Hizon Notes - Sales (Seña Civil Law Review II) PDF

NOTES ON CIVIL LAW REVIEW II: SALES
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
UNIVERSITY OF SANTO TOMAS

Faculty of Civil Law
A.Y. 2013-2014
NOTES ON CIVIL LAW REVIEW II:

SALES
Title VI. - SALES

CONTRACT TO SELL: The promisors in this case have the power, in
CHAPTER 1 case of failure of the other party to complete payment, to extra-
NATURE AND FORM OF THE CONTRACT judicially terminate the operation of the contract, refuse the
conveyance and retain the sums of installments already received.
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to deliver a If ownership is retained by the seller and is not to pass until the full
determinate thing, and the other to pay therefor a price certain in payment of the price, such payment is a suspensive condition, the
money or its equivalent. failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title
A contract of sale may be absolute or conditional. (1445a) from acquiring binding force.
Characteristics of Sale: If there is doubt whether parties intended a suspensive condition or

a suspensive period for payment of the price, doubt shall be settled
1. Consensual in favor of greatest reciprocity of interests which will obtain if the
2. Bilateral buyer’s obligation is deemed to be actually existing with only its
3. Commutative (although in some cases, it may be aleatory) maturity postponed or deferred.
4. onerous
Art. 1459. The thing must be licit and the vendor must have a right
It gives rise to reciprocal obligations since each party assumes to transfer the ownership thereof at the time it is delivered. (n)
obligations conditioned upon those of the other and the obligations
are derived from the perfected contract of sale. OWNERSHIP OF THE THING SOLD: Not necessary that the vendor of
the thing be the owner at the time of contract. Even if the thing does
Delivery of the thing does not mean a mere physical transfer, but it not belong to the vendor, the contract is valid and if he does not
is a means of transmitting ownership. comply with the obligation to deliver, he must indemnify for
damages.
Essence of sale: Transfer of title or an agreement to transfer it for a
price paid or promise to be paid. RATIO: Ownership is transferred by delivery of the thing. Hence, it
need not exist in the vendor at the time the contract is entered into
Contract of lease with an option to the buyer to purchase for a small but must exist when the thing is delivered.
consideration at the end of the term provided that all installments
are paid, with stipulation that if rent throughout the term is paid In such cases, the vendor must assume the risk of acquiring title and
title shall vest in the lessee is essentially a contract of sale. making the conveyance or responding in damages for the vendee’s
loss of his bargain.
Wholesale Retail sale
It is not the bulk or quantity of goods sold but rather the But if the thing already belongs to the vendee, the contract is VOID,
use to which the goods sold is put by the buyer unless the intention of the parties is to release some encumbrance
1. Resale at a profit, Sale of textiles to tailors on the property or settle the question of ownership.
2. the goods being should be regarded as retail
unaltered when for the reason that said Art. 1460. A thing is determinate when it is particularly designated
resold, textiles are consumed by or physical segregated from all other of the same class.
3. quantity of goods said buyers in their
being large, business of converting the The requisite that a thing be determinate is satisfied if at the time
4. not to be used by the cloth into finished suits, the contract is entered into, the thing is capable of being made
purchaser or in excess dresses, shirts, etc. determinate without the necessity of a new or further agreement
of the requirements of between the parties. (n)
his business and,
5. the merchant selling Art. 1461. Things having a potential existence may be the object of
the goods being the contract of sale.
habitually engaged in
the sale of such goods The efficacy of the sale of a mere hope or expectancy is deemed
in large quantities subject to the condition that the thing will come into existence.
Facultad de Derecho Civil 1

whole mass and the seller is bound to make good the deficiency
The sale of a vain hope or expectancy is void. (n) from goods of the same kind and quality, unless a contrary intent
appears. (n)
THINGS WITH POTENTIAL EXISTENCE: A valid sale may be made of a
thing, which though not yet actually in existence is reasonably Art. 1465. Things subject to a resolutory condition may be the
certain to come into existence as the natural increment or usual object of the contract of sale. (n)
incident of something already in existence. Title will vest to the
buyer the moment the thing comes into existence. Art. 1466. In construing a contract containing provisions
characteristic of both the contract of sale and of the contract of
E.g: Sale of wine that a vineyard is expected to produce; or the grain agency to sell, the essential clauses of the whole instrument shall
a field may grow in a given time; the milk a cow may yield during the be considered. (n)
coming year; or the wool that shall thereafter grow upon a sheep;
fruits to grow; young animals not yet in existence or the goodwill of PRIMARY TEST: Primary test to determine whether a particular
a trade. contract or transaction whereby goods are delivered by one party to
another for sale by the latter created the relation of buyer and seller
The validity depends upon the intention of the parties. or only a relation of principal and agent is the intention of the
parties to be gathered from the whole scope and effect of the
EMPTIO REI SPERATAE OR PURCHASE OF AN EXPECTED THING: In language used.
such case, the parties agree that the contract depend upon the
existence of the thing and that if the thing does not come into If the agent is intended to acquire ownership upon the delivery to
existence the contract is considered not made and there is no him of the thing, the contract is a sale.
obligation to pay the price.
TEST: Whether there arises at the time of the consignment the
EMPTIO SPEI OR PURCHASE OF A HOPE OR EXPECTANCY: In this relation of creditor and debtor between the consignor and
case, parties intend the contract to exist at all events so that the consignee?
buyer will have to pay the purchase price even if the thing does not
come into existence. The contract is aleatory. This is VOID under the 1. None- transaction is usually regarded as consignment for
last paragraph. sale or agency;
2. If a liability to pay a fixed price for goods or their
Art. 1462. The goods which form the subject of a contract of sale reasonable value arises- transaction is usually regarded as
may be either existing goods, owned or possessed by the seller, or sale, transferring title to the consignee.
goods to be manufactured, raised, or acquired by the seller after
the perfection of the contract of sale, in this Title called "future If the transaction puts the transferee in a position of an owner and
goods." makes him liable to the transferor as a debtor for the agreed price,
the transaction is a sale.
There may be a contract of sale of goods, whose acquisition by the
seller depends upon a contingency which may or may not happen. AGENCY TO SELL: The essence is the delivery to an agent, not as his
(n) property but as property of the principal who remains the owner
and has a right to control saes, fix the price and terms, demand and
SALE OF FUTURE GOODS: Goods which at the time of the sale are receive the proceeds of the sale less the agent’ s commission upon
not yet owned by the seller but which are thereafter to be acquired sales made.
by him cannot be the subject of an executed sale but may be the
subject of a contract for future sale and delivery thereof. In such CASE: Quiroga v. Parsons
case, the title will not pass until the goods have been acquired and
the seller has done some act of appropriating them to the contract. Art. 1467. A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business
A contract for sale of agricultural products to be delivered in the manufactures or procures for the general market, whether the
future has been held to be perfectly valid. same is on hand at the time or not, is a contract of sale, but if the
goods are to be manufactured specially for the customer and upon
E.g: Sale of goods to be produced by a factory I a given period of his special order, and not for the general market, it is a contract for
time or a newspaper subscription is a sale of future goods. a piece of work. (n)
Art. 1463. The sole owner of a thing may sell an undivided interest When a contractor furnishes both the labor and materials, this is a
therein. (n) contract of sale.
Art. 1464. In the case of fungible goods, there may be a sale of an Art. 1468. If the consideration of the contract consists partly in
undivided share of a specific mass, though the seller purports to money, and partly in another thing, the transaction shall be
sell and the buyer to buy a definite number, weight or measure of characterized by the manifest intention of the parties. If such
the goods in the mass, and though the number, weight or measure intention does not clearly appear, it shall be considered a barter if
of the goods in the mass is undetermined. By such a sale the buyer the value of the thing given as a part of the consideration exceeds
becomes owner in common of such a share of the mass as the the amount of the money or its equivalent; otherwise, it is a sale.
number, weight or measure bought bears to the number, weight or (1446a)
measure of the mass. If the mass contains less than the number,
weight or measure bought, the buyer becomes the owner of the
The name given by the parties is an index of their intention but it is
an index which may be destroyed by more powerful distinctions. INADEQUACY OF THE PRICE:
EXCHANGE OF MONEY: When bills of local currency are exchanged GR: Mere inadequacy of the price is not a sufficient ground for the
for coins of the same currency, the act is a barter but if it is cancellation of the contract of sale.
exchanged for foreign currency, it is purchase and sale. When the
currency for foreign currency is exchanged in the Philippines for XPN: If there are other circumstances (other than such inadequacy)
currency of another foreign country, the act is also barter. that:
Art. 1469. In order that the price may be considered certain, it shall 1. the vendor was in an abnormal state of mind;
be sufficient that it be so with reference to another thing certain, 2. the contact is not free from invalidating the defects
or that the determination thereof be left to the judgment of a 3. parties are not in a position form an independent
special person or persons. judgment concerning the transaction.
Should such person or persons be unable or unwilling to fix it, the Such does not follow when the law gives to the owner the right to
contract shall be inefficacious, unless the parties subsequently redeem as when the law gives to the owner the right to redeem
agree upon the price. upon the theory that the lesser the price, the easier it is for the
owner to effect the redemption.
If the third person or persons acted in bad faith or by mistake, the
courts may fix the price. LESION: A lesion of more than ¼ of the value of the thing makes the
sale rescissible unless it is approved by the court (Art. 1381).
Where such third person or persons are prevented from fixing the
price or terms by fault of the seller or the buyer, the party not in JUDICIAL SALE: Will be set aside when the price is so adequate as to
fault may have such remedies against the party in fault as are shock the conscience of the court or when there are circumstances
allowed the seller or the buyer, as the case may be. (1447a) against its fairness.
Price- the sum stipulated as the equivalent of the thing sold and also Art. 1471. If the price is simulated, the sale is void, but the act may
every incident taken into consideration for the fixing of the price but be shown to have been in reality a donation, or some other act or
to the debit of the vendee and agreed to by him. contract. (n)
Requisites: SALE WITHOUT CONSIDERATION: A fictitious sale without

consideration is non-existent and VOID. Where the price which
1. Must be certain appears to have been paid has in fact never been paid, the contract
2. Real, not fictitious is VOID.
3. It cannot be grossly inferior to the value of the thing
An action to declare the sale void does not prescribe.
CERTAINTY OF THE PRICE: It is not necessary that the certainty of
the price be actual or determined at the time of executing the Art. 1472. The price of securities, grain, liquids, and other things
contract. It is sufficient if same can be determined by the stipulation shall also be considered certain, when the price fixed is that which
of the contract made by the parties. It can be determined: the thing sold would have on a definite day, or in a particular
exchange or market, or when an amount is fixed above or below
1. By reference to a certain thing; or the price on such day, or in such exchange or market, provided said
2. By reference to a certain fact. amount be certain. (1448)
There would be no contract if the price is “what would be its just Art. 1473. The fixing of the price can never be left to the discretion
price” or “what another person may offer” for the thing. of one of the contracting parties. However, if the price fixed by one
of the parties is accepted by the other, the sale is perfected.
PRICE FIXED BY THIRD PERSONS: If the third person has been (1449a)
designated as arbitrator and they have agreed that his decision
would be final, the price fixed by him cannot be impugned. Yet, he is RATIO: From the moment the determination of the price is left to
subject to correction by the court if he acts under a mistake or in the judgment of one of the contracting parties, it cannot be said that
bad faith or if he disregards the instructions and standards given to there has been an agreement o the price since it is not possible for
him by the parties. the other contracting party to agree on something of which he does
not know beforehand.
PENSION AS PRICE: Tolentino: The contract is not a sale as the price
is not certain. First paragraph states that in order that the price may DETERMINATION OF PRICE BY VENDOR: The transaction may be
be considered certain, it shall be sufficient that it be so with valid as a donation if he can show that such was the intention of
reference to another thing certain. The duration of life can never be both parties to the contract and if there are no reasons which may
regarded as certain. militate against its validity.
Art. 1470. Gross inadequacy of price does not affect a contract of Art. 1474. Where the price cannot be determined in accordance
sale, except as it may indicate a defect in the consent, or that the with the preceding articles, or in any other manner, the contract is
parties really intended a donation or some other act or contract. inefficacious. However, if the thing or any part thereof has been
(n) delivered to and appropriated by the buyer he must pay a
reasonable price therefor. What is a reasonable price is a question induce any person to bid at such sale on behalf of the seller or
of fact dependent on the circumstances of each particular case. (n) knowingly to take any bid from the seller or any person employed
by him. Any sale contravening this rule may be treated as
ABSENCE OF STATEMENT OF PRICE: The law implies a price fraudulent by the buyer. (n)
equivalent to the reasonable value of the goods in cases where the
buyer has appropriated the things sold. TERMS AND CONDITIONS OF SALES AT AUCTION: The owner has
the right to prescribe the manner, conditions and terms of such sale.
Where the buyer accepts delivery knowing the price claimed by the He may provide that the purchase price shall be paid at the time of
seller, he cannot thereafter refuse to pay for it at that price, even if the sale or any portion thereof or at that time will be given for
there is no agreement as to price. payment. Such conditions of public sale, are binding upon the
purchaser, whether he knew them or not.
Art. 1475. The contract of sale is perfected at the moment there is
a meeting of minds upon the thing which is the object of the The terms of the sale may be changed and goods not listed may be
contract and upon the price. sold at different terms from those announced for listed goods if due
public announcement is made at the sale; and a bidder who did not
From that moment, the parties may reciprocally demand hear the announcement is nonetheless bound by his bid.
performance, subject to the provisions of the law governing the
form of contracts. (1450a) PUFFING OR BY-BIDDING: The rule that by-bidding is illegal and that
the vendor cannot hold the purchaser where the price has been run
Requisites: Contract of sale is perfected from the moment the by means thereof has been embodied in par.4.
parties have agreed upon:
Employment of a puffer by the auctioneer invalidates the sale
1. a determinate thing, irrespective of knowledge thereof by the owner of the goods.
2. the object of the contract, and
3. certain price therefor whether in money of in something WHO MAY ATTACK THE SALE: Objection to such sale is also available
representing it, even if neither is delivered. to the debtor in an action for deficiency after the sale.
XPN to Art. 1475: When by virtue of the stipulation of the parties or Art. 1477. The ownership of the thing sold shall be transferred to
by provision of law, the sale is subject to suspensive condition, the the vendee upon the actual or constructive delivery thereof. (n)
contract is perfected only from the fulfillment of the condition.
There is also no perfected contract of sale if it was expressly made TRANSFER OF OWNERSHIP:
subject to the approval of higher authorities.
GR: Ownership is transferred only from the time of delivery thereof
EFFECT OF PERFECTION: There is nothing left for the parties to do even if the price is not fully paid.
except the execution of their mutual agreement.
XPN: The sale is conditional and ownership is transferred not upon
It gives right to the vendee to compel the vendor to deliver the the delivery but upon full payment of the price.
thing, but he acquires no real right over it until the delivery is made.
If before the delivery is made to the vendee, the vendor transfers Ownership is not transferred if the vendee stole the property from
the thing to a third person who acquires it in good faith, the vendee the vendor.
cannot bring an accion reinvindicatoria against the latter; his right
would be a personal action for damages against the vendor. Art. 1478. The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the price. (n)
After the perfection, if a party refuses to proceed with the sale and
demands a higher price, he is guilty of breach of contract. RESERVATION OF OWNERSHIP (PACTUM RESERVATI DOMINII):
Art. 1476. In the case of a sale by auction: Contract of sale Contract to sell
Title passes to the buyer upon Ownership is reserved in the
(1) Where goods are put up for sale by auction in lots, each lot is delivery of the thing sold seller and is not to pass until fill
the subject of a separate contract of sale. payment of the purchase price is
made
(2) A sale by auction is perfected when the auctioneer announces Non-payment of the price is a Full payment is a positive
its perfection by the fall of the hammer, or in other customary negative resolutory condition suspensive condition
manner. Until such announcement is made, any bidder may retract Vendor has lost and cannot Title remains in the vendor if the
his bid; and the auctioneer may withdraw the goods from the sale recover the ownership of the vendee does not comply with
unless the auction has been announced to be without reserve. thing sold until and unless the the condition precedent of
contract is itself resolved and set making payment at the time
(3) A right to bid may be reserved expressly by or on behalf of the aside; specified in the contract.
seller, unless otherwise provided by law or by stipulation.
Art. 1479. A promise to buy and sell a determinate thing for a price
(4) Where notice has not been given that a sale by auction is certain is reciprocally demandable.
subject to a right to bid on behalf of the seller, it shall not be lawful
for the seller to bid himself or to employ or induce any person to An accepted unilateral promise to buy or to sell a determinate
bid at such sale on his behalf or for the auctioneer, to employ or thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price. This rule shall apply to the sale of fungible things, made
(1451a) independently and for a single price, or without consideration of
their weight, number, or measure.
Applicability:
Should fungible things be sold for a price fixed according to weight,
1. An accepted unilateral promise to sell where the promisee number, or measure, the risk shall not be imputed to the vendee
decides to buy; until they have been weighed, counted, or measured and
2. Accepted unilateral promise to buy where the promisee delivered, unless the latter has incurred in delay. (1452a)
decides to sell;
3. A bilateral promise to purchase and sell, reciprocally PERFECTION REQUIRED: This article relative to injury or benefit of
accepted, where either party decides to exact compliance. the thing sold after a contract has been perfected, and Arts. 1165
and 1262 relative to the obligation to deliver a specified thing and
NOTE: In these cases, it is necessary that the thing be determinate the extinction of such obligation when the thing is either lost or
and the price already fixed. destroyed are not applicable when no contract has been perfected.
UNILATERAL PROMISE: Once accepted, and supported by a If no contract of sale was actually executed, the loss of the thing
consideration distinct from the price, it becomes in reality a contract must be borne by its owner.
of option, which is preliminary contract to the contract of sale.
WHO BEARS LOSS BY FORTUITOUS EVENT: Tolentino: If the thing is
The unilateral promise binds the promisor. This is a contract subject lost by fortuitous event after perfection and before delivery, there
to a potestative condition on the part of the promisee that he wants being no negligence or delay on the part of the vendor: the vendor
the contract to be carried out. In an option to buy, the privilege of should bear the loss and the vendee should not be bound to pay the
demanding its performance exists only in one person—the buyer— price.
who may exercise the right or not. He may not be compelled to buy
the property. a. Under Arts. 1477 and 1496 that ownership is transferred
by delivery hence before delivery the vendor owns the
NECESSITY OF ACCEPTANCE: Unilateral promise to buy or sell is a thing and should suffer its loss (res perit domino);
mere offer which is not converted into a contract except at the b. The obligations of the vendor and the vendee are
moment it is accepted. reciprocal and thus, one depends upon the other. If the
obligation of the vendor to deliver is extinguished, the
a. Prior to such acceptance, the promissory may withdraw it correlative obligation of the vendee to pay, which depends
any time. upon it, cannot remain subsisting;
b. Upon acceptance, a bilateral contract to sell and buy is c. Art. 1480 (par.3), is not an exception but is an expression
created and the offeree ipso facto assumes the obligations of the rule that the risk is not imputed to the vendee until
of the purchaser; the offeror, on the other hand, would be after delivery. Before such completion of delivery, the
liable for damages if he fails to deliver the thing he had vendor bears the risk;
offered for sale. d. Purchase and sale is an onerous contract where the cause,
with respect to the vendee, is the thing. If he cannot have
NECESSITY OF CONSIDERATION: The unilateral promise to buy or the thing, it is juridically illogical and unjust to make him
sell, even if accepted, is binding only if supported by a consideration. pay its price.
Otherwise, it can still be withdrawn.
Under the principle of res perit domino, the law imposes the risk of
The contract option is a separate and distinct contract which the loss upon the vendor. Hence, if the thing is lost by fortuitous event
parties may enter into upon the consummation of the option and a before delivery, the vendor suffers the loss and cannot recover the
consideration for an optional contract is just as important as the price from the vendee.
consideration for any other kind of contract.
FUNGIBLES: When goods are to be counted, weighed or measured,
EFFECT ON TITLE: An agreement to buy or sell does not pass title or the counting, weighing, or measuring is a suspensive condition,
dominion over the property but only gives a right to demand the before the fulfillment, of which no obligation exists. But if they have
fulfillment of the contract in proper cases or damages for the breach been placed at the disposal of the vendee and they are lost by
where it is not possible to carry it out. By contract to sell, only jus in fortuitous event even before they are actually counted, weighed or
personam is created while by sale, a jus in rem is transferred. measured, the loss must be borne by the vendee.
REMEDY FOR BREACH: The injured party in case of breach cannot Art. 1481. In the contract of sale of goods by description or by
sue for the delivery of the thing or payment of the price because the sample, the contract may be rescinded if the bulk of the goods
obligations arising from the contract are not obligations to give but delivered do not correspond with the description or the sample,
to do. Hence, the obligation, upon breach, is converted into one of and if the contract be by sample as well as description, it is not
indemnity for damages. sufficient that the bulk of goods correspond with the sample if they
do not also correspond with the description.
Art. 1480. Any injury to or benefit from the thing sold, after the
contract has been perfected, from the moment of the perfection of The buyer shall have a reasonable opportunity of comparing the
the contract to the time of delivery, shall be governed by Articles bulk with the description or the sample. (n)
1163 to 1165, and 1262.

