Pointers in Law on Sales

I. NATURE AND FORM OF THE CONTRACT

Sources of the Law on Sales

Sales are governed by the provisions of the Civil Code of the Philippines (RA No. 386 NCC):

1. Book IV, Title VI, Articles 1458-1637 (Sales)

2. Title I, Arts. 1156-1422 (Obligations and Contracts)

3. Jurisprudence

Concept of Contract of Sale

The contract of sales is an agreement whereby one of the parties (called the seller or vendor) obligates himself to deliver
something to the other (called the buyer or purchaser or vendee) who, on his part, hinds himself to pay therefore a sum of
money or its equivalent (known as the price).

The transfer of title to property or the agreement to transfer title for a price paid or promised not mere physical transfer
of the property, is the essence of sale.

Characteristics of a Contract of Sale

1. Consensual - perfected by mere consent of the parties without further acts.

2. Bilateral - both the contracting parties are bound to fulfill correlative obligations towards each other (the
seller to deliver and transfer ownership of the thing sold, and the buyer to pay the price).
3. Onerous - the thing sold is conveyed in consideration of the price and vice versa.
4. Commutative - the thing sold is considered the equivalent of the price paid and vice versa.
5. Aleatory - in the case of sale of hope, one of the parties or both reciprocally bind themselves to give or to
do something in consideration of what the other shall give or do upon the happening of an event
which is uncertain, or which is to occur at an indeterminate time.

6. Nominate - the contract is given a special name or designation in the Civil Code.
7. Principal - the contract does not depend for its existence and validity upon another contract.

Essential Requisites of a Contract of Sale

1. Consent or meeting of the minds refers to the conformity of the parties to the terms of the contract, the acceptance by
one of the offer made by the other. As a bilateral contract, the acceptance of payment by a party is an indication of his
consent to a contract of sale, thereby precluding him from rejecting its binding effect [Clarin vs. Rulova, 127 SCRA 512].

There may be a sale against the will of the owner in case of expropriation and the three different kinds of sale under
the law ordinary execution sale, judicial foreclosure sale, and extra-judicial foreclosure sale.

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2. Object or subject matter refers to the determinate thing which is the object of the contract;

Requisites:

a. It must be existing, future or subject to resolutory condition (Art 1462,1465 NCC)

Emptio rei speraate Rei spetae

(sale of thing expected)

- the sale of a thing not yet in existence,but
with potential existence subject to the
condition that the thing will exist and on
failure of the condition, the contract
becomes ineffective and hence, the buyer
has not obligation to pay the price;
- the future thing is certain as to itself but
uncertain as to its quantity and quality;
- contract deals with a future thing;
- sale is subject to the condition that the
thing should exist, so that if it does not,
there will be no contract by reason of the
absence of an essential element.
- the sale of hope itself that the thing will
come into existence, where it is agreed that
the buyer will pay the price even if the thing
does not eventually exist;
- like the sale of a sweepstake ticket, it is not
certain that the thing itself (winning a prize)
will exist, much less it quantity and quality;
- contract relates to a thing which exists or is
present the hope or expectancy;
- produces effect even though the thing does
not come into existence because the object of
the contract is the hope itself, unless it is a
vain hope or expectancy (like the sale of a
falsified sweepstakes ticket which can never
win).

Even a future thing not existing at the time the contract is entered into may be the object of sale, provided it has a
potential or possible existence, that is, it is reasonably certain to come into existence as the natural increment or usual
incident of something in existence already belonging to the seller, and the tile will vest the buyer the moment the
thing comes into existence (Art. 1461).

b. It must be licit

i. It is not outside the commerce of men;

ii. It is not intransmissible; and

iii. It does not contemplate a future inheritance, unless expressly authorized by law (Art.1347).

c. It must be determinable or at least determinable.

3. Cause or consideration refers to the price certain in money or its equivalent.

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Natural Elements those which are deemed to exist in certain contracts, in the absence of any contrary stipulations, like
warranty against eviction;

Accidental Elements those which may be present or absent depending on the stipulations of the parties, like conditions,
interest, penalty, time or place of payment.

Kinds of a Contract of Sale

1. As to presence or absence of conditions

Absolute where the sale is not subject to any condition whatsoever and where the title passes to the buyer upon delivery of
the thing sold.

Conditional where the sale contemplates a contingency and where the contract is subject to certain conditions, usually in the
case of the vendee, for the full payment of the agreed purchase price.

