QUIZ 5 – SALES AND LEASE
2020
True or False (explain) unless otherwise required
1-10 What are the most important features of the Maceda Law
and the Recto Law?
The Recto Law
The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It
was added to the Civil Code to prevent abuses in the foreclosure of
chattel mortgages, such as when mortgagee-creditors foreclosed
mortgaged property, bought them at a low price (on purpose,) then
prosecuted the mortgagor-debtors to recover the deficiencies.
In the event a buyer of personal property defaults by failing to pay
two or more of the agreed installments, the seller can do any of the
following: ALTERNATIVE REMEDIES
1. Exact fulfillment of the obligation, should the vendee fail to
pay
2. Cancel the sale, should the vendee’s failure to pay cover two
or more installments
3. Foreclosure the chattel mortgage
The Recto Law also won't apply to a straight sale or a sale that is
partly cash and partly term
If the buyer refuses to surrender the items to the seller, he becomes
a perverse buyer-mortgagor. When that happens, the seller can
recover expenses and attorney's fees.
The Recto Law also covers leases with the option to purchase.
The Maceda Law
The Maceda Law, RA 6552, is the real estate equivalent of the Recto
Law. Like the Recto Law, it also covers financing of sales of real
property (which is why mortgages also come in.)
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EXCEPTIONS:
1. Sale of industrial lots
2. Sale of commercial buildings
3. Sale to Agricultural Tenants
4. Straight sale or sale not on installment
Depending on when the buyer defaults, there are two (2) possible
scenarios: if the buyer paid at least two (2) years' installments and if
the buyer paid less than 2 years' installments.
If the buyer paid less than 2 years' installments and defaults, he is
given a grace period of sixty (60) days starting from the date of his
last installment to resume paying. This period can be increased by
the seller. If after the grace period the buyer still can't pay, the seller
must make a notarial demand to cancel the sale. The cancellation
becomes effective thirty (30) days after the buyer was notified. So it's
possible that the buyer could be notified two months after the 60-day
period and then the 30-day period will begin.
If the buyer paid at least two years' installments, the buyer can pay
the unpaid balance without interest. The grace period is computed at
one (1) month per year of installment payments. It also begins from
the time the buyer paid his last installment. The grace period can be
used only once every five (5) years of the sales contract's life
-including its extensions. So it's possible to have a grace period of a
year if the buyer had been paying his installments faithfully for 12
years. Once the buyer chooses to use the grace period, he can't get
it again until another five years are over.
If the seller wants to cancel the sale, he has to refund the buyer of
50% of the actual payments. If the buyer paid more than five years'
installments another 5% for every year is to be added to the refund,
but only up to 90% of the total payments made. The payments
mentioned here include the downpayment, options and deposits. The
refund is made in this way: if the buyer paid more 2 to 5 years'
installments, he can get back 50% of the cash surrender value. If he
paid for more than 5 years, he can get the 50% plus 5% per year up
to 90%.
The buyer is also allowed to make advanced payments, or even the
full price, without interest. He can also assign his rights to another
person, making that person the new buyer, but he can only do that
with a notarial deed of sale assignment.
11. In a sale of goods, there is a possibility that the vendor may
demand to have complied with his prestation even if he does
not deliver the goods. TRUE
12-16 A,B,C,D and E are solidarily debtors of X for the amount of
500K. When demanded payment from A, the latter refused to
pay because B is 15 years old; C’s share has already been
condoned by X through a phone conversation; D is insolvent;
E was given an extension of 6 months without consent of the
co-debtors. State the effect of each of the above defenses.
17. A lease for professional services may be implied because no
specific form is required TRUE
18. In a lease of work, a portion of the town plaza which is
property for public use may be the object of lease. FALSE
19. Exceptionally, a portion of the town plaza which is property
for public use may be the object of lease TRUE
20. Persons enumerated in Art 1491 are prohibited from entering
into contract of lease of service FALSE. Art 1646 – only
disqualified to become lesses of the thing under 1491.
21. A right may also be the object of a contract of lease and the
compensation is referred to as royalty TRUE
22. The lessor is obliged to answer even for a mere act of
trespass which a third party may cause on the use of the
thing leased but the lessee shall have a direct action against
the intruder. FALSE. Lessor is not liable
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23. When the lessor repairs the thing leased but the lessee is
not satisfied, the latter may suspend payment of rent.
FALSE. Art 1658 – Lessee may suspend payment of rent in
case lessors fail to make necessary repairs or maintain lease
in a peaceful and adequate enjoyment of property leased
24. If the lessee fails to comply with his obligations, the lessor
may file an action for rescission plus damages but not an
action for damages only. FALSE. He may file an action for
rescission w/ damages or damages only.
25. If the lessor sells the property leased to a third party in
violation of a right of first refusal given to a lessee, the
contract of sale is rescissible regardless of the good faith of
the buyer. FALSE. Rescissible only in bad faith
26. The lessor has subrogatory right against a sub-lessee for
unpaid rent. FALSE ART. 1652 – The sub lessee is
subsidiarily liable to the lessor for any rent due from the
lessee.
