against hidden defects
c) Warranty against eviction
d) Warranty in merchantability
80. In a true pacto de retro sale, the title and ownership of the property sold are immediately
vested in the vendee a retro subject only to the resolutory condition of repurchase by the
vendor a retro within the stipulated period. This is known as:
a) Equitable mortgage
b) Conventional redemption
c) Legal redemption
d) Equity of redemption

Rule on loss