2. Other kinds

As to the nature of the subject matter real or personal, tangible or intangible

As to the manner of payment cash or installment

As to its validity valid, rescissible, unenforceable, void

Contract of Sale Distinguished from Contract to Sell

Contract of Sale Contract to Sell

Transfer of - passes to the buyer upon delivery - remains with the seller until full
title: of the thing sold. payment of the agreed price.

Payment of - non-payment of the price is a - full payment is a positive

price: negative resolutory condition, and suspensive condition, the failure of
the remedy is to exact fulfillment or which is not a breach, casual or
to rescind the contract. serious, of the contract but simply
an event that prevents the
obligation of the vendor to convey
title from acquiring binding force.

Ownership - vendor loses and cannot recover - title remains in the vendor until
of vendor: ownership of the thing sold and full payment of price.
delivered, actually or constructively
until and unless the contract of sale
itself is resolved and set aside.

Sale Distinguished from Dation in Payment:

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Sale Dation in Payment

- no pre-existing credit - there is pre-existing credit

- gives rise to obligation
- cause or consideration is the price, or the
acquisition of title to the property
- there is greater freedom in the determination
of the price
- giving of the price may generally end the
obligation of the buyer
- extinguishes obligation
- cause of consideration is extinguishment of
the debt (from the point of view of the
offeror), and the acquisition of the object
offered (from the point of view of the creditor)
in lieu of the original credit
- less freedom
- the giving of the object in lieu of the credit
may extinguish completely or partially the
credit (depending on the agreement)

Sale of goods by description Sale of goods by sample

- occurs where the purchaser has not seen
the article sold and relies on the description
given him by the vendor, or has seen the
goods but the want of identity is not apparent
on inspection.- If the bulk of the goods
delivered does not correspond with the
description, the contract may be rescinded.
(Art. 1481.)
- the parties contracted solely with reference
to the sample, with the understanding that the
bulk was like it.- the vendor warrants that the
thing sold and to be delivered by him shall
conform with the sample in kind, charater, and
quality.

Form of Contract of Sale

Generally, a contract may be entered into in any form provided all the essential requisites for its validity are present (Art.
1356). It may be in writing, oral, or partly in writing and party oral. It may even be inferred from the conduct of the parties,
since sale is a consensual contract that is perfected by mere consent.

However, in case the contract of sale should be covered by the Statute of Frauds, the law requires that the agreement be in
writing subscribed by the party charged, or by his agent; otherwise, the contract cannot be enforced by action [see Art. 1403].

Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the following contracts must be in writing to be
enforceable:

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(a) sale of personal property at a price not less than P500;

(b) sale of real property or an interest therein regardless of the price involved; and

(c) sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the
price involved.

The Statute Frauds specifies three (3) ways in which contracts of sales of goods within its terms may be made
binding:

(a) the giving of a memorandum;

(b) acceptance and receipt of part of the goods (or things in action) sold and actual receipt of the same (Art. 1585); and

(c) payment or acceptance at the time some part of the purchase price.

The Statute of Frauds is applicable only to executory contracts (where no performance, i.e., delivery and payment,
has as yet been made by both parties), and not to contracts which are totally consummated or partially performed
[Vda. De Espiritu vs. CFI of Cavite, 47 SCRA 354].

II. CAPACITY TO BUY OR SELL

Persons Who May Enter Into a Contract of Sale

As a general rule, all persons, whether natural or juridical, who can bind themselves, have the legal capacity to buy and sell.

Persons Who Are Incapacitated to Enter Into a Contract of Sale

1.Absolute Incapacity pertains to persons who cannot bind themselves

(a) Minor

(b) Insane or demented persons

(c) Deaf-mutes who do not know how to read and write

Contracts entered into by a minor and other incapacitated persons are voidable. However, where the necessaries are
sold and delivered to him (without the intervention of the parent or guardian), he must pay a reasonable price
therefore. The contract is therefore valid, but the minor has the right to recover any excess above a reasonable value
paid by him.

Sale of real property by minors who have already passed the ages of puberty and adolescence and are now in the
adult age, when they pretended to have already reached their majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves from compliance with the obligations assumed by them or to
seek their annulment. This is in accord with the doctrine of estoppel [Mercado and Mercado vs. Espiritu, 37 Phil.
265].

2. Relative Incapacity where it exists only with reference to certain persons or class of property (Art. 1490-1491). The
prohibition extends to sales by virtue of legal redemption, compromises, and renunciations.

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(a) Husband and wife to each other except when a separation of property was agreed upon in the marriage settlements, or
when there has been a judicial separation of property

(b) Guardian as to the property of his ward

(c) Agents as to the property whose administration or sale has been entrusted to them, unless consent of the principal is
given

(d) Executors or administrators as to the state under their administration

(e) Public officers and employees as to the property of the State or any subdivision thereof, or of the government-owned
or controlled corporations, the administration of which is entrusted to them

(f) Judges and government experts who take part in the sale of the property and rights under litigation

The prohibition is based on the fiduciary relationship (based on trust), to prevent fraud and undue and improper
influence.