27. A lease extendible by mutual agreement would simply
amount to a right of first refusal in favor of the lessee so that
if a third party will offer a higher rent, the lease in favor of the
first lessee will not be extended unless he can match the
higher offer TRUE
28. A contract for the lease of a vibrator is personal in character
and is therefore terminated by the death of the lessee.
FALSE not terminated by death
29. An implied new lease may result even if there is an express
stipulation to the contrary FALSE. No implied renewal of
lease where parties stipulated that there would be no
renewal by implication.
30. An implied new lease is for the same period as the original
lease but a guaranty executed by a third person in favor of
the lessor shall cease with respect to the new lease.
 FALSE - Instead of the original period, period of new lease
will be according to the character of property and mode of
payment of rent.
31. The failure to pay rentals shall make the continued
possession unlawful. FALSE Unless coupled with a refusal
on part of lessor to pay after lawful demand.
32. A provision in a contract of lease that improvements
introduced by the lessee will accrue to the lessor upon
termination of the lease shall be governed by the rules on
sale of property FALSE. Rules on Sales will NOT apply
33. The lessor in a lease of rural lands has a right to a reduction
of rental on account of sterility of land the fruits due to
extraordinary and unforeseen event FALSE. Loss must be
more than ½ .
34. A contract of sale entered into in violation of a right of first
refusal is valid. TRUE. it may be rescinded or may be the
subject of an action for specific performance
35. The lessee in a lease of rural lands has a right to a reduction
of rental on account of sterility of the land and for the loss of
the fruits due to extraordinary and unforeseen event. False.
Right to reduction of the loss for more than ½ of the fruits
lost through extraordinary and unforeseen events.
36. A provision in a contract of lease that all improvements
introduced by the lessee will accure to the benefit of the
lessor without reimbursement is valid FALSE. Stipulation not
contrary to law etc is valid and binding
37. A contract of lease is consensual, nominate, bilateral,
onerous, and commutative although exceptionally, it could
be remuneratory. FALSE. Not remuneratory
38. A lease for a determinate time ceases upon the day fixed
without the need of a demand TRUE
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39-41. (3) modes of terminating a lease
1. By the expiration of the period (NCC, Art. 1673);
2. Total loss or destruction of the thing leased (NCC, Art.
1655);
3. Rescission due to non-performance of the obligations of a
party;
4. Mutual agreement to terminate the lease contract;
5. By action of the purchaser or transferee of the property
leased in good faith against the lessee whose lease contract
is not duly recorded;
6. In case the dwelling place or any other building is unfit for
human habitation and is dangerous to life or health (NCC,
Art. 1660);
7. By resolution of the right of the lessor;
8. By will of the purchaser or transferee of the thing
42- 45. Warranty against hidden vices of animals
1. Expert knowledge is not sufficient to discover
2. The veterinarian failed to discover or disclose through
ignorance or bad faith
3. The animal dies within 3 days after purchase and the
disease which caused the death existed at the time of the
contract ( Beda Memaid)
46-52
52-58. (7) persons specifically disqualified to buy
1. Husband and wife
2. Guardian, with respect to the property of his ward
3. Agents, with respect to the property whose administration or
sale may have been entrusted unless the consent of the
principal has been given
4. Executor, administrator with respect to property of the estate
under administration
5. Public Officers and employees with respect to the
government, its political subdivisions, or GOCC’s that are
entrusted to them.
6. Judges, justices; prosecuting attorneys, clerks of courts with
respect to property in custodial egis
 7. Other persons specifically disqualified by law
59-61. (3) exceptional cases when delivery does not transfer title
over the thing sold 71-75. (5) requisites of warranty against eviction
1. Pactum reservati dominiI (contractual reservation of title) 1. Vendee is deprived in whole or in part of the thing purchased
2. Impled reservation of ownership under Art 1503 2. Deprivation by final judgement
3. Sale on acceptance/trial/approval satisfaction 3. Judgment is based on a right prior to the sale or an act
4. Sale by non – owner imputable to the vendor
5. Contract to sell 4. Vendor is summoned in the suit for eviction at the instance of
the vendee
62-64. (3) instances when goods are no longer considered in transit a. To enable the seller to prove his claim
1. After delivery to the buyer or his agent in that behalf b. To avoid multiplicity of suits
2. If the buyer or his agent obtains delivery of the goods at the c. To satisfy due process
point before their arrival at the appointed destination 5. No waiver of warranty by the vendee
3. If after the arrival of the goods at the appointed destination
the carrier or the bailee acknowledges to hold the goods in 76. Explain tacita reconduccion?
behalf of the owner  “Implied lease”
4. If the carrier or bailee wrongfully refuses to deliver the goods  The right of the lessee to continue enjoying the material
to the buyer. or de facto possession w/n the period of the time fixed by
law.
65-67. (3) implied warranties in a contract of sale  Requisites
1. Warranty against eviction a. the term of the original contract of lease has expired;
2. Warranty that the seller has the right to sell b. the lessor has not given the lessee a notice to
3. Warranty against non- apparent burden of servitude vacate;
4. Warranty against hidden defects c. the lessee continued enjoying the thing leased for 15
5. Warranty of quality or fitness days with the acquiescence of the lessor.