SALE BY SAMPLE: Where a quantity of a commodity is exhibited by
the seller as a fair specimen of the bulk, which is not present and as (2) Cancel the sale, should the vendee's failure to pay cover two or
to which there is no opportunity to inspect or examine. more installments;
In such sale, there is a warranty that the bulk of the commodity will (3) Foreclose the chattel mortgage on the thing sold, if one has
correspond with a sample exhibited. As a rule, the fact that the been constituted, should the vendee's failure to pay cover two or
seller does not know that the goods are inferior to the sample does more installments. In this case, he shall have no further action
not vary the warranty. It is enough if the purchaser purchases upon against the purchaser to recover any unpaid balance of the price.
the faith of it. Any agreement to the contrary shall be void. (1454-A-a)
Under the sale by sample, the article proposed to be sold is like that Requisites: It must appear that there was a contract for sale of:
which is shown as a parcel of the article; it is intended to save the
buyer of the trouble of examining the whole quantity. 1. Personal property;
2. Payable in installments and in the case of second and third
SALE BY DESCRIPTION: Where a seller sells the thing as being of a remedies,
particular kind, buyer not knowing whether the seller’s 3. That there has been a failure to pay 2 or more
representations are true or false but relying on them as true. installments.
The extent of the warranty arising from descriptive words or from a The article will not apply if the prices of the personal property
sale by description seems to be that the thing sold comes up to the bought are payable on straight term or partly in cash and party in
description. one term, or sale of real property.
When a particular brand or quality is stipulated, the delivery of REMEDIES AVAILABLE TO THE VENDOR:
different brand or quality will release the vendee from his obligation
to pay unless he acquiesces to such deviation after knowledge 1. Specific performance
thereof. 2. Cancellation of the sale
3. Foreclosure of the chattel mortgage
Warranties under sale by sample and by description:
NOTE: These remedies are alternative not cumulative.
1. That the commodity answers the description; and
2. It is equal in quality to the sample. Specific performance
Art. 1482. Whenever earnest money is given in a contract of sale, it If the seller chooses the remedy of fulfillment by praying that the
shall be considered as part of the price and as proof of the buyer be ordered to pay the unpaid sums under the contract, he is
perfection of the contract. (1454a) deemed to have waived the remedy of foreclosure.
EARNEST MONEY: It is considered payment of part of the price and The judgment he secures can be enforced by attachment and
as proof of perfection of the contract. It may be given as a guarantee execution not only against the property under chattel mortgage but
that the vendee would not back out. also, in case of deficiency, upon any other property not exempt from
execution.
Art. 1483. Subject to the provisions of the Statute of Frauds and of
any other applicable statute, a contract of sale may be made in CANCELLATION OF SALE: He need not return to the purchaser the
writing, or by word of mouth, or partly in writing and partly by amount of the installments already paid of there be an agreement to
word of mouth, or may be inferred from the conduct of the parties. that effect, and such agreement is not unconscionable.
(n)
FORECLOSURE OF MORTGAGE: He (vendor)need not return to the
SALE OF LAND: A sale of land appearing in a private deed is a valid purchaser the amount of the installments already paid of there be
contract between the parties if the essential elements of a contract an agreement to that effect, and such agreement is not
are present. It may even be orally made. If there is objection to oral unconscionable. But any subsequent action by him to recover any
evidence in an action to enforce the contract, however, the Statute unpaid balance which the purchaser may owe on account of sale is
of frauds requires that the contract be in writing, even in a private barred. In all proceedings for the foreclosure of the chattel
instrument. mortgage, executed in chattels, which have been sold on installment
plan, the mortgagee is limited to the property included in the
In order to be valid and effective against third persons, the sale must mortgage.
be in a public instrument and recorded in the Registry of property.
As between the parties and their privies, the unrecorded sale is If the vendor waives his right to foreclose and instead chooses to
valid. exact fulfillment of the obligation to pay, and enforces the judgment
by execution, he is not limited to the proceeds of the sale on
Art. 1484. In a contract of sale of personal property the price of execution if the mortgaged property is insufficient, he may enforce
which is payable in installments, the vendor may exercise any of execution of the other personal and real property of the vendee not
the following remedies: exempt from execution sufficient to satisfy the judgment.
(1) Exact fulfillment of the obligation, should the vendee fail to Actual foreclosure required
pay;
Mere choice of foreclose has no effect of barring the action to days from receipt by the buyer of the notice of cancellation or the
recover the balance of the purchase price. It means that the demand for rescission of the contract by a notarial act.
mortgage has been foreclosed. It is deemed that there has been
foreclosure of the mortgage when all the proceedings of foreclosure Section 5. Under Section 3 and 4, the buyer shall have the right to
including the sale of property at public auction have been sell his rights or assign the same to another person or to reinstate
accomplished. the contract by updating the account during the grace period and
before actual cancellation of the contract. The deed of sale or
Real estate mortgage assignment shall be done by notarial act.
Where the vendor of personal property does not want to foreclose Section 6. The buyer shall have the right to pay in advance any
the chattel mortgage or cancel the sale, he may exact fulfillment of installment or the full unpaid balance of the purchase price any
the obligation which is the payment of the full purchase price by time without interest and to have such full payment of the
having the vendee execute a real estate mortgage and later purchase price annotated in the certificate of title covering the
foreclose the same. property.
REPUBLIC ACT No. 6552 Cancellation of sale

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS In a contract to sell realty with reserved title, vendor has the right to
cancel the sale extrajudicially upon the vendee’s failure to pay the
Section 1. This Act shall be known as the "Realty Installment Buyer agreed installment.
Act."
Art. 1485. The preceding article shall be applied to contracts
Section 2. It is hereby declared a public policy to protect buyers of purporting to be leases of personal property with option to buy,
real estate on installment payments against onerous and when the lessor has deprived the lessee of the possession or
oppressive conditions. enjoyment of the thing. (1454-A-a)
Section 3. In all transactions or contracts involving the sale or Art. 1486. In the case referred to in two preceding articles, a
financing of real estate on installment payments, including stipulation that the installments or rents paid shall not be returned
residential condominium apartments but excluding industrial lots, to the vendee or lessee shall be valid insofar as the same may not
commercial buildings and sales to tenants under Republic Act be unconscionable under the circumstances. (n)
Numbered Thirty-eight hundred forty-four, as amended by
Republic Act Numbered Sixty-three hundred eighty-nine, where Art. 1487. The expenses for the execution and registration of the
the buyer has paid at least two years of installments, the buyer is sale shall be borne by the vendor, unless there is a stipulation to
entitled to the following rights in case he defaults in the payment the contrary. (1455a)
of succeeding installments:
Art. 1488. The expropriation of property for public use is governed
(a) To pay, without additional interest, the unpaid installments due by special laws. (1456)
within the total grace period earned by him which is hereby fixed
at the rate of one month grace period for every one year of
installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of CHAPTER 2
the contract and its extensions, if any. CAPACITY TO BUY OR SELL
(b) If the contract is canceled, the seller shall refund to the buyer
the cash surrender value of the payments on the property Art. 1489. All persons who are authorized in this Code to obligate
equivalent to fifty per cent of the total payments made, and, after themselves, may enter into a contract of sale, saving the
five years of installments, an additional five per cent every year modifications contained in the following articles.
but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take Where necessaries are those sold and delivered to a minor or other
place after thirty days from receipt by the buyer of the notice of person without capacity to act, he must pay a reasonable price
cancellation or the demand for rescission of the contract by a therefor. Necessaries are those referred to in Article 290. (1457a)
notarial act and upon full payment of the cash surrender value to
the buyer. CAPACITY TO BUY AND SELL:
Down payments, deposits or options on the contract shall be 1. There are no incapacities except those expressly
included in the computation of the total number of installment mentioned in law and that such incapacities cannot be
payments made.lawphi1™ extended to other cases by implication since construction
would conflict with the very nature of the provision;
Section 4. In case where less than two years of installments were 2. As a general rule, those who can bind themselves have
paid, the seller shall give the buyer a grace period of not less than also the legal capacity to buy and sell subject to certain
sixty days from the date the installment became due. exceptions;
3. Incapacity to buy or sell may be absolute or relative;
If the buyer fails to pay the installments due at the expiration of
the grace period, the seller may cancel the contract after thirty
4. Such incapacity is absolute in case of persons who cannot (4) Public officers and employees, the property of the State or of
bind themselves; and any subdivision thereof, or of any government-owned or
5. Relative incapacity may exist with reference to certain controlled corporation, or institution, the administration of which
persons or certain classes of property. has been intrusted to them; this provision shall apply to judges and
government experts who, in any manner whatsoever, take part in
ABSOLUTE INCAPACITY: The following have no capacity to purchase the sale;
and sell. They cannot enter into a contract of purchase and sale by
themselves personally but only through their legal representatives: (5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with
1. Minors the administration of justice, the property and rights in litigation or
2. Demented persons levied upon an execution before the court within whose
3. Imbeciles jurisdiction or territory they exercise their respective functions;
4. Deaf and dumb persons this prohibition includes the act of acquiring by assignment and
5. Prodigals shall apply to lawyers, with respect to the property and rights
6. Those subject to civil iinterdiction which may be the object of any litigation in which they may take
part by virtue of their profession.
RELATIVE INCAPACITY: See articles 1490 and 1491.
(6) Any others specially disqualified by law. (1459a)
Art. 1490. The husband and the wife cannot sell property to each
other, except: RELATIVE INCAPACITY TO BUY: The incapacity is based on the
person’s relation to the vendor or to the property itself. It is based
(1) When a separation of property was agreed upon in the on moral reasons and is intended to avoid situations where a person
marriage settlements; or may find his personal interests conflicting with the interests of those
whom he represents. It is feared that greed might get the better of
(2) When there has been a judicial separation or property under sentiments of loyalty and disinterestedness.
Article 191. (1458a)
EFFECT OF VIOLATION: The violation makes the transaction
RATIO: VOIDABLE. It must be asserted by person having the necessary legal
capacity to do so and decreed by competent court.
1. To prevent abuse of influence of one spouse to the other;
2. To avoid donations in the guise of sale, from one spouse to Agents
the other; and
3. To protect third persons, especially CRs, against fraud due The prohibition refers to voluntary agents and not to legal
to transfer of property from one spouse to the other. representatives. It includes managers and directors of partnerships
and corporations because they are agents in the strict sense.
EFFECT OF VIOLATION: The contract shall be VOID because the
prohibition is a matter of public policy. The incapacity is limited to property under the agent’s
administration at the time of the purchase.
The spouses themselves cannot invoke the nullity of the sale
because they have executed the act with full knowledge of its An agent may not, without the permission of his principal, directly or
nullity. indirectly buy for himself what has been commissioned to sell and
sell what has been commissioned to buy. The relation however,
The validity of the sale may be challenged only by persons who bear must exist between the vendee and vendor and that the agent
such relation to the parties making the transfer or to the property purchased the property entrusted to his care by himself personally
itself that such transfer interferes with their rights or interest. or through an intermediary.
Thus, persons who are absolutely not related to the parties and had Agent’s incapacity terminates upon the termination of the agency
no rights interests inchoate, present, remote or otherwise, at the relation.
time such transfer was made, were held not entitled to attack the
transfer. Case: Araneta v. De Paterno—a person who acts as go-between or
middleman between the vendor and the vendee, bringing them
Art. 1491. The following persons cannot acquire by purchase, even together to make the contract themselves, without any power or
at a public or judicial auction, either in person or through the discretion whatsoever which he could abuse is not an agent within
mediation of another: the meaning of this article.
(1) The guardian, the property of the person or persons who may
be under his guardianship; Executors and Administrators
(2) Agents, the property whose administration or sale may have The disqualification is with respect to the property under their
been entrusted to them, unless the consent of the principal has administration. The right of an heir is not subject to administration.
been given; The sale of the hereditary right of an heir to the executor or
administrator does not fall within the prohibition.
(3) Executors and administrators, the property of the estate under
administration; Judges and justices

This is not only intended to avoid fraud but also to free such officials CHAPTER 3
from any suspicion which, even if unfounded, may cause discredit ot EFFECTS OF THE CONTRACT
the judicial system. WHEN THE THINGSOLD HAS BEEN LOST
The prohibition is not limited to property actually and directly in Art. 1493. If at the time the contract of sale is perfected, the thing
litigation before the courts. It includes the property that may be which is the object of the contract has been entirely lost, the
levied and sold in execution by virtue of writ of execution issued by contract shall be without any effect.
them. What the law seeks to avoid the improper interference with
and interest of judge in a thing levied upon and sold by his order. But if the thing should have been lost in part only, the vendee may
choose between withdrawing from the contract and demanding
The prohibition applies only where the sale takes place during the the remaining part, paying its price in proportion to the total sum
pendency of the litigation. It will not apply where the property was agreed upon. (1460a)
not acquired from any of the parties to the case pending before the
court of the judge. LOSS OF THING: When the thing has been totally lost at the time the
contract of purchase and sale is celebrated, the contract never
Attorneys-at-law comes into existence. There can be no sale without a thing to be
sold.
Writers like Manresa believe that the article covers quota litis an
agreement where the lawyer is to be given an aliquot part of the If the thing has been lost by fault of the vendor, or that he knew at
property or amount in litigation if he should win the case of his the time of the contract that it has already been lost, he must pay
client. damages to the vendee. But if the parties did not know of the
previous loss, the contract is without effect for them unless the sale
The Spanish Supreme Court has held that this article is not was aleatory. In such case, or if the thing is subject to certain risks,
applicable to a contract which limits the fees of a lawyer to a certain the vendor would be entitled to the price, even if the thing had
percentage of what may be recovered in the litigation, as this is not ceased to exist at the time of the contract.
contrary to morals or law.
PARTIAL LOSS: Even when the loss is only of an insignificant part,
The purchase by the lawyer of property involved is not only voidable the provisions of the second paragraph will still apply.
but also subjects the attorney to disciplinary action for malpractice.
But the assignment of the amount of a judgment by a client to his Art. 1494. Where the parties purport a sale of specific goods, and
attorney, who has not taken any part in the case wherein such the goods without the knowledge of the seller have perished in
judgment was rendered, does not contravene the prohibition. part or have wholly or in a material part so deteriorated in quality
Neither is the sale of property of the client to his lawyer before the as to be substantially changed in character, the buyer may at his
property became involved in litigation prohibited. option treat the sale:
The prohibition covers not only sales to lawyer but also mortgages. (1) As avoided; or
PROPERTY IN LITIGATION: Tolentino: Even when the thing is not in (2) As valid in all of the existing goods or in so much thereof as
controversy, the prohibition applies; if it applies to execution sales, have not deteriorated, and as binding the buyer to pay the agreed
with more reason should it apply to sales in guardianship and testate price for the goods in which the ownership will pass, if the sale was
or intestate proceedings where the sale has to be authorized and divisible. (n)
approved by the court.
SALE AS GOOD AS IS: In a contract for the sale of goods “as is,” the
ALIENS AS TO REAL PROPERTY: A sale made in violation of Art. 13, fact that the goods have deteriorated from decay without the
sec. 5 of the constitution Is VOID but although void the vendor knowledge of either party does not bring such a sale within the
cannot recover back the land sold even if an offer to pay back the purview of this article.
purchase price is made.
PURCHASE BY INTERMEDIARY: It is essential that to prove the

existence of an agreement between the alleged intermediary and CHAPTER 4
the disqualified person that the former would make the purchase for OBLIGATIONS OF THE VENDOR
the benefit of the latter. Otherwise, the sale cannot be set aside. SECTION 1. - General Provisions
Art. 1492. The prohibitions in the two preceding articles are Art. 1495. The vendor is bound to transfer the ownership of and
applicable to sales in legal redemption, compromises and deliver, as well as warrant the thing which is the object of the sale.
renunciations. (n) (1461a)
OBLIGATIONS OF THE VENDOR:
1. To deliver the thing;

2. To warrant against eviction and against hidden defects;
and
3. NCC: To transfer the ownership of the thing.
DELIVER THE THING: Used to indicate the transfer of rights or incorporeal rights and may
be defined as the exercise of the right by the grantee with the
1. To deliver according to their agreement; acquiescence of the vendor.
2. Vendor is responsible, even if the prompt transportation
of said goods does not depend upon him but upon the Tradition by operation of law
importers, for he who contracts and assumes an obligation
is presumed to know the circumstances under which it can Covers all other cases not enumerated and in which delivery is
be complied with. affected solely by virtue of an express provision of law.
3. The thing sold must be delivered in a condition suitable for
its enjoyment by the buyer for the purpose contemplated SECTION 2. - Delivery of the Thing Sold
in the sale,
Art. 1497. The thing sold shall be understood as delivered, when it
EXECUTION SALES: In execution sales, it is not the duty of the is placed in the control and possession of the vendee. (1462a)
judgment debtor to immediately deliver the real property sold. The
purchaser of such property at an ordinary auction sale, is not REAL OR ACTUAL DELIVERY: This is when the thing sold is placed in
entitled to possession of the land or the accruing rents and profits the control and possession of the vendee. Thus, where the vendor
until after the 12-month period of redemption expired and legal title placed the things in the warehouse of the vendee, leaving them
to the land has become vested in him. entirely under the latter’s control or where logs were placed along a
vessel of the vendee as stipulated in the contract.
Art. 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways Art. 1498. When the sale is made through a public instrument, the
specified in Articles 1497 to 1501, or in any other manner signifying execution thereof shall be equivalent to the delivery of the thing
an agreement that the possession is transferred from the vendor which is the object of the contract, if from the deed the contrary
to the vendee. (n) does not appear or cannot clearly be inferred.
PURPOSES OF DELIVERY: It is a mode of acquiring dominion and With regard to movable property, its delivery may also be made by
determines the transmission of ownership, the birth of legal right. It the delivery of the keys of the place or depository where it is
is an indispensable requisite for purposes of acquiring ownership. stored or kept. (1463a)
Before such delivery, the risk is on the vendor, who is still the owner
thereof. But if the vendee is in default or mora, then he bears the EXECUTION OF DOCUMENT: Symbolic delivery by execution of a
risk. public instrument applies to both movables and immovables.
NON-PAYMENT OF PRICE: This is not an obstacle to the acquisition GR: The execution of public instrument without actual delivery of
of ownership by the vendee, if such condition has not been the thing, transfers ownership from the vendor to the vendee, who
stipulated in the contract. This is without prejudice to the right of may exercise the rights of an owner over the same.
the vendor to claim payment for any sum still due.
XPN: If from the instrument it should appear that it was not the
KINDS OF TRADITION: purpose of the contracting parties to effect the delivery.
Real tradition E.g. When a fixed date was set when the vendee shall take
possession of the thing or when the sale is on installments and it is
Takes place by the delivery or transfer of a thing from hand to hand, stipulated that the ownership shall not be transferred until payment
if it is movable and if it is immovable, by certain material or of the last installment.
possessory acts by the vendee done in the presence and with the
consent of the vendor, such as entering upon the property, DELIVERY REBUTTABLE: The execution of the deed is rebuttable
gathering of fruits, opening doors, etc. which constitute taking which can be rebutted by clear and convincing evidence.
possession.
E.g. It can be negated by failure to take actual possession of the land
Constructive tradition sold.
Exists when the delivery of the movable and immovable things is not For constructive delivery to produce the effect of transmitting
actual or material and is represented by signs or acts indicative ownership, it is necessary that the vendor shall have had such
thereof. control over the thing sold that, at the moment of the sale, its
material delivery could have been made. The thing must be placed
Forms: in his control.
1. Symbolic (Art. 1498); If, notwithstanding the execution of the instrument, the purchaser
2. Tradicion longa manu (Art. 1499); cannot have the environment and material tenancy of the thing and
3. Tradicion brevi manu (Art. 1499); and make use of it himself or through another in his name, the delivery
4. Tradicion constitutum possessorium (Art. 1500) has not been made.
Quasi-tradition

It is also necessary that the act be coupled with the intention of Art. 1502. When goods are delivered to the buyer "on sale or
delivering the thing. The act without intention is insufficient. It is return" to give the buyer an option to return the goods instead of
intention that is essential. paying the price, the ownership passes to the buyer of delivery,
but he may revest the ownership in the seller by returning or
Execution of instrument, gives rise only to a prima facie presumption tendering the goods within the time fixed in the contract, or, if no
of delivery which is destroyed when it appears expressly or impliedly time has been fixed, within a reasonable time. (n)
from the instrument itself that delivery was not intended, or when
by other means it is shown that delivery of the thing was not When goods are delivered to the buyer on approval or on trial or
effected because a third person was actually in possession of the on satisfaction, or other similar terms, the ownership therein
thing. passes to the buyer:
Art. 1499. The delivery of movable property may likewise be made (1) When he signifies his approval or acceptance to the seller or
by the mere consent or agreement of the contracting parties, if the does any other act adopting the transaction;
thing sold cannot be transferred to the possession of the vendee at
the time of the sale, or if the latter already had it in his possession (2) If he does not signify his approval or acceptance to the seller,
for any other reason. (1463a) but retains the goods without giving notice of rejection, then if a
time has been fixed for the return of the goods, on the expiration
TRADICION LONGA MANU AND BREVI MANU: of such time, and, if no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact.
Tradicion Longa Manu- made by the vendor pointing out the vendee (n)
the things which are being transferred and which at the time must
be in signt. CONTRACT OF SALE OR RETURN: This is one by which property is
sold but may be returned to the seller at the option of the buyer.
Brevi Manu- when a person in possession under a title that is not of Such sale is conditional being defeasible upon a condition
ownership, continues after the transfer to possess the thing but subsequent, title to the goods passing to the purchaser, subject to
under title of ownership such as when lessee purchases the thing being vested out of him and revested in the seller, by return made
leased and continues thereafter to hold it as owner and no longer as according to the terms of the contract.
lessee.
Contract of sale or return Consignment of sale
Art. 1500. There may also be tradition constitutum possessorium. Title to the property is vested to Relation created is merely that
(n) the buyer with an option to of principal and agent, title not
return. passing out of the principal.
TRADICION CONSTITUTUM POSSESSORIUM:
PASSING OF TITLE: Contract of sale or return vests title in the buyer
Tradicion Constitutum Possessorium- it takes place when the owner which will be recognized unless and until the buyer exercises his
of a thing alienates it but continues in possession under a different privilege of terminating the sale. The buyer under such sale passes a
title, such as that of depositary, lessee, pledge, or under a similar good title to a third party even though he does not pay for the
kind of title. The vendor converts himself into a material possessor property.
of the property in the name and representation of the purchaser, its
lawful owner. RISK OF LOSS OR DESTRUCTION: The fortuitous or accidental
destruction of the property without negligence or fault of the buyer
Art. 1501. With respect to incorporeal property, the provisions of ought not to excuse his failure to return, and in such case, the sale
the first paragraph of article 1498 shall govern. In any other case has been held to become absolute and the buyer’s privilege to
wherein said provisions are not applicable, the placing of the titles return and escape liability for the price or recover the same if it has
of ownership in the possession of the vendee or the use by the been paid is lost.
vendee of his rights, with the vendor's consent, shall be
understood as a delivery. (1464) RATIO: Title passes immediately to the buyer and prior to the offer
to return the title remains with him.
QUASI-TRADICION (USE OF THE RIGHT BY THE VENDEE):
RETURN OF THE GOODS: Buyer given this privilege must comply
Quasi-tradicion- refers to incorporeal things, and provides the with the express and implied conditions attached to the return
following ways of delivery; in the first place, the delivery shall be privilege; otherwise, the sale becomes absolute.
deemed effected by the execution of the public instrument; and
when no public instrument has been executed, the delivery shall Title does not revest in the seller until they are delivered back to him
take place when the titles of ownership are placed in the control of or at the place agreed upon; where, because of misdirection of the
the vendee or when the vendee makes use of his rights with the goods by the buyer, the goods never reaches the seller, the return is
consent of the vendor. not deemed made and the buyer is liable for the price.
Although there has been no material delivery, the delivery of title SALE ON APPROVAL, TRIAL OR SATISFACTION: These are
deeds of property to the vendee is equivalent to the delivery of the transactions wherein the vendee receives the goods and agrees to
property itself, especially where the vendee made use of his rights keep them and pay for them if they are satisfactory to him. This is
with the consent of the vendor. one which is subject to a condition precedent, the condition being
that the property be satisfactory to the buyer.

