PLEDGE, MORTGAGE AND ANTICHRESIS

Sales - contract whereby one of the contracting parties (known as the 4. Onerous - valuable consideration are given by both parties to Rules on the object of the Contact of Sale
seller or vendor), obligates himself to transfer the ownership of and to acquire rights 1. Requisites of object of a contract of sale
deliver a determinate thing, and the other party, (known as the buyer or 5. Commutative - parties exchange almost equivalent values (a) The thing must be within the commerce of men
vendee), obligates himself to pay therefor a price certain money or its 6. Nominate - has a special name given to it by law (b) Thing must be licit (not contrary to Law, Morals, Good
equivalent. Contact of Sale vs Contract for a Piece of Work Customs, Public Order, or Public Policy)
SALE PIECE OF WORK (c) Thing must be Determinate - if it is particularly designated or
Elements of a Contract of Sale A contract for the delivery at a certain The goods are to be physically segregated from all others of the same class
1. Essential elements / requisites - those without which a contract of price of an article which the vendor in manufactured specially for 2. Vendor must have the right to transfer the ownership of the thing at the
sale would not exist the ordinary course of business the customer and upon his time that it is delivered. Thus, it is not necessary that the vendor must
a) Consent of the contracting parties manufactures or procures for the special order, and not for be the owner at the time of sale.
b) Subject matter which should be a determinate thing general market, whether the same is the general market 3. Things having a potential existence may be the object of a contract of
c) Price certain in money or its equivalent on hand or not sale
2. Natural Element - those inherent in a contract of sale, which in the (a) Emptio Rei Speratae (Sale of an expected thing) - Sale of a
absence of stipulation excluding them, are deemed to exist Sale vs Barter future thing; The thing sold must come to existence
a) Warranty against eviction SALE BARTER (b) Emptio Spei (Sale of the hope itself) - deals with a present thing -
b) Warranty against hidden defects and encumbrances Cause or Consideration is in Cause or consideration is the hope or expectancy; the sale produces effects even if the
3. Accidental Elements - refer to particular stipulations of the parties money another thing thing hoped for does not come into existence
such as terms, place and time of payment and other conditions 4. The goods which form the subject of a contract of sale may be either:
agreed upon Consideration is partly in money and partly another thing, the following (a) Existing goods owned or possessed by the seller
rules shall be observed to determine whether the contract is a sale or (b) Goods to be manufactured, raised, or acquired by the seller after
Payment by Cession (Cession de bienes) vs Sale vs Dacion en pago the perfection of the contract of sale, called “future goods”, or
barter:
CESSION DE 1. The contract shall be one of sale or barter depending upon the goods whose acquisition
SALE DACION EN PAGO
BIENES manifest intention of the parties (stated in the contract) 5. The sole owner of the thing may sell an undivided interest therein.
There are pre-existing No pre-existing There is pre-existing 2. If the intention of the parties does not clearly appear: Such sale shall produce the effect of making the seller and the buyer
credits credit credit a) Contract of barter - if the value of the thing given as co-owners of the thing sold
Extinguishes Creates Extinguishes part of the consideration exceeds the monetary 6. Sale of Fungible Goods - interchangeable goods such as grain, oil,
obligation obligation obligation consideration etc., that allow one to be replaced by another without loss of value
Cause or Cause or Cause or b) Contract of sale - if the monetary consideration is (a) Quantity of the Mass > Quantity Sold - Parties shall become co-
Consideration is the Consideration is Consideration is the more than or equal to the value of the thing given as owners of the mass
extinguishment of the the price from the extinguishment of the part of the consideration (b) Quantity of the Mass < Quantity Sold - buyer becomes the
obligation from the seller’s point of obligation from the owner of the whole mass, with the seller being bound to make
debtor’s point of view; view; Delivery of debtor’s point of view; Sale vs Contract to Sell good the deficiency from goods of the same kind and quality,
Assignment of the the object from Delivery of the object Contract of Sale Contract to Sell unless a contrary intent appears
things to be sold from the buyer’s point given in lace of the 7. Thing subject to a resolutory condition may be the object of a contract
Title of property passes to the Ownership is, by agreement,
the creditors’ point of of view credit from the of sale.