With respect to (b) to (d), the sale shall only be voidable because in such cases only private interests are affected.
The defect can be cured by ratification by the seller. With respect to (e) and (f), the sale shall be null and void, public
interests being involved therein.

(g) Aliens who are disqualified to purchase private agricultural lands under Art. XII, Secs. 3 and 7 of the Constitution

(h) Unpaid seller having a right of lien or having estopped the goods in transitu

(i) Officer holding the execution or his deputy

III. EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST

Where the thing is entirely lost at the time of perfection, the contract is inexistent and void because there is no
object. There being no contract, there is no necessity to bring an action for annulment.

Where the thing is only partially lost, the vendee may elect between withdrawing from the contract and demanding
the remaining part, paying its proportionate price.

The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown
or it cannot be recovered.

IV. OBLIGATIONS OF THE VENDOR

1. Principal Obligations of the Vendor

a. to transfer the ownership of the determinate thing sold (Art. 1495);

The vendor need not be the owner of the thing at the time of perfection of the contract; it is sufficient that he has a
right to transfer the ownership thereof at the time it is delivered (Art. 1459).

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. The vendee-buyer is fact may
ask for the rescission or resolution of the sale.

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 If the failure of the 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.

b. to deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the
perfection of the contract (Art. 1537);

c. to warrant against eviction and against hidden defects (Arts. 1495, 1547);

d. to take care of the thing, pending delivery, with proper diligence (Art. 1163);

e. to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art. 1487).

V. SALE BY A PERSON HAVING A VOIDABLE TITLE

Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the sellers defect of
the title (Art. 1506, NCC).

*Is possession equivalent to title as to movable properties

General Rule: Possession of movable property acquired in good faith is equivalent to title.

Exceptions:

1. Owner lost the movable- owner may recover the movable without reimbursement; or

2. Owner is unlawfully deprived of the movable owner may recover the movable without reimbursement (Art.
559, NCC).

Exception to the exception:

a. The person who possesses the movable property has acquired the same in good faith at a public
sale(Art.559, NCC).

b. The buyer bought the movable at a merchants store.

Delivery or Tradition

Tradition or delivery is a derivative mode of acquiring ownership by virtue of which one has the right and intention to
alienate a corporeal thing, transmits it by virtue of a just title to one who accepts the same.

Within which to re Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver right away; he has
one (1) year deem the property.

Kinds of Delivery or Tradition

1. Actual or Real (Art. 1497) the thing sold is placed in the control and possession of the vendee or his agent. This
involves the physical delivery of the thing and is usually done by the passing of a movable thing from hand to hand.

2. Legal or Constructive (Arts. 1498-1501) through the execution of a public instrument

Requisites of constructive delivery are:

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 a. The seller must have control over the thing;

b. The buyer must be put under control;

c. There must be the intention to deliver the thing for purposes of ownership.

Kinds of Constructive delivery

1. Legal formalities/ execution of public instrument applies to real and personal properties, where the delivery is
made through the execution of a public document;

2. Traditio simbolica to effect delivery, the parties make use of a token symbol to represent the thing delivered; with
regard to movable property, its delivery may be made by the delivery of the keys of the place or depository where it
is stored or kept.(Art.1498).

3. Traditio longa manu movable property is delivered by mere consent by the contracting parties if the thing sold
cannot be transferred to the possession of the vendee at the time of the sale;(i.e. by mere pointing; Art. 1499, NCC)

4. Traditio brevi manu the vendee already has the possession of the thing sold by virtue of another title as when the
lessor sells the thing leased to the lessee;

5. Constitotum possessorium the vendor continues in possession of the property sold not as owner but in some other
capacity (e.g., as tenant of the vendee).

6. Quasi-Tradition (Art. 1501) delivery of rights, credits or incorporeal real property, made by placing the titles of
ownership in the hands of the vendee or lawyer, by execution of a public instrument, or by allowing the vendee to
use his rights as new owner with the consent of the vendor.

VI. REMEDIES OF AN UNPAID SELLER

A. General remedies:

1. Action for specific performance with damages

2. Action for rescission with damages

B. Special remedies:

1. Sale of personal property in installment [RECTO LAW]

i. Specific performance in case the buyer fails to pay;

ii. Rescission or cancellation of the sale in case of default by the vendee of two or more
installments;

iii. Foreclose the chattel mortgage on the thing sold, if one has been constituted, in case of
default by the vendee of two or more installments. In this case, the seller shall have no
further action for deficiency judgment or to recover any unpaid balance of the price.
Any agreement to the contrary shall be void (Art.1484).