A sale on terms permitting the rejection of goods if they do not pass Where it is so agreed and understood, title to the property may
a prescribed test quality is analogous to a sale on trial. remain in the seller even after delivery to the buyer.
PASSING OF TITLE: FORM OF BILL OF LADING: Par.2 applies only where the bill of lading
is made to the order of the seller or his agent.
In this contract title shall continue in the seller until the sale has
become absolute either by the buyer’s approval of the goods, or by Title does not pass to the buyer by shipment; the buyer gets only a
his failure to comply with the express or implied conditions of the special interest in the goods and not the general property.
contract as to giving notice of dissatisfaction or as to returning the
goods. RETENTION OF BILL OF LADING: Par. 2 applies to cases where the
seller retains possession of the bill of lading but the effect is
LOSS, DESTRUCTION OF AND INJURY TO PROPERTY: subordinate to the intention of the parties. Where the seller retains
the bill of lading, he may, as against the buyer who is in default,
GR: The risk of loss of or injury to the goods, pending the exercise by divert the goods to another customer while it is in transit under the
the buyer of his option to purchase or return it, is upon the seller. right to take possession under par.3.
RATIO: The title to the goods does not pass to the buyer Art. 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but
XPN: When the buyer may be at fault or may have agreed to stand when the ownership therein is transferred to the buyer the goods
the loss. are at the buyer's risk whether actual delivery has been made or
not, except that:
Art. 1503. When there is a contract of sale of specific goods, the
seller may, by the terms of the contract, reserve the right of (1) Where delivery of the goods has been made to the buyer or to a
possession or ownership in the goods until certain conditions have bailee for the buyer, in pursuance of the contract and the
been fulfilled. The right of possession or ownership may be thus ownership in the goods has been retained by the seller merely to
reserved notwithstanding the delivery of the goods to the buyer or secure performance by the buyer of his obligations under the
to a carrier or other bailee for the purpose of transmission to the contract, the goods are at the buyer's risk from the time of such
buyer. delivery;
Where goods are shipped, and by the bill of lading the goods are (2) Where actual delivery has been delayed through the fault of
deliverable to the seller or his agent, or to the order of the seller or either the buyer or seller the goods are at the risk of the party in
of his agent, the seller thereby reserves the ownership in the fault. (n)
goods. But, if except for the form of the bill of lading, the
ownership would have passed to the buyer on shipment of the RISK OF LOSS OR INJURY:
goods, the seller's property in the goods shall be deemed to be
only for the purpose of securing performance by the buyer of his GR: The risk of loss follows the title.
obligations under the contract.
1. If the title has passed to the buyer, even though there has
Where goods are shipped, and by the bill of lading the goods are been no actual delivery of the property to him, the loss
deliverable to order of the buyer or of his agent, but possession of falls on the buyer and he has no claim against the seller for
the bill of lading is retained by the seller or his agent, the seller the recovery of the price if it has been paid, nor can he
thereby reserves a right to the possession of the goods as against escape liability to the seller for the price if it has not been
the buyer. paid.
2. If title has not passed at the time the property is
Where the seller of goods draws on the buyer for the price and destroyed, the loss falls in the seller and he cannot recover
transmits the bill of exchange and bill of lading together to the from the buyer the price agreed to be paid. If the buyer
buyer to secure acceptance or payment of the bill of exchange, the has paid the price or any part thereof, he may recover the
buyer is bound to return the bill of lading if he does not honor the same from the seller.
bill of exchange, and if he wrongfully retains the bill of lading he
acquires no added right thereby. If, however, the bill of lading Under an ordinary C.I.F. agreement, delivery to the buyer is
provides that the goods are deliverable to the buyer or to the complete upon delivery of the goods to the carrier and tender of the
order of the buyer, or is indorsed in blank, or to the buyer by the shipping and other documents required by the contract and the
consignee named therein, one who purchases in good faith, for insurance policy taken in the buyer’s behalf. Yet, the parties may as
value, the bill of lading, or goods from the buyer will obtain the by making the buyer’s obligation depend on arrival and inspection of
ownership in the goods, although the bill of exchange has not been the goods, modify a CIF contract and throw the risk upon the seller
honored, provided that such purchaser has received delivery of the until arrival in the port of destination.
bill of lading indorsed by the consignee named therein, or of the
goods, without notice of the facts making the transfer wrongful. DELIVERY TO THE BUYER: Par. 1 contemplates a situation where a
(n) conditional sale has been made, the goods delivered to the buyer
and very likely in use by him. The beneficial interest is in the buyer
RESERVATION OF TITLE OR POSSESSION: As to whether title passes and the risk should be on him. Where the goods are seen in
to the buyer depends upon the intention of the parties. compliance with an order but is marked as COD even though the
effects of this were to withhold the title, the risk would be thrown
on the buyer.
This is a case of imperfect or void title ripening into a valid one, as a
If delivery is made to a carrier FOB place of shipment in pursuance result of some intervening causes,
of the terms of an unconditional contract to sell goods in a
deliverable condition, there is delivery to the buyer within the RATIO: It is the policy of the law that where rights and interests of a
meaning of the Code and a loss which occurs in the course of vendor come into clash with that of an innocent buyer for value, the
shipment falls on the buyer. latter must be protected. This is to give stability to business
transactions for a buyer cannot be expected to look behind the title
Art. 1505. Subject to the provisions of this Title, where goods are of every article when he buys at a store.
sold by a person who is not the owner thereof, and who does not
sell them under authority or with the consent of the owner, the Art. 1506. Where the seller of goods has a voidable title thereto,
buyer acquires no better title to the goods than the seller had, but his title has not been avoided at the time of the sale, the buyer
unless the owner of the goods is by his conduct precluded from acquires a good title to the goods, provided he buys them in good
denying the seller's authority to sell. faith, for value, and without notice of the seller's defect of title. (n)
Nothing in this Title, however, shall affect: PROTECTION OF BONA FIDE PURCHASER: A seller who has title but
whose title is defeasible, as where it is obtained by fraud—may pass
(1) The provisions of any factors' act, recording laws, or any other an indefeasible title to a bona fide purchaser.
provision of law enabling the apparent owner of goods to dispose
of them as if he were the true owner thereof; Art. 1507. A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the order
(2) The validity of any contract of sale under statutory power of of any person named in such document is a negotiable document
sale or under the order of a court of competent jurisdiction; of title. (n)
(3) Purchases made in a merchant's store, or in fairs, or markets, in Art. 1508. A negotiable document of title may be negotiated by
accordance with the Code of Commerce and special laws. (n) delivery:
(1) Where by the terms of the document the carrier,

SALE BY ONE WITHOUT A TITLE: warehouseman or other bailee issuing the same undertakes to
deliver the goods to the bearer; or
GR: Seller without title cannot transfer a better title than he has.
(2) Where by the terms of the document the carrier,
XPN: warehouseman or other bailee issuing the same undertakes to
deliver the goods to the order of a specified person, and such
1. unless some principle of estoppels comes into operation person or a subsequent endorsee of the document has indorsed it
against the person claiming under what otherwise be the in blank or to the bearer.
better title, as where the owner by some direct and
equivocal act has clothed the seller with the indicia and Where by the terms of a negotiable document of title the goods
equivocal act has clothed the seller with the indicia of are deliverable to bearer or where a negotiable document of title
ownership or has been indorsed in blank or to bearer, any holder may indorse
2. unless the seller has the authority from the owner. the same to himself or to any specified person, and in such case
the document shall thereafter be negotiated only by the
ESTOPPEL: The owner of the goods may by his own conduct be endorsement of such endorsee. (n)
precluded from denying the seller’s authority to sell.
Art. 1509. A negotiable document of title may be negotiated by the
Requisites: endorsement of the person to whose order the goods are by the
terms of the document deliverable. Such endorsement may be in
1. owner must by word or conduct have caused or allowed it blank, to bearer or to a specified person. If indorsed to a specified
to appear that the title is in the seller; and person, it may be again negotiated by the endorsement of such
2. buyer must have been misled to his damage. person in blank, to bearer or to another specified person.
Subsequent negotiations may be made in like manner. (n)
Mere entrusting of possession and control thereof is not sufficient to
estop the real owner from asserting his title against a person who Art. 1510. If a document of title which contains an undertaking by
has dealt with the one in possession on the faith of his apparent a carrier, warehouseman or other bailee to deliver the goods to
ownership or apparent authority to sell. bearer, to a specified person or order of a specified person or
which contains words of like import, has placed upon it the words
It is possession coupled with indicia of title that estops the true "not negotiable," "non-negotiable" or the like, such document may
owner from asserting claim to the goods. nevertheless be negotiated by the holder and is a negotiable
document of title within the meaning of this Title. But nothing in
SALES AT MERCHANT’S STORES: this Title contained shall be construed as limiting or defining the
effect upon the obligations of the carrier, warehouseman, or other
A person who buys a thing at a merchant’s store after the same has bailee issuing a document of title or placing thereon the words
been put on display thereat, acquires a valid title to the thing "not negotiable," "non-negotiable," or the like. (n)
although his predecessors in interest did not have any right over it.

Art. 1511. A document of title which is not in such form that it can (1) That the document is genuine;
be negotiated by delivery may be transferred by the holder by
delivery to a purchaser or donee. A non-negotiable document (2) That he has a legal right to negotiate or transfer it;
cannot be negotiated and the endorsement of such a document
gives the transferee no additional right. (n) (3) That he has knowledge of no fact which would impair the
validity or worth of the document; and
Art. 1512. A negotiable document of title may be negotiated:
(4) That he has a right to transfer the title to the goods and that
(1) By the owner therefor; or the goods are merchantable or fit for a particular purpose,
whenever such warranties would have been implied if the contract
(2) By any person to whom the possession or custody of the of the parties had been to transfer without a document of title the
document has been entrusted by the owner, if, by the terms of the goods represented thereby. (n)
document the bailee issuing the document undertakes to deliver
the goods to the order of the person to whom the possession or Art. 1517. The endorsement of a document of title shall not make
custody of the document has been entrusted, or if at the time of the endorser liable for any failure on the part of the bailee who
such entrusting the document is in such form that it may be issued the document or previous endorsers thereof to fulfill their
negotiated by delivery. (n) respective obligations. (n)
Art. 1513. A person to whom a negotiable document of title has Art. 1518. The validity of the negotiation of a negotiable document
been duly negotiated acquires thereby: of title is not impaired by the fact that the negotiation was a
breach of duty on the part of the person making the negotiation, or
(1) Such title to the goods as the person negotiating the document by the fact that the owner of the document was deprived of the
to him had or had ability to convey to a purchaser in good faith for possession of the same by loss, theft, fraud, accident, mistake,
value and also such title to the goods as the person to whose order duress, or conversion, if the person to whom the document was
the goods were to be delivered by the terms of the document had negotiated or a person to whom the document was subsequently
or had ability to convey to a purchaser in good faith for value; and negotiated paid value therefor in good faith without notice of the
breach of duty, or loss, theft, fraud, accident, mistake, duress or
(2) The direct obligation of the bailee issuing the document to hold conversion. (n)
possession of the goods for him according to the terms of the
document as fully as if such bailee had contracted directly with Art. 1519. If goods are delivered to a bailee by the owner or by a
him. (n) person whose act in conveying the title to them to a purchaser in
good faith for value would bind the owner and a negotiable
Art. 1514. A person to whom a document of title has been document of title is issued for them they cannot thereafter, while
transferred, but not negotiated, acquires thereby, as against the in possession of such bailee, be attached by garnishment or
transferor, the title to the goods, subject to the terms of any otherwise or be levied under an execution unless the document be
agreement with the transferor. first surrendered to the bailee or its negotiation enjoined. The
bailee shall in no case be compelled to deliver up the actual
If the document is non-negotiable, such person also acquires the possession of the goods until the document is surrendered to him
right to notify the bailee who issued the document of the transfer or impounded by the court. (n)
thereof, and thereby to acquire the direct obligation of such bailee
to hold possession of the goods for him according to the terms of Art. 1520. A creditor whose debtor is the owner of a negotiable
the document. document of title shall be entitled to such aid from courts of
appropriate jurisdiction by injunction and otherwise in attaching
Prior to the notification to such bailee by the transferor or such document or in satisfying the claim by means thereof as is
transferee of a non-negotiable document of title, the title of the allowed at law or in equity in regard to property which cannot
transferee to the goods and the right to acquire the obligation of readily be attached or levied upon by ordinary legal process. (n)
such bailee may be defeated by the levy of an attachment of
execution upon the goods by a creditor of the transferor, or by a Art. 1521. Whether it is for the buyer to take possession of the
notification to such bailee by the transferor or a subsequent goods or of the seller to send them to the buyer is a question
purchaser from the transfer of a subsequent sale of the goods by depending in each case on the contract, express or implied,
the transferor. (n) between the parties. Apart from any such contract, express or
implied, or usage of trade to the contrary, the place of delivery is
Art. 1515. Where a negotiable document of title is transferred for the seller's place of business if he has one, and if not his residence;
value by delivery, and the endorsement of the transferor is but in case of a contract of sale of specific goods, which to the
essential for negotiation, the transferee acquires a right against the knowledge of the parties when the contract or the sale was made
transferor to compel him to endorse the document unless a were in some other place, then that place is the place of delivery.
contrary intention appears. The negotiation shall take effect as of
the time when the endorsement is actually made. (n) Where by a contract of sale the seller is bound to send the goods
to the buyer, but no time for sending them is fixed, the seller is
Art. 1516. A person who for value negotiates or transfers a bound to send them within a reasonable time.
document of title by endorsement or delivery, including one who
assigns for value a claim secured by a document of title unless a Where the goods at the time of sale are in the possession of a third
contrary intention appears, warrants: person, the seller has not fulfilled his obligation to deliver to the

buyer unless and until such third person acknowledges to the whole of the goods so delivered he must pay for them at the
buyer that he holds the goods on the buyer's behalf. contract rate.
Demand or tender of delivery may be treated as ineffectual unless Where the seller delivers to the buyer the goods he contracted to
made at a reasonable hour. What is a reasonable hour is a sell mixed with goods of a different description not included in the
question of fact. contract, the buyer may accept the goods which are in accordance
with the contract and reject the rest.
Unless otherwise agreed, the expenses of and incidental to putting
the goods into a deliverable state must be borne by the seller. (n) In the preceding two paragraphs, if the subject matter is
indivisible, the buyer may reject the whole of the goods.
PLACE OF DELIVERY:
The provisions of this article are subject to any usage of trade,
1. The place of delivery is a question to be determined special agreement, or course of dealing between the parties. (n)
according to the intention of the parties.
QUANTITY TO BE DELIVERED: A provision in a sales contract as to
A stipulation in the contract designating the place of delivery is the quantity of the goods to be delivered is of the essence of the
controlling upon the contracting parties, and in such case the buyer contract, and the seller is bound to tender the amount of goods
is not bound to accept a tender of the goods made in any other contracted for in order hold the buyer for the performance.
place, nor is the seller obliged to make a tender elsewhere.
NOTE: Precision in quantity is not intended, and the law allows some
2. In the absence of stipulation, the delivery must be made variation or margin for an excess of or a deficiency in the quantity
at the place indicated by the usage of trade mentioned but these provisions are generally construed to cover
3. In its absence, delivery must be made at the place of only slight discrepancies in quantity.
business of the seller
4. If the seller has no pl ace of business, then at his place of QUANITIY TO BE DELIVERED IS INDEFINITE- the obligation of good
residence. faith and fair dealing is implied, and the buyer has no right to use
the contract for a purpose not within the contemplation of the
NOTE: The foregoing rule does not apply where the contract is for parties, as for speculation, as distinguished from the regular or
the sale of specific goods, which at the time the contract was ordinary business purposes.
entered into were known to the parties to be in some other place,
for in such case, the place where the goods are is the place of GREATER THAN STIPIULATED QUANTITY: The buyer is entitled to
delivery. refuse the whole of the goods tendered if they exceed the quantity
agreed upon, and the seller has no right to insist on the buyer’s
TIME OF DELIVERY: acceptance at all, or on the buyer’s selecting out of a larger quantity
delivered.
1. A stipulation in the contract of sale as to the time of
delivery, is controlling on the parties DELIVERY OF GOODS MIXED WITH OTHERS: Where the seller agrees
2. In default, delivery within a reasonable time is required to deliver a separate commodity, such as grain of a certain quality,
he does not perform his duty by tendering the commodity in mass,
REASONABLE TIME- depends upon the circumstances of the only part of which is of the required quality, although there is
particular case, such at least as the parties may be supposed to have sufficient of the required quality to fill the entire contract, because
contemplated in a general way when making the contract. in such case, the labor of separation devolves on the seller.
Goods in possession of third persons. There cannot be a delivery of EFFECT OF PARTIAL PERFORMANCE: A buyer who accepts the goods
goods to the buyer, which are in possession of a third person, until that are in accord with the contract and rejects the balance does not
they have been placed in his power by the prescribed have the right, without giving the seller an opportunity to make
acknowledgment. In the case of an entire contract, where a proper substitution for the goods rejected, to purchase in the
substantial part of the goods are in the hands of third persons, there market and charge the seller with the difference in price. If he
cannot be a sufficient delivery where the acknowledgments of such returns part of the goods as not complying with the contract,
third persons are not produced. without giving the seller the opportunity to replace them, he waives
any right which he may have had to damages.
Art. 1522. Where the seller delivers to the buyer a quantity of
goods less than he contracted to sell, the buyer may reject them, Art. 1523. Where, in pursuance of a contract of sale, the seller is
but if the buyer accepts or retains the goods so delivered, knowing authorized or required to send the goods to the buyer, delivery of
that the seller is not going to perform the contract in full, he must the goods to a carrier, whether named by the buyer or not, for the
pay for them at the contract rate. If, however, the buyer has used purpose of transmission to the buyer is deemed to be a delivery of
or disposed of the goods delivered before he knows that the seller the goods to the buyer, except in the case provided for in Article
is not going to perform his contract in full, the buyer shall not be 1503, first, second and third paragraphs, or unless a contrary intent
liable for more than the fair value to him of the goods so received. appears.
Where the seller delivers to the buyer a quantity of goods larger Unless otherwise authorized by the buyer, the seller must make
than he contracted to sell, the buyer may accept the goods such contract with the carrier on behalf of the buyer as may be
included in the contract and reject the rest. If the buyer accepts the reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to do, and the goods
are lost or damaged in course of transit, the buyer may decline to (2) In case of the insolvency of the buyer, a right of stopping the
treat the delivery to the carrier as a delivery to himself, or may goods in transitu after he has parted with the possession of them;
hold the seller responsible in damages. (3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Unless otherwise agreed, where goods are sent by the seller to the
buyer under circumstances in which the seller knows or ought to Where the ownership in the goods has not passed to the buyer, the
know that it is usual to insure, the seller must give such notice to unpaid seller has, in addition to his other remedies a right of
the buyer as may enable him to insure them during their transit, withholding delivery similar to and coextensive with his rights of
and, if the seller fails to do so, the goods shall be deemed to be at lien and stoppage in transitu where the ownership has passed to
his risk during such transit. (n) the buyer. (n)
DELIVERY TO CARRIER: REMEDIES OF SELLER:
GR: Delivery by the seller to the carrier for the shipment to the Art. 1595- right of action for the price
buyer is a delivery to the buyer and a performance of the seller’s Art. 1596- action for damages where the buyer wrongfully neglects
obligation to make delivery. or refuses to accept and pay for the goods
Art. 1597- right of the seller to rescind the contract or the sale
This rule applies only to cases where the buyer has directed or
agreed to the shipment of the goods by carrier, and not to cases Art. 1527. Subject to the provisions of this Title, the unpaid seller
where there is an absence of any agreement or direction on the of goods who is in possession of them is entitled to retain
buyer’s part as to the mode of shipment. possession of them until payment or tender of the price in the
following cases, namely:
CONTRACT WITH THE CARRIER: If the buyer has required the
delivery to the carrier to be made under a specified contract, the (1) Where the goods have been sold without any stipulation as to
seller cannot make a delivery which will relieve from responsibility credit;
unless he makes that contract. (2) Where the goods have been sold on credit, but the term of
credit has expired;
NOTE: The buyer may decline to treat delivery to the carrier as (3) Where the buyer becomes insolvent.
delivery to him where the seller has taken no precaution to guard
the buyer’s rights either by way of insurance on the goods or a The seller may exercise his right of lien notwithstanding that he is
declaration of their value in case of a loss in transit. in possession of the goods as agent or bailee for the buyer. (n)
Art. 1524. The vendor shall not be bound to deliver the thing sold, NATURE OF LIEN: The right given under this Article is greater than a
if the vendee has not paid him the price, or if no period for the lien. The lienor’s position is very nearly that of a pledge with power
payment has been fixed in the contract. (1466) to sell at private sell in case of default. The power survives till
payment of the price.
GR: The thing shall not be delivered, unless the price be paid
NOTE: An action for the price is not inconsistent with the later
XPN: The thing must be delivered even if the price be not first paid, enforcement of the lien, though the buyer must be credited with
if a period for payment has been fixed, the vendor, notwithstanding any payment on the price in reduction of the lien.
that such period has not terminated, nor, consequently, that he has
not collected the price, is obliged to deliver the thing sold. The unpaid seller in possession, even though his possession be that
of an agent or a bailee for the buyer, has a lien on the goods for the
Art. 1525. The seller of goods is deemed to be an unpaid seller purchase price, although the title to the goods has passed to the
within the meaning of this Title: buyer, if the goods have not actually been removed.
(1) When the whole of the price has not been paid or tendered; INSOLVENCY OF BUYER BEFORE DELIVERY: A seller of goods under
(2) When a bill of exchange or other negotiable instrument has an executor contract of sale on credit is entitled to withhold delivery
been received as conditional payment, and the condition on which unless the price is paid, even though the term of credit has not yet
it was received has been broken by reason of the dishonor of the expired, if the buyer becomes insolvent before the time of delivery.
instrument, the insolvency of the buyer, or otherwise.
If before payment the buyer becomes bankrupt or insolvent, and the
In Articles 1525 to 1535 the term "seller" includes an agent of the seller still retains the custody of the goods, or any part of them, he
seller to whom the bill of lading has been indorsed, or a consignor may retain possession as security for the price, and cannot be
or agent who has himself paid, or is directly responsible for the compelled to deliver possession without payment of the price.
price, or any other person who is in the position of a seller. (n)
Art. 1528. Where an unpaid seller has made part delivery of the
Art. 1526. Subject to the provisions of this Title, notwithstanding goods, he may exercise his right of lien on the remainder, unless
that the ownership in the goods may have passed to the buyer, the such part delivery has been made under such circumstances as to
unpaid seller of goods, as such, has: show an intent to waive the lien or right of retention. (n)
(1) A lien on the goods or right to retain them for the price while he Art. 1529. The unpaid seller of goods loses his lien thereon:
is in possession of them;

