Title VI.
– SALES -goods to be manufactured, raised, or acquired by the
CHAPTER 1
NATURE AND FORM OF THE CONTRACT
Art. 1458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
1. Essential Elements of a Contract of Sale [CSP]
(a) Consent or meeting of the minds, that is, the consent
to transfer ownership in exchange for the price;
(b) Determinate subject matter; and
(c) Price certain in money or its equivalent.
2. CHARACTERISTICS [NPC-ROC]
(a) Nominate
(b) Principal
(c) Consensual
(d) Reciprocal
-both the seller and the buyer have corresponding
obligations to give under a contract of sale. The buyer is
obligated to pay the price while the seller will deliver and
transfer ownership of the thing sold.
(e) Onerous
-the price is the valuable consideration for the delivery
and transfer of ownership of the thing sold.
(f) Commutative
Art. 1459. The thing must be licit and the vendor must have a
right to transfer the ownership thereof at the time it is
delivered.
Art. 1460. A thing is determinate when it is particularly
designated or physical segregated from all other of the same
class.
The requisite that a thing be determinate is satisfied if at
the time the contract is entered into, the thing is capable of
being made determinate without the necessity of a new or further
agreement between the parties.
Art. 1461. Things having a potential existence may be the
object of the contract of sale.
The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
existence.
The sale of a vain hope or expectancy is void.
Art. 1462. The goods which form the subject of a contract of sale
may be either existing goods, owned or possessed by the seller,
or goods to be manufactured, raised, or acquired by the seller
after the perfection of the contract of sale, in this Title called
"future goods."
There may be a contract of sale of goods, whose acquisition
by the seller depends upon a contingency which may or may not
happen.
Art. 1463. The sole owner of a thing may sell an undivided
interest therein.
Art. 1464. In the case of fungible goods, there may be a sale of
an undivided share of a specific mass, though the seller purports
to sell and the buyer to buy a definite number, weight or measure
of the goods in the mass, and though the number, weight or
measure of the goods in the mass is undetermined. By such a sale
the buyer becomes owner in common of such a share of the mass
as the number, weight or measure bought bears to the number,
weight or measure of the mass. If the mass contains less than the
number, weight or measure bought, the buyer becomes the owner
of the whole mass and the seller is bound to make good the
deficiency from goods of the same kind and quality, unless a
contrary intent appears.
Art. 1465. Things subject to a resolutory condition may be the
object of the contract of sale.
1. OBJECT
-the object of the contract may be determinate thing or
something that is determinable.
-The object may be things of Potential existence, future
goods, fungible goods, or things subject to resolutory
condition.
(a) DETERMINABLE
-capable of being made determinate without necessity of
a new or further agreement between the parties.
(b) POTENTIAL EXISTENCE
-may be the object of the contract of sale.
i. Mere Hope or Expectancy
-the efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into
existence. (Art 1461)
ii. Future Goods
seller after the perfection of the contract of sale. (Art 1462)
iii. Resolutory Condition (Art 1465)
-things subject to a resolutory condition may be the
object of the contract of sale.
iv. Subject to Contingency
-there may be a contract of sale of goods, whose
acquisition by the seller depends upon a contingency which
may or may not happen.
v. Voidable Title
-Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the
buyer acquires a good title to the goods, provided he buys
them in good faith, for value, and without notice of the seller’s
defect of title. (Art 1506)
(c) LICIT
-the thing must be licit and the vendor must have a right
to transfer the ownership thereof at the time it is delivered.
(Art 1459)
-The sale is void if the subject is illicit. Thus, sale of
shabu is VOID.
(e) LOSS AT PERFECTION (Art 1493)
- if at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the
contract shall be without any effect.
-BUT if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract
and demanding the remaining part, paying its price in
proportion to the total sum agreed upon.
(f) SALE OF FUTURE INHERITANCE
-this cannot be the object of sale under Art 1493 CC.
(g) Sale of Undivided Share of a Specific Mass (Art 1464)
-There may be a sale of an undivided share of a specific
mass of fungible goods though the seller purports to sell and
the buyer to buy a definite number, weight or measure of the
goods in the mass, and though the number, weight or measure
of the goods in the mass is undetermined.
-If the mass contains LESS than the number, weight or
measure bought, the buyer becomes the owner of the whole
mass and the seller is bound to make good the deficiency from
goods of the same kind and quality, UNLESS a contrary intent
appears.
Art. 1466. In construing a contract containing provisions
characteristic of both the contract of sale and of the contract of
agency to sell, the essential clauses of the whole instrument shall
be considered.
Art. 1467. A contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the
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 his special order, and not for the general market, it is
a contract for a piece of work.
Art. 1468. If the consideration of the contract consists partly in
money, and partly in another thing, the transaction shall be
characterized by the manifest intention of the parties. If such
intention does not clearly appear, it shall be considered a barter
if the value of the thing given as a part of the consideration
exceeds the amount of the money or its equivalent; otherwise, it
is a sale.
Art. 1469. In order that the price may be considered certain, it
shall be sufficient that it be so with reference to another thing
certain, or that the determination thereof be left to the
judgment of a special person or persons.
Should such person or persons be unable or unwilling to fix
it, the contract shall be inefficacious, unless the parties
subsequently agree upon the price.
If the third person or persons acted in bad faith or by
mistake, the courts may fix the price.
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 fault may have such remedies against the party in
fault as are allowed the seller or the buyer, as the case may be.
Art. 1470. Gross inadequacy of price does not affect a contract
of sale, except as it may indicate a defect in the consent, or that
the parties really intended a donation or some other act or
contract.
Art. 1471. If the price is simulated, the sale is void, but the act
may be shown to have been in reality a donation, or some other
 act or contract.
Art. 1472. The price of securities, grain, liquids, and other things
shall also be considered certain, when the price fixed is that
which 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 the price on such day, or in such exchange or market,
provided said amount be certain.
Art. 1473. The fixing of the price can never be left to the
discretion 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.
Art. 1474. Where the price cannot be determined in accordance
with the preceding articles, or in any other manner, the contract
is inefficacious. However, if the thing or any part thereof has
been delivered to and appropriated by the buyer he must pay a
reasonable price therefor. What is a reasonable price is a
question of fact dependent on the circumstances of each
particular case.
1. PRICE
-is the sum that will be paid for the property sold.
2. OPTION MONEY
-is NOT part of the price because it is a consideration in a
separate contract of option.
3. EARNEST MONEY
-is part of the purchase price. Hence, there is already a
perfected and binding contract of sale if earnest money is
paid.
4. PRICE SHOULD BE CERTAIN
-it is considered certain if
i. It is a FIXED amount;
ii. it is certain with reference to another thing certain; or
iii. that the determination thereof is left to the judgment of
a special person or persons.
(a) Fixing by 3rd persons
-subject to the ff rules:
i. Should such person or persons be unable or unwilling
to fix it, the contract shall be inefficacious, UNLESS the
parties subsequently agree upon the price.;
ii. if the third person or persons acted in bad faith or by
mistake, the courts may fix the price;
iii. Where such 3rd persons are PREVENTED from fixing the
price or terms by fault of the seller or buyer, the party not in
fault may have such remedies against the party in fault.
(b) GR: Fixing Cannot be at the Sole Discretion of One
Party
- EXC: if the price fixed by one of the parties is accepted
by the other, the sale is perfected.
(c) Effect if Price Cannot be Fixed
GR: Where the price cannot be determined in accordance
with the above-stated rules, the contract is INEFFICACIOUS.
(Art 1474)
EXC: If the thing or any part thereof has been delivered
to and appropriated by the buyer, he must pay a reasonable
price therefor. (Art 1474)
(d) Manner of Payment
- A definite agreement on the manner of payment of the
purchase price is an essential element in the formation of a
binding and enforceable contract of sale.
-Disagreement on the manner of payment = FAILURE TO
AGREE ON THE PRICE = There is no perfected contract
5. GROSS INADEQUACY OF THE PRICE
-this does NOT affect the validity of the contract of sale.
(Art 1470)
-HOWEVER, such gross inadequacy may indicate either
(i) a defect in the consent; or
(ii) that the parties really intended a donation or some
other act or contract.
(a) Simulated
-if the price is not merely inadequate but is in fact
SIMULATED, the sale is VOID, but the act may be shown to
have been in reality a donation, or some other act or contract.
(Art 1471)
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 contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each
lot is the subject of a separate contract of sale.
(2) A sale by auction is perfected when the auctioneer
announces its perfection by the fall of the hammer, or in other
customary manner. Until such announcement is made, any bidder
may retract his bid; and the auctioneer may withdraw the goods
from the sale unless the auction has been announced to be
without reserve.
(3) A right to bid may be reserved expressly by or on behalf
of the seller, unless otherwise provided by law or by stipulation.
(4) Where notice has not been given that a sale by auction
is 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 bid at such sale on his behalf or for the auctioneer, to
employ or induce any person to bid at such sale on behalf of the
seller or knowingly to take any bid from the seller or any person
employed by him. Any sale contravening this rule may be treated
as fraudulent by the buyer.
Art. 1477. The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in
the thing shall not pass to the purchaser until he has
fully paid the price.
1. CONTRACT TO SELL
- the transfer of ownership in a contract to sell is subject
to a suspensive condition which is usually full payment of the
purchase price.
CONTRACT TO SELL CONTRACT OF SALE
-the happening or non- -Sale is already perfected
happening of the suspensive but the obligation of either
condition (like full payment party is subject to a
of the price) prevents the condition.
contract from obtaining
obligatory force.
Need to Rescind
There is no need to rescind, Seller needs to rescind the
if the buyer failes to pay contract in case of non-
the price because payment.
ownership is NOT
transferred even if there
was a prior delivery.
2. AGENCY TO SELL
- The agent, the person to whom the thing is delivered,
does not become the owner and he holds it merely as a
fiduciary; the agent does not pay the price but is bound to
remit whatever he may receive from a third person who is the
buyer. (Quiroga vs Parsons)
3. CONTRACT FOR A PIECE OF WORK
CPW CONTRACT OF SALE
-when the thing if the thing transferred
transferred is one not in would have existed and
existence and which never has been the subject of sale
would have existed but for for some other person even
the order of the party if the order had not been
desiring to acquire it. given.
-When the customers regularly acquires froma corporation
AC units, which regularly fabricates them from units, parts and
equipment on hand, then the said corporation is engaged in
sale not contract for piece of work. (CIR vs Engineering
Equipment and Supply Co)
4. OPTION CONTRACT
-There is a contract is whereby the prospective buyer for
a (OPTION MONEY) consideration distinct from the price is
given the right to purchase the thing to be sold.
(a) An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promisor if the promise is supported by a consideration
distinct from the price. An option contract is a preparatory
contract that is NOT binding unless it is supported by a
consideration that is separate from the price. The buyer is NOT
DUTY BOUND to purchase the thing to be sold.
(b) Even if there is no separate consideration, there is a
perfected contract of sale if the offer is accepted before the
offer is withdrawn. Art 1324 CC provides that an offer can be
withdrawn at any time before acceptance.