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 Notes: The remedies under Art, 1484 have been recognized as an alternative, not cumulative, in that the exercise of
one would bar the exercise of the others.

These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a
waiver of the right to resort to the others [Pacific Commerial Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140
SCRA 255].

Art. 1484 does not apply in:

Sale of real property

Mortgage of real property

Sale of personal property on straight terms

2. Sale of goods

Who is deemed an unpaid seller

An unpaid seller is one who has not been paid or rendered the whole price or who has received a bill
of exchange or other negotiable instrument as conditional payment and the condition on which it was
received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or
otherwise( Art.1525,NCC).

Rights of an unpaid seller:

1. A lien on the goods or right to retain them for the price while in his possession

2. A right of stopping the goods in transitu in case of insolvency of the buyer; requisites:

(a) the seller must be unpaid;

(b) the buyer must be insolvent;

(c) the goods must be in transit;

(d) the seller must either actually take possession of the goods sold or give notice of his claim to the carrier or
other person in possession;

(e) the seller must surrender the negotiable document of title, if any, issued by the carrier or bailee; and

(f) the seller must bear the expenses of delivery of the goods after the exercise of the right.

3. A right of resale

4. A right to rescind the sale

3. Sale of real property or immovables on installments (RA 6552) [MACEDA LAW]

a. If buyer has paid at least 2 years of installmanets

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 The buyer must pay, without additional interest, the unpaid installments due
within the total grace period earned by him. There shall be one (1) month grace
period for every one (1) year of installment payments made.

Actual cancellation can only take place after 30 days from receipt by the buyer
of the notice of cancellation or demand for rescission by a notarial act and upon
full payment of the cash surrender value to the buyer. (note: the seller shall
refund to the buyer the cash surrender value of the payments on the property
equivalent to 50% of the total payments made.

The buyer has the right to sell his rights or assign the same to another person or
to reinstate the contract by updating the account during the grace period and
before actual cancellation of the contract.

The buyer shall have the right to pay in advance any installment or the full
unpaid balance of the purchase price in any time without interest and to have
such full payment of the purchase price annotated in the certificate of title
covering the property.

b. If buyer has paid LESS THAN 2 YEARS of installments.

The seller shall give the buyer a grace period of not less than 60 days from the
date the installment become due. If the buyer fails to pay the installment due at
the expiration of the grace period, the seller may cancel the contract after 30
days from receipt of the buyer of the notice of cancellation or the demand for
rescission of contract by a notarial act.

Downpayments, deposits or options on the contract shall be included in the

computation of the total installment payments made.

VII. DOUBLE SALES (Art. 1544 NCC)

Requisites;

a. Two or more transactions must constitute valid sales;

b. They must pertain exactly to the same object or subject matter;

c. They must be bought from the same or immediate seller; and,

d. Two or more buyers who are at odds over the rightful ownership of the subject matter must represent
conflicting interest.

Rules as to preference of ownership in case of double sale

A. Personal property first possessor in good faith

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 If the property sold is movable, the ownership shall be acquired by the vendee who first takes possession in
good faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861].

B. Real property

i. First registrant in good faith

the vendee who first registers the sale in good faith in the Registry of Deeds has preferred right over
another vendee who has not registered his title even if the latter is in actual possession of the
immovable property governed by the principle prius tempore, patior jure (first in time, stronger in
right) knowledge by the first buyer of the second sale cannot defeat the first buyers right except
when the second first registers in good faith the second sale;

ii. First possessor in good faith- in the absence of registration, the vendee who first takes possession in
good faith; and

iii. Person with oldest title in good faith- in the absence of both registration and possession, the vendee who
presents the oldest title (who first bought the property) in good faith.

Article 1544 has no application to lands not registered with the Torrens system.

Who is a purchaser in good faith?

One who buys the property without notice that some other person has a right to, or interest in such property. And one
who 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 before he has notice of the claim or interest of some other person in the property.

VIII. RISK OF LOSS

1. Loss of the object occurred before perfection.

Res perit domino applies. The seller still owns the thing because there is no delivery or transfer of ownership yet; hence,
seller bears the risk of loss.

2. Loss occurred at perfection. (Arts. 1493-1494 NCC)

Where the is entirely lost at the time of perfection, the contract is inexistent and void( Art.1318,par.2,NCC) because
there is no object. There being no contract, there is no necessity to bring an action for annulment.