68-70. (3) persons from whom redemption may be made 77-81. The lessee constructed a garage in the residential property
1. Co owner of a thing in case the shares of all the other co-
owners or of any of them are sold to a 3rd person
2. Owners of adjoining lands when a piece of rural land does
not exceed 1 hectare is alienated unless the grantee does
not own any rural land
3. Persons, jointly and in the same contract should sell an
undivided immovable with a right to repurchase. None of
them may exercise this right for more than his respective
share. 82-86.
4. When a credit or another incorporeal right in litigation is sold 1.
5. Sale of adjacent small urban lands brought merely for 2.
speculation. 3.
4.
leased. There is nothing in the contract of lease about the
introduction of improvements on the property. What is the
nature of the improvement made? Can the lessor retain the
garage after the expiration of the lease?
(6) exceptions on the pari delicto non oritur action rule
breach of warranty cases
simulated contracts
when parties are not equally guilty
against the government

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 5. prohibited conveyances under the law
6. constitutional prohibition against alien landholding.
97-100. May a person donate or sale a thing that does not belong
87-96. State whether the following contracts are unenforceable, to him?
voidable, rescissible, void or valid.

Assume all the other requirements for validity are complied

with. IF the contract is NOT VALID, explain briefly your
answer.

a. A contract of sale of a prescription drug entered into

between an insane and a minor

b. A deed of donation signed by a party thereto who

thought that it was a contract commodatum but the other
party knew it was a donation

c. A sale of a guardian of a parcel of land belonging to his

ward without judicial approval where the ward suffers
lesion/damage equivalent to 1/3 of the value of the
property.

d. An oral partition of a parcel of land

e. An oral promise to be solidarily liable for the debt of

another person

f. An oral agreement for the grant of an easement of right

of way

g. Relatively simulated contract entered into between

relatives

h. Vote-buying agreement in an election contest in a private

labor union

i. An oral agreement to extend a loan in an amount of 300

j. An oral promise to put in writing a verbal sale of a

condominium unit