5.RIGHT OF FIRST REFUSAL
-gives the first priority to the person to whom the right is
given (prospective buyer) to purchase the property should the
owner decide to sell the same; the owner should offer the
property first to such person.
(a) Right of First Refusal in Lease Contract
- Only after the lessee has failed to exercise his right to
first priority could the lessor sell the property to other buyers
under the same terms and conditions offered to the lessee, or
under the terms and conditions more favorable to the lessor.
Consideration for the lease includes the consideration for
the right of first refusal. (Equatorial Realty Devt vs Mayfair
Theater)
(b) Specific Performance
-The lessee, or the person who is given the right of first
refusal in a contract of lease can file an action to compel the
lessor to allow him to purchase the property. The execution
of such right consists in directing the grantor to comply with
his obligation according to the terms at which he should have
offered the property in favor of the grantee and at that price
when the offer should have been made. If the same property
is sold to buyer in bad faith, the sale violates the right of
first refusal and may be RESCINDED.  
(2) Cancel the sale, should the vendee's failure to pay
cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one
has been constituted, should the vendee's failure to pay cover
two or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.
Art. 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or
enjoyment of the thing.
Art. 1486. In the case referred to in two preceding articles, a
stipulation that the installments or rents paid shall not be
returned to the vendee or lessee shall be valid insofar as the
same may not be unconscionable under the circumstances.
Art. 1487. The expenses for the execution and registration of the
sale shall be borne by the vendor, unless there is a stipulation to
the contrary.
Art. 1488. The expropriation of property for public use is
governed by special laws.

Art. 1479. A promise to buy and sell a determinate thing for a

price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.

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 contract to the time of delivery, shall be governed by
Articles 1163 to 1165, and 1262.
This rule shall apply to the sale of fungible things, made
independently and for a single price, or without consideration of
their weight, number, or measure.
Should fungible things be sold for a price fixed according to
weight, number, or measure, the risk shall not be imputed to the
vendee until they have been weighed, counted, or measured and
delivered, unless the latter has incurred in delay.
Art. 1481. In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk of the goods
delivered do not correspond with the description or the sample,
and if the contract be by sample as well as description, it is not
sufficient that the bulk of goods correspond with the sample if
they do not also correspond with the description.
The buyer shall have a reasonable opportunity of comparing
the bulk with the description or the sample.

Art. 1482. Whenever earnest money is given in a contract of

sale, it shall be considered as part of the price and as proof of
the perfection of the contract.

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 writing, or by word of mouth, or partly in writing and partly by
word of mouth, or may be inferred from the conduct of the
parties.
1. NOT FORMAL CONTRACTS
(a) Statute of Frauds (Art 1358)
-a sale is covered by statute of frauds if:
i. Public or Private Instrument – if the terms of the sale is
not to be performed within a year;
ii. Public Instrument – if the sale involves a real property;
and
iii. Private or Public Instrument 0 in sale of goods
exceeding P500.

(b) Exception
-Sale of Large Cattle MUST be in writing otherwise it is
VOID. (Art 1581)
(1) In a sale if a piece of land, the power to sell (not
the sale itself) MUST be in writing, otherwise the sale is VOID.
While the Contract of Sale itself must be in a public instrument
otherwise it is unenforceable.

Art. 1484. In a contract of sale of personal property the price

of which is payable in installments, the vendor may exercise
any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee
fail to pay;
 CHAPTER 2
CAPACITY TO BUY OR SELL
Art. 1489. All persons who are authorized in this Code to obligate
themselves, may enter into a contract of sale, saving the
modifications contained in the following articles.
Where necessaries are those sold and delivered to a minor
or other person without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to in Article 290.
Art. 1490. The husband and the wife cannot sell property to
each other, except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation or property
under Article 191.

Art. 1491. The following persons cannot acquire by purchase,

even at a public or judicial auction, either in person or through
the mediation of another:
(1) The guardian, the property of the person or persons
who may be under his guardianship;
(2) Agents, the property whose administration or sale
may have been entrusted to them, unless the consent of the
principal has been given;
(3) Executors and administrators, the property of the
estate under administration;
(4) Public officers and employees, the property of the
State or of any subdivision thereof, or of any government-
owned or controlled corporation, or institution, the
administration of which has been intrusted to them; this
provision shall apply to judges and government experts who, in
any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of
superior and inferior courts, and other officers and employees
connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of
any litigation in which they may take part by virtue of their
profession.
(6) Any others specially disqualified by law.
Art. 1492. The prohibitions in the two preceding articles
are applicable to sales in legal redemption, compromises and
renunciations.
1. THE PARTIES
- all persons who are authorized in the NCC to obligate
themselves, may enter into a contract of sale.
(a)  MINORS (Art 1489)
-Necessaries are sold/delivered = Must pay a reasonable
price therefor
- Necessaries are those that are indispensable for
sustenance, dwelling, clothing and medical attendance,
according to the social position of the family.

(b) SALE BETWEEN SPOUSES VOID

-the husband and the wife cannot sell property to each
other; this sale is VOID.
-The incapacity or prohibition applies to Common Law
Spouses. ( Cruz vs CA)
EXCEPTIONS: The sale from one spouse to another is
allowed in the ff cases:
i. When a Separation of Property was agreed upon in
the marriage settlement; or
ii. When there has been a judicial separation of
property.

(c) RELATIVE INCAPACITY TO BUY

- the persons listed in Art 1491 cannot acquire by
purchase, even at public or judicial auction sales (or in legal
redemption, compromises and renunciations [ Art 1492]),
either in person or through the mediation of another.

i. Generally Void.
- The sale to a person who suffers from relatice incapacity
enumerated above (Art 1491) is VOID even if there is consent.
The exception is sale to an agent with the consent of the
principal which is Valid under Art 1492(2).
 CHAPTER 3
EFFECTS OF THE CONTRACT
WHEN THE THING SOLD HAS BEEN LOST
Art. 1493. If at the time the contract of sale is perfected, the
thing which is the object of the contract has been entirely lost,
the contract shall be without any effect.
But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract and
demanding the remaining part, paying its price in proportion to
the total sum agreed upon.
Art. 1494. Where the parties purport a sale of specific goods, and
the goods without the knowledge of the seller have perished in
part or have wholly or in a material part so deteriorated in quality
as to be substantially changed in character, the buyer may at his
option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay the
agreed price for the goods in which the ownership will pass, if the
sale was divisible.