(1) When he delivers the goods to a carrier or other bailee for the buyer, until the buyer, or his agent in that behalf, takes delivery of
purpose of transmission to the buyer without reserving the them from such carrier or other bailee;
ownership in the goods or the right to the possession thereof;
(2) If the goods are rejected by the buyer, and the carrier or other
(2) When the buyer or his agent lawfully obtains po\ssession of the bailee continues in possession of them, even if the seller has
goods; refused to receive them back.
(3) By waiver thereof. Goods are no longer in transit within the meaning of the preceding
article:
The unpaid seller of goods, having a lien thereon, does not lose his
lien by reason only that he has obtained judgment or decree for (1) If the buyer, or his agent in that behalf, obtains delivery of the
the price of the goods. (n) goods before their arrival at the appointed destination;
LOSS OF LIEN: Lien of the seller depends on either possession or (2) If, after the arrival of the goods at the appointed destination,
control of the property on which the lien is claimed, and if the seller the carrier or other bailee acknowledges to the buyer or his agent
permits the property to go into actual possession of the buyer, such that he holds the goods on his behalf and continues in possession
lien is lost, although he delivers on the faith of a chattel mortgage of them as bailee for the buyer or his agent; and it is immaterial
which turns out to be invalid, or the draft given in payment was that further destination for the goods may have been indicated by
dishonored. But if the seller had been induced to part with the buyer;
possession by fraud, lien of the seller is not lost but continues.
(3) If the carrier or other bailee wrongfully refuses to deliver the
REVIVAL OF LIEN: The return of the goods by the buyer to the seller goods to the buyer or his agent in that behalf.
in wrongful repudiation of the sale ordinarily restores the seller to
the position of a lien holder for unpaid purchase price, provided the If the goods are delivered to a ship, freight train, truck, or airplane
seller makes it clear that in accepting the goods, he is not assenting chartered by the buyer, it is a question depending on the
to rescission of the sale. circumstances of the particular case, whether they are in the
possession of the carrier as such or as agent of the buyer.
The return of the goods to the seller for some special purpose (to
repair or alter by the seller) does not revive the lien of the seller. If part delivery of the goods has been made to the buyer, or his
agent in that behalf, the remainder of the goods may be stopped in
Art. 1530. Subject to the provisions of this Title, when the buyer of transitu, unless such part delivery has been under such
goods is or becomes insolvent, the unpaid seller who has parted circumstances as to show an agreement with the buyer to give up
with the possession of the goods has the right of stopping them in possession of the whole of the goods. (n)
transitu, that is to say, he may resume possession of the goods at
any time while they are in transit, and he will then become entitled DURATION OF THE RIGHT: The right continues while the goods are
to the same rights in regard to the goods as he would have had if in the hands of the carrier and terminates when the consignee or his
he had never parted with the possession. (n) bona fide transferee obtains lawful possession of the goods shipped.
The fact that the goods are taken from the carrier by one having no
RIGHT OF STOPPAGE IN TRANSITU: authority from the buyer will not terminate the seller’s right.
This is a right which a seller of goods on credit has to recall them or INTERCEPTED SHIPMENT: Transit ceases and right of stoppage
retake them while they are in the possession of a carrier or other terminates when the buyer intercepts the shipment before it
middleman who received them for delivery to buyer, on discovery of reaches its original destination and lawfully and actually obtains
the insolvency of the buyer. possession thereof. After proper demand on the carrier and tender
of the freight charges by the buyer, transit is deemed ended and
GR: Such lien is superior to any lien against a lien of third party seller cannot exercise the right anymore.
against him.
PARTIAL DELIVERY: The fact that a part of the goods has rightfully
XPN: If the lien arises from the necessary care, trouble, or expense come into possession of the buyer at the point of destination does
incurred about the goods themselves in the course of the transit. not constitute constructive delivery so as terminate the right as to
the balance of the goods still undelivered.
The right to retake continues while goods are in transit. If the goods
have reached their destination, vendor’s right to possession is gone. Art. 1532. The unpaid seller may exercise his right of stoppage in
transitu either by obtaining actual possession of the goods or by
The insolvency of the buyer is essential to the seller’s right. If at the giving notice of his claim to the carrier or other bailee in whose
time of the sale however the seller knew of the buyer’s insolvency, possession the goods are. Such notice may be given either to the
he cannot claim a right of stoppage. person in actual possession of the goods or to his principal. In the
latter case the notice, to be effectual, must be given at such time
Art. 1531. Goods are in transit within the meaning of the preceding and under such circumstances that the principal, by the exercise of
article: reasonable diligence, may prevent a delivery to the buyer.
(1) From the time when they are delivered to a carrier by land, When notice of stoppage in transitu is given by the seller to the
water, or air, or other bailee for the purpose of transmission to the carrier, or other bailee in possession of the goods, he must
redeliver the goods to, or according to the directions of, the seller.
The expenses of such delivery must be borne by the seller. If,
however, a negotiable document of title representing the goods Art. 1534. An unpaid seller having the right of lien or having
has been issued by the carrier or other bailee, he shall not obliged stopped the goods in transitu, may rescind the transfer of title and
to deliver or justified in delivering the goods to the seller unless resume the ownership in the goods, where he expressly reserved
such document is first surrendered for cancellation. (n) the right to do so in case the buyer should make default, or where
the buyer has been in default in the payment of the price for an
EXERCISE OF THE RIGHT: The exercise requires some act on the part unreasonable time. The seller shall not thereafter be liable to the
of the seller indicative of his intention to repossess himself of the buyer upon the contract of sale, but may recover from the buyer
goods. damages for any loss occasioned by the breach of the contract.
Actual seizure of the goods is not required in exercising the right, a The transfer of title shall not be held to have been rescinded by an
notice to or demand upon the carrier before the goods come into unpaid seller until he has manifested by notice to the buyer or by
the hands of the buyer is sufficient. some other overt act an intention to rescind. It is not necessary
that such overt act should be communicated to the buyer, but the
RIGHTS, DUTIES AND LIABILITIES OF CARRIER: The carrier in such giving or failure to give notice to the buyer of the intention to
case holds the goods in the capacity of an ordinary bailee or rescind shall be relevant in any issue involving the question
warehouseman and is liable only as such. The exercise of the right by whether the buyer had been in default for an unreasonable time
the seller terminates the contract of carriage. before the right of rescission was asserted. (n)
If the carrier delivers the goods to the buyer despite proper notice Rescission:
from the seller, he will be liable to the seller for the resulting loss.
1. Where the right to rescind on default has been expressly
Right of stoppage is subject to the carrier’s lien for freight charges. reserved; and
2. Where the buyer has been in default for an unreasonable
Art. 1533. Where the goods are of perishable nature, or where the time.
seller expressly reserves the right of resale in case the buyer should
make default, or where the buyer has been in default in the If the unpaid seller rescinds the transfer of title and resumes the
payment of the price for an unreasonable time, an unpaid seller property in the goods, his position is the same as if the property in
having a right of lien or having stopped the goods in transitu may the goods had never passed to the buyer and he cannot maintain an
resell the goods. He shall not thereafter be liable to the original action for the price of the goods. But the law allows him to recover
buyer upon the contract of sale or for any profit made by such damages for breach of contract.
resale, but may recover from the buyer damages for any loss
occasioned by the breach of the contract of sale. Acts manifesting intention to rescind:
Where a resale is made, as authorized in this article, the buyer 1. Claiming ownership and offering the property to a third
acquires a good title as against the original buyer. person;
2. Bringing of replevin suit;
It is not essential to the validity of resale that notice of an 3. Notice to one with whom the goods are stored not to
intention to resell the goods be given by the seller to the original deliver them until the seller learned whether the buyer
buyer. But where the right to resell is not based on the perishable intended to settle certain dishonored checks does not
nature of the goods or upon an express provision of the contract of constitute the notice of intention to rescind.
sale, the giving or failure to give such notice shall be relevant in
any issue involving the question whether the buyer had been in Art. 1535. Subject to the provisions of this Title, the unpaid seller's
default for an unreasonable time before the resale was made. right of lien or stoppage in transitu is not affected by any sale, or
other disposition of the goods which the buyer may have made,
It is not essential to the validity of a resale that notice of the time unless the seller has assented thereto.
and place of such resale should be given by the seller to the
original buyer. If, however, a negotiable document of title has been issued for
goods, no seller's lien or right of stoppage in transitu shall defeat
The seller is bound to exercise reasonable care and judgment in the right of any purchaser for value in good faith to whom such
making a resale, and subject to this requirement may make a document has been negotiated, whether such negotiation be prior
resale either by public or private sale. He cannot, however, directly or subsequent to the notification to the carrier, or other bailee
or indirectly buy the goods. (n) who issued such document, of the seller's claim to a lien or right of
stoppage in transitu. (n)
RIGHT TO RESELL:
Art. 1536. The vendor is not bound to deliver the thing sold in case
This confers on the seller the right to resell to enforce his lien after the vendee should lose the right to make use of the terms as
title has passed but does not impose the duty to resell. provided in Article 1198. (1467a)
The resale is in the nature of foreclosure of a lien held to secure the Art. 1537. The vendor is bound to deliver the thing sold and its
payment of the purchase price; it does not rescind the original sale accessions and accessories in the condition in which they were
and is consistent with the title being in the buyer. The seller does upon the perfection of the contract.
not lose his right of action against the buyer for such part of the
original purchase price as remains unpaid.
All the fruits shall pertain to the vendee from the day on which the shall be no increase or decrease of the price, although there be a
contract was perfected. (1468a) greater or less area or number than that stated in the contract.
EFFECT OF FORTUITOUS EVENT: Vendor is obliged to preserve the The same rule shall be applied when two or more immovables as
thing in the same condition that it had at the perfection of the sold for a single price; but if, besides mentioning the boundaries,
contract until it is delivered to the vendee. But the obligation is which is indispensable in every conveyance of real estate, its area
extinguished under Art. 1262 when the thing is lost or destroyed or number should be designated in the contract, the vendor shall
without the fault of the debtor and before there is default. be bound to deliver all that is included within said boundaries,
even when it exceeds the area or number specified in the contract;
RIGHT TO FRUITS: Obligation to deliver the thing sold arises upon and, should he not be able to do so, he shall suffer a reduction in
the perfection of the contract. This includes the fruits—natural, the price, in proportion to what is lacking in the area or number,
industrial, and civil although the latter should always be considered unless the contract is rescinded because the vendee does not
produced from day to day. accede to the failure to deliver what has been stipulated. (1471)
DELAY IN DELIVERY: In case of delay, the amount of damages shall SALES FOR LUMP SUM:
be the difference between the contract or the stipulated price and
the prevailing market price of the commodity at the stipulated time When the contract concerns the delivery of a determinate object for
and place of delivery. lump sum, vendor has the obligation of delivering everything within
the boundaries inasmuch as it is the entirety thereof that
Art. 1538. In case of loss, deterioration or improvement of the distinguishes the determinate object. If the area of the determinate
thing before its delivery, the rules in Article 1189 shall be observed, things is set forth in the contract and after delivery it is found that
the vendor being considered the debtor. (n) the actual area included within the boundaries does not coincide
with what is stipulated, there shall be no increase or decrease in the
Art. 1539. The obligation to deliver the thing sold includes that of price, even if the area be more or less than that indicated in the
placing in the control of the vendee all that is mentioned in the contract. The consideration of the contract and the thing to be
contract, in conformity with the following rules: delivered is a determinate object and not the number of units it
contains. Thus, its greater or lesser area cannot influence the
If the sale of real estate should be made with a statement of its increase or decrease of the price agreed upon, so long as they are
area, at the rate of a certain price for a unit of measure or number, sold for a single price constituting a lump sum and not for a specified
the vendor shall be obliged to deliver to the vendee, if the latter amount for unit measure or number.
should demand it, all that may have been stated in the contract;
but, should this be not possible, the vendee may choose between a Of the vendor has delivered the land in its entirety, the vendee
proportional reduction of the price and the rescission of the cannot ask for resolution of the contract or resolution of the price if
contract, provided that, in the latter case, the lack in the area be the actual area turns out to be less than that mentioned in the
not less than one-tenth of that stated. contract.
The same shall be done, even when the area is the same, if any XPN: A vendee of land, when it is sold in gross or with the
part of the immovable is not of the quality specified in the description “more or less” with reference to its area, does not
contract. thereby ipso facto take all risk of quantity in the land. Mutual
mistake of the contracting parties to a sale in regard to the subject
The rescission, in this case, shall only take place at the will of the matter of the sale which is so material as to go to the essence of the
vendee, when the inferior value of the thing sold exceeds one- contract, is a ground for relief and annulment. Thus, where the
tenth of the price agreed upon. difference between the actual area and that stated in the contract is
so great as to cause a subsequent error, it was held that the contract
Nevertheless, if the vendee would not have bought the immovable could be annulled, because without such mistake the agreement
had he known of its smaller area of inferior quality, he may rescind would not have been made.
the sale. (1469a)
FAILURE TO DELIVER AT ALL: In determining the reduction of the
AS TO QUALITY: The third paragraph refers to some part of the thing price, for failure to deliver all that is included in the boundaries, the
not being of the quality stipulated. If the difference in quality affects actual area of the tenement or tenements should be taken into
the whole of the thing, there may be error or even deceit but it account; the difference between what the vendor offered to deliver
cannot fall under the case referred to by said paragraph. and what he actually delivers, should be the basis of the amount of
the reduction in price.
Art. 1540. If, in the case of the preceding article, there is a greater
area or number in the immovable than that stated in the contract, Art. 1543. The actions arising from Articles 1539 and 1542 shall
the vendee may accept the area included in the contract and reject prescribe in six months, counted from the day of delivery. (1472a)
the rest. If he accepts the whole area, he must pay for the same at
the contract rate. (1470a) Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
Art. 1541. The provisions of the two preceding articles shall apply may have first taken possession thereof in good faith, if it should
to judicial sales. (n) be movable property.
Art. 1542. In the sale of real estate, made for a lump sum and not
at the rate of a certain sum for a unit of measure or number, there
Should it be immovable property, the ownership shall belong to vendor could have transmitted at the time of the acquisition in bad
the person acquiring it who in good faith first recorded it in the faith.
Registry of Property.
BOTH SALES REGISTERED: In the absence of bad faith, when both
Should there be no inscription, the ownership shall pertain to the sales have been registered, preference shall be given to the vendee
person who in good faith was first in the possession; and, in the who was first in registering the sale in his favor.
absence thereof, to the person who presents the oldest title,
provided there is good faith. (1473) PRIORITY OF POSSESSION: When none of the sales has been
registered in good faith, the vendee who first takes possession of
PRE-EXISTING RIGHT: To invoke this article, it is necessary that the the real property in good faith, will be preferred in the ownership of
conveyance mist have been made by a party who has an existing the thing sold.
right in the thing, and the power to dispose it. It cannot be invoked
in a case where the 2 different contracts of sale are made by 2 NOTE: The taking of possession which confers a preferential right
different persons, one of the not being the owner of the property under this article, is not limited to actual physical delivery, but
sold. And even if the sale is made by the same person, if the second includes also constructive delivery such as the execution of a public
sale is made when such person is no longer the owner of the instrument.
property, because it has been acquired by the first purchaser in full
dominion, the second purchaser cannot acquire any right. PRIORITY OF TITLE: When neither sale has been registered, and it
does not appear who first took possession of the property, the
MOVABLE PROPERTY: If the movable property has been sold to 2 preference shall be given to the vendee with the oldest title.
different buyers, the ownership is transferred to the purchaser who
has first taken possession thereof, in good faith. LIABILITY OF VENDOR: Under this article, only one of the 2 vendees
will be entitled to the property sold twice.
IMMOVABLE PROPERTY: The following are the rules of preference: 1. The effect is that the winning vendee’s contract must be
declared valid so that the vendee may exercise all the
1. That it shall belong to the person acquiring it who first rights of the owner.
recorded it in the registry 2. The contract of the vendee whose sale is not upheld is
2. Should there be no entry, it shall belong to the person who considered as void, to cut off all the rights to the property
first took possession that could arise therefrom.
3. In the absence thereof, to the person who presents the 3. The vendor who has sold his property to 2 different
oldest title, provided there is good faith. vendees cannot be allowed to benefit from both sales. He
should return the price paid by the vendee whose contract
REGISTRATION v. POSSESSION: As between 2 purchasers, the one is void, plus interest, and moral damages in appropriate
who has registered the sale in his favor, has a preferred right over cases.
the other who has not registered his title.
XPN: The effect which the law gives to the registry of a sale, in case
of a double sale, against the efficacy of the sale that was not SECTION 3. - Conditions and Warranties
registered, does not extend to the other titles which the other
vendee may have gained independently of the unregistered sale, Art. 1545. Where the obligation of either party to a contract of sale
such as title of prescription. is subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance
REGISTRATION- Does not only mean mere presentation to the office of the condition. If the other party has promised that the condition
of the register of deeds of a document on which acknowledgment of should happen or be performed, such first mentioned party may
receipt is written even if a copy thereof is filed with the register of also treat the nonperformance of the condition as a breach of
deeds. It must be understood as the entry made in a book or public warranty.
registry of deeds.
Where the ownership in the thing has not passed, the buyer may
Good faith required. The public records cannot be converted into treat the fulfillment by the seller of his obligation to deliver the
instruments of fraud and oppression by one who secures an same as described and as warranted expressly or by implication in
inscription therein in bad faith. Mere registration of title in case of the contract of sale as a condition of the obligation of the buyer to
double sale is not enough; good faith must concur with the perform his promise to accept and pay for the thing. (n)
registration.
Art. 1546. Any affirmation of fact or any promise by the seller
A purchaser cannot close his eyes to facts which should put a relating to the thing is an express warranty if the natural tendency
reasonable man upon his guard and claim that he acted in good faith of such affirmation or promise is to induce the buyer to purchase
under the belief that there was no defect in the title of the vendor. the same, and if the buyer purchase the thing relying thereon. No
affirmation of the value of the thing, nor any statement purporting
Effect of bad faith. Bad faith renders the registration futile. The to be a statement of the seller's opinion only, shall be construed as
situation will be the same as if there had been no registration at all, a warranty, unless the seller made such affirmation or statement
and the vendee who first took into possession of the real property in as an expert and it was relied upon by the buyer. (n)
good faith shall be preferred. The vendee who thus acts in bad faith
stands in the shoes of his vendor, and acquires only such right as the

EXPRESS WARRANTY- Includes all warranties which are derived
from express language, whether the language is in form of a PERIOD OF PRESCRIPTION: Within 10 years after the action accrues
promise, or a representation.
NOTE: The warranty is based on a contract between the parties for