If the thing is partly lost, the vendee may elect between withdrawing from the contract and demanding the remaining
part, paying its proportionate part.

3. Loss occurred after perfection but before delivery

The general rule is that it is governed by the stipulations in the contract. In the absence of stipulations: there are two
conflicting views:

First: Buyer bears the loss ( according to Paras, Vitug, Padilla, and de Leon)

Second: Seller bears the risk of loss( according to Tolentino, Jurado, Baviera,and Villanueva) this is back up by the
provision of Art. 1504 NCC, the goods remain at the sellers risk until the ownership therein is transferred to the
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 buyer, because there was still no delivery, the subject of the sale is still with the seller,thus ownership has not yet
been transferred to the buyer. Before delivery, if the determinate subject of the sale is lost through the fault of the seller,
the buyer need not pay the price but cab recover damages for breach of contract. However should the loss be through
fortuitous event, the seller is excused from his obligation to deliver the thing, and not being in breach of his obligation
he cannot be held liable for damages by the buyer.

*It is submitted that the second is more just and equitable. Besides it is in conformity with the principle of res perit
domino. The owner of the thing must bear the loss.

4. Loss after delivery

Res perit domino applies. The buyer is the owner; hence, the buyer bears the loss.

If the thing is lost without the fault of the debtor, the obligation shall be extinguished.

1. If the thing is lost through the fault of the debtor, he shall be obliged to pay damages, if 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 it cannot
be recovered.

2. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor.

3. 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.

4. If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor.

5. If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.

V. CONDITION AND WARRANTIES

Condition means an uncertain event or contingency on the happening of which the obligation (or right) of the contract
depends.

Warranty is a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale,
having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain
facts are or shall be as he then represents them.

If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either (1) refuse
to proceed with the contract, or (2) proceed with the contract, waiving the performance of the condition.

If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by
the other party as a breach of warranty.

Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he has a right to sell the thing sold and to
transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.

Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that the seller guarantees that the thing sold
is reasonably fit for the known particular purpose for which it was acquired by the buyer or, where it was bought by
description, that it is of merchantable quality.

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 Essential elements of warranty against eviction

1. the vendee is deprived in whole or in part of the thing purchased;

2. the vendee 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 of the vendee; and

5. there is no waiver on the part of the vendee.

Kinds of waiver of eviction

1. Consciente the waiver is voluntarily made by the vendee without the knowledge and assumption of the risks of
eviction. As an effect the seller shall pay only the value which the thing sold had at the time of eviction.

2. Intencionada the waiver is made by the vendee with knowledge of the risks of eviction and assumption of its
consequence. The vendor is exempted from the obligation to answer for eviction, provided he did not act in bad faith
[Andaya vs. Manansala, 107 Phil. 1151].

Rights of the vendee against the vendor in case eviction occurs (Art. 1555)

1. return of the value of the thing sold at the time of eviction;

2. income or fruits if he has been ordered to deliver them to the party who won the suit against him;

3. costs of the suit;

4. expenses of the contract;

5. damages and interests and ornamental expenses if the sale was made in bad faith.

Redhibition Redhibitory action Redhibitory vice or defect

- an action instituted to avoid - a defect in the article sold

- the avoidance of a sale a sale on account of some against which defect the

on account of some vice or vice or defect in the thing seller is bound to warrant.

defect in the thing sold, sold which renders its use The vice or defect must

which renders its use impossible, or so constitute an imperfection, a

impossible, or so inconvenient and imperfect defect in its nature, of certain

inconvenient and that it must be supposed that importance; and a minor

imperfect that it must be the buyer would not have defect does not five rise to

supposed that the buyer purchased it had he known of redhibition. The mere

would not have purchased the vice. The object is the absence of a certain quality in

it had he known of the rescission of the contract. If the thing sold which the

vice. the object is to procure the vendee thought it to contain

return of a part of the is not necessarily a
purchase price paid by the redhibitory defect. One thing
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 vendee, the remedy is known is that is positively suffers
as accion minoris or from certain defects.
estimatoris.

Doctrines of caveat venditor and caveat emptor

Caveat venditor Caveat emptor

(Let the seller beware) (Let the buyer beware)

- the vendor is liable to the vendee for - applies in sheriffs sale, sales of animals,
any hidden faults or defects in the thing and tax sales, for there is no warranty of title
sold, even though he was not aware or quality on the part of the seller in such
thereof (Art. 1566). sales.- Also applies in double sales of

- Based on the principle that a sound property where the issue is who between two

price warrants a sound article. vendees has a better right to the

property .- Requires the purchaser to be
aware of the supposed title of the vendor and
one who buys without checking the vendors
title takes all the risks and losses consequent
to such failure [Solvoso vs. Tanega, 87
SCRA 349].