  
 CHAPTER 4
OBLIGATIONS OF THE VENDOR
SECTION 1. - General Provisions
Art. 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the
sale.
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 specified in Articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from
the vendor to the vendee.
1. OBLIGATIONS OF THE VENDOR
(a) Reservation (Art 1503)
(b) When Vendor Need Not Deliver (Art 1536)
(c) Accessions and Accessories (Art 1537)
(d) Fruits
 
SECTION 2. - Delivery of the Thing Sold
Art. 1497. The thing sold shall be understood as delivered, when
it is placed in the control and possession of the vendee.
1. MODES OF ACQUIRING OWNERSHIP
-The mode of transferring ownership is DELIVERY or
TRADITION in a contract of sale.
-The contract of sale itself is considered the “Title” which
is the justification for the “Mode” to effectively transfer
ownership.
Art. 1498. When the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be
made by the delivery of the keys of the place or depository
where it is stored or kept.
Art. 1499. The delivery of movable property may likewise be
made by the mere consent or agreement of the contracting
parties, if the 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 for any other reason.
Art. 1500. There may also be tradition constitutum
possessorium.
Art. 1501. With respect to incorporeal property, the provisions
of the first paragraph of article 1498 shall govern. In any other
case wherein said provisions are not applicable, the placing of
the titles of ownership in the possession of the vendee or the
use by the vendee of his rights, with the vendor's consent ,
shall be understood as a delivery.
1. KINDS OF DELIVERY
(a) Actual Delivery
-physical transfer of control and possession to the vendee
or buyer.
-“A stipulation designating the place and manner of
delivery is controlling on the contracting parties. The thing
sold can only be understood as delivered to the buyer when
it is placed in the buyer’s control and possession at the
agreed place of delivery.” (San Fernando Regala vs Cargill
PH)
(b) Constructive Delivery
- includes
(i) Execution of Public Documents (Art 1498)
-applies to incorporeal and corporeal property
GR: Incorporeal Property is delivered through the execution of
a Public Document
EXC: If not applicable, it shall be delivered by:
(1) the placing of the titles of ownership in the possession
of the vendee, or
(2) the use by the vendee of his rights, with the vendor’s
consent (Quasi-Tradition) (Art 1501)
(ii) Tradition Longa Manu (Art 1499)
-where there is delivery by mere consent
(iii) Tradition Brevi Manu (Art 1499)
-the buyer is already in possession in some
other capacity as in the case where the buyer is the lessee,
depositary or borrower;
(iv) Traditio Symbolica (Art 1498 par 2)
-where the vendor delivers the symbol of
possession of the movables
(v) Traditio Constitutum Possessorium (Art 1500)
-the vendor remains in possession in some other
capacity for the vendee as in the case where the vendor will
not be the agent or depositary of the vendee.
(vi) Negotation of a Negotiable Document of Title
-the document of title like a bill of lading represents
title to or possession of the property covered by the document.
2. THERE CAN BE NO DELIVERY WHEN PUBLIC INSTRUMENT IS
EXECUTED IN THE FF CASES:
(a) If the INTENTION of the parties is that there is no
delifery despite such execution;
(b) If the vendor has NO CONTROL OR CONTROL OVER THE
THING
-to be effective there should be no impediment to
actual transfer of possession
Art. 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of
paying the price, the ownership passes to the buyer of delivery,
but he may revest the ownership in the seller by returning or
tendering the goods within the time fixed in the contract, or, if
no time has been fixed, within a reasonable time.
When goods are delivered to the buyer on approval or on
trial or on satisfaction, or other similar terms, the ownership
therein passes to the buyer:
(1) When he signifies his approval or acceptance to the
seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, 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 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.
1. SALE OR RETURN
-The buyer is given an option to return the goods instead
of paying the price, the ownership passes to the buyer upon
delivery, but he may revest the ownership in the seller by
returning or tendering the goods within the time fixed in the
contract, or, if no time has been fixed, within a reasonable
time.
2. SALE ON APPROVAL
-When goods are delivered to the buyer on approval or on
trial or on satisfaction, or other similar terms, the ownership
therein passes to the buyer:
(1) When he signifies his approval or acceptance the
seller or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance but
retains the goods without giving notice of rejection within the
stipulated time, or if no time has been fixed, on the expiration
of a reasonable time.
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
possession or ownership in the goods until certain conditions
have been fulfilled. The right of possession or ownership may be
thus reserved notwithstanding the delivery of the goods to the
buyer or to a carrier or other bailee for the purpose of
transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods
are deliverable to the seller or his agent, or to the order of the
seller or of his agent, the seller thereby reserves the ownership in
the goods. But, if except for the form of the bill of lading, the
ownership would have passed to the buyer on shipment of the
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
obligations under the contract.
Where goods are shipped, and by the bill of lading the goods
are deliverable to order of the buyer or of his agent, but
possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession of the
goods as against the buyer.
Where the seller of goods draws on the buyer for the price
and transmits the bill of exchange and bill of lading together to
the buyer to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill of lading if he
does not honor the bill of exchange, and if he wrongfully retains
the bill of lading he acquires no added right thereby. If, however,
the bill of lading provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed in blank, or to
the buyer by the consignee named therein, one who purchases in
good faith, for value, the bill of lading, or goods from the buyer
will obtain the ownership in the goods, although the bill of
exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the facts
making the transfer wrongful.
Art. 1504. Unless otherwise agreed, the goods remain at the
seller's risk until the ownership therein is transferred to the
buyer, but when the ownership therein is transferred to the buyer
the goods are at the buyer's risk whether actual delivery has been
made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and the
ownership in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations under the
contract, the goods are at the buyer's risk from the time of such
delivery;
(2) Where actual delivery has been delayed through the
fault of either the buyer or seller the goods are at the risk of the
party in fault.
Art. 1505. Subject to the provisions of this Title, where goods
are 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 buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct precluded
from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any
other provision of law enabling the apparent owner of goods to
dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory
power of sale or under the order of a court of competent
jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and special
laws.
Art. 1506. Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the
buyer acquires a good title to the goods, provided he buys them
in good faith, for value, and without notice of the seller's defect
of title.
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 of any person named in such document is a negotiable
document of title.
Art. 1508. A negotiable document of title may be negotiated by
delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes to
deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes to
deliver the goods to the order of a specified person, and such
person or a subsequent endorsee of the document has indorsed it
in blank or to the bearer.
Where by the terms of a negotiable document of title the
goods are deliverable to bearer or where a negotiable document
of title has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any specified person, and in
such case the document shall thereafter be negotiated only by
the endorsement of such endorsee.
Art. 1509. A negotiable document of title may be negotiated by
the endorsement of the person to whose order the goods are by
the terms of the document deliverable. Such endorsement may be
in blank, to bearer or to a specified person. If indorsed to a
specified person, it may be again negotiated by the endorsement
of such person in blank, to bearer or to another specified person.
Subsequent negotiations may be made in like manner.
Art. 1510. If a document of title which contains an undertaking
by a carrier, warehouseman or other bailee to deliver the goods
to bearer, to a specified person or order of a specified person or
which contains words of like import, has placed upon it the
words "not negotiable," "non-negotiable" or the like, such
document may nevertheless be negotiated by the holder and is a
negotiable document of title within the meaning of this Title. But
nothing in this Title contained shall be construed as limiting or
defining the effect upon the obligations of the carrier,
warehouseman, or other bailee issuing a document of title or
placing thereon the words "not negotiable,"  "non-negotiable," or
the like.
Art. 1511. A document of title which is not in such form that it
can be negotiated by delivery may be transferred by the holder
by delivery to a purchaser or donee. A non-negotiable document
cannot be negotiated and the endorsement of such a document
gives the transferee no additional right.
Art. 1512. A negotiable document of title may be negotiated:
(1) By the owner therefor; or
(2) By any person to whom the possession or custody of the
document has been entrusted by the owner, if, by the terms of
the document the bailee issuing the document undertakes to
deliver the goods to the order of the person to whom the
possession or custody of the document has been entrusted, or if
at the time of such entrusting the document is in such form that
it may be negotiated by delivery.
Art. 1513. A person to whom a negotiable document of title has
been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser in
good faith for value and also such title to the goods as the person
to whose order the goods were to be delivered by the terms of
the document had or had ability to convey to a purchaser in good
faith for value; and
(2) The direct obligation of the bailee issuing the document
to hold possession of the goods for him according to the terms of
the document as fully as if such bailee had contracted directly
with him.
Art. 1514. A person to whom a document of title has been
transferred, but not negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to the terms of any
agreement with the transferor.
If the document is non-negotiable, such person also acquires
the right to notify the bailee who issued the document of the
transfer thereof, and thereby to acquire the direct obligation of
such bailee to hold possession of the goods for him according to
the terms of the document.
Prior to the notification to such bailee by the transferor or
transferee of a non-negotiable document of title, the title of the
transferee to the goods and the right to acquire the obligation of
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
notification to such bailee by the transferor or a subsequent
purchaser from the transfer of a subsequent sale of the goods by
the transferor.
Art. 1515. Where a negotiable document of title is transferred
for value by delivery, and the endorsement of the transferor is
essential for negotiation, the transferee acquires a right against
the transferor to compel him to endorse the document unless a
contrary intention appears. The negotiation shall take effect as of
the time when the endorsement is actually made.
Art. 1516. A person who for value negotiates or transfers a
document of title by endorsement or delivery, including one who
assigns for value a claim secured by a document of title unless a
contrary intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair
the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and
that the goods are merchantable or fit for a particular purpose,
whenever such warranties would have been implied if the
contract of the parties had been to transfer without a document
of title the goods represented thereby.
Art. 1517. The endorsement of a document of title shall not
make the endorser liable for any failure on the part of the bailee
who issued the document or previous endorsers thereof to fulfill
their respective obligations.
Art. 1518. The validity of the negotiation of a negotiable
document 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 by the fact that the owner of the document was
deprived of the possession of the same by loss, theft, fraud,
accident, mistake, duress, or conversion, if the person to whom
the document was negotiated or a person to whom the document
was subsequently negotiated paid value therefor in good faith
without notice of the breach of duty, or loss, theft, fraud,
accident, mistake, duress or conversion.
Art. 1519. If goods are delivered to a bailee by the owner or by a
person whose act in conveying the title to them to a purchaser in
good faith for value would bind the owner and a negotiable
document of title is issued for them they cannot thereafter, while
in possession of such bailee, be attached by garnishment or
otherwise or be levied under an execution unless the document
be first surrendered to the bailee or its negotiation enjoined. The
bailee shall in no case be compelled to deliver up the actual
possession of the goods until the document is surrendered to him
or impounded by the court.
Art. 1520. A creditor whose debtor is the owner of a negotiable
document of title shall be entitled to such aid from courts of
appropriate jurisdiction by injunction and otherwise in attaching
such document or in satisfying the claim by means thereof as is
allowed at law or in equity in regard to property which cannot
readily be attached or levied upon by ordinary legal process.
Art. 1521. Whether it is for the buyer to take possession of the
goods or of the seller to send them to the buyer is a question
depending in each case on the contract, express or implied,
between the parties. Apart from any such contract, express or
implied, or usage of trade to the contrary, the place of delivery is
the seller's place of business if he has one, and if not his
residence; but in case of a contract of sale of specific goods,
which to the knowledge of the parties when the contract or the
sale was made were in some other place, then that place is the
place of delivery.
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 bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of
a third person, the seller has not fulfilled his obligation to deliver
to the buyer unless and until such third person acknowledges to
the buyer that he holds the goods on the buyer's behalf.
 Demand or tender of delivery may be treated as ineffectual
unless made at a reasonable hour. What is a reasonable hour is a
question of fact.
Unless otherwise agreed, the expenses of and incidental to
putting the goods into a deliverable state must be borne by the