without a contract, there can be no warranty. Thus, a manufacturer SUBSECTION 1. - Warranty in Case of Eviction
who warrants goods sold to a dealer, cannot be held liable for
breach of warranty to one who purchases from the dealer. But Art. 1548. Eviction shall take place whenever by a final judgment
where a manufacturer agrees with a dealer to give a warranty to based on a right prior to the sale or an act imputable to the
each ultimate purchaser, the warranty is available to the dealer in an vendor, the vendee is deprived of the whole or of a part of the
action by the manufacturer for the price. thing purchased.
The buyer must have relied on the representation as a warranty, if The vendor shall answer for the eviction even though nothing has
he did not, there is no warranty. been said in the contract on the subject.
Q: When should warranty be made? The contracting parties, however, may increase, diminish, or
suppress this legal obligation of the vendor. (1475a)
A: It must have been made at the time of, or before the sale;
otherwise, there is no warranty. Requisites of Warranty:
STATEMENTS AS TO QUALITY: The mere expression by the seller of 1. That there be a final judgment
an opinion as to the character or quality of the goods sold does not 2. That the vendee be deprived of the whole or part of the
amount to a warranty, because the law permits a seller to thing sold
exaggerate, enhance the quality. This is known as “dealer’s talk”. 3. That this deprivation be by virtue of a right previous to the
sale
Art. 1547. In a contract of sale, unless a contrary intention appears, 4. That the vendor be notified previously at the instance of
there is: the vendee of the complaint for eviction.
(1) An implied warranty on the part of the seller that he has a right FINAL JUDGMENT: The law requires that there be a final judgment
to sell the thing at the time when the ownership is to pass, and depriving the vendee of the whole or part of the property sold. Once
that the buyer shall from that time have and enjoy the legal and the judgment has become final, the requisite of the law is complied
peaceful possession of the thing; with, and it is immaterial whether the judgment became final
because of the failure of the vendee to appeal. The vendor must
(2) An implied warranty that the thing shall be free from any have been notified of the case, and he could have proceeded with it
hidden faults or defects, or any charge or encumbrance not if the vendee did not wish to appeal anymore.
declared or known to the buyer.
DEPRIVATION OF PROPERTY: The vendee may be deprived of the
This Article shall not, however, be held to render liable a sheriff, possession of the thing sold in 2 ways:
auctioneer, mortgagee, pledgee, or other person professing to sell
by virtue of authority in fact or law, for the sale of a thing in which 1.
rd
By the performance by a 3 person of acts depriving him
a third person has a legal or equitable interest. (n) of his possession, without the intention of the competent
authority (Deprivation in fact; the vendor is not bound to
SCOPE OF WARRANTY OF TITLE: An implied warranty of title means make good his warranty for this)
that the seller is the owner of the goods which he offers for sale and 2.
rd
By the resort of such 3 person to the tribunal of justice
that he has the right to sell the same; that at the time and place of (deprivation in law)
delivery, the buyer shall have and enjoy quiet possession of the
goods; and that the same will be free from any charge or claim of Ex: Pedro, the owner of a piece of land, authorized Juan, who resides
any third person. in a different province, to sell the land. Pedro is later able to sell the
land to Joaquin, and so he immediately notifies Juan thereof. But
LATENT or HIDDEN DEFECTS- defects not discovered by the when Juan receives the notice, he had already sold the land to
inspection actually made, and not discoverable by such as ought to Diego, who registered the sale in his favor before the sale to Joaquin
have been made. could be recorded. The registration of the sale in favor of Joaquin, it
arises from an act of the vendor, and so he will be bound under the
To constitute a “latent defect”, the defect must be hidden from the warranty.
knowledge as well as from the sight and must be one which could
not be discovered by the exercise of ordinary and reasonable care. NOTE: The vendor is not liable for the dispossession due to the
fortuitous event or force majeure, or to acts imputable to the
Exceptions: vendee himself.
1. A purchaser of a tax title takes all the chances. There is no NOTICE TO VENDOR: Failure to give notice to the vendor will release
warranty on the part of the State. the latter from his obligation to make good the warranty against
2. A sheriff who sells realty in compliance with the execution eviction.
of a judgment, does not guarantee title to the property he
sells. OBLIGATIONS OF THE VENDOR:
of the risks of eviction and assumed its consequences, the vendor
1. He must abstain from disturbing the vendee in the shall not be liable. (1477)
peaceful possession of the thing sold
2. If a third person seeks to evict the vendee, the vendor KINDS OF WAIVER:
must come to the defense of his vendee, giving him the
means to resist to eviction; pursuant to this duty, he must 1. With the knowledge of the risk of eviction (intencionada);
respond when he is notified of the suit for eviction. or
2. Without his knowledge (consciente)
AGAINST WHOM ENFORCEABLE:
GR: Every waiver is presumed to be consciente while the contrary is
GR: The right to enforce the warranty may be exercised only against not proven.
the immediate vendor of the party dispossessed but not against the
previous vendors who are not bound by any juridical tie to the To consider it intencionada, to presume that the purchaser had
person evicted intended to own all the consequences of eviction, it is necessary
besides the act of waiver that it be accompanied by some exterior
XPN: Except when the previous vendor has bound himself to the sign to make manifest in an indubitable manner that state of will of
warranty in favor of any succeeding purchaser, or where a vendor the purchaser.
has expressly assigned to his vendee his right to enforce the
warranty against his own vendor Art. 1555. When the warranty has been agreed upon or nothing
has been stipulated on this point, in case eviction occurs, the
WHO MAY ENFORCE WARRANTY: It is exclusively for the benefit of vendee shall have the right to demand of the vendor:
the vendee. It may only be invoked by the vendee who is not himself
guilty of bad faith (1) The return of the value which the thing sold had at the time of
the eviction, be it greater or less than the price of the sale;
WAIVER OF WARRANTY: The vendee’s formal and express waiver of
warranty in case of eviction, contained in the deed of sale, releases (2) The income or fruits, if he has been ordered to deliver them to
the vendor from the warranty under the provisions of the last the party who won the suit against him;
paragraph of this article.
(3) The costs of the suit which caused the eviction, and, in a proper
Art. 1549. The vendee need not appeal from the decision in order case, those of the suit brought against the vendor for the warranty;
that the vendor may become liable for eviction. (n)
(4) The expenses of the contract, if the vendee has paid them;
Art. 1550. When adverse possession had been commenced before
the sale but the prescriptive period is completed after the transfer, (5) The damages and interests, and ornamental expenses, if the
the vendor shall not be liable for eviction. (n) sale was made in bad faith. (1478)
BASIS: The negligence on the part of the vendee in allowing the EFFECT OF WAIVER: Purchaser may be deprived of the right of
period of prescription to lapse without interrupting it. Yet, it is restitution of the price in case of eviction:
necessary to inquire into the circumstances to determine who is at
fault, and then impose the responsibility upon the party to whom 1. He has waived his right to the vendor’s warranty against
the damage is imputable. If the vendee did not have sufficient time eviction; and
after the sale to interrupt the prescription, he cannot be blamed and 2. That he made the waiver with knowledge of the danger of
the warranty would still be considered enforceable. eviction and assumed the risk.
Art. 1551. If the property is sold for nonpayment of taxes due and Thus, even an express renunciation of the right will not extinguish
not made known to the vendee before the sale, the vendor is liable the vendee’s right to return the purchase price unless hem knowing
for eviction. (n) the risk, made the renunciation and expressly submitted himself to
the consequences thereof. The sole effect of waiver unaccompanied
Art. 1552. The judgment debtor is also responsible for eviction in by knowledge and assumption of risk is to deprive the purchaser of
judicial sales, unless it is otherwise decreed in the judgment. (n) the benefits in par.2 to 5 of Art. 1555.
Art. 1553. Any stipulation exempting the vendor from the To completely release the vendor from liability, the vendee must
obligation to answer for eviction shall be void, if he acted in bad expressly assume the risk of losing the property through eviction
faith. (1476) and it is sufficient that he states in the contract that he knows those
risks and submits to their consequences.
BAD FAITH IN WAIVER: The bad faith must bear some relation to
the fact or facts giving rise to eviction. It consists in knowing before WAIVER OF LIABILITY: Under Argentine Code, the vendor may
and at the time of the sale of the presence of the fact giving rise to totally be exempt from liability for eviction if there is an express
eviction and its possible consequences. stipulation excluding the responsibility t return the price or value of
the thing in case of eviction. This is also applicable based on the
Art. 1554. If the vendee has renounced the right to warranty in principle of freedom of contract. Vendor must however acted in
case of eviction, and eviction should take place, the vendor shall good faith without the knowledge of the danger of eviction.
only pay the value which the thing sold had at the time of the Otherwise, the waiver is void unless the vendee himself knew the
eviction. Should the vendee have made the waiver with knowledge risks of eviction and assumed its consequences.
VENDOR MUST BE CALLED: The purchaser threatened with eviction
USE OF THE THING: Under par.2, to the vendee belongs the use, free should call in the vendor to defend the action which has been
from any liability of the subject matter of the sale. And this benefit is instituted against the purchaser. The vendor must be made a co-
not by any means gratuitous. It is offset by the use without interest defendant. The vendee, after notice to the vendor, may ask in the
of the money of the purchaser by the seller. same action that in case the eviction is realized, the said vendor be
held liable to him on the warranty against eviction. Thus, it is
RIGHT TO COSTS: The vendee is only entitled to the costs of the suit. necessary that the defendant file a third party complaint against the
He is also entitled to recover such other expenses imputable to the vendor who may answer not only the third party complaint, but also
vendor and incurred in connection with the litigation. the original complaint filed by person seeking the eviction of the
vendee.
RIGHT TO DAMAGES, INTEREST AND ORNAMENTAL EXPENSES: This
right is qualified by the condition that the sale was made in bad Art. 1560. If the immovable sold should be encumbered with any
faith. Good faith is presumed and in the absence of allegation or hint non-apparent burden or servitude, not mentioned in the
to the contrary, these items cannot be recovered. agreement, of such a nature that it must be presumed that the
vendee would not have acquired it had he been aware thereof, he
Art. 1556. Should the vendee lose, by reason of the eviction, a part may ask for the rescission of the contract, unless he should prefer
of the thing sold of such importance, in relation to the whole, that the appropriate indemnity. Neither right can be exercised if the
he would not have bought it without said part, he may demand the non-apparent burden or servitude is recorded in the Registry of
rescission of the contract; but with the obligation to return the Property, unless there is an express warranty that the thing is free
thing without other encumbrances that those which it had when from all burdens and encumbrances.
he acquired it.
Within one year, to be computed from the execution of the deed,
He may exercise this right of action, instead of enforcing the the vendee may bring the action for rescission, or sue for damages.
vendor's liability for eviction.
One year having elapsed, he may only bring an action for damages
The same rule shall be observed when two or more things have within an equal period, to be counted from the date on which he
been jointly sold for a lump sum, or for a separate price for each of discovered the burden or servitude. (1483a)
them, if it should clearly appear that the vendee would not have
purchased one without the other. (1479a) This article deals with juridical defects.
CONTRACTS COVERED: This article refers to all contracts, whether
Art. 1557. The warranty cannot be enforced until a final judgment public or private or even oral. In the latter case, it is not necessary to
has been rendered, whereby the vendee loses the thing acquired compel the vendor to execute a public instrument before bringing
or a part thereof. (1480) the action contemplated.
Art. 1558. The vendor shall not be obliged to make good the proper REQUISITE FOR WARRANTY:
warranty, unless he is summoned in the suit for eviction at the
instance of the vendee. (1481a) 1. That the encumbrance be hidden—that it is non-apparent,
not stated in the contract of sale and not recorded in the
APPLICATION: When the purchaser is the defendant in a suit Registry of Property;
instituted by another to deprive him of the thing purchased. 2. That is of such character that it must be presumed that the
vendee would not have acquired the property had he
REASON FOR REQUIRING FORMAL SUMMONS TO BE SERVED known of the encumbrance; and
UPON THE VENDOR: To give him an opportunity to show that the 3. That the action to enforce the warranty must be brought
action interposed against the vendee is unjust. within the proper period.
There is only one condition to be complied with by the vendee--that SERVITUDES NOT COVERED: No application to natural and legal
is to give notice of the complaint. Once this is proven, his right to the servitudes which are imposed without special action. They cannot
warranty is perfect and the vendor cannot set up anything against it. be considered as unknown to the vendee because nobody can
excuse himself by alleging ignorance of the law.
WHEN NOTICE IS UNNECESSARY: When the purchaser is an
applicant in a land registration proceedings. In such case, it is
enough that he advise his vendor of the application for registration
and the opposition thereto. If the vendor does not care to avail SUBSECTION 2. - Warranty Against Hidden Defects of or
himself of the opportunity to be a party and defend the action Encumbrances Upon the Thing Sold
because he realizes that he does not have any defense and his
appearance in the eviction case may be more harmful than Art. 1561. The vendor shall be responsible for warranty against the
beneficial due to his bad record, he may be deemed to have waived hidden defects which the thing sold may have, should they render
his right to be made a party in the eviction case and is therefore it unfit for the use for which it is intended, or should they diminish
released from his warranty. its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given
Art. 1559. The defendant vendee shall ask, within the time fixed in a lower price for it; but said vendor shall not be answerable for
the Rules of Court for answering the complaint, that the vendor be patent defects or those which may be visible, or for those which
made a co-defendant. (1482a) are not visible if the vendee is an expert who, by reason of his
trade or profession, should have known them. (1484a)
manufacturer or not), there is an implied warranty that the goods
REQUISITE FOR WARRANTY: shall be of merchantable quality. (n)
1. Defect must be really important; WARRANTY OF FITNESS FOR PARTICULAR PURPOSE: This implied
2. Defect must be hidden; warranty does not extend beyond an obligation on the part of the
3. Defect must be unknown or could not have been known to seller if he is the manufacturer, to furnish an article reasonably fit
the vendee. If it is known or could have been known, even for the disclosed purpose, and does not impose on him a duty to
if it is known, there is no warranty. furnish the best article if its kind.
Defects which are common, usual or current, that they
must always be expected, are not covered by the For perishable goods, there is implied warranty that they will
warranty. continue sound for any definite time for any period of time.
4. Defect must be exist at the time of sale (at the time of
transfer of risks according to Art. 459 of the German An implied warranty of fitness of a machine to do a particular work
Code); does not include a warranty that the machine will do the work as
5. Defect must not have been excluded by the contract. This rapidly or economically as some other specified machine.
warranty, like that against eviction, can be renounced,
provided that the vendor is in good faith and without PARTICULAR PURPOSE: This is the purpose for which the buyer buys
knowledge of the defect; the article not the article itself which is the essential matter.
6. Claim to enforce the warranty must be brought within the
proper period. It is not necessary that the buyer, at the time he contracts or
proposes to buy, state the purpose for which he requires the goods.
DEFECT: When the defect is such as to make the use for which the If the seller knows, from past transactions with the buyer or
thing is intended impossible, or reduces the usefulness of the thing otherwise, what is the purpose for which the buyer requires the
for such purpose to such an extent that if the vendee had known it goods, it will equally be implied that the seller warrants them to be
he would not have purchased the thing or would have paid a lower reasonably fit for that purpose.
price there for, the defect is sufficiently important to give rise to the
enforcement of the warranty. RELIANCE ON SELLER’S SKILL AND JUDGMENT: In such case, it is
essential that the buyer must have relied on the seller’s skill and
USE: That which is adapted to the nature of the thing and to the judgment.
business or operation of the purchaser.
Where both parties are on equal footing as to the ability to judge
DEFECT MUST BE HIDDEN: The defect must be hidden to the the fitness of the goods in question for purposes for which they are
vendee. The fact that an article is of one grade or quality instead of intended, and there is nothing to indicate that the buyer relied on
another, does not constitute hidden defect especially when the the seller’s skill and judgment, there is no implied warranty of
vendee examined the merchandise at the time of the sale. fitness.
A vendee who is aware of the defect in the thing cannot later WARRANTY OF MERCHANTABLE QUALITY: It is a rule that in a
complain. contract of sale of unidentified commodities of a particular kind that
there is an implied stipulation that the commodity tendered by the
The fact of being hidden is not to be construed absolutely but in seller will be merchantable.
relation to the purchaser at the time of the sale. Therefore, the that
same defect may be hidden with respect to one person but not with This means that the article is of such quality and in such condition
respect to such an expert like an expert. that a reasonable man would accept it under the circumstances of
the case, in performance of his offer to buy that article, whether he
GR: There is no implied warranty in the sale of second-hand articles. buys it for his own use or to sell again. Also, it means that the goods
comply with the description in the contract so that a purchaser
PARTIES LIABLE: When there are successive sales, each vendee may buying the goods of that description the goods would be good
exercise the action to enforce the warranty against his own vendor, tender; it does not mean that there shall in fact be persons ready to
the period of prescription should be considered. The responsibility buy the goods.
of the first vendor cannot be extended in point of time by a
subsequent sale in which he has no intervention. Art. 1563. In the case of contract of sale of a specified article under
its patent or other trade name, there is no warranty as to its fitness
Art. 1562. In a sale of goods, there is an implied warranty or for any particular purpose, unless there is a stipulation to the
condition as to the quality or fitness of the goods, as follows: contrary. (n)
(1) Where the buyer, expressly or by implication, makes known to SCOPE: Although there is no implied warranty of fitness for any
the seller the particular purpose for which the goods are acquired, particular purpose where the goods are sold under their patent or
and it appears that the buyer relies on the seller's skill or judgment other trade name, there is an implied warranty of the
(whether he be the grower or manufacturer or not), there is an merchantability of the goods according to the trade name where the
implied warranty that the goods shall be reasonably fit for such seller knows that the purchaser is buying for the purposes of trade—
purpose; that they can be put on the market and sold as possessing the
qualities usually belonging to the goods sold under that name.
(2) Where the goods are brought by description from a seller who
deals in goods of that description (whether he be the grower or
Art. 1564. An implied warranty or condition as to the quality or
fitness for a particular purpose may be annexed by the usage of Art. 1571. Actions arising from the provisions of the preceding ten
trade. (n) articles shall be barred after six months, from the delivery of the
thing sold. (1490)
IMPLIED WARRANTY BY USAGE OF TRADE: Since the parties to a
contract are presumed to know the general customs or usages of Art. 1572. If two or more animals are sold together, whether for a
trade, evidence is admissible to show such customs or usages lump sum or for a separate price for each of them, the redhibitory
creating the warranty. defect of one shall only give rise to its redhibition, and not that of
the others; unless it should appear that the vendee would not have
Art. 1565. In the case of a contract of sale by sample, if the seller is purchased the sound animal or animals without the defective one.
a dealer in goods of that kind, there is an implied warranty that the
goods shall be free from any defect rendering them The latter case shall be presumed when a team, yoke pair, or set is
unmerchantable which would not be apparent on reasonable bought, even if a separate price has been fixed for each one of the
examination of the sample. (n) animals composing the same. (1491)
Art. 1566. The vendor is responsible to the vendee for any hidden Art. 1573. The provisions of the preceding article with respect to
faults or defects in the thing sold, even though he was not aware the sale of animals shall in like manner be applicable to the sale of
thereof. other things. (1492)
This provision shall not apply if the contrary has been stipulated, Art. 1574. There is no warranty against hidden defects of animals
and the vendor was not aware of the hidden faults or defects in sold at fairs or at public auctions, or of live stock sold as
the thing sold. (1485) condemned. (1493a)
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, Art. 1575. The sale of animals suffering from contagious diseases
the vendee may elect between withdrawing from the contract and shall be void.
demanding a proportionate reduction of the price, with damages
in either case. (1486a) A contract of sale of animals shall also be void if the use or service
for which they are acquired has been stated in the contract, and
ACTIONS AVAILABLE: Where the defect is of such a nature as to they are found to be unfit therefor. (1494a)
justify the enforcement of the warranty against hidden defects, the
vendee may choose between: Art. 1576. If the hidden defect of animals, even in case a
professional inspection has been made, should be of such a nature
1. Withdrawing from the contract (redhibitory action); that expert knowledge is not sufficient to discover it, the defect
2. and asking for a proportionate reduction of the price shall be considered as redhibitory.
(accion quanti minoris).
3. Tolentino: Annulment of the contract upon proof or fraud But if the veterinarian, through ignorance or bad faith should fail
to discover or disclose it, he shall be liable for damages. (1495)
Art. 1568. If the thing sold should be lost in consequence of the
hidden faults, and the vendor was aware of them, he shall bear the REQUISITE FOR THE ENFORCEMENT OF THE WARRANTY:
loss, and shall be obliged to return the price and refund the
expenses of the contract, with damages. If he was not aware of 1. The defect must be hidden;
them, he shall only return the price and interest thereon, and 2. That it be one determined by law or local customs;
reimburse the expenses of the contract which the vendee might 3. That the sale is not made at fairs or at public aution;
have paid. (1487a) 4. That the animal be not sold as condemned; and
5. The action has not prescribed.
Art. 1569. If the thing sold had any hidden fault at the time of the
sale, and should thereafter be lost by a fortuitous event or through Art. 1577. The redhibitory action, based on the faults or defects of
the fault of the vendee, the latter may demand of the vendor the animals, must be brought within forty days from the date of their
price which he paid, less the value which the thing had when it was delivery to the vendee.
lost.
This action can only be exercised with respect to faults and defects
If the vendor acted in bad faith, he shall pay damages to the which are determined by law or by local customs. (1496a)
vendee. (1488a)
Art. 1578. If the animal should die within three days after its
REASON: The difference between the price and the value of the purchase, the vendor shall be liable if the disease which cause the
thing at the time of the loss, represents the amount of damage death existed at the time of the contract. (1497a)
suffered by the buyer, and the amount by which the seller is
enriched at the expense of the buyer. Besides, the thing belongs to APPLICATION: A case where the defect or disease existed before the
the vendee at the time it is lost and therefore he should bear the contract whether redhibitory or not, and the animal dies from said
loss to the extent of its value. disease or defect; it does not apply to a case where the animal might
have a disease or defect at the time of sale but dies from fortuitous
Art. 1570. The preceding articles of this Subsection shall be event or the fault of the vendee. In the latter case, art. 1569 may be
applicable to judicial sales, except that the judgment debtor shall applied.
not be liable for damages. (1489a)
Art. 1579. If the sale be rescinded, the animal shall be returned in
the condition in which it was sold and delivered, the vendee being DELIVERY IN INSTALLMENTS: The breach must be material to
answerable for any injury due to his negligence, and not arising warrant a refusal of the other party to proceed. If the circumstances
from the redhibitory fault or defect. (1498) of the default are of such that the injured party cannot repudiate
the entire contract, then the breach is severable giving right to
Art. 1580. In the sale of animals with redhibitory defects, the compensation for the one default, but not the right to treat the
vendee shall also enjoy the right mentioned in article 1567; but he whole as broken.
must make use thereof within the same period which has been
fixed for the exercise of the redhibitory action. (1499) WAIVER OF BREACH: The seller waives his right to refuse further
performance by continuing to make deliveries after notice of the
Art. 1581. The form of sale of large cattle shall be governed by buyer’s default in payment or by accepting, without disapproval,
special laws. (n) belated payments. On the other hand, where the buyer insists on
continued performance by the seller after previous short deliveries,
and the seller later makes good for short delivery, the buyer waives
the seller’s breach so far as his right to cancel is concerned.
CHAPTER 5
OBLIGATIONS OF THE VENDEE Art. 1584. Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have accepted them
Art. 1582. The vendee is bound to accept delivery and to pay the unless and until he has had a reasonable opportunity of examining
price of the thing sold at the time and place stipulated in the them for the purpose of ascertaining whether they are in
contract. conformity with the contract if there is no stipulation to the
contrary.
If the time and place should not have been stipulated, the payment
must be made at the time and place of the delivery of the thing Unless otherwise agreed, when the seller tenders delivery of goods
sold. (1500a) to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of
DELIVERY AND PAYMENT: In contract of purchase and sale, the ascertaining whether they are in conformity with the contract.
seller is not required to deliver the thing until the price is paid, in the
absence of an agreement to the contrary. Neither is the purchaser
bound to pay the price before the article is delivered to him. Thus, Where goods are delivered to a carrier by the seller, in accordance
the payment of the price and the delivery of the thing are with an order from or agreement with the buyer, upon the terms
simultaneous acts. that the goods shall not be delivered by the carrier to the buyer
until he has paid the price, whether such terms are indicated by
Art. 1583. Unless otherwise agreed, the buyer of goods is not marking the goods with the words "collect on delivery," or
bound to accept delivery thereof by installments. otherwise, the buyer is not entitled to examine the goods before
the payment of the price, in the absence of agreement or usage of
Where there is a contract of sale of goods to be delivered by stated trade permitting such examination. (n)
installments, which are to be separately paid for, and the seller
makes defective deliveries in respect of one or more instalments, RIGHT OF EXAMINATION:
or the buyer neglects or refuses without just cause to take delivery
of or pay for one more instalments, it depends in each case on the GR: In case of an executory contract of sale the buyer is entitled to a
terms of the contract and the circumstances of the case, whether fair opportunity to inspect or examine the goods tendered to
the breach of contract is so material as to justify the injured party determine whether they conform to the contract—whether they are
in refusing to proceed further and suing for damages for breach of such as were bargained for. Otherwise, the buyer may reject them.
the entire contract, or whether the breach is severable, giving rise
to a claim for compensation but not to a right to treat the whole A denial of such right affords a ground for the recovery of the buyer
contract as broken. (n) of the money advanced.
DELIVERY IN FULL REQUIRED: The duty of the seller is to deliver the On the arrival of the goods at their destination, the buyer has the
required quantity and in case a less quantity is tendered, with no right to inspect them to ascertain whether they conform to the
intention of performing the contract in full, the buyer is under no contract and the right to inspect implies the right to reject them if
obligation to accept the partial tender, but may refuse the same and they are not of the quality required by the contract.
maintain his action for breach of the contract as a whole.
EXAMINATION BEFORE AND AFTER THE DELIVERY:
XPN: Where the contract is for the sale of a large quantity of a
commodity or a number of articles, the seller is not required to  First paragraph relates to examination after delivery; and
deliver the entire amount of the commodity or all of the articles at  Second paragraph accords the buyer the right of
the same time, if there is no provision or stipulation in the contract examination when the seller tenders delivery of the goods
to that effect. to the buyer.
Where it is plain from the terms and subject matter of the contract Buyer may waive the right of examination before acceptance of
that a simultaneous delivery of all goods was not contemplated, the delivery of the goods and have the recourse to a right of
buyer cannot urge the failure to deliver the goods at the same time examination within a reasonable time after delivery.
in justification for his refusal to accept the goods.
PAYMENT BEFORE EXAMINATION: Where the buyer agrees to pay Art. 1589. The vendee shall owe interest for the period between
before delivery, his obligation to pay is not conditioned upon a prior the delivery of the thing and the payment of the price, in the
opportunity to examine the goods. Paragraph 3 does not apply to following three cases:
every shipment by a carrier, but only to such a shipment when the
terms of the contract provide that the carrier shall collect on (1) Should it have been so stipulated;
delivery.
(2) Should the thing sold and delivered produce fruits or income;
Where the goods are sold for cash f.o.b point of shipment, the buyer
must exercise his right of inspection at the point of shipment, and (3) Should he be in default, from the time of judicial or extrajudicial
cannot reserve the right until the goods reach the point of demand for the payment of the price. (1501a)
destination and delay payment at that time.
APPLICATION: The failure of the vendee to hand the money to the
Art. 1585. The buyer is deemed to have accepted the goods when vendor, after the notarization of the contract, as previously
he intimates to the seller that he has accepted them, or when the promised, constitutes default at most and the vendor is entitled to
goods have been delivered to him, and he does any act in relation demand legal interest for the delay.
to them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods Art. 1590. Should the vendee be disturbed in the possession or
without intimating to the seller that he has rejected them. (n) ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
ACTS INCONSISTENT WITH OWNERSHIP OF SELLER: There is an foreclosure of mortgage, he may suspend the payment of the price
acceptance if anything is done by the buyer which he would have no until the vendor has caused the disturbance or danger to cease,
right to do unless he were the owner of the goods such as continued unless the latter gives security for the return of the price in a
possession and use of the goods, resale of goods inconsistent with proper case, or it has been stipulated that, notwithstanding any
the seller’s ownership and with the contract, offering the goods for such contingency, the vendee shall be bound to make the
sale, or mortgaging the goods. payment. A mere act of trespass shall not authorize the suspension
of the payment of the price. (1502a)
Use of goods on trial is not inconsistent with a subsisting right to
reject for cause and will not constitute acceptance. SUSPENSION OF PAYMENT: Under the article, the vendee is only
entitled to retain the price but it does not entitle him to recover
Art. 1586. In the absence of express or implied agreement of the what has already been paid to the vendor.
parties, acceptance of the goods by the buyer shall not discharge
the seller from liability in damages or other legal remedy for With the right to suspend payment of the price exists the right to
breach of any promise or warranty in the contract of sale. But, if, suspend payment of interests. But it is clear that if the vendee wins
after acceptance of the goods, the buyer fails to give notice to the the suit and is not deprived of possession or ownership, he must pay
seller of the breach in any promise of warranty within a reasonable the interests with the price.
time after the buyer knows, or ought to know of such breach, the
seller shall not be liable therefor. (n) PARTIAL RETENTION: When the disturbance affects the whole
ownership, the entire price may be retained, but when it affects only
NECESSITY OF ARTICLE: As a prerequisite to recovery for breach of a part of the property, only the value of the part affected should be
warranty, the purchaser must give notice to the seller of such breach retained.
within a reasonable time after he knew or under the circumstances
should have known of the breach. CONSIGNATION OF PRICE: According to Castan, there is no
obligation to consign the price upon the vendee when he avails
The notice is intended for the protection of the seller, by giving him himself himself of the right granted by this article.
timely information that the buyer proposes to look to him for
damages for the breach, so that he may govern his conduct DISTURBANCE OF POSSESSION: It is necessary that the cause of the
accordingly. It is to prevent the buyer from interposing belated disturbance of the vendee’s possession or ownership or the danger
claims for damages as an offset to a suit begun by the seller for the thereof, arise from an act of the vendor prior to the sale. The fear of
purchase price. such disturbance or danger must be due to an actual or possible
exercise of a reivindicatory action or an action to foreclose a
Art. 1587. Unless otherwise agreed, where goods are delivered to mortgage. The mortgage must have been mortgage prior to the sale.
the buyer, and he refuses to accept them, having the right so to do,
he is not bound to return them to the seller, but it is sufficient if he OTHER CAUSES FOR RETAINING PRICE: The non-performance by the
notifies the seller that he refuses to accept them. If he voluntarily vendor of any essential condition of the contract of sale, including
constitutes himself a depositary thereof, he shall be liable as such. the warranty against hidden defects, entitles the vendee to withhold
(n) payment of the price, not by provisions of the present article, but by
the general principles of reciprocal obligations. The vendee in such
Art. 1588. If there is no stipulation as specified in the first case may demand the resolution of the contract.
paragraph of article 1523, when the buyer's refusal to accept the
goods is without just cause, the title thereto passes to him from SECURITY BY VENDOR: The vendee may be required to pay the price
the moment they are placed at his disposal. (n) if the vendor gives a security for its return in a proper case. The
security cannot exceed the price. The right to determine whether a
security will be given is vested in the vendor; the vendee cannot
require it.
Art. 1593. With respect to movable property, the rescission of the
Art. 1591. Should the vendor have reasonable grounds to fear the sale shall of right take place in the interest of the vendor, if the
loss of immovable property sold and its price, he may immediately vendee, upon the expiration of the period fixed for the delivery of
sue for the rescission of the sale. the thing, should not have appeared to receive it, or, having
appeared, he should not have tendered the price at the same time,
Should such ground not exist, the provisions of Article 1191 shall unless a longer period has been stipulated for its payment. (1505)
be observed. (1503)
APPLICATION: This refers to sale of immovables and to a case