Alternative remedies of the buyer to enforce warranty (Art. 1567):

1. Accion redhibitoria to withdraw from the contract

2. Accion quanti minoris demand a proportionate reduction of the price, with a right to damages in either case

Effect of loss of thing sold on account of hidden defects (Art. 1568)

1. If the vendor was aware of the hidden defects in consequence of which the thing sold was lost, he shall bear the
loss because he acted in bad faith. In such case, the vendee has the right to recover the expenses of the price, the
contract and damages.

2. If the vendor was not aware of them, he shall be obliged only to return the price paid, the interest thereon and
the expenses of the contract if paid by the vendee. He is not liable for damages because he is not in bad faith.

The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold.

The following rules must be borne in mind:

1. In contract of sale, the vendor is not required to deliver the thing sold until the price is paid
nor the vendee pay the price before the thing is delivered in the absence of an agreement to

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 the contrary [La Font vs. Pascacio, 5 Phil. 591].
2. If stipulated, then the vendee is bound to accept delivery and to pay the price at the time and
place designated.
3. If there is no stipulation as to the time and place of payment and delivery, the vendee is
bound to pay at the time and place of delivery.
4. In the absence also of stipulation, as to the place of delivery, it shall be made wherever the
thing might be at the moment the contract was perfected (Art. 1251).
5. If only the time for delivery of the thing sold has been fixed in the contract, the vendee is
required to pay even before the thing is delivered to him; if only the time for payment of the
price has been fixed, the vendee is entitled to delivery even before the price is paid by him
(Art. 1524).

Instances when the vendee may suspend the payment of the price:

a) should he be disturbed in the possession or ownership of the thing sold;

b) should he have reasonable grounds to fear such disturbance by a vindicatory action or by a foreclosure of mortgage;

These rights do not exist in the following cases:

(a) should there be a stipulation to that effect; or

(b) should the vendor give security for the return of the price; or

(c) should the vendor have caused the disturbance or danger to cease; or

(d) should the disturbance consist only of a mere act or trespass.

VII. ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODS

Goods include all chattels personal but not things in action or money of legal tender in the Philippines. The term includes
growing fruits or crops.

Actions available for breach of the contract of sale of goods:

1. Action by the seller for payment of the price (Art. 1595)

2. Action by the seller for damages for non-acceptance of the goods (Art. 1596)

3. Action by the seller for rescission of the contract for breach thereof (Art. 1597)

4. Action by the buyer for specific performance (Art. 1598)

5. Action by the buyer for rescission or damages for breach of warranty (Art. 1599)

Remedies allowed to the buyer when the seller has been guilty of a breach of promise or warranty (Art. 1599):

1 Recoupment accept the goods and set up the sellers breach to reduce or extinguish the price. The theory of recoupment
is that the sellers damages are cut down to an amount which will compensate him for the value of what he has given.
2 Set-off or Counterclaim for damages accept the goods and maintain an action for damages for the breach of the
warranty. Both sides of the contract are enforced in the same litigation. The buyer (defendant) does not seek to avoid his
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 obligation under the contract but seeks to enforce the sellers (plaintiffs) obligation and to deduct it from his liability for
the price for breach of warranty.
3 Action for damages refuse to accept the goods and maintain an action for damages for the breach of the warranty.
4 Rescission rescind the contract of sale by returning or offering the return of the goods, and recover the price or any part
thereof which has been paid. This remedy is not available in the following cases:(a) if the buyer accepted the goods
knowing of the breach of warranty without protest;(b) if he fails to notify the seller within a reasonable time of his
election to rescind; and

(c) If he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the
transfer of ownership to him. But where the injury to the goods was caused by the very defect against which the seller
warranted, the buyer may still rescind the sale.

VIII. EXTINGUISHMENT OF SALE

Classification of modes or causes of extinguishing the contract of sale:

Common those causes which are also the means of extinguishing all other contracts like payment, loss of the thing,
condonation, etc. (Art. 1231).

1. Payment/performance
2. Presription
3. Loss of thing due
4. Annulment
5. Novation
6. Condonation/remission
7. Confusion/merger
8. Compensation
9. Rescission
10.Resolutory condition fulfilled
11.Redemption
conventional redemption and
legal redemption.