seller.
Art. 1522. Where the seller delivers to the buyer a quantity of goods
less than he contracted to sell, the buyer may reject them, but if the
buyer accepts or retains the goods so delivered, knowing that the
seller is not going to perform the contract in full, he must pay for them
at the contract rate. If, however, the buyer has used or disposed of the
goods delivered before he knows that the seller is not going to perform
his contract in full, the buyer shall not be liable for more than the fair
value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger
than he contracted to sell, the buyer may accept the goods included in
the contract and reject the rest. If the buyer accepts the whole of the
goods so delivered he must pay for them at the contract rate.
Where the seller delivers to the buyer the goods he contracted to
sell mixed with goods of a different description not included in the
contract, the buyer may accept the goods which are in accordance
with the contract and reject the rest.
In the preceding two paragraphs, if the subject matter is indivisible,
the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage of trade,
special agreement, or course of dealing between the parties.
Art. 1523. Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the case provided for in Article
1503, first, second and third paragraphs, or unless a contrary intent
appears.
Unless otherwise authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer as may
be 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 treat the delivery to the carrier as a delivery to himself,
or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to
the buyer under circumstances in which the seller knows or ought
to know that it is usual to insure, the seller must give such notice to
the buyer as may enable him to insure them during their transit,
and, if the seller fails to do so, the goods shall be deemed to be at
his risk during such transit.
Art. 1524. The vendor shall not be bound to deliver the thing sold,
if the vendee has not paid him the price, or if no period for the
payment has been fixed in the contract.
Art. 1525. The seller of goods is deemed to be an unpaid seller
within the meaning of this Title:
(1) When the whole of the price has not been paid or
tendered;
(2) When a bill of exchange or other negotiable
instrument has been received as conditional payment, and the
condition on which it was received has been broken by reason
of the dishonor of the instrument, the insolvency of the buyer,
or otherwise.
In Articles 1525 to 1535 the term "seller" includes an
agent of the seller to whom the bill of lading has been
indorsed, or a consignor or agent who has himself paid, or is
directly responsible for the price, or any other person who is in
the position of a seller.
Art. 1526. Subject to the provisions of this Title, notwithstanding
that the ownership in the goods may have passed to the buyer,
the unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price
while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of
stopping the goods in transitu after he has parted with the
possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this
Title.
Where the ownership in the goods has not passed to the
buyer, the unpaid seller has, in addition to his other remedies a
right of withholding delivery similar to and coextensive with his
rights of lien and stoppage in transitu where the ownership has
passed to the buyer.
Art. 1527. Subject to the provisions of this Title, the unpaid
seller of goods who is in possession of them is entitled to retain
possession of them until payment or tender of the price in the
following cases, namely:
(1) Where the goods have been sold without any stipulation
as to credit;
(2) Where the goods have been sold on credit, but the term
of credit has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding
that he is in possession of the goods as agent or bailee for the
buyer.
Art. 1528. Where an unpaid seller has made part delivery of the
goods, he may exercise his right of lien on the remainder, unless
such part delivery has been made under such circumstances as to
show an intent to waive the lien or right of retention.
Art. 1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee
for the purpose of transmission to the buyer without reserving the
ownership in the goods or the right to the possession thereof;
(2) When the buyer or his agent lawfully obtains possession
of the goods;
(3) By waiver thereof.
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 the price of the goods.
Art. 1530. Subject to the provisions of this Title, when the buyer
of goods is or becomes insolvent, the unpaid seller who has
parted with the possession of the goods has the right of stopping
them in 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 to the same rights in regard to the goods as he
would have had if he had never parted with the possession.
Art. 1531. Goods are in transit within the meaning of the
preceding article:
(1) From the time when they are delivered to a carrier by
land, water, or air, or other bailee for the purpose of
transmission to the buyer, until the buyer, or his agent in that
behalf, takes delivery of them from such carrier or other bailee;
(2) If the goods are rejected by the buyer, and the carrier
or other bailee continues in possession of them, even if the seller
has refused to receive them back.
Goods are no longer in transit within the meaning of the
preceding article:
(1) If the buyer, or his agent in that behalf, obtains delivery
of the goods before their arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed
destination, the carrier or other bailee acknowledges to the buyer
or his agent that he holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his agent; and it is
immaterial that further destination for the goods may have been
indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or
airplane chartered by the buyer, it is a question depending on the
circumstances of the particular case, whether they are in the
possession of the carrier as such or as agent of the buyer.
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 transitu, unless such part delivery has been under such
circumstances as to show an agreement with the buyer to give up
possession of the whole of the goods.
Art. 1532. The unpaid seller may exercise his right of stoppage in
transitu either by obtaining actual possession of the goods or by
giving notice of his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be given either to the
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
and under such circumstances that the principal, by the exercise
of reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller 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 has been issued by the carrier or other bailee, he shall not
obliged to deliver or justified in delivering the goods to the seller
unless such document is first surrendered for cancellation.
Art. 1533. Where the goods are of perishable nature, or where
the seller expressly reserves the right of resale in case the buyer
should make default, or where the buyer has been in default in
the payment of the price for an unreasonable time, an unpaid
seller having a right of lien or having stopped the goods in
transitu may resell the goods. He shall not thereafter be liable to
the original buyer upon the contract of sale or for any profit made
by such resale, but may recover from the buyer damages for any
loss occasioned by the breach of the contract of sale.
Where a resale is made, as authorized in this article, the
buyer acquires a good title as against the original buyer.
It is not essential to the validity of resale that notice of an
intention to resell the goods be given by the seller to the original
buyer. But where the right to resell is not based on the perishable
nature of the goods or upon an express provision of the contract
of sale, the giving or failure to give such notice shall be relevant
in any issue involving the question whether the buyer had been in
default for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of
 the time and place of such resale should be given by the seller to
the original buyer.
The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this requirement may
make a resale either by public or private sale. He cannot,
however, directly or indirectly buy the goods.
Art. 1534. An unpaid seller having the right of lien or having
stopped the goods in transitu, may rescind the transfer of title
and resume the ownership in the goods, where he expressly
reserved 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 unreasonable time. The seller shall not thereafter be
liable to the buyer upon the contract of sale, but may recover
from the buyer damages for any loss occasioned by the breach of
the contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested by notice to
the buyer or by some other overt act an intention to rescind. It is
not necessary that such overt act should be communicated to the
buyer, but the giving or failure to give notice to the buyer of the
intention to rescind shall be relevant in any issue involving the
question whether the buyer had been in default for an
unreasonable time before the right of rescission was asserted.
Art. 1535. Subject to the provisions of this Title, the unpaid seller's
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,
unless the seller has assented thereto.
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 right of any purchaser for value in good faith to whom such
document has been negotiated, whether such negotiation be prior
or subsequent to the notification to the carrier, or other bailee who
issued such document, of the seller's claim to a lien or right of
stoppage in transitu.
Art. 1536. The vendor is not bound to deliver the thing sold in case
the vendee should lose the right to make use of the terms as
provided in Article 1198.
Art. 1537. The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they were upon
the perfection of the contract.
All the fruits shall pertain to the vendee from the day on
which the contract was perfected.
Art. 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in Article 1189 shall be observed, the
vendor being considered the debtor.
Art. 1539. The obligation to deliver the thing sold includes that of
placing in the control of the vendee all that is mentioned in the
contract, in conformity with the following rules:
If the sale of real estate should be made with a statement of
its area, at the rate of a certain price for a unit of measure or
number, the vendor shall be obliged to deliver to the vendee, if the
latter should demand it, all that may have been stated in the
contract; but, should this be not possible, the vendee may choose
between a proportional reduction of the price and the rescission of
the contract, provided that, in the latter case, the lack in the area
be not less than one-tenth of that stated.
The same shall be done, even when the area is the same, if
any part of the immovable is not of the quality specified in the
contract.
The rescission, in this case, shall only take place at the will of
the vendee, when the inferior value of the thing sold exceeds one-
tenth of the price agreed upon.
Nevertheless, if the vendee would not have bought the
immovable had he known of its smaller area of inferior quality, he
may rescind the sale.
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,
the vendee may accept the area included in the contract and reject
the rest. If he accepts the whole area, he must pay for the same at
the contract rate.
Art. 1541. The provisions of the two preceding articles shall apply
to judicial sales.
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
shall be no increase or decrease of the price, although there be a
greater or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables
as sold for a single price; but if, besides mentioning the boundaries,
which is indispensable in every conveyance of real estate, its area
or number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even
when it exceeds the area or number specified in the contract; and,
should he not be able to do so, he shall suffer a reduction in the
price, in proportion to what is lacking in the area or number, unless
the contract is rescinded because the vendee does not accede to
the failure to deliver what has been stipulated.
Art. 1543. The actions arising from Articles 1539 and 1542 shall
prescribe in six months, counted from the day of delivery.
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
1. DOUBLE SALE
(a) Movable
- First possessor is preferred
(b) Immovable Property
-The order of preference is as follows:
(i) The buyer who first registered in good faith
(ii) First Possessor
-should there be no inscription or registration
(iii) Oldest Title (acquisition)
-Primus Tempore Potior Jure or first in time
stronger in right
2. OTHER RULES ON DOUBLE SALE OF IMMOVABLES
  (1) Registration in GF of Immovable Property is satisfied if
there is registration of an adverse claim or a notice lis
pendens.
(2) Knowledge gained by the first buyer of the second
sale CANNOT defeat the first buyer’s rights EXCEPT when the
second buyer registers in good faith the second sale ahead of
the first. (Uraca vs CA)
-Thus, the first buyer will not lose priority if he registers
the first sale ahead of the second sale with the first buyer
knowing the existence of the second sale.
(3) In execution sales of unregistered lands, the buyer
merely steps into the shoes of the judgment debtor. Thus, if
the judgment debtor already sold his property before the same
property was levied upon , the buyer at the auction sale shall
not acquire the property. (Radiowealth Finance Co. vs.
Palileo)
(4) The buyer must be wary and should investigate the
rights of the possessor if the property that the buyer is
purchasing is in actual possession of persons other the the
seller. Without making such investigation, on cannot claim that
he is a buyer in good faith. (St. Fe Realty Inc vs Sison)
(5) Art 1544 does not apply where one of the transactions
is a contract to sell where there is failure to pay the price
because there is no double sale to speak of.
SECTION 3. - Conditions and Warranties
Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may refuse
to proceed with the contract or he may waive performance of the
condition. If the other party has promised that the condition should
happen or be performed, such first mentioned party may also treat the
nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may
treat the fulfillment by the seller of his obligation to deliver the
same as described and as warranted expressly or by implication in
the contract of sale as a condition of the obligation of the buyer to
perform his promise to accept and pay for the thing.
Art. 1546. Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural tendency
of such affirmation or promise is to induce the buyer to purchase
the same, and if the buyer purchase the thing relying thereon. No
affirmation of the value of the thing, nor any statement purporting
to be a statement of the seller's opinion only, shall be construed as
a warranty, unless the seller made such affirmation or statement as
an expert and it was relied upon by the buyer.
Art. 1547. In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to pass, and
that the buyer shall from that time have and enjoy the legal and
peaceful possession of the thing;
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer.
This Article shall not, however, be held to render liable a
sheriff, 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 a third person has a legal or equitable interest.
SUBSECTION 1. - Warranty in Case of Eviction