where the vendor has a reasonable ground to fear that he would CHAPTER 6
lose both the thing and the price and thus be left with nothing, if ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS
there is a bond or guaranty for the payment of the price, and the
vendee is insolvent, there is nothing to fear. Even if there is no Art. 1594. Actions for breach of the contract of sale of goods shall
express guaranty or bond, if the vendee fails to pay, the vendor still be governed particularly by the provisions of this Chapter, and as
has some kind of guaranty because under Art. 1191, he may ask for to matters not specifically provided for herein, by other applicable
the resolution of the sale. But if the vendee appears to be insolvent provisions of this Title. (n)
and cannot pay the price, and at the same time he uses his rights in
such manner that the thing might be lost, such as when he destroys Art. 1595. Where, under a contract of sale, the ownership of the
the building, or cuts down the forest or woodlands, he may bring his goods has passed to the buyer and he wrongfully neglects or
action for resolution under this article. While under Art. 1191 the refuses to pay for the goods according to the terms of the contract
court has discretion to grant a period to the vendee within which to of sale, the seller may maintain an action against him for the price
pay, under this article the resolution must be granted immediately. of the goods.
Art. 1592. In the sale of immovable property, even though it may Where, under a contract of sale, the price is payable on a certain
have been stipulated that upon failure to pay the price at the time day, irrespective of delivery or of transfer of title and the buyer
agreed upon the rescission of the contract shall of right take place, wrongfully neglects or refuses to pay such price, the seller may
the vendee may pay, even after the expiration of the period, as maintain an action for the price although the ownership in the
long as no demand for rescission of the contract has been made goods has not passed. But it shall be a defense to such an action
upon him either judicially or by a notarial act. After the demand, that the seller at any time before the judgment in such action has
the court may not grant him a new term. (1504a) manifested an inability to perform the contract of sale on his part
or an intention not to perform it.
APPLICATION: This refers to non-payment as a resolutory condition
and does not contemplate an agreement to sell in which title is Although the ownership in the goods has not passed, if they
reserved by the vendor until the vendee has complied first with the cannot readily be resold for a reasonable price, and if the
conditions specified. It does not apply to a mere promise to sell, nor provisions of article 1596, fourth paragraph, are not applicable, the
to a sale on installment. seller may offer to deliver the goods to the buyer, and, if the buyer
refuses to receive them, may notify the buyer that the goods are
PACTO COMISORIO: The agreement that the vendee shall pay the thereafter held by the seller as bailee for the buyer. Thereafter the
price at a definite date, and that upon his failure to do so, the seller may treat the goods as the buyer's and may maintain an
contract shall be automatically rescinded, the vendor retaining the action for the price. (n)
earnest money or any part of the price already paid.
ACTION FOR THE PRICE: The action can be maintained in 3 cases
NECESSITY OF DEMAND: This article refers to a demand, judicial or only:
notarial, which bars the right of the vendee to pay the price after the
period agreed upon, and prohibits a court from granting him a 1. Where the property in the goods has passed to the buyer;
further term. 2. Where the prices is payable on a day certain, irrespective
of delivery or transfer of title; and
The demand is not for payment of the price but for the vendee to 3. Where the goods cannot readily be resold for a reasonable
agree to the resolution of the contract and create no obstacles to price and the provisions of art. 1596 which regulates
this contractual mode of extinguishing obligations; it is thus a actions for damages for non-acceptance of the goods, are
demand for the resolution of the contract pursuant to pactum not applicable.
comisorio. Such demand cannot be renounced, either at the time of
the perfection of the contract or by a subsequent act. In other cases, the remedy is for damages sustained by the breach.
SALE ON INSTALLMENT; CONTRACTUAL RIGHT TO RESCIND: Where Ownership transferred to the buyer: Where the ownership has
the contract between the contracting parties for the sale of real been transferred to the buyer and the latter wrongfully refuses to
property on installments expressly conferred on the vendor the right accept the goods, the seller may maintain an action for the price
to declare the sale cancelled upon failure of vendee to pay 3 st
under the 1 par.of this article.
successive installments, but the vendor decided not to take
advantage of said provision and further accepted late payments On the other hand, if the property in the goods is not to pass until
without objection, the legal effects of the failure of the vendee to they are accepted by the buyer, an action for the price cannot be
pay such installments is deemed waived. maintained even though the seller has fully performed and the
goods wrongfully rejected by the buyer; the remedy of the seller in
such case is by an action for damages under Art. 1596. The same
rule will apply if title to the goods having been transferred to the the contract had been fully performed by the other party
buyer, the seller thereafter rescinds the transfer of title and resumes responsible for the breach.
the property in the goods under Art. 1534.
The seller is entitled to the profits of his contract; he is entitled to
GOODS NOT READILY SALABLE: Under the third par., a suit for the the fruits of his contract and to be placed in as good a position as he
purchase price agreed upon may be maintained although no title has would have been if the buyer has fulfilled his contract.
been transferred, if the goods cannot be resold at a reasonable price
and the buyer has not been notified that they are held by the seller GOODS STILL TO BE MADE: It is not applicable to a contract for the
as bailee. sale if a staple product nor to the goods which at the time of the
breach are already completed except for inspection and packing,
rd
Elements under the 3 par: these being slight and inexpensive operations.
1. A breach of the contract to sell goods; Where the goods have not been manufactured before the buyer
2. That the property in the goods at the time of the breach repudiates the contract of sale, or notifies the seller to proceed no
has not passed; further, the measure of damages is the difference between the
3. That they cannot be sold for a reasonable price; contract price and the cost of manufacture or production. This rule
4. That the seller has offered to deliver them to the buyer; is subject to the qualification that a reasonable deduction is to be
5. That the buyer has refused to receive them; and made for the lesser amount of time required by the manufacturer,
6. That the seller has notified the buyer that he thereafter his EEs and the factory, and for the release from trouble, risk and
hold the goods as bailee for the buyer. responsibility attendant on his part.
Also, the buyer is liable not only for the price of the goods but also The seller can recover from the buyer only such damages equivalent
for a reasonable charge for the care and custody thereof. to the amount of labor performed or expenses incurred prior to the
receipt of notice of the buyer’s repudiation, plus profits he would
Art. 1596. Where the buyer wrongfully neglects or refuses to have been permitted to complete his contract, to be ascertained by
accept and pay for the goods, the seller may maintain an action subtracting the cost of manufacture from the contract price.
against him for damages for nonacceptance.
Art. 1597. Where the goods have not been delivered to the buyer,
The measure of damages is the estimated loss directly and and the buyer has repudiated the contract of sale, or has
naturally resulting in the ordinary course of events from the manifested his inability to perform his obligations thereunder, or
buyer's breach of contract. has committed a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to do to the
Where there is an available market for the goods in question, the buyer. (n)
measure of damages is, in the absence of special circumstances
showing proximate damage of a different amount, the difference APPLICATION: Limited to cases of technical rescission. It has no
between the contract price and the market or current price at the application to the case of renunciation of the contract by the buyer
time or times when the goods ought to have been accepted, or, if before the time for performance has arrived, in which the seller
no time was fixed for acceptance, then at the time of the refusal to acquiesces but retains his right of action for damages under Art.
accept. 1596.
If, while labor or expense of material amount is necessary on the RIGHT TO RESCIND: Under the article, rescission is not simply for
part of the seller to enable him to fulfill his obligations under the repudiation but also for the inability of the other to perform and for
contract of sale, the buyer repudiates the contract or notifies the any breach of a contract so material and substantial that it would be
seller to proceed no further therewith, the buyer shall be liable to a defense to an action brought by the party in default under the
the seller for labor performed or expenses made before receiving contract; but before there can be a rescission by the seller there
notice of the buyer's repudiation or countermand. The profit the must be an unequivocal breach by the buyer, merely evasive
seller would have made if the contract or the sale had been fully conduct is not enough.
performed shall be considered in awarding the damages. (n)
In case of repudiation before the time for performance has arrived,
PURPOSE: To give the seller the value of his contract by putting him the seller may acquiesce therein and hold the buyer liable for
in the same position as he would have been had the buyer damages sustained by anticipatory breach under Art. 1596 or he
performed. may acquiesce in the buyer’s breach and then rescind the contract
so that it shall be as if it had never been made.
SCOPE AND APPLICATION: This article relates to the measure of
damages in an action against a buyer for damages for wrongful NOTICE OF RESCISSION: A seller who fails to give due notice of an
neglect or refusal to accept and pay for the goods. election to treat it as abandoned will not be deemed to have
rescinded, and the contract will survive. The intention to rescind
Except for Art. 1595, the remedy of the seller where the buyer must be clearly express.
wrongfully neglects or refuses to pay for the goods is an action for
damages under this article. Art. 1598. Where the seller has broken a contract to deliver specific
or ascertained goods, a court may, on the application of the buyer,
MEASURE OF DAMAGES: The underlying principle of damages for direct that the contract shall be performed specifically, without
the breach of contract is compensation. This is to award such a sum giving the seller the option of retaining the goods on payment of
in money as would put the injured party in the same position as if damages. The judgment or decree may be unconditional, or upon
such terms and conditions as to damages, payment of the price
and otherwise, as the court may deem just. (n) 1. To rescind the contract; or
2. To recover damages resulting from the breach of
SPECIFIC OR ASCERTAINED GOODS: The remedy is available to the warranty.
buyer only where the goods are specified or ascertained.
These 2 remedies are inconsistent to each other, and the buyer must
Art. 1599. Where there is a breach of warranty by the seller, the elect between them.
buyer may, at his election:
But if the buyer erroneously claims a remedy which he does not
(1) Accept or keep the goods and set up against the seller, the have, he is not thereby precluded from invoking a remedy which he
breach of warranty by way of recoupment in diminution or does not have. The test for determining whether a party, by the
extinction of the price; election of one remedy, has become precluded from invoking
another is whether he has the 2 forms of remedy. If he did not,
(2) Accept or keep the goods and maintain an action against the there was no chance for an election. A party cannot choose a
seller for damages for the breach of warranty; remedy which he does not have. If the buyer has sought to avail
himself of the remedy of rescission and that remedy no longer
(3) Refuse to accept the goods, and maintain an action against the exists, he is not thereby precluded from recovering damages for
seller for damages for the breach of warranty; breach of warranty.
(4) Rescind the contract of sale and refuse to receive the goods or
if the goods have already been received, return them or offer to
return them to the seller and recover the price or any part thereof CHAPTER 7
which has been paid. EXTINGUISHMENT OF SALE
When the buyer has claimed and been granted a remedy in anyone Art. 1600. Sales are extinguished by the same causes as all other
of these ways, no other remedy can thereafter be granted, without obligations, by those stated in the preceding articles of this Title,
prejudice to the provisions of the second paragraph of Article and by conventional or legal redemption. (1506)
1191.
RESOLUTION OF SALE: This article is applicable to both
Where the goods have been delivered to the buyer, he cannot consummated and perfected sale. In the contract of purchase and
rescind the sale if he knew of the breach of warranty when he sale, the obligation to pay the price is correlative to the obligation to
accepted the goods without protest, or if he fails to notify the deliver the thing sold.
seller within a reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the seller in But the right to resolve the sale for non-performance is not
substantially as good condition as they were in at the time the absolute. The law subordinates it to the rights of third persons to
ownership was transferred to the buyer. But if deterioration or whom bad faith is not imputable. Also, it is discretionary for the
injury of the goods is due to the breach or warranty, such court to deny the resolution and grant a period within which the
deterioration or injury shall not prevent the buyer from returning defaulting party may perform.
or offering to return the goods to the seller and rescinding the sale.
SECTION 1. - Conventional Redemption
Where the buyer is entitled to rescind the sale and elects to do so,
he shall cease to be liable for the price upon returning or offering Art. 1601. Conventional redemption shall take place when the
to return the goods. If the price or any part thereof has already vendor reserves the right to repurchase the thing sold, with the
been paid, the seller shall be liable to repay so much thereof as has obligation to comply with the provisions of Article 1616 and other
been paid, concurrently with the return of the goods, or stipulations which may have been agreed upon. (1507)
immediately after an offer to return the goods in exchange for
repayment of the price. DISTINGUISH FROM MORTGAGE: In case of sale with right of
repurchase, no difference exists except that in the latter, ownership
Where the buyer is entitled to rescind the sale and elects to do so, of the purchaser is subject to the resolutory condition that the
if the seller refuses to accept an offer of the buyer to return the vendor exercises his right of repurchase within the time agreed
goods, the buyer shall thereafter be deemed to hold the goods as upon.
bailee for the seller, but subject to a lien to secure payment of any
portion of the price which has been paid, and with the remedies DISTINGUISH FROM MORTGAGE:
for the enforcement of such lien allowed to an unpaid seller by
Article 1526. CONTRACT OF SALE WITH MORTGAGE
PACTO DE RETRO
(5) In the case of breach of warranty of quality, such loss, in the If the seller does not repurchase The mortgagor does not lose his
absence of special circumstances showing proximate damage of a the property on the very day interest in the property if he fails
greater amount, is the difference between the value of the goods stated in the contract, he loses to pay his debt at its maturity.
at the time of delivery to the buyer and the value they would have all interest therein
had if they had answered to the warranty. (n) It is the duty of the mortgagee
to foreclose the mortgage if he
BREACH OF WARRANTY; REMEDY OF THE BUYER: The buyer has 2 wishes to secure a perfect title
alternative remedies:
thereto; and after the maturity a. Such right must be expressly stipulated or agreed upon,
of the debt, but before the for without such express agreement, the contract would
foreclosure, the mortgagor has be absolute and unconditional sale.
the right to redeem. b. The right to repurchase must appear in the same
There is no obligation resting Usually for the purpose of instrument of sale and not in a separate instrument. A
upon the vendee to foreclose. guaranteeing the fulfillment o a stipulation to repurchase established on a contract distinct
Neither does the vendor, as has principal obligation and the from the sale is valid only as between the parties and it
been said, have the right to creditor cannot appropriate to cannot be set up against intervening third persons.
redeem the property after the himself the things given in c. A stipulation giving the vendor a “preference” to buy back
maturity of the redemption. mortgage, nor dispose of them the property at a price to be agreed upon does not make a
As soon as the rights of pacto de retro sale, under which the price for repurchase
dominion are consolidated, must be the same as that paid by the vendee.
purchaser may dispose of the
same as absolute owner and EFFECT OF THE CONTRACT: A purchase and sale, once
without restriction. consummated, is a contract which by its nature transfers the
ownership and other rights in the thing sold. The agreement to
DISTINGUISH FROM USUFRUCT: repurchase, or the pacto de retro, is merely personal right stipulated
between the parties, to the end that the vendor may again acquire
SALE USUFRUCT the ownership of the thing alienated.
A sale, even if it is with pacto de Merely gives a right to enjoy
retro carries with it the right of another’s property RIGHTS OF THE VENDOR PENDING REPURCHASE: Pending the
the vendee to possess the thing redemption, the vendor has no right over the thing, except that of
and consequently enjoy the repurchasing the same upon compliance with the legal requirements
fruits or rents thereof as his own for the repurchase. Thus, a deed of absolute sale of land executed
by the vendor a retro before the lapse of the agreed period of
DISTINGUISHED FROM ANTICHRESIS redemption, has been held as not conveying to the purchaser the
ownership of the property but only all the rights and interests that
SALE ANTICHRESIS the vendor had, at the time, in the property, which includes the right
to repurchase retained by the vendor. If the vendor transfers his
The contract of sale with right to The creditor only acquires a
repurchase is entirely different right to receive the fruits of the right to another, the contract would be an assignment of credit.
from the contract of antichresis. real property of his debtor with
Here, the vendor cannot the obligation to apply them to He cannot constitute real rights over the thing sold; hence, the
mortgage he creates his void, even if eventually he reacquires the
exercise the right of redemption the payment, first of the
thing.
without returning to the vendee interest, and second, of the
the price of sale, and if the principal of his credit. The
The vendor may also register his right to repurchase under the Land
vendor should not do this within creditor does not acquire the
the time agreed upon, the ownership of the thing, when Registration Act.
vendee irrevocably acquires the the contract is one of
ownership of the thing sold antichresis, by non-payment of RIGHTS OF THE VENDEE PENDING REPURCHASE: The vendee in
pacto de retro sale immediately acquires title and possession of the
the debt within the terms
agreed upon property sold, subject only to the vendor’s right of redemption. He
may dispose of the same as any other owner without any other
limitation than those imposed upon all owners. It is however subject
SUBJECT MATTER OF PACTO DE RETRO: The Code does not
to a resolutory condition; hence, all the acts of disposition that he
distinguish between movables and immovables as the subject
may make pending the condition are as revocable as his right.
matter of the contract of sale with pacto de retro; hence, it may be
concluded that both kinds of property may be the subject matter of
OBLIGATION OF THE VENDEE: The vendee has to take care of the
sale with such stipulation.
thing sold during the period of repurchase as a good father of a
family who would take care of his own property.
CHARACTER OF PARTIES: A vendor who decides to redeem or
repurchase a property sold with pacto de retro stands as the debtor,
The property must be preserved in such way that at the time of
and the vendee as the creditor, of the repurchase price. Hence, if
repurchase, the property would be in the same condition as of the
the vendor is absent, the vendee may exercise his right of
time it was sold, except the minor ordinary wear and tear and
redemption by filing a suit against the vendor and making
depreciation due to common natural causes.
consignation with the court of the amount due for the redemption
under Art. 1256. The redemption, however, is not an obligation, but
Art. 1602. The contract shall be presumed to be an equitable
a right with the vendor may or may not exercise. The vendee cannot
mortgage, in any of the following cases:
compel the vendor to repurchase, because there is no obligation on
the part of the vendor a retro to repurchase.
(1) When the price of a sale with right to repurchase is unusually
inadequate;
STIPULATION OF REPURCHASE:
(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase VENDOR REMAINING IN POSSESSION: In this case, the contract shall
another instrument extending the period of redemption or be presumed to be an equitable mortgage. The reason for the
granting a new period is executed; presumption lies in the fact that it is of the essence of a contract of
sale with pacto de retro that the legal title to the property is
(4) When the purchaser retains for himself a part of the purchase immediately transferred to the vendee. Retention is inconsistent
price; with the vendee’s acquisition of the right of ownership under a true
sale subject only to the vendor’s right to redeem.
(5) When the vendor binds himself to pay the taxes on the thing
sold; Art. 1603. In case of doubt, a contract purporting to be a sale with
right to repurchase shall be construed as an equitable mortgage.
(6) In any other case where it may be fairly inferred that the real (n)
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation. CONSTRUCTION AS EQUITABLE MORTGAGE FAVORED: Sales with
the right to repurchase is not favored. In case of doubt, the contract
In any of the foregoing cases, any money, fruits, or other benefit to will be considered as that of loan with mortgage, because this
be received by the vendee as rent or otherwise shall be considered involves a smaller transmission of rights and interests.
as interest which shall be subject to the usury laws. (n)
Art. 1604. The provisions of Article 1602 shall also apply to a
PURPOSE: Articles 1602 to 1605 have been adopted in order to contract purporting to be an absolute sale. (n)
prevent circumvention of the laws on usury and of the prohibition
against the creditor appropriating the mortgaged property. It is well- A definite sale may be interpreted as an equitable mortgage, and
known that the contract of sale is with the right of repurchase has parol evidence is admissible to show that a conveyance of real or
been frequently used in order to conceal the true contract, which is personal property, absolute in form, or purporting on its face to
one of loan with mortgage. transfer the absolute title to property, was in fact a mortgage given
as a security for the payment of a loan.
RETROACTIVE APPLICATION: This article which indicates the
circumstances under which a contract of sale may be presumed to Art. 1605. In the cases referred to in Articles 1602 and 1604, the
be an equitable mortgage is remedial in nature, and not one which apparent vendor may ask for the reformation of the instrument.
creates or takes away new or vested rights, and consequently, may (n)
be given retroactive effect so as to apply to transactions entered
into before the effectivity of the NCC. VENDOR REMAINS AS OWNER: Where the contract was adjudged to
be an equitable mortgage rather that a pacto de retro sale, it is not
INTERPRETATION OF CONTRACT: The determination of whether a proper for the trial court to declare the property in question as
contract is one of sale or mortgage depends upon the intention of owned by the mortgagee upon the mortgagor’s failure to pay his
the parties. When the terms of contract are clear, showing that the obligation within the required period. The property should be
contract is one of sale with the right of repurchase, it must be foreclosed and sold in a public
interpreted according to its literal sense, and held to be such a
contract with pacto de retro. Art. 1606. The right referred to in Article 1601, in the absence of an
express agreement, shall last four years from the date of the
SALES CON PACTO DE RETRO CONSTRUED AS MORTGAGE: Even contract.
when a document appears on its face to be a sale with pacto de
retro, the owner of the property may prove that the contract is Should there be an agreement, the period cannot exceed ten
really a loan with mortgage by raising as an issue the fact that the years.
document does not express the true intent and agreement of the
contracting parties. Parol evidence then becomes competent and However, the vendor may still exercise the right to repurchase
admissible to prove that the instrument was in truth and in fact as a within thirty days from the time final judgment was rendered in a
security for the allegations, the courts will enforce the agreement or civil action on the basis that the contract was a true sale with right
understanding in this regard, in accord with the true intent of the to repurchase. (1508a)
parties.
PERIOD OF REDEMPTION: The period should be understood as the
INADEQUACY OF THE PRICE: The inadequacy of the alleged price date when the contract produces effects (Tolentino). If the efficacy o
paid for the property sold with pacto de retro, so gross and the sale with pacto de retro has been subjected by the parties to a
unconscionable that the mind revolts as it and such that a suspensive condition, the period should be counted, not from the
reasonable mind would neither directly or indirectly be likely to date appearing on the instrument, but from the date when the
consent to, is a circumstance indicative of the fact that the alleged condition is fulfilled, which marks the consummation of the sale.
sale with pacto de retro was merely intended to secure the payment
of a loan. In a decision, the SC held that non-payment of the purchase price by
the vendee does not suspend the running of the period of
NOTE: The difference in the value of the property and the price for redemption in the absence of stipulation to that affect.
which it is sols is not always a decisive factor for determining
whether a contract is one of sale with the right to repurchase or a NO STIPULATION: When the contract of sale with pacto de retro
mere loan with guaranty, because the selling price of a property does not have any stipulation as to when the redemption may be
mainly depends upon the needs of the vendor. effected, the law fixes the period as 4 years from the date of the