Conventional Redemption Legal Redemption

(Arts. 1601-1618) (Arts. 1619-1623)

It is the right which the vendor reserves to
himself, to reacquire the property sold
provided her returns to the vendee the price of
the sale, the expenses of the contract, any
other legitimate payments made therefore and
the necessary and useful expenses made on
It is the right to be subrogated, upon the same
terms and conditions stipulated in the contract,
in the place of one who acquires a thing by
purchase or dation in payment, or by any other
transaction whereby ownership is transmitted
by onerous title.

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the thing sold, and fulfills other stipulations
which may have been agreed upon.
Nature:
(a) it is purely contractual because it is a
right created, not by mandate of the law, but
by virtue of an express contract [Ordoez vs.
Villaroman, 78 Phil. 116];
(b) it is an accidental stipulation and,
therefore, its nullity cannot affect the sale of
itself since the latter might be entered into
without said stipulation [Alojado vs. Lim
Siongco, 51 Phil. 339];
(c) it is a real right when registered, because
it binds third persons [Mortera vs. Martinez,
14 Phil. 541];
(d) it is a resolutory condition because when
exercised, the right of ownership acquired by
the vendee is extinguished [Aquino vs. Deal,
63 Phil. 582];
(e) it is potestative because it depends upon
the will of the vendor;
(f) it is a power or privilege, not an
obligation, that the vendor has reserved for
himself [Ocampo vs. Potenciano, CA 48 OG
2230];
(g) it is reserved at the moment of the
perfection of the contract for if the right to
repurchase is agreed upon afterwards, there is
only a promise to sell which produces
different rights and effects and is governed by
Art. 1479 [Diamante vs. CA, 206 SCRA 52];
(h) the person entitled to exercise the right
of redemption necessarily is the owner of the
property sold and not any third party [Gallar
vs. Husain, 20 SCRA 186];
Nature:
(a) identical with conventional redemption,
except for the source of the right
conventional redemption arises from the
voluntary agreement of the parties; legal
redemption proceeds from law;
(b) it is not predicated on proprietary right
but on a bare statutory privilege to be
exercised only by the person named in the
statute the statute does not make actual
ownership at the time of sale or redemption a
condition precedent, the right following the
person and not the property [Magno vs. Viola
and Sotto, 61 Phil. 80];
(c) it is in the nature of a mere privilege
created partly for reason of public policy and
partly for the benefit and convenience of the
redemptioner to afford him a way out of what
might be a disagreeable or inconvenient
association into which he has been thrust it
is intended to minimize co-ownership [Basa
vs. Aguilar, 117 SCRA 128; Tan vs. CA, 172
SCRA 660].
Instances of Legal Redemption:
(a) Under the Civil Code, those found in
Arts. 1620-1622, 1634, and 1088;
(b) Under special laws:
(1) redemption by owner of real property
sold for delinquent taxes period is within 1
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(i) it gives rise to reciprocal obligation that year from date of sale;
of returning the price of sale and other (2) repurchase by homesteader of homestead
expenses, on the part of the vendor, and that sold under the Public Land Act period is 5
of delivering the property and executing a years [Tupas vs. Damasco, 132 SCRA 593];
deed of sale therefore, on the part of the
(3) redemption by judgment debtor or
vendee [Pandaquilla vs. Gaza, 12 Phil. 663].
redemptioner or real property sold on
execution period is 12 months;

(4) redemption by mortgagor after

mortgaged property has been judicially
foreclosed and sold period is 90 days but
before confirmation of sale by the court (in all
cases of extra-judicial foreclosure sale, the
mortgagor may redeem the property within 1
year from the date of registration of the sale);

(5) redemption by an agricultural lessee of

landholding sold by the landowner period is
180 days from notice in writing which shall be
served by the vendee on all lessees affected by
DAR upon the registration of the sale.

An equitable mortgage is one which lacks the proper formalities, form of words, or other requisites prescribed by law for a
mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and
contains nothing impossible or contrary to law [Cachola vs. CA, 208 SCRA 496].

Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as the accepted equivalent of the
performance of an obligation.

Pacto de retro Mortgage

Ownership is transferred but the ownership is
subject to the condition that the seller might
recover the ownership within a certain period
of time.
If the seller does not repurchase the property
upon the very day named in the contract, he
loses all interest thereon.
There is no obligation resting upon the
purchaser to foreclose; neither does the vendor
Ownership is not transferred but the property is
merely subject to a charge or lien as security for
the compliance of a principal obligation,
usually a loan.
The mortgagor does not lose his interest in the
property if he fails to pay the debt at its
maturity.
It is the duty of the mortgagee to foreclose the
mortgage if he wishes to secure a perfect title

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have any right to redeem the property after the thereto, and after the maturity of the debt
maturity of the debt. secured by the mortgage and before
foreclosure, the mortgagor has a right to
redeem [Basilio vs. Encarnacion, 5 Phil. 360].