Art. 1548. Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the vendor,
the vendee is deprived of the whole or of a part of the thing
purchased.
The vendor shall answer for the eviction even though nothing has
been said in the contract on the subject.
The contracting parties, however, may increase, diminish, or
suppress this legal obligation of the vendor. (1475a)
Art. 1549. The vendee need not appeal from the decision in order
that the vendor may become liable for eviction. (n)
Art. 1550. When adverse possession had been commenced before
the sale but the prescriptive period is completed after the transfer,
the vendor shall not be liable for eviction. (n)
Art. 1551. If the property is sold for nonpayment of taxes due and
not made known to the vendee before the sale, the vendor is liable
for eviction. (n)
Art. 1552. The judgment debtor is also responsible for eviction in
judicial sales, unless it is otherwise decreed in the judgment. (n)
Art. 1553. Any stipulation exempting the vendor from the obligation
to answer for eviction shall be void, if he acted in bad faith. (1476)
Art. 1554. If the vendee has renounced the right to warranty in case
of eviction, and eviction should take place, the vendor shall only
pay the value which the thing sold had at the time of the eviction.
Should the vendee have made the waiver with knowledge of the
risks of eviction and assumed its consequences, the vendor shall not
be liable. (1477)
Art. 1555. When the warranty has been agreed upon or nothing has
been stipulated on this point, in case eviction occurs, the vendee
shall have the right to demand of the vendor:
(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;
(2) The income or fruits, if he has been ordered to deliver them to
the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a proper
case, those of the suit brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale
was made in bad faith. (1478)
Art. 1556. Should the vendee lose, by reason of the eviction, a part
of the thing sold of such importance, in relation to the whole, that
he would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the
thing without other encumbrances that those which it had when he
acquired it.
He may exercise this right of action, instead of enforcing the
vendor's liability for eviction.
The same rule shall be observed when two or more things have
been jointly sold for a lump sum, or for a separate price for each of
them, if it should clearly appear that the vendee would not have
purchased one without the other. (1479a)
Art. 1557. The warranty cannot be enforced until a final judgment
has been rendered, whereby the vendee loses the thing acquired or
a part thereof. (1480)
Art. 1558. The vendor shall not be obliged to make good the proper
warranty, unless he is summoned in the suit for eviction at the
instance of the vendee. (1481a)
Art. 1559. The defendant vendee shall ask, within the time fixed in
the Rules of Court for answering the complaint, that the vendor be
made a co-defendant. (1482a)
Art. 1560. If the immovable sold should be encumbered with any
non-apparent burden or servitude, not mentioned in the agreement,
of such a nature that it must be presumed that the vendee would
not have acquired it had he been aware thereof, he may ask for the
rescission of the contract, unless he should prefer the appropriate
indemnity. Neither right can be exercised if the non-apparent
burden or servitude is recorded in the Registry of Property, unless
there is an express warranty that the thing is free from all burdens
and encumbrances.
Within one year, to be computed from the execution of the deed,
the vendee may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages
within an equal period, to be counted from the date on which he
discovered the burden or servitude. (1483a)
 