contract. A failure to redeem within said period consolidates the of Property without a judicial order, after the vendor has been duly
title to the vendee. heard. (n)
STIPULATION OF PERIOD: The repurchase must be made at the time Under the Old Code, vendee shall irrevocably acquire ownership of
stipulated; otherwise, title will be consolidated in the vendee. the thing sold upon failure of the vendor to fulfill what has been
prescribed under Art. 1616. The ownership is consolidated by
When the contract stipulate that the vendor may redeem at any operation of law and the vendor looses all his rights in the property.
time he may be in a position to exercise such right, or at any time he The present Code does not change the rule but adds that the
has the money, the right must be exercised within 10 years from the consolidation of title cannot be recorded in the RD without judicial
date of the contract. order after the vendor has been fully heard.
SUSPENSION OF RIGHT TO REPURCHASE: Parties may validly Under the present rule, consolidation of ownership of real property
stipulate that the vendor shall not be permitted to exercise the right a retro shall be effected through an ordinary civil action not by mere
within a period after the date of the contract. Also, they may motion and that the vendor a retro should be made a party
stipulate that the right shall commence from a certain date. If no defendant, who should be served with summons.
period has been fixed after the expiration of said period within
which the right of redemption could be exercised, the vendor shall CONSOLIDATION OF TITLE: If the vendor allows the period of
have 4 years after the expiration of a suspensive period within which redemption to lapse, without making the redemption, the
the right could not be exercised. In the vent that the 4 years would ownership becomes consolidated by operation of law in the vendee,
extend the life of the contract beyond 10 years, the vendor has the and the vendor loses all his rights in the property sold. The vendee a
balance of the 10-year period within which to repurchase. retro’s failure to consolidate his title does not impair his title or
ownership of the property.
When the period of suspension is for 10 years or more, the
stipulation is illicit and the right of repurchase can be exercised at REGISTRATION BY THE VENDOR: A contract of sale with pacto de
any time after the making of the contract and prior to the expiration retro of certain parcels of land, executed before the vendor
of 10 years. petitioned for the registration of the land in his name under the
Torrens System, even if the period of repurchase expired without
STIPULATION CANNOT EXCEED 10 YEARS: A stipulation giving the the vendor having exercised his right of redemption, will not entitle
vendor the right to redeem for more than 10 years is not totally null the vendee to ask for the vendee to ask for the review of the decree
and void, but only as to the excess. In such case, the nullity does not of registration, which has become indefeasible and absolutely
affect the validity of the sale. binding as against the whole world after the time fixed by law for
review has already expired.
The prohibition does not apply however to a case where the vendee,
after having become absolute owners of the property for failure of The ownership of the land is not consolidated in the vendee by
the vendee to repurchase, promises to resell and reconvey the operation of law upon the expiration of the period for repurchase,
property to the vendor. because the decree has destroyed the efficacy of the period for
repurchase, because the decree has destroyed the efficacy of such
EXTENSION OF PERIOD: Parties may extend the original period consolidation. However, the contract of sale with pacto de retro still
provided any extension does not exceed 10 years. subsists between the parties.
The vendee may allow redemption even after the lapse of the period The purchaser has no right to institute a real action for the recovery
for repurchase. of said land based upon the consolidation of his ownership thereof
due to the vendor’s failure to exercise the right of repurchase; but
STIPULATION FOR AUTOMATICE TERMINATION: Parties may the purchaser, notwithstanding the registered title obtained by the
stipulate that the vendors shall remain in possession of the land as vendor, has a right and a corresponding subsisting personal action,
lessees for a certain period subject to the condition that in case of also arising from the same contract of purchase and sale, to ask for
failure to pay any rental, the lease shall automatically terminate and its compliance and the delivery of the land sold, after the execution
the right of ownership of the vendee shall become absolute. of a document of absolute sale thereof, which should be annotated
in the certificate of title issued to the vendor, the latter being bound
ADDITIONAL 30-DAYS FOR REPURCHASE; WHEN AVAILABLE: This on his part to deliver this certificate to the purchaser who thereby
applies only where the nature and character of the transaction, becomes the owner of the lands sold.
whether as pacto de retro sale or as an equitable mortgage, was put
in issue before the court. It does not apply where the transaction Art. 1608. The vendor may bring his action against every possessor
was admittedly one of sale with pacto de retro. This provision whose right is derived from the vendee, even if in the second
applies to sale with pacto de retro executed prior to the effectivity of contract no mention should have been made of the right to
the new Code. repurchase, without prejudice to the provisions of the Mortgage
Law and the Land Registration Law with respect to third persons.
The provision does not apply to a contract found to be an absolute (1510)
sale.
RIGHT OF VENDOR: When the vendor pays the purchase price to the
Art. 1607. In case of real property, the consolidation of ownership vendee, the latter is bound to restore and deliver the property to
in the vendee by virtue of the failure of the vendor to comply with the vendor, if the vendee has delivered the thing to a third person
the provisions of article 1616 shall not be recorded in the Registry whom he believed was better entitled to possess, it cannot serve as
an excuse for the failure to comply with this obligation.
If the vendor is permitted to redeem only the part which is sold, the
The seller has a right of action to enforce the redemption thereof as community of property will be restored. Yet, since the law wants to
against any other possessor who derived his right from the avoid indivision, the vendee may require the vendor to redeem the
purchaser under pacto de retro, inasmuch as said action is of the entire property if he wishes to make use of the right to repurchase.
nature of a real right. The redemption price of the portion which had been acquired from
the other co-owners should be the price at which it was adjudicated
Art. 1609. The vendee is subrogated to the vendor's rights and to the vendee.
actions. (1511)
Art. 1612. If several persons, jointly and in the same contract,
REGISTRATION OF TITLE: If the vendor can register his title, the should sell an undivided immovable with a right of repurchase,
vendee can also register the same title after he has once acquired it. none of them may exercise this right for more than his respective
But, the title has a condition subsequent attached to it---that it will share.
be terminated if the vendor should exercise the right to repurchase.
Notwithstanding this condition subsequent, the vendee may register The same rule shall apply if the person who sold an immovable
his title with the consent of the vendor. He may also alienate the alone has left several heirs, in which case each of the latter may
thing bought and the acquirer knows very well from the title entered only redeem the part which he may have acquired. (1514)
in the registry that he acquires title revocable after a fixed period.
RIGHTS OF HEIRS OF VENDOR A RETRO: Each heir can only
OWNERSHIP OF FRUITS: The purchaser becomes the owner, not repurchase or redeem the part of the property which he has or may
only of the property sold a restro but also of the fruits subject to the have acquitted as inheritance. A number less than all of the heirs are
condition that the vendee should resell the property to the vendor a not entitled to repurchase for themselves all or the whole
retro within the period stipulated in the contract or within the legal immovable sold to the prejudice of the estate of the deceased or of
period fixed in the Code. all the other heirs of the latter.
If the vendor sues the vendee in order to compel the latter to allow Similarly, the purchasers a retro cannot be compelled to allow a
the redemption, consigning the redemption price in the court, the single co-heir to redeem the property.
vendee ceases to be the owner of the property from the time of
consignation: Art. 1613. In the case of the preceding article, the vendee may
demand of all the vendors or co-heirs that they come to an
a. All the fruits gathered BEFORE the consignation pertains to agreement upon the purchase of the whole thing sold; and should
the vendee; they fail to do so, the vendee cannot be compelled to consent to a
b. Fruits produced AFTER the consignation belong to the partial redemption. (1515)
vendor a retro.
JOINT SALE IN SINGLE CONTRACT: This contemplates a single
Art. 1610. The creditors of the vendor cannot make use of the right contract between the vendee and all the co-owners. This is
of redemption against the vendee, until after they have exhausted consistent with the policy of the law against indivision. The vendee
the property of the vendor. (1512) may refuse to become a co-owner with the vendors who can
redeem only their shares. Hence, he can require them to come to an
CREDITORS INCLUDED: All creditors, whether preferred or not agreement for the redemption of the entire property.
provided that their preference is not based upon a real right prior to
the sale with pacto de retro and imposed upon the very same thing The option to require either a total or partial redemption lies with
sold. the vendee.
It does not refer to mortgage creditors under instruments recorded Art. 1614. Each one of the co-owners of an undivided immovable
prior to the sale. Such mortgagees may proceed to foreclose the who may have sold his share separately, may independently
mortgage entirely disregarding the rights of the vendee, whose right exercise the right of repurchase as regards his own share, and the
to recover the price depends entirely upon the existence of any vendee cannot compel him to redeem the whole property. (1516)
excess over the mortgage credit.
SEPARATE SALES: This contemplates a situation where each co-
Art. 1611. In a sale with a right to repurchase, the vendee of a part owner sells his interest separately there being a special price fixed
of an undivided immovable who acquires the whole thereof in the for the share of each one, and said share being specifically
case of article 498, may compel the vendor to redeem the whole determined.
property, if the latter wishes to make use of the right of
redemption. (1513) What the law prohibits is the vendee requiring 1 co-owner to rdeem
the entire property but it does not forbid the co-owner from
APPLICATION: The vendee of a part of undivided tenement acquires redeeming the shares of the others by:
all the rights of the vendor pending the redemption. He may ask for
partition of the thing owned in common. If he acquires the shares of a. Solidarity among them; or
all other co-owners, he becomes the owner of the entire property b. By agency
but he has only a revocable title over the portion purchased under
pacto de retro although his title over the rest is absolute and Art. 1615. If the vendee should leave several heirs, the action for
irrevocable. redemption cannot be brought against each of them except for his
own share, whether the thing be undivided, or it has been
partitioned among them.
still retain the property. He may require the completion of the of the
But if the inheritance has been divided, and the thing sold has been price or that he be paid other expenses before he returns the thing
awarded to one of the heirs, the action for redemption may be which he had purchased under a condition subsequent.
instituted against him for the whole. (1517)
AMOUNTS TO BE PAID: Vendor must tender the payment of the
Art. 1616. The vendor cannot avail himself of the right of repurchase price.
repurchase without returning to the vendee the price of the sale,
and in addition: Nonetheless, it is legal for the parties to stipulate in their contract
that the repurchase price be an amount higher or lower than the
(1) The expenses of the contract, and any other legitimate price of the original sale. This may not be the pacto de retro sale
payments made by reason of the sale; governed by the Code but such stipulation will evidently have
juridical effects as a conventional right of redemption.
(2) The necessary and useful expenses made on the thing sold.
(1518) It is only the price of the repurchase which must be paid at the time
of the redemption. Others may be paid afterwards.
WHO MAY REPURCHASE: A vendor who is not the vendor or does
not have the rights or representation of such vendor cannot USEFUL AND NECESSARY EXPENSES:
repurchase the thing sold under a pacto de retro. However, if such
right had already been attached and sold on execution to his Vendee a retro is entitled to reimbursement for improvements
judgment creditor, such vendor can no longer redeem the property which are of the category of useful expenses and those which have
for such right of redemption has been transferred to and may be increased the value and augmented the income of the property but
exercised only buy the judgment CR. not those which are ordinary and simple expenses for preservation
because these expenses are incident to the enjoyment of the thing
Yet, a third person may make the repurchase on behalf of the and should be borne by the vendee.
vendor or his heirs. Such third person does not thereby become the
owner of the property redeemed but acquires only a lien for the Useful expenses. Vendee must be considered as a possessor in good
repayment of the amount advanced. In effect, the third person faith and he should not be deprived of this character simply because
becomes a trustee and is bound to administer the property in this of the uncertainty whether the vendor would exercise the right. In
character. such case, the vendor has the option either to pay the:
FROM WHOM REPURCHASE MADE: It must be made to the vendee a. Expenses incurred; or
or the person who possesses the rights of the vendee under the b. The increase in the value under Art. 546.
contract of sale with pacto de retro. Otherwise, it will not be a valid
redemption of the property even if the third person is in physical Until the vendee is paid, he may retain possession of the
possession thereof. land.
MAKING THE REPURCHASE: Land tax paid. The vendee is not entitled to the reimbursement
because the payment of the land tax is not an expenditure on the
a. The vendor must complete the repurchase before the thing sold but a charge against the owner of the property to help in
expiration of the redemption period; the expenditures of the government in the maintenance of order
b. There must also be an actual and simultaneous tender of and in protecting the rights of the property owners and the vendee
payment which constitutes the legal use or exercise of the is the owner of the thing sold while the vendor has not repurchased.
right;
Art. 1617. If at the time of the execution of the sale there should
Tender of payment must be in full amount otherwise, the be on the land, visible or growing fruits, there shall be no
offer to redeem will be held ineffectual; reimbursement for or prorating of those existing at the time of
XPN: Tender is not necessary when the amount of redemption, if no indemnity was paid by the purchaser when the
repurchase is uncertain and depends upon an accounting sale was executed.
of the vendee who has not yet made such accounting.
c. If despite diligent efforts to repurchase and doing all which Should there have been no fruits at the time of the sale and some
is within his power to effect the repurchase on time, exist at the time of redemption, they shall be prorated between
vendor fails to complete the repurchase by reason of the redemptioner and the vendee, giving the latter the part
circumstances over which he has no control or which are corresponding to the time he possessed the land in the last year,
imputable to the vendee, he does not lose his right to counted from the anniversary of the date of the sale. (1519a)
repurchase. The court may grant him the right to
repurchase at a later date. BASIS IS OWNERSHIP: Vendee a retro is the owner of the property
d. Filing of complaint to enforce repurchase within the period during the period for redemption and the vendor a retro reacquires
of redemption is equivalent to an offer to redeem; ownership after redemption. A purchaser a retro who retains
e. If the tender is refuse, it is not necessary for the vendor a possession of the property after it has been repurchased must
retro to consign in the court or make a judicial deposit of therefore indemnify the vendor a retro for the use and occupation
the repurchase price. of the property.
PARTIAL PAYMENTS: The vendee is bound to fulfill the obligation to Art. 1618. The vendor who recovers the thing sold shall receive it
sell back or must show why he may keep his part of the price and free from all charges or mortgages constituted by the vendee, but
he shall respect the leases which the latter may have executed in The right cannot be exercised by one co-owner alone as this right
good faith, and in accordance with the custom of the place where belongs to all co-owners in common.
the land is situated. (1520)
Legal redemption presupposes co-ownership and where there is
none, the right can no longer be exercised.
SECTION 2. - Legal Redemption AGAINST WHOM AVAILABLE: The right cannot be exercised when
one co-owner purchases the share or shares of the other co-owners.
Art. 1619. Legal redemption is the right to be subrogated, upon the It can only be exercised when the purchaser is a stranger to the co-
same terms and conditions stipulated in the contract, in the place ownership.
of one who acquires a thing by purchase or dation in payment, or
by any other transaction whereby ownership is transmitted by A third person is anyone who is not a co-owner. A lessee is included.
onerous title. (1521a)
Where a surviving spouse sold his undivided portion of the conjugal
SCOPE: Legal redemption is right created and regulated by reason of property to the wife of one of his sons, the vendor’s other children,
public interest. It is applicable to all transactions which result in the being co-owners of the conjugal property by inheritance from the
transmission of ownership, whose special nature does not bar deceased parent, are entitled to exercise the right from the vendee,
subrogation but not to barter or acquisition by hereditary title. as the sister-in-law is a stranger or a third person under the Article.
Person cannot exercise this right if he is not in a condition to take Art. 1621. The owners of adjoining lands shall also have the right of
the place of the vendee. redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own
DISTINGUISHED FROM PRE-EMPTION: any rural land.
PRE-EMPTION REDEMPTION This right is not applicable to adjacent lands which are separated
The power to acquire the thing Right to rescind the sale, by brooks, drains, ravines, roads and other apparent servitudes for
for the same price in preference subrogate oneself in the place the benefit of other estates.
over any other buyer and to the exclusion of the
buyer and acquire the thing at If two or more adjoining owners desire to exercise the right of
the price stipulated so long as redemption at the same time, the owner of the adjoining land of
this is done within the time and smaller area shall be preferred; and should both lands have the
under the circumstances same area, the one who first requested the redemption. (1523a)
provided by law.
TENEMENTS COVERED: This refers to rural tenements or those
Art. 1620. A co-owner of a thing may exercise the right of destined for agricultural exploitation.
redemption in case the shares of all the other co-owners or of any
of them, are sold to a third person. If the price of the alienation is RATIO: To protect agriculture, by union of small agricultural lands
grossly excessive, the redemptioner shall pay only a reasonable and those adjoining thereto under one single owner for their better
one. exploitation.
Should two or more co-owners desire to exercise the right of To prevent a rural estate, adjacent to that belonging to another
redemption, they may only do so in proportion to the share they owner, or other owners and the area of which does not exceed 1
may respectively have in the thing owned in common. (1522a) hectare, from passing into the hands of a person other than one of
the adjacent owners.
COMPARED WITH ART. 1088:
RURAL LANDS DISTINGUISHED FROM URBAN TENEMENTS:
ART. 1088 ART. 1620
1. By its situation, being located in the country and not in the
Applies where co-heir sells his Once the portion has been fixed,
town;
share to a stranger before co-heirs turn into co-owners and
2. By its purpose or use, being for agricultural, fishing or
partition or distribution or their right of legal redemption is
timber exploitation and not for dwelling, industry, or
before determination of the governed by Art. 1620 and 1624.
commerce; and
portion to which each heir is
3. By the preponderance of the rural element, if an urban
entitled.
element concurs, such that former is the principal and the
latter is an accessory.
WHO MAY REDEEM: The right is given not only solely and
exclusively to the original co-owners but also to all who
AREA OF LAND: Redemption can be exercised only of the land sold is
subsequently acquire their respective shares while the community
one hectare or less in area.
subsists.
AGAINST WHOM AVAILABLE: Keeping in mind the purpose, the
RATIO: To reduce the number of participants until the community is
right can be exercised only against a stranger who buys the property
done away with.
sought to be redeemed and not against his wife even if she acquires
the land adjacent as her paraphernal property.