Instances when conventional redemption is presumed to be an equitable mortgage:

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 or
granting a new period is executed;

4. when the purchaser retains for himself a part of the purchase price;

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 the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation; and

7. when there is a doubt as to whether the contract is a contract of sale with right or repurchase or an equitable
mortgage.

Requisites before legal redemption can be exercised:

1 There must be a sale or assignment of credit. The concept of sale must be understood in its restricted sense. The right
cannot be exercised if the transaction is exchange or donation.
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 creditor before the sale of the credit.
3 The debtor must pay the assignee (a) the price paid by him, (b) the judicial costs incurred by him, and (c) the interests on
the price from the date of payment.
4 The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-
judicially) payment from him.

Redemption Pre-emption

1 The sale to a third person has already been
perfected
2 Has a much broader scope
3 Directed against the third person who bought
The sale to a third person has not yet been
perfected
Narrower in scope may be exercised only
where there is a prospective resale of a
small piece of urban land originally bought
by the prospective vendor merely for
speculation
Directed against the prospective vendor who
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 the property is about to resell the property
4 Effect is to extinguish a contract that has Effect is to prevent the birth or perfection of
already been perfected or even consummated a contract

IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS

Assignment of credit a contract by which the owner of a credit transfers to another his rights and actions against a third
person in consideration of a price certain in money or its equivalent (Art. 1458).

Assignment of credit and other incorporeal rights are consensual, bilateral, onerous, and commutative or aleatory contracts.
The assignment involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time
to the assignee [Casabuena vs. CA, 286 SCRA 594].

It may be done gratuitously, but if done onerously, it is really a sale. Thus, the subject matter is the credit or right assigned;
the consideration is the price paid for the credit or right; and the consent is the agreement of the parties to the assignment of
the credit or right at the agreed price.

Renunciation the abandonment of a right without a transfer to another.

Agency involves representation, not transmission wherein the agent acts for the principal.

Substitution the change of a new debtor for the previous debtor with the credit remaining in the same creditor.

Subrogation the change in the person of the creditor with the credit being extinguished.

Binding effects of assignment:

1 As between the parties, the assignment is valid although it appears only in a private document
so long as the law does not require a specific form for its validity.
2 To affect third persons, the assignment must appear in a public instrument, and in case it
involves real property, it is indispensable that it be recorded in the Registry of Deeds [Lopez
vs. Alvarez, 9 Phil. 28].
3 The assignee merely steps into the shoes of the assignor, the former acquiring the credit
subject to defenses (fraud, prescription, etc.) available to the debtor against the assignor. The
assignee is deemed subrogated to the rights as well as to the obligations of the seller. He
cannot acquire greater rights than those pertaining to the assignor. [Koa vs CA, 219 SCRA
541].

X. BARTER OR EXCHANGE

Barter a contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the
part of the latter to give things of the same kind, quantity, and quality.

The contract is perfected from the moment there is a meeting of the minds upon the things promised by each party in
consideration of the other. It is consummated from the time of mutual delivery by the contracting parties of things they
promised.

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Effect where the giver is not the lawful owner of the thing delivered: the aggrieved party cannot be compelled to deliver the
thing he has promised. He is entitled to claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933].

Remedy in case of eviction: the injured party is given the option to recover the property he has given in exchange with
damages or only claim an indemnity for damages. The right to recover is, however, subject to the rights of innocent third
persons (Art. 1640).

XI. THE BULK SALES LAW

Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the secret sale or disposal or mortgage in bulk
of all or substantially all of a merchants stock of goods.

The general scheme is to declare such bulk sales fraudulent and void as to creditors of the vendor, or presumptively so, unless
specified formalities are observed, such as the demanding and the giving of a list of creditors, the giving of actual and
constructive notice to such creditors, by record or otherwise, and the making of an inventory.

A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or assignment

(a) of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the
regular prosecution of the business; or

(b) of all or substantially all, of the business or trade; or

(c) of all or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor transferor, or
assignor.

Acts punished by the law:

1. Knowingly or willfully making or delivering a statement as required by the Act which does not include the names of
all the creditors of the vendor, etc. with the correct amount due and to become due or which contains any false or
untrue statement; and

2. Transferring title to a any stock of goods, wares, merchandise, provisions or materials sold in bulk without
consideration of for a nominal consideration only.

Reference:

1. De Leon, Comments and Cases on Sales;

2. Paras, Civil Code of the Philippines Annotated, Book V;

3. Jurado, Civil Law Reviewer.

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