SUBSECTION 2. - Warranty Against Hidden Defects
of or Encumbrances Upon the Thing Sold
Art. 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render it
unfit for the use for which it is intended, or should they diminish 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 a
lower price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those which are
not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them. (1484a)
Art. 1562. In a sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an
implied warranty that the goods shall be reasonably fit for such
purpose;
(2) Where the goods are brought by description from a seller who
deals in goods of that description (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods
shall be of merchantable quality. (n)
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
for any particular purpose, unless there is a stipulation to the
contrary. (n)
Art. 1564. An implied warranty or condition as to the quality or
fitness for a particular purpose may be annexed by the usage of
trade. (n)
Art. 1565. In the case of a contract of sale by sample, if the seller is
a dealer in goods of that kind, there is an implied warranty that the
goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the
sample. (n)
Art. 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has been stipulated,
and the vendor was not aware of the hidden faults or defects in the
thing sold. (1485)
Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the contract
and demanding a proportionate reduction of the price, with
damages in either case. (1486a)
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
loss, and shall be obliged to return the price and refund the
expenses of the contract, with damages. If he was not aware of
them, he shall only return the price and interest thereon, and
reimburse the expenses of the contract which the vendee might
have paid.
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
the fault of the vendee, the latter may demand of the vendor the
price which he paid, less the value which the thing had when it was
lost.
If the vendor acted in bad faith, he shall pay damages to the
vendee.
Art. 1570. The preceding articles of this Subsection shall be
applicable to judicial sales, except that the judgment debtor shall
not be liable for damages.
Art. 1571. Actions arising from the provisions of the preceding
ten articles shall be barred after six months, from the delivery of
the thing sold.
Art. 1572. If two or more animals are sold together, whether
for a lump sum or for a separate price for each of them, the
redhibitory 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 purchased the sound animal or animals
without the defective one.
The latter case shall be presumed when a team, yoke
pair, or set is bought, even if a separate price has been fixed
for each one of the animals composing the same.
Art. 1573. The provisions of the preceding article with respect
to the sale of animals shall in like manner be applicable to the
sale of other things.
Art. 1574. There is no warranty against hidden defects of
animals sold at fairs or at public auctions, or of live stock sold
as condemned.
Art. 1575. The sale of animals suffering from contagious
diseases shall be void.
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 they are found to be unfit therefor.
Art. 1576. If the hidden defect of animals, even in case a
professional inspection has been made, should be of such a
nature that expert knowledge is not sufficient to discover it,
the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith
should fail to discover or disclose it, he shall be liable for
damages.
Art. 1577. The redhibitory action, based on the faults or
defects of animals, must be brought within forty days from the
date of their delivery to the vendee.
This action can only be exercised with respect to faults
and defects which are determined by law or by local customs.
Art. 1578. If the animal should die within three days after its
purchase, the vendor shall be liable if the disease which cause
the death existed at the time of the contract.
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 answerable for any injury due to his
negligence, and not arising from the redhibitory fault or
defect.
Art. 1580. In the sale of animals with redhibitory defects, the
vendee shall also enjoy the right mentioned in article 1567;
but he must make use thereof within the same period which
has been fixed for the exercise of the redhibitory action.
Art. 1581. The form of sale of large cattle shall be governed by
special laws.
 CHAPTER 5 upon him either judicially or by a notarial act. After the demand,
OBLIGATIONS OF THE VENDEE the court may not grant him a new term. (1504a)
Art. 1593. With respect to movable property, the rescission of the
Art. 1582. The vendee is bound to accept delivery and to pay the sale shall of right take place in the interest of the vendor, if the
price of the thing sold at the time and place stipulated in the vendee, upon the expiration of the period fixed for the delivery of
contract. the thing, should not have appeared to receive it, or, having
If the time and place should not have been stipulated, the payment appeared, he should not have tendered the price at the same time,
must be made at the time and place of the delivery of the thing unless a longer period has been stipulated for its payment. (1505)
sold. (1500a)  
Art. 1583. Unless otherwise agreed, the buyer of goods is not bound
to accept delivery thereof by installments.
Where there is a contract of sale of goods to be delivered by stated
installments, which are to be separately paid for, and the seller
makes defective deliveries in respect of one or more instalments, 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
terms of the contract and the circumstances of the case, whether
the breach of contract is so material as to justify the injured party
in refusing to proceed further and suing for damages for breach of
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
contract as broken. (n)
Art. 1584. Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of examining
them for the purpose of ascertaining whether they are in
conformity with the contract if there is no stipulation to the
contrary.
Unless otherwise agreed, when the seller tenders delivery of goods
to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of
ascertaining whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance
with an order from or agreement with the buyer, upon the terms
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
marking the goods with the words "collect on delivery," or
otherwise, the buyer is not entitled to examine the goods before
the payment of the price, in the absence of agreement or usage of
trade permitting such examination. (n)
Art. 1585. The buyer is deemed to have accepted the goods when
he intimates to the seller that he has accepted them, or when the
goods have been delivered to him, and he does any act in relation to
them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods
without intimating to the seller that he has rejected them. (n)
Art. 1586. In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not discharge
the seller from liability in damages or other legal remedy for breach
of any promise or warranty in the contract of sale. But, if, after
acceptance of the goods, the buyer fails to give notice to the seller
of the breach in any promise of warranty within a reasonable time
after the buyer knows, or ought to know of such breach, the seller
shall not be liable therefor. (n)
Art. 1587. Unless otherwise agreed, where goods are delivered to
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
notifies the seller that he refuses to accept them. If he voluntarily
constitutes himself a depositary thereof, he shall be liable as such.
(n)
Art. 1588. If there is no stipulation as specified in the first
paragraph of article 1523, when the buyer's refusal to accept the
goods is without just cause, the title thereto passes to him from the
moment they are placed at his disposal. (n)
Art. 1589. The vendee shall owe interest for the period between
the delivery of the thing and the payment of the price, in the
following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial
demand for the payment of the price. (1501a)
Art. 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease,
unless the latter gives security for the return of the price in a
proper case, or it has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to make the payment.
A mere act of trespass shall not authorize the suspension of the
payment of the price. (1502a)
Art. 1591. Should the vendor have reasonable grounds to fear the
loss of immovable property sold and its price, he may immediately
sue for the rescission of the sale.
Should such ground not exist, the provisions of Article 1191 shall be
observed. (1503)
Art. 1592. In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made
 CHAPTER 6 paid, the seller shall be liable to repay so much thereof as has been
ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS paid, concurrently with the return of the goods, or immediately
after an offer to return the goods in exchange for repayment of the
Art. 1594. Actions for breach of the contract of sale of goods shall price.
be governed particularly by the provisions of this Chapter, and as to Where the buyer is entitled to rescind the sale and elects to do so,
matters not specifically provided for herein, by other applicable if the seller refuses to accept an offer of the buyer to return the
provisions of this Title. (n) goods, the buyer shall thereafter be deemed to hold the goods as
Art. 1595. Where, under a contract of sale, the ownership of the bailee for the seller, but subject to a lien to secure payment of any
goods has passed to the buyer and he wrongfully neglects or refuses portion of the price which has been paid, and with the remedies for
to pay for the goods according to the terms of the contract of sale, the enforcement of such lien allowed to an unpaid seller by Article
the seller may maintain an action against him for the price of the 1526.
goods. (5) In the case of breach of warranty of quality, such loss, in the
Where, under a contract of sale, the price is payable on a certain absence of special circumstances showing proximate damage of a
day, irrespective of delivery or of transfer of title and the buyer greater amount, is the difference between the value of the goods at
wrongfully neglects or refuses to pay such price, the seller may the time of delivery to the buyer and the value they would have had
maintain an action for the price although the ownership in the if they had answered to the warranty. (n)
goods has not passed. But it shall be a defense to such an action   
that the seller at any time before the judgment in such action has
manifested an inability to perform the contract of sale on his part or
an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot
readily be resold for a reasonable price, and if the provisions of
article 1596, fourth paragraph, are not applicable, the 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 thereafter
held by the seller as bailee for the buyer. Thereafter the seller may
treat the goods as the buyer's and may maintain an action for the
price. (n)
Art. 1596. Where the buyer wrongfully neglects or refuses to accept
and pay for the goods, the seller may maintain an action against him
for damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally
resulting in the ordinary course of events from the buyer's breach of
contract.
Where there is an available market for the goods in question, the
measure of damages is, in the absence of special circumstances
showing proximate damage of a different amount, the difference
between the contract price and the market or current price at the
time or times when the goods ought to have been accepted, or, if
no time was fixed for acceptance, then at the time of the refusal to
accept.
If, while labor or expense of material amount is necessary on the
part of the seller to enable him to fulfill his obligations under the
contract of sale, the buyer repudiates the contract or notifies the
seller to proceed no further therewith, the buyer shall be liable to
the seller for labor performed or expenses made before receiving
notice of the buyer's repudiation or countermand. The profit the
seller would have made if the contract or the sale had been fully
performed shall be considered in awarding the damages. (n)
Art. 1597. Where the goods have not been delivered to the buyer,
and the buyer has repudiated the contract of sale, or has
manifested his inability to perform his obligations thereunder, or
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
buyer. (n)
Art. 1598. Where the seller has broken a contract to deliver specific
or ascertained goods, a court may, on the application of the buyer,
direct that the contract shall be performed specifically, without
giving the seller the option of retaining the goods on payment of
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)
Art. 1599. Where there is a breach of warranty by the seller, the
buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or
extinction of the price;
(2) Accept or keep the goods and maintain an action against the
seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the
seller for damages for the 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
which has been paid.
  
When the buyer has claimed and been granted a remedy in anyone
of these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot
rescind the sale if he knew of the breach of warranty when he
accepted the goods without protest, or if he fails to notify the 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 substantially as
good condition as they were in at the time the ownership was
transferred to the buyer. But if deterioration or injury of the goods
is due to the breach or warranty, such deterioration or injury shall
not prevent the buyer from returning or offering to return the
goods to the seller and rescinding the sale.
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 to
return the goods. If the price or any part thereof has already been
 CHAPTER 7
EXTINGUISHMENT OF SALE
Art. 1600. Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this Title,
and by conventional or legal redemption. (1506)
  
SECTION 1. - Conventional Redemption
Art. 1601. Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other
stipulations which may have been agreed upon. (1507)
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting
a new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to
be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws. (n)
Art. 1603. In case of doubt, a contract purporting to be a sale with
right to repurchase shall be construed as an equitable mortgage. (n)
Art. 1604. The provisions of Article 1602 shall also apply to a
contract purporting to be an absolute sale. (n)
Art. 1605. In the cases referred to in Articles 1602 and 1604, the
apparent vendor may ask for the reformation of the instrument. (n)
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
contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase
within thirty days from the time final judgment was rendered in a
civil action on the basis that the contract was a true sale with right
to repurchase. (1508a)
Art. 1607. In case of real property, the consolidation of ownership
in the vendee by virtue of the failure of the vendor to comply with
the provisions of article 1616 shall not be recorded in the Registry
of Property without a judicial order, after the vendor has been duly
heard. (n)
Art. 1608. The vendor may bring his action against every possessor
whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to
repurchase, without prejudice to the provisions of the Mortgage
Law and the Land Registration Law with respect to third persons.
(1510)
Art. 1609. The vendee is subrogated to the vendor's rights and
actions. (1511)
Art. 1610. The creditors of the vendor cannot make use of the right
of redemption against the vendee, until after they have exhausted
the property of the vendor. (1512)
Art. 1611. In a sale with a right to repurchase, the vendee of a part
of an undivided immovable who acquires the whole thereof in the
case of article 498, may compel the vendor to redeem the whole
property, if the latter wishes to make use of the right of
redemption. (1513)
Art. 1612. If several persons, jointly and in the same contract,
should sell an undivided immovable with a right of repurchase, none
of them may exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable
alone has left several heirs, in which case each of the latter may
only redeem the part which he may have acquired. (1514)
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
agreement upon the purchase of the whole thing sold; and should
they fail to do so, the vendee cannot be compelled to consent to a
partial redemption. (1515)
Art. 1614. Each one of the co-owners of an undivided immovable
who may have sold his share separately, may independently
exercise the right of repurchase as regards his own share, and the
vendee cannot compel him to redeem the whole property. (1516)
Art. 1615. If the vendee should leave several heirs, the action for
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.
But if the inheritance has been divided, and the thing sold has been
awarded to one of the heirs, the action for redemption may be
instituted against him for the whole. (1517)
Art. 1616. The vendor cannot avail himself of the right of
repurchase without returning to the vendee the price of the sale,
and in addition:
(1) The expenses of the contract, and any other legitimate
payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
(1518)
Art. 1617. If at the time of the execution of the sale there should be
on the land, visible or growing fruits, there shall be no
reimbursement for or prorating of those existing at the time of
redemption, if no indemnity was paid by the purchaser when the
sale was executed.
Should there have been no fruits at the time of the sale and some
exist at the time of redemption, they shall be prorated between the
redemptioner and the vendee, giving the latter the part
corresponding to the time he possessed the land in the last year,
counted from the anniversary of the date of the sale. (1519a)
Art. 1618. The vendor who recovers the thing sold shall receive it
free from all charges or mortgages constituted by the vendee, but
he shall respect the leases which the latter may have executed in
good faith, and in accordance with the custom of the place where
the land is situated. (1520)
 
SECTION 2. - Legal Redemption
Art. 1619. Legal redemption is the right to be subrogated, upon the
same terms and conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted by onerous
title. (1521a)
Art. 1620. A co-owner of a thing may exercise the right of
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
grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of
redemption, they may only do so in proportion to the share they
may respectively have in the thing owned in common. (1522a)
Art. 1621. The owners of adjoining lands shall also have the right of
redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own
any rural land.
This right is not applicable to adjacent lands which are separated by
brooks, drains, ravines, roads and other apparent servitudes for the
benefit of other estates.
If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption. (1523a)
Art. 1622. Whenever a piece of urban land which is so small and so
situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought
merely for speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land
shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the
right of
pre-emption or redemption, the owner whose intended use of the
land in question appears best justified shall be preferred. (n)
Art. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed
of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining
owners. (1524a)
 
 CHAPTER 8
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS

Art. 1624. An assignment of creditors and other incorporeal rights

shall be perfected in accordance with the provisions of Article 1475.
(n)
Art. 1625. An assignment of a credit, right or action shall produce
no effect as against third person, unless it appears in a public
instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property. (1526)
Art. 1626. The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation.
(1527)
Art. 1627. The assignment of a credit includes all the accessory
rights, such as a guaranty, mortgage, pledge or preference. (1528)
Art. 1628. The vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale, unless it
should have been sold as doubtful; but not for the solvency of the
debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and
for the expenses specified in No. 1 of Article 1616.
The vendor in bad faith shall always be answerable for the payment
of all expenses, and for damages. (1529)
Art. 1629. In case the assignor in good faith should have made
himself responsible for the solvency of the debtor, and the
contracting parties should not have agreed upon the duration of the
liability, it shall last for one year only, from the time of the
assignment if the period had already expired.
If the credit should be payable within a term or period which has
not yet expired, the liability shall cease one year after the maturity.
(1530a)
Art. 1630. One who sells an inheritance without enumerating the
things of which it is composed, shall only be answerable for his
character as an heir. (1531)
Art. 1631. One who sells for a lump sum the whole of certain rights,
rents, or products, shall comply by answering for the legitimacy of
the whole in general; but he shall not be obliged to warrant each of
the various parts of which it may be composed, except in the case
of eviction from the whole or the part of greater value. (1532a)
Art. 1632. Should the vendor have profited by some of the fruits or
received anything from the inheritance sold, he shall pay the
vendee thereof, if the contrary has not been stipulated. (1533)
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 the
estate and satisfy the credits he may have against the same, unless
there is an agreement to the contrary. (1534)
Art. 1634. When a credit or other incorporeal right in litigation is
sold, the debtor shall have a right to extinguish it by reimbursing
the assignee for the price the latter paid therefor, the judicial costs
incurred by him, and the interest on the price from the day on
which the same was paid.
A credit or other incorporeal right shall be considered in litigation
from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date
the assignee demands payment from him. (1535)
Art. 1635. From the provisions of the preceding article shall be
excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject
to the right in litigation assigned. (1536)
 CHAPTER 9
GENERAL PROVISIONS