vendee upon the delivery of the reserved to the vendor and is not
view creditor’s point of view thing sold to pass to the vendee until full
Less freedom in fixing Greater freedom Less freedom in fixing Price - sum stipulated as the equivalent of the thing sold, and also every
payment of the purchase price
the price because of in fixing the price the price because of incident taken into consideration for the fixing of the same, put to the debit
Non-payment of the price is a Full payment of the purchase
the pre-existing credit the pre-existing credit of the vendee, and agreed to by him
negative resolutory condition price is a positive suspensive
which the parties seek which the parties seek condition
to extinguish to extinguish RULES ON PRICE
Risk of loss is on the buyer Risk of loss is on the seller
Creditors do not Ownership of the 1. Certainty of the Price - price of the thing sold must be certain;
become the owners of thing is otherwise, the sale is void by reason of the absence of meeting of
Sale vs Agency to Sell minds between the parties
the properties transferred to the
Sale Agency to Sell (a) If the parties have agreed upon a definite amount for the sale
assigned to them but buyer
Title to the gods is transferred to Title to the goods is retained by NOTE: Fixing of the Price can never be left to the discretion of
are merely given the
the buyer upon delivery of the the owner despite the delivery of one of the contracting parties. However, if the price fixed by
right to sell such
thing sold the goods to the agent one of the parties is accepted by the other, the sale is
properties and apply
the proceeds to their Buyer is required to pay the price Agent is required to turn over to perfected.
claims the principal the price of the (b) If it be certain with reference to another thing certain
goods which he received from (c) If the determination of the price is let to the judgment of a
Characteristics of a Contract of Sale the buyer specified person or persons
1. Consensual - perfected by mere consent of the parties  Unable or unwilling to fix the price, the contract shall be
Recipient of the property may do Principal retains control of the
2. Principal - can exist by itself without being dependent upon inefficacious, unless the parties subsequently agreed
with the property as he pleases property
another contract upon the price
3. Bilateral - parties are bound by reciprocal obligations  Third person acted in bad faith or by mistake, the court
may fix the price
PLEDGE, MORTGAGE AND ANTICHRESIS
 If such third person ae prevented from fixing the price
or terms by the fault of the seller or buyer, the party not
at fault may have such remedies against the party at
fault as are allowed to the seller or buyer, as the case
may be
(d) If the fixed price is that which the thing sold would have a
definite day, or in a particular exchange or market, or when an
amount is fixed above or below the price on such day, or in
such exchange or market, provided said amount is certain
NOTE: Price cannot be determined - sale shall be inefficacious.
However, if the thing or any part thereof has been delivered to
and appropriated by the buyer, he must pay a reasonable price
therefor
2. Gross Inadequacy of Price - does not affect a contract of sale, except
as it may indicate a defect in the consent, or that the parties really
intended a donation or some other act or contract
3. Simulated Price - it appear that a price certain in money is to be paid or
has been paid; the sale is void, but the act may be shown to have been
in reality a donation or some other act of contract
When a contract of sale is perfected
 Contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
 From that moment, the parties ay reciprocally demand performance,
subject to the provisions of law governing the form of contract
Form of a Contract of Sale
1. Subject to the provision of the Statute of Frauds and of any other
applicable statute, a contract of sale may be any of the following
forms:
(a) In writing
(b) By word of mouth (oral)
(c) Partly in writing and partly oral
(d) May be inferred from the conduct of the parties
2. Under the Statute of frauds, the sale involving the following must be in
writing to be enforceable:
(a) Sale of real property or of any interest therein (regardless of
the price)
(b) Sale of goods, chattels or things in action (credit, shares of
stock, incorporeal properties) the price of which is P500 or
more.
3. Sale of land through an agent - authority of agent to sell a piece of land
must be in writing; otherwise, the sale is void
(a) Not in writing - sale is void
(b) In a private instrument
 Orally - sale is unenforceable
 Private instrument - sale is valid
 Public instrument - sale is valid
(c) In a public instrument
 Orally - sale is unenforceable
 Private instrument - sale is valid
 Public instrument - sale is valid
RULES IN CASE OF SALE BY AUCTION
1. Sale by auction in lots - each lot is subject to a separate contract of
sale
2. When sale by auction is perfected - when the auctioneer announces its  Not supported by any consideration distinct from the
perfection (a) by the fall of the hammer, or (b) in any other manner price, the promise is not binding upon the promisor.
(a) Rights of parties before perfection The promisor can withdraw his promise by informing
(1) Any bidder may retract his Bid - bid is merely an offer and the promisee of such withdrawal even before the
an offer may be withdrawn at anytime before acceptance lapse of any option period given to the promisee.
(2) Auctioneer may withdraw the goods from the sale unless
the auction has been announced without reserve. Earnest Money vs Option Money
Withdrawal of the goods is equivalent to a rejection of the Earnest Money Option Money
offer made by any bidder Money given as part of the Consideration paid for the
 Auction with reserve - auctioneer is the offeree and purchase price and as proof of purpose of holding one to his
has the power of acceptance. As offeree, he has perfection of the contract promise to buy or sell a
the power to reject all bids determinate thing for a certain
 Auction without reserve - auctioneer is much like period of time, which
an offeror, with the bidders competing to determine consideration is separate and
who will win the power of acceptance. After the distinct from the purchase price
auctioneer calls for bids on an article or lot, that Paid upon the perfection of a Paid for a sale that is yet to be
article or lot cannot be withdrawn unless no bid is contract of sale perfected
made within a reasonable time
(b) Rights of parties after perfection - winning bidder cannot retract RULES ON PRESERVATION OF, INJURY TO OR BENEFIT FROM THE
his bid nor can the auctioneer withdraw the goods since there is THING SOLD BEFORE OR AFTER PERFECTION
already a perfected contract. Withdrawal from the contract by 1. Duty of seller to preserve thing after perfection but before delivery
either party constitutes a violation of the Principle of Mutuality of  Seller is obliged to take care of the thing with the diligence of a
Contracts good father of a family unless the law or stipulation of the parties
3. Right of seller to bid requires another standard or care
(a) Right to bid must have been reserved expressly by or on 2. Right of the buyer to the fruits
behalf of the seller  Buyer has a right to the fruits of the thing from the time of the
(b) Right to bid must not be prohibited by law or stipulation perfection of the contract unless a contrary stipulation has been
(c) Notice must be given that the sale is subject to right to bid by agreed upon or a later date is set by the parties when such right
or on behalf of the seller will accrue such as when the obligation to deliver arises at some
future date. However, the buyer shall acquire no real right over
Effect of employment by the seller of “by bidders” or “puffers” without the thing and its fruits until the same have been delivered to him
notice. 3. Loss of or injury to the thing
 “By bidders” or “puffers” - refer to persons employed by the seller (a) Loss before perfection
to bid in his behalf, the purpose of which is to raise the price, but  Complete loss - void cause of the absence of the object
the said persons are not in themselves bound by their bids  Partial loss, buyer may
 any sale whereby the seller employs “by bidders” or “puffers”  Withdrawal from the contract / rescission
without notice may be treated as Fraudulent by the buyer. Thus,  Demanding the remaining part and paying its
the buyer may annul the sale on the ground of vitiated consent proportionate price
due to fraud (b) Loss after perfection
 First View - buyer bears the risk of loss except
When ownership of the thing sold is transferred (1) Seller delays
 It is transferred upon the actual or constructive delivery thereof. The (2) Law provides that the seller shall be liable even in
time when ownership is transferred is important to determine the party case of fortuitous event
who shall bear the loss (3) Parties have stipulated that the seller shall be
 The parties may, however, stipulate, that ownership in the thing sold liable even in case of fortuitous event
shall not pass to the purchaser until he has fully paid the price (4) Nature of the seller’s obligation requires the
assumption of risk
Promise to Buy and/or Sell  Second View - seller bears the risk of loss except
1. Bilateral Promise - one party promises to buy and the other party (1) There is an agreement to that effect
promises to sell a determinate thing at an agreed price (2) Ownership of the goods retained by the seller
2. Unilateral Promise - promise to buy or sell a determinate thing at a merely to secure the performance by the buyer of
certain price is made by only one of the parties his obligation under the contract
(a) If not accepted by the promisee (POLICITACION) - does not (3) Actual delivery has been delayed through the
produce any legal effect fault of the buyer
(b) If accepted by the promisee
 Supported by a consideration distinct from the price, NOTE: The weight of authority is on the second view because it is
the promise is binding upon the promisor consistent with the principle of “res perit domino”.
PLEDGE, MORTGAGE AND ANTICHRESIS
(a)
RES PERIT DOMINO - the loss of property falls upon the owner
Sale by Sample - contract solely with reference to the sample; seller
warrants that the bulk of the goods delivered corresponds with the sample
shown to the buyer
Sale by Description - with reference to the description; seller warrants that
the bulk of the goods delivered corresponds with the description of the
goods presented by the buyer
Sale by Sample and Description - seller warrants that the bulk of the
goods delivered corresponds with both the sample and description; buyer
shall have reasonable opportunity of comparing the bulk with the
description or the sample
Rescission by Buyer - goods delivered do not correspond with the sample,
description, or sample and description, as the case may be, the buyer may
ask for the rescission of sale
RECTO LAW - remedies of vendor in installment sales of personal
property, and 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
(1) Exact fulfillment of the obligation, should the vendee fail to pay -
applies regardless of the number of installments defaulted
(2) If the vendee’s failure to pay covers two or more installments, he
may, at his option, avail himself of the first remedy, or do either
of the following:
(a) Cancel the sale
(b) Foreclose the chattel mortgage on the thing sold, if one
has been constituted
(b)
Acceleration Clause - the whole shall become due upon default of the
payment of an installment
When Deficiency may be recovered
(1) Sale on straight-term
(2) Security foreclosed is other than the chattel mortgage constituted on
the thing sold
(3) Sale on execution of judgement in favor of the seller
MACEDA LAW - sale of real property in installments
- Realty Installment Buyer Act
- to protect buyers of real estate on installment payments against
onerous and oppressive conditions
(1) Transactions covered - sale or financing of real estate on
installment payments, including residential condominium,
apartments, but excluding industrial lots, commercial buildings,
and sales to tenant under RA No. 3844 as amended by RA No.
6389 (Land Reform Law), where the buyer has paid at least two
years of installments
(2) Rights of the Buyer
Grace period to pay installments in case of default
i. At least 2 years of installment had been paid at the time
of default
 To pay, without additional interest, the unpaid
installment due within the total grace period earned by him,
which is fixed at the rate of 1 month grace period for every 1
year of installment paid. This right shall be exercised by the
buyer only once in every five years of the life of the contract
and its extensions, if any
 CONTRACT IS CANCELLED, he shall be entitled
to the refund of the CASH SURRENDER VALUE of the
payments on the property equivalent to 50% of the total
payments, and after 5 years of installments, an additional 5%
every year but not to exceed 90% of the total payments made
 WHEN CANCELLATION SHALL TAKE PLACE -
after 30 days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by
notarial act and upon full payment of the cash surrender value
to the buyer
 NOTE - downpayment, deposits or options on the
contracts shall be included in the computation of the total
number of installments
ii. Less than 2 years of the installment had been paid at
the time of default
 Buyer shall be given a grace period of not less
than 60 days from the date the installment became
due to pay
 WHEN CANCELLATION SHALL TAKE PLACE -
buyer fails to pay the installment due upon the
expiration of the grace period, the seller may cancel
the sale after 30 days from the receipt by the buyer
of the notice of cancellation or the demand for
rescission of the contract by notarial act
Additional rights
i. Buyer shall have the right during the grace period
before the cancellation of the contract
 To sell his rights to another by notarial act
 To assign his rights to another by notarial act
 To reinstate the contract by updating the account
ii. To pay in advance any installment or the full unpaid
balance any time without interest
iii. To ask for the annotation of the full payment of the
purchase price in the certificate of title covering the
property