Under the present code, if the grantee does not own any rural land,
the right will not lie against such grantee. The right of redemption of co-owners excludes that of adjoining
owners. (1524a)
TRANSFER BY VENDEE: If after a co-owner has instituted an action
to compel redemption, another co-owner voluntarily buys the land, PERIOD OF REDEMPTION: This article does not provide a period of
this will not bar the action which can be exercised against the prescription. It creates a right, and fixes the period for the exercise
subsequent transferee. of that right. The period is not a prescriptive period, but is more a
requisite or condition precedent to the exercise of the right of legal
The repurchase of the land by the original vendor cannot defeat the redemption; it is a period provided by law to restrict the right of the
right of legal redemption and any subsequent act of the buyer and person exercising the legal redemption.
seller cannot prejudice the prospective redemptioner.
The period is extinctive, so that if the claim is not made within the
period provided, the right can no longer be exercised.
BURDEN OF PROVING THE EXISTENCE OF BROOKS, RAVINES,
ROADS, etc.: The grantee or purchaser of the tenement who wants The period is preemptory, because the policy of the law is not to
to defeat the right of legal redemption sought to be exercised by an leave the purchaser’s title in uncertainty beyond the 30-day period.
adjoining owner, and not the person seeking to exercise the right of
legal redemption, has the duty to prove that the lands involved are The period of 30 days fixed by this article, within which the right of
separated by brooks, ravines, roads, drains, and other apparent redemption or pre-emption must be exercised should be counted
servitudes for the benefit of other estates. from the date the vendor or prospective vendor, as the case may be,
notified in writing the prospective redemptioner or the person with
Art. 1622. Whenever a piece of urban land which is so small and so the right of pre-emption, of the sale or intended sale.
situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought Notice: Although the prospective redemptioner knew of the sale or
merely for speculation, is about to be re-sold, the owner of any intended sale of the property subject to redemption or preemption,
adjoining land has a right of pre-emption at a reasonable price. the prospective redemptioner is entitled to written notice, because
that is the exclusive method of notification that can be accepted.
If the re-sale has been perfected, the owner of the adjoining land The notice should not only be of the perfected sale but also of the
shall have a right of redemption, also at a reasonable price. actual execution and delivery of the deed of sale.
When two or more owners of adjoining lands wish to exercise the The law does not require any specific form of the written notice.
right of pre-emption or redemption, the owner whose intended
use of the land in question appears best justified shall be EFFECT OF PREVIOUS OFFER TO REDEMPTIONER: The inability of a
preferred. (n) prospective redemptioner to accept an offer of sale of the property
subject to redemption before the actual sale to a third person took
REQUISITES FOR THE EXERCISE OF THE RIGHT OF PRE-EMPTION: place, because the offer appeared expensive or for lack of funds,
does not extinguish his right to redeem the same within the period
1. The piece of urban land is so small that it cannot be used fixed by law.
for any practical purpose within a reasonable time
2. Such small urban land was sought merely for speculation MANNER OF EXERCISING REDEMPTION: The better and usual
practice is for redemptioner to first approach the third person from
RIGHT OF PRE-EMPTION- This is the right of preference to a sale; whom redemption is sought and offer to buy back the property
that is, if the owner of a thing sells it to a third party, the person subject to redemption.
entitled to pre-emption may require the owner to convey the
property to him, and he will be bound to pay therefor the price The law, however, does not require any previous notice to the new
agreed upon with the third party. owner, nor a meeting between him and the redemptioner, much
less a previous formal tender, before any action is began in court to
PRE-EMPTION v. REDEMPTION enforce the right. The important thing is to assert it in due time and
in proper form.
PRE-EMPTION REDEMPTION
Exercised before the stipulated Is exercised after the sale is
sale is consummated by the perfected and consummated;
vendor, who must communicate hence, it must be brought CHAPTER 8
the proposed sale to possible against the vendor and the ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
redemptioners so that they can vendee, and even against
exercise the right of pre- succeeding vendees ASSIGNMENT OF CREDIT- It is an assignment by virtue of which the
emption if they so desire. owner of a credit, known as the assignor, by a legal cause, such as
sale, dation in payment, exchange or donation, and without the
Art. 1623. The right of legal pre-emption or redemption shall not need of the consent of the debtor, transfers his credit and its
be exercised except within thirty days from the notice in writing by accessory rights to another known as the assignee, who acquires the
the prospective vendor, or by the vendor, as the case may be. The power to enforce it to the same extent as the assignor could have
deed of sale shall not be recorded in the Registry of Property, enforced it against the debtor.
unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
The assignment may refer to all kinds of rights, even those which are instrument, or the instrument is recorded in the Registry of
doubtful, present, and future, so long as they are licit and can be Property in case the assignment involves real property. (1526)
exercised by a third person.
EFFECTS AS TO THIRD PARTIES:
EFFECTS OF ASSIGNMENT:
GR: An assignment made by the creditor does not affect third
1. Assignment transfers to the assignee the right to collect persons including the debtor
the full value of the credit, even if he paid a price less than
such value XPN: They have knowledge thereof
2. The assignment transfers also all the accessory rights
3. The debtor can set up against the assignee the defenses he If the document of assignment is public, it is evidence even against a
could have set up against the assignor. third person of the facts which gave rise to its execution and of the
date of the latter.
Art. 1624. An assignment of creditors and other incorporeal rights
shall be perfected in accordance with the provisions of Article If the credit, right or transfer or assignment refers to an immovable,
1475. (n) the transfer will not produce effect as against third persons, except
from the moment of its inscription in the registry of property.
FORM OF ASSIGNMENT: a.) It may be a sale, b.) but at times it may
constitute a dation in payment, such as when a debtor, in order to ATTACHMENT OF CREDIT: When the assignment has become
obtain a release from his debt, assigns to his creditor a credit he has effective against third persons under this article, even if the debtor
against a third person; or c.) it may constitute a donation as when it has not yet been notified, the assigned credit can no longer be
is by gratuitous title; d.) or it may even be merely by way of attached by creditors of the assignor.
guaranty, as when the creditor gives it as collateral to secure his
own debt in favor of the assignee, without transmitting ownership. The assignee can object to the payment of the debt to the attaching
creditor of the assignor, and may prevent such payment by merely
TRANSMISSION OF RIGHTS: The transfer of rights by assignment notifying the debtor, even after the attachment notice to the latter.
takes place by the mere agreement of the assignor and the assignee, The assignee is entitled to payment, as against the attaching creditor
or upon perfection of the contract. From that moment, the of the assignor.
ownership of the right is acquired by the assignee and the assignor
cannot do anything that will prejudice the assignee without incurring If the attachment is subsequent to the notification of the assignment
liability for damages. If he collects the credit or assigns it to another, to the debtor, the debtor will not be released if he pays under the
he becomes liable on his warranty. attachment, if the assignment is in a public instrument. In this case,
the assignment is already effective both against the attaching
The delivery of the incorporeal objects or of the title or documents creditor and the debtor himself. The debtor pays at his own risk,
evidencing the credit is not necessary for this purpose, but must be under the attachment.
considered merely as an accessory obligation not essential to the
transfer of the right. Art. 1626. The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation.
Contra view of Manresa: Although the contract for the transfer of a (1527)
credit is perfected from the moment the parties agree as to the
object, which is the credit, and the price, even if neither one nor the NECESSITY OF NOTICE TO THE DEBTOR: As to the debtor, the
other has been delivered, the ownership or the real right is assignment takes effect only from the time he has knowledge
transferred only upon delivery, so that to determine when the credit thereof.
has been delivered, resort must be had to articles 1497 to 1501
which treat not only tradition but also quasi-tradition. The law does not require any formal notice to bind the debtor to the
assignee; all that the law requires is that he has knowledge of the
Tolentino’s view: The right is transmitted by the perfection of the assignment. If the debtor has such knowledge of the assignment,
contract of assignment without the necessity of delivery of the even if he had not been notified and by whatever means he came to
document evidencing the credit. This rule does not apply however to have such knowledge, the assignment becomes binding upon him.
negotiable instruments and documents of title, where there are
special laws applicable. If he subsequently pays to the assignor, he thereby acts in bad faith;
the debt is not legally extinguished, and he can be made to pay
TWO ASSIGNMENTS- The priority between 2 assignments of the again by the assignee.
same credit does not depend upon the dates of the instruments of
assignment, but upon the time they took effect. The second NOTE: The knowledge of the debtor must be of such certainty as to
assignment is without effect, if the first is valid, even if the second influence a person in the ordinary affairs of his life to act one way or
assignee has no knowledge of the first assignment. the other; that is, bad faith is required, and since bad faith is not
presumed, it must be proved by the interested party.
The perfection of the assignment transfers the credit to the
assignee, and this cannot be nullified by merely cancelling the DEFENSES OF DEBTOR: The debtor may set up against the assignee
assignment. all the defenses that he has against the assignor based on facts prior
to the notification of the assignment to him.
Art. 1625. An assignment of a credit, right or action shall produce
no effect as against third person, unless it appears in a public
The assignee can make use of all civil and criminal actions against Art. 1632. Should the vendor have profited by some of the fruits or
the assignor, but he can ask nothing from the debtor, because the received anything from the inheritance sold, he shall pay the
latter did not know of the assignment, nor was he bound to know it; vendee thereof, if the contrary has not been stipulated. (1533)
the assignee has only himself to blame for not having procured
notice to be given. Art. 1633. The vendee shall, on his part, reimburse the vendor for
all that the latter may have paid for the debts of and charges on
NOTE: If the creditor makes a second assignment, and this is made the estate and satisfy the credits he may have against the same,
known to the debtor, who has no knowledge of the first assignment, unless there is an agreement to the contrary. (1534)
a payment by the debtor to the second assignee, or a compromise
or compensation with him, can be set up against the first assignee. NOTE: Under our law, the estate itself is liable for debts and charges;
the heir has no personal liability; therefore, the assignee cannot be
Art. 1627. The assignment of a credit includes all the accessory held for more that the value of the properties ultimately adjudicated
rights, such as a guaranty, mortgage, pledge or preference. (1528) to the heir-assignor.
Art. 1628. The vendor in good faith shall be responsible for the Art. 1634. When a credit or other incorporeal right in litigation is
existence and legality of the credit at the time of the sale, unless it sold, the debtor shall have a right to extinguish it by reimbursing
should have been sold as doubtful; but not for the solvency of the the assignee for the price the latter paid therefor, the judicial costs
debtor, unless it has been so expressly stipulated or unless the incurred by him, and the interest on the price from the day on
insolvency was prior to the sale and of common knowledge. which the same was paid.
Even in these cases he shall only be liable for the price received A credit or other incorporeal right shall be considered in litigation
and for the expenses specified in No. 1 of Article 1616. from the time the complaint concerning the same is answered.
The vendor in bad faith shall always be answerable for the The debtor may exercise his right within thirty days from the date
payment of all expenses, and for damages. (1529) the assignee demands payment from him. (1535)
WARRANTY OF EXISTENCE- The credit must be in existence at the CREDIT IN LITIGATION- This refers to credits and other incorporeal
time of the transmission. rights; however, it cannot be extended to include immovables.
NOTE: The completion of prescription after the assignment does not LEGAL REDEMPTION: This article grants a right of legal redemption
give rise to responsibility, if the assignee had sufficient time to to a debtor of a credit or right in litigation which is assigned by the
interrupt it. creditor to a third person.
DOUBTFUL CREDITS examples: The reimbursement must be of the true price, and not the stipulated
price which may be fictitious.
1. A credit in litigation
2. One included in a compromise When applicable: It is only admitted in the case of the sale of the
3. A claim filed in insolvency proceedings right, in which case, there is speculation. It is applicable on all kinds
of sales including the judicial.
EXPRESS STIPULATION ON SOLVENCY: The guaranty refers only to
solvency at the time of the assignment, unless solvency in the future Hence, if the transfer of the right is gratuitous, there is no sale, and
is also expressly included. therefore, no speculation. The redemption cannot be exercised in
such cases.
Art. 1629. In case the assignor in good faith should have made
himself responsible for the solvency of the debtor, and the Effect of redemption: The redemptioner is substituted in the place
contracting parties should not have agreed upon the duration of of the assignee, as if the original sale had been made directly to such
the liability, it shall last for one year only, from the time of the redemptioner. This means that the redemption has a retroactive
assignment if the period had already expired. effect, as if the assignee had never acquired the right in question.
If the credit should be payable within a term or period which has Art. 1635. From the provisions of the preceding article shall be
not yet expired, the liability shall cease one year after the excepted the assignments or sales made:
maturity. (1530a)
(1) To a co-heir or co-owner of the right assigned;
Art. 1630. One who sells an inheritance without enumerating the
things of which it is composed, shall only be answerable for his (2) To a creditor in payment of his credit;
character as an heir. (1531)
(3) To the possessor of a tenement or piece of land which is subject
Art. 1631. One who sells for a lump sum the whole of certain to the right in litigation assigned. (1536)
rights, rents, or products, shall comply by answering for the
legitimacy of the whole in general; but he shall not be obliged to REASON FOR EXCEPTIONS: In all these exceptions, redemption is
warrant each of the various parts of which it may be composed, the right is not allowed, because the assignment does not involve
except in the case of eviction from the whole or the part of greater any speculation. In the assignment to a co-heir or co-owner of the
value. (1532a) right, the position of the assignee to enforce the right is merely
strengthened.
BARTER- a contract whereby one person transfers the ownership of
Effect: In these cases, the debtor is not entitled to the benefits of non-fungible things to another with the obligation on the part of the
Art. 1634; he cannot extinguish the claim against him by merely latter to give things of the same kind, quantity and quality.
paying the amounts mentioned in said article. He will have to pay
the full amount of the credit, or so much as the creditor will agree to NATURE OR BARTER: Barter is a consensual contract, and is
accept. perfected by mere agreement of the parties as to the things to be
exchanged. The contract is consummated only from the time the
parties mutually take possession of the things exchanged.
Art. 1639. If one of the contracting parties, having received the

thing promised him in barter, should prove that it did not belong to
the person who gave it, he cannot be compelled to deliver that
CHAPTER 9 which he offered in exchange, but he shall be entitled to damages.
GENERAL PROVISIONS (1539a)
Art. 1636. In the preceding articles in this Title governing the sale IMPOSSIBILITY OF DELIVERY: If one of the parties cannot deliver all
of goods, unless the context or subject matter otherwise requires: of the things he has undertaken to deliver, the other cannot be
(1) "Document of title to goods" includes any bill of lading, dock compelled to perform his undertaking, but will, instead, have the
warrant, "quedan," or warehouse receipt or order for the delivery right to ask for the resolution of the contract of barter.
of goods, or any other document used in the ordinary course of
business in the sale or transfer of goods, as proof of the possession Art. 1640. One who loses by eviction the thing received in barter
or control of the goods, or authorizing or purporting to authorize may recover that which he gave in exchange with a right to
the possessor of the document to transfer or receive, either by damages, or he may only demand an indemnity for damages.
endorsement or by delivery, goods represented by such document. However, he can only make use of the right to recover the thing
which he has delivered while the same remains in the possession
"Goods" includes all chattels personal but not things in action or of the other party, and without prejudice to the rights acquired in
money of legal tender in the Philippines. The term includes good faith in the meantime by a third person. (1540a)
growing fruits or crops.
Art. 1641. As to all matters not specifically provided for in this
"Order" relating to documents of title means an order by Title, barter shall be governed by the provisions of the preceding
endorsement on the documents. Title relating to sales. (1541a)
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at the TITLE VIII
time a contract of sale is made. LEASE
Chapter 1
An antecedent or pre-existing claim, whether for money or not,
constitutes "value" where goods or documents of title are taken GENERAL PROVISIONS
either in satisfaction thereof or as security therefor.
Art. 1642. The contract of lease may be of things, or of work and
(2) A person is insolvent within the meaning of this Title who either service.
has ceased to pay his debts in the ordinary course of business or
cannot pay his debts as they become due, whether insolvency SALE v. LEASE
proceedings have been commenced or not.
SALE LEASE
(3) Goods are in a "deliverable state" within the meaning of this There is transmission of the Only the use or enjoyment of
Title when they are in such a state that the buyer would, under the ownership of the thing sold and the thing is transferred, and only
contract, be bound to take delivery of them. (n) the transmission is permanent, for a determinate period
unless subject to a resolutory
Art. 1637. The provisions of this Title are subject to the rules laid condition
down by the Mortgage Law and the Land Registration Law with
regard to immovable property. (1537a) NOTE: Contracts in the form of leases either with options to the
buyer to purchase for small consideration at the end of term,
provided the so-called rent has been duly paid, or with stipulation
that if the rent throughout the term is paid, title shall thereupon
Title VII. - BARTER OR EXCHANGE vest upon the lessee are leases in the name only.
Art. 1638. By the contract of barter or exchange one of the parties LEASE v. USUFRUCT
binds himself to give one thing in consideration of the other's
promise to give another thing. (1538a) LEASE USUFRUCT
A real right only by exception Is always a real right
Ownership is not required in To constitute usufruct, one must

order to give an object in lease be the owner of the thing
The lessor places and maintains The owner allows the NOTE: Where the price consists of a certain percentage of the fruits
the lessee in the enjoyment of usufructuary to use and enjoy obtained from the thing, the contract is to be regarded as a tenancy
the thing the property contract, which is generally regarded as an important variation of
May be limited to particular uses Usufruct includes all possible the contract of lease. Under our law, land tenancy on shares is
of the property uses and manner of enjoyment regarded more as a partnership than as a lease contract.
of the property
Must be for a determinate May be for an indefinite period AMOUNT OF RENT:
period, and if the contract does of time
not fix a period, the court must a. The price of lease or rent must be serious or substantial.
fix such period in an action b. The price must be determined by the parties, or at least,
brought for such purpose susceptible of determination under the contract. If the
parties are unable to fix the price, or at the basis for its
LEASE v. COMMODATUM determination, the contract is void.
LEASE COMMODATUM INCREASES OF RENT: Where there is no statute fixing the ceiling on
Onerous Essentially gratuitous rentals, the landowner has a right to demand an increase thereof
upon expiration of the contract.
LEASE v. DEPOSIT
Factors to be considered in determining reasonableness of rental
LEASE DEPOSIT increases:
If the price is to be paid whether Deposit is a real contract which
1. The location of the apartment, including the neighborhood
or not the objects are actually is perfected only by the delivery
2. The area per floor or storey
kept in the premises or safe, of the object
3. Number of rooms, bedrooms, kitchen, closet,
there is a lease
4. The facilities provided therefor
5. Other material factors as the description of the building,
LEASE v. SIMPLE LOAN
its type and construction, as well as the age of the building
LEASE SIMPLE LOAN
PERIOD OF LEASE: The law excludes perpetual lease. There must
The owner of the property does The thing loaned becomes the always be a period which may be definite or indefinite. When the
not lose ownership. He simply property of the obligor. period is indefinite, and the thing leased is rural land, Art. 1682 shall
loses his control over the apply.
property rented during the
period of the contract
NOTE: A lease of things during the lifetime of one of the parties is
The relation between the parties The relation between the parties valid. When the lease is for such time as the lessor or the lessee may
is that of landlord and tenant is that of obligor and obligee please, it is considered as one for life, ending upon the death of the
party who could have terminated the contract.
Art. 1643. In the lease of things, one of the parties binds himself to
give to another the enjoyment or use of a thing for a price certain, BEYOND NINETY-NINE YEARS: The existence of a long leased on
and for a period which may be definite or indefinite. However, no property will usually prevent its alienation, and even its partition
lease for more than ninety-nine years shall be valid. among the heirs of the lessor.
LEASE OF THINGS: The thing must be within the commerce of man, TOLENTINO: A lease made for more than 99 years shall be
otherwise, it is void. considered as terminated after the end of 99 years. After that
period, it will be a lease for an indefinite term.
Characteristics of Lease of things:
LEASE OF MOVABLES: The Code makes no special provisions for the
1. Its essential purpose is to transmit the use or enjoyment of lease of movables. In the absence of special law, the provisions of
a thing special Code which are of the essence of lease and which do not
2. It is consensual require as a necessary condition that the property be immovable,
3. It is onerous are applicable to lease of personal property.
4. Its price is fixed in relation to the period of use or
enjoyment Art. 1644. In the lease of work or services, one of the parties binds
5. It is temporary. himself to execute a piece of work or to render to the other some
service for a price certain, but the relation of principal and agent
Extent of enjoyment: Within the freedom of contract authorized by does not exist between them.
the law, the parties may establish the terms they deem convenient,
subjecting the manner of use or enjoyment to limitations and CONTRACT OF WORK:
conditions.
By the contract of work, one of the parties binds himself to produce
FORM OF RENT: The price in lease may be in money, or in fruits, or a result of work or labor and the other party to pay remuneration.
in some other useful things. It may even be in some other The contract of surgeon to make an operation, that of an artist to
prestation.

give a concert, and that of a contractor to construct a building, are
contracts of work. 1. The lease of consumable property, not for the purpose of
consuming it but for display or advertising such as wine.
LEASE OF SERVICES: One of the parties binds himself to render some This is known as lease ad pompam et ostentationem; and
service—his own activity or labor, not its result, and the other party 2. Lease of consumables which constitute accessories in the
binds himself to pay some remuneration. The party obliged to lease of an industrial establishment such as the coal in a
render some service does not lease his person or his power or factory.
energy for work, but a free activity within the limits set forth by the
contract and by good faith. REFERENCES:
DISTINGUISHED FROM CONTRACT OF WORK:  DE LEON, HECTOR S., The Law on Sales, Agency, and Credit
Transactions, Rex Bookstore, Inc., 2005
LEASE OF SERVICES CONTRACT OF WORK  TOLENTINO, ARTURO M., Commentaries and Jurisprudence
(locatio operarum) (locatio operis) on the Civil Code of the Philippines, Vol. V., Central Book
The object of the contract is the The result is the object to be Publishing, Co., Inc. 1991
service itself and not the result delivered without considering
which it produces. the labor that produces it.
The object is the lessor’s labor; The lessor’s labor, although an
the acts in which such labor important factor, is not the
consists, performed for the direct object of the contract, nor
benefit of the lessee are taken is it immediately taken into
into consideration immediately. account. The object is not the
labor but the result, the
complete and finished work, the
aggregate of the lessor’s act
embodied in something material
which is the useful object of the
contract.
Even if the result intended is not The risk is upon the promissory,
attained, without fault on the so that if the result promised is
parties, the remuneration is due not accomplished he is not
for the services rendered. entitled to demand
compensation.
Law does not speak of risk for The price is stipulated taking
the workman never assumes into consideration not the labor
them; the workman is paid for but the finished work; the price
the labor he performs, whatever is not payable until the work is
the result of the work assigned completed and accepted, and
to him, and even should it be the same cannot lawfully be
destroyed by accident. demanded if the work is
destroyed before it is finished
and accepted.
PROFESSIONALS: They are lease of services.
COMPENSATION: This may consist of money or some other thing,

or, of a fixed sum or a certain percentage of the product of the work.
Although no fixed amount may have been determined as the

consideration for the contract of hiring, the contract is nevertheless
valid if the amount of the implied compensation can be determined
by custom or frequent use in place where the services were
rendered.
Art. 1645. Consumable goods cannot be the subject matter of a

contract of lease, except when they are merely to be exhibited or
when they are accessory to an industrial establishment.
LEASE OF CONSUMABLE GOODS:
GR: Consumable goods cannot be the subject matter of a contract of

lease.
XPNs:

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NOTES ON CIVIL LAW REVIEW II: SALES

Kenneth and King C. Hizon _________________________________________________________________________________________________________________

UNIVERSITY OF SANTO TOMAS

NOTES ON CIVIL LAW REVIEW II:

Title VI. - SALES

Characteristics of Sale: If there is doubt whether parties intended a suspensive condition or

Facultad de Derecho Civil 1

Requisites: SALE WITHOUT CONSIDERATION: A fictitious sale without

Facultad de Derecho Civil 5

REPUBLIC ACT No. 6552 Cancellation of sale

Facultad de Derecho Civil 8

PURCHASE BY INTERMEDIARY: It is essential that to prove the

OBLIGATIONS OF THE VENDOR:

1. To deliver the thing;

Facultad de Derecho Civil 10

Facultad de Derecho Civil 11

(1) Where by the terms of the document the carrier,

Facultad de Derecho Civil 13

Facultad de Derecho Civil 14

DELIVERY TO CARRIER: REMEDIES OF SELLER:

Facultad de Derecho Civil 16

Facultad de Derecho Civil 20

NOTE: The warranty is based on a contract between the parties for

APPLICATION: This refers to sale of immovables and to a case

Facultad de Derecho Civil 31

Facultad de Derecho Civil 32

Facultad de Derecho Civil 36

Art. 1639. If one of the contracting parties, having received the

"Quality of goods" includes their state or condition.

Facultad de Derecho Civil 40

Facultad de Derecho Civil 41

PROFESSIONALS: They are lease of services.

COMPENSATION: This may consist of money or some other thing,

Although no fixed amount may have been determined as the

Art. 1645. Consumable goods cannot be the subject matter of a

LEASE OF CONSUMABLE GOODS:

GR: Consumable goods cannot be the subject matter of a contract of

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