Art. 1636. In the preceding articles in this Title governing the sale
of goods, unless the context or subject matter otherwise requires:
(1) "Document of title to goods" includes any bill of lading, dock
warrant, "quedan," or warehouse receipt or order for the delivery
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
or control of the goods, or authorizing or purporting to authorize
the possessor of the document to transfer or receive, either by
endorsement or by delivery, goods represented by such document.
"Goods" includes all chattels personal but not things in action or
money of legal tender in the Philippines. The term includes growing
fruits or crops.
"Order" relating to documents of title means an order by
endorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at the time
a contract of sale is made.
An antecedent or pre-existing claim, whether for money or not,
constitutes "value" where goods or documents of title are taken
either in satisfaction thereof or as security therefor.
(2) A person is insolvent within the meaning of this Title who either
has ceased to pay his debts in the ordinary course of business or
cannot pay his debts as they become due, whether insolvency
proceedings have been commenced or not.
(3) Goods are in a "deliverable state" within the meaning of this
Title when they are in such a state that the buyer would, under the
contract, be bound to take delivery of them. (n)
Art. 1637. The provisions of this Title are subject to the rules laid
down by the Mortgage Law and the Land Registration Law with
regard to immovable property.
 BAR QUESTIONS
[ STATUTE OF FRAUDS; 2019]
Mr. P offered to sell his Manila Polo Club shares to Ms. Q for
P2.500,000.00. Ms. Q accepted on the condition that their agreement
will not take effect until after one (1) year. Mr. P then acceded and
both of them shook hands, Excited about the prospect of acquiring Mr.
P's shares, Ms. Q approached the former and offered to pay him an
earnest money equivalent to 1% of the purchase price, which Mr. P
accepted. After one (1) year, Ms. Q approached Mr. P seeking the
enforcement of their agreement for Mr. P to sell his shares to her. Mr.
P refused to honor their agreement, claiming that the same was
covered by the Statute of Frauds because it was not reduced into
writing and hence, unenforceable.
Is the position of Mr. P correct? Explain. (3%)
SUGGESTED ANSWER:
No, the position of P is incorrect. The Statute of Frauds only
applies to purely executory contracts; partial performance removes the
contract from the ambit of the Statute of Frauds and not to partially or
completely executed contracts. Article 1482 of the Civil Code provides
that whenever earnest money is given in a contract of sale, it shall be
considered as part of the price and as proof of the perfection of the
contract. The payment of earnest money, such as in this case, is
tantamount to partial execution of the contract which precludes the
application of the Statute of Frauds. The contract has been partially
performed and a benefit was already accepted when the seller
accepted earnest money from the buyer (Article 1403 (2)(d); Averia v.
Averia, G.R. No. 141877. August 13, 2004; Mactan-Cebu International
Aiport Authority v. Tudtud, (2 008).
[Contract to Sell; 2019]
Distinguish the following:
(a) Contract of sale and contract to sell (2%)
(b) Interruption and tolling of prescription of actions (2%)
SUGGESTED ANSWER
(a) A contract of sale may be absolute or conditional (Art. 1458 (2),
Civil Code). A contract to sell is a kind of conditional sale.
In an absolute sale, title to the property passes to the vendee
upon the delivery of the thing sold. In both contracts to sell and
contracts of conditional sale, title to the property remains with the
seller despite delivery. Both contracts are subject to the positive
suspensive condition of the buyer's full payment of the purchase price
or the fulfillment of the condition.
ALTERNATE ANSWER
(a) In an absolute sale, title to the property passes to the vendee upon
the delivery of the thing sold.
In a contract of conditional sale, the buyer automatically
acquires title to the property upon full payment of the purchase price.
This transfer of title is "by operation of law without any further act
having to be performed by the seller."
In a contract to sell, transfer of title to the prospective buyer is
not automatic. "The prospective seller (must) convey title to the
property [through a deed of conditional sale (Olivarez Realty
Corporation And Dr. Pablo R. Olivarez V. Benjamin Castillo, G .R. No.
196251, July 9, 2014).
SUGGESTED ANSWER
(b). The interruption of the prescriptive period by written
extrajudicial demand means that the said period would commence
anew from the receipt of the demand [ Overseas Bank of Manila v.
Geraldez, 94 SCRA 937 (1979)]
Article 1155 of the Civil Code provides that the "prescription of
actions is interrupted " inter alia, "when there is any written
acknowledgment of the debt by the debtor." This simply means that
the period of prescription, when interrupted by such a written
acknowledgment, begins to run anew; and whatever time of limitation
might have already elapsed from the accrual of the cause of action is
thereby negated and rendered inefficacious. The effect of the
interruption spoken of in Article 1155 is to renew the obligation, to
make prescription run again from the date of the interruption .
[Philippine National Railway's vs. National Labor Relations Commission,
177 SCRA 740 (1989)]
In Overseas Bank of Manila v. Geraldez , the Supreme Court ruled
that tolling merely suspends the period that has already elapsed.
[NATURE AND FORM OF CONTRACTS]
Bert offers to buy Simeon’s property under the
following terms and conditions: P1 million
purchase price, 10% option money, the balance
payable in cash upon the clearance of the
property of all illegal occupants. The option
money is promptly paid and Simeon clears the
property of illegal occupants in no time at all.
However, when Bert tenders payment of the
balance and ask Simeon for the deed for absolute
sale, Simeon suddenly has a change of heart,
claiming that the deal is disadvantageous to him
as he has found out that the property can fetch
three time the agreed purchase price. Bert seeks
specific performance but Simeon contends that he
has merely given Bert an option to buy and
nothing more, and offers to return the option
money which Bert refuses to accept.
A. Will Bert’s action for specific performance
prosper? Explain.
May Simeon justify his refusal to proceed with
the sale by the fact that
thedealisfinancially
disadvantageous to him? Explain.(1993, 2002
Bar)
A:
Bert’s action for specific performance will
prosper because there was a binding agreement
of sale, not just an option contract. The sale was
perfected upon acceptance by Simeon of 10% of
the agreed price. This amount is in really earnest
money which, under Art. 1482, “shall be
considered as part of the price and as proof of the
perfection of the contract”
(Topacio v. CA, G.R. No. 102606, July 3, 1992;
Villongco Realty v. Bormaheco, G.R. No. L-26872,
July 25, 1975).
B. Simeon cannot justify his refusal to proceed with
the sale by the fact that the dealis
financiallydisadvantageous to him. Having made a
bad bargain is not a legal ground for pulling out a
binding contract of sale, in the absence of some
actionable wrong by the other party (Vales v.
Villa, G.R. No. 10028, December 16, 1916) and no
such wrong has been committed by Bert.
Spouses Biong and Linda wanted to sell their
house. They found a prospective buyer, Ray. Linda
negotiated with Ray for the sale of the property.
They agreed on a fair price of P2 Million. Ray sent
Linda a letter confirming his intention to buy the
property. Later, another couple, Bernie and Elena,
offered a similar house at a lower price of P1.5
Million. But Ray insisted on buying the house of
Biong and Linda for sentimental reasons. Ray
prepared a deed of sale to be signed by the couple
and a manager's check for P2 Million. After
receiving the P2 Million, Biong signed the deed of
sale. However, Linda was not able to sign it
because she was abroad. On her return, she
refused to sign the document saying she changed
her mind. Linda filed suit for nullification of the
deed of sale and for moral and exemplary
damages against Ray.
Will the suit proper?
Does Ray have any cause of action against
Biong and Linda? Can he also recover
damages from the spouses? Explain.(2006
Bar)
A:
The suit will propser. The sale was void because
Linda did not give her written consent to the sale.
In Jade-Manalo v. Camaisa, 374 SCRA 498 (2002),
the Supreme Court has ruled that the sale of
conjugal property is void if both spouses have not
given their written consent to it and even if the
 spouse who did not sign the Deed of Sale
participated in teh negotiation of the contract. In
Abalos v. Macatangay, 439 SCRA 649 (2004), the
Supreme Court even held that for the sale to be
valid, the signatures of the spouses to signify their
written consent must be on the same document.
In this case, Linda, although she was the one who
negotiated the sale, did not give her written
consent to the sale. Hence, the sale is void.
However, Linda will nto be entitled to damages
because Ray is not in any way in bad faith.
Yes, Ray has a cause of action against Linda and Biong
for the return of the 2 million pesos he paid for the
property. He may recover damages from the spouses, if
it can be proven that they were in bad faith in backing
out from the contract, as this is an act contrary to
morals and good customs under Articles 19 and 21 of
the Civil Code.
[OBLIGATIONS OF THE VENDOR]
D sold a second-hand car to E for P150,000.00. The
agreement between D and E was that half of the
purchase price, or P75,000.00 shall be paid in five equal
monthly instalments of P15,000.00 each. That car was
delivered to E, and E paid the amount of P75,000.00 to
D. Less than one month thereafter, the car was stolen
from
E’s garage with no fault on E’s art and was never
recovered. Is E legally bound to pay the said unpaid
balance of P75,000.00? Explain your answer. (1990 Bar)
Yes, E is legally bound to pay the balance of P75,000.00. The
ownership of the car sold was acquired by E from the
moment it was delivered to him. Having acquired
ownership. E bears the risk of the loss under the doctrine of
res perit domino (Articles 1496, 1497, Civil Code).
Pablo sold his car to Alfonso who issued a postdated
check in full payment therefore. Before the maturity of
the check, Alfonso sold the car to Gregorio who later
sold it to Gabriel. When presented for payment, the
check issued by Alfonso was dishonoured by the drawee
bank for the reason that he, Alfonso, had already closed
his account even before he issued his check.
Pablo sued to recover the car from Gabriel alleging that
he (Pablo) had been unlawfully deprived of it by reason
of Alfonso’s deception. Will the suit prosper? (1991 Bar)
No. The suit will not prosper because Pablo was not
unlawfully deprived of the car although he was unlawfully
deprived of the price. The perfection of the sale and the
delivery of the car was enough to allow Alfonso to have a
right of ownership over the car, which can be lawfully
transferred to Gregorio. Art. 559 applies only to a person
who is in possession in good faith of the property, and not to
the owner thereof. Alfonso, in the problem, was the owner,
and, hence, Gabriel acquired the title to the car.
Non- payment of the price in a contract of sale does not
render ineffective the obligation to deliver.
The obligation to deliver a thing is different from teh
obligation to pay its price. [EDCA Publishing Co. vs Santos]
A granted B the exclusive right to sell his brand of
Maong pants in Isabela, the price for his merchandise
payable within 60 days from delivery, and promising B
a commission of 20% on all sales. After the delivery of
the merchandise to B but before he could sell any of
them, B’s store in Isabela was completely burned
without his fault, together will all of A’s pants. Must
B pay A for his lost pants? Why? (1999 Bar)
The contract between A and B is a sale not an agency to
sell because the price is payable by B upon 60 days from
delivery even if B is unable to resell it. If B were an agent, he
is not bound to pay the price if he is unable to resell it.
As a buyer, ownership passed to B upon delivery and, under
Art. 1504 of the Civil Code, the thing perishes for the owner.
Hence, B must still pay the price.
On June 15, 1995, Jesus sold a parcel of registered
land to Jaime. On June 30, 1995, he sold the same land
to Jose. Who has a better right if:
The first sale is registered ahead of the second sale,
with knowledge of the latter. Why?
The second sale is registered ahead of the first sale,
with knowledge of the latter? Why?(2001, 2017
Bar)
A:
The first buyer has the better right if his sale was first to
be registered, even though the first buyer knew of the
second sale. The fact that he knew of the second sale at
the time of his registration does not make him as acting
in bad faith because the sale to him was ahead in time,
hence, has a priority in right. What creates bad faith in
the case of double sale of land is knowledge of a
previoussale.
The first buyer is still to be preferred, where the second
sale is registered ahead of the first sale but with
knowledge of the latter. This is because the second
buyer, who at the time he registered his sale knew that
the property had already been sold to someone else,
acted in bad faith (Article 1544).
JV, owner of a parcel of land, sold it to PP. But the
deed of sale was not registered. One year later, JV sold
the parcel again to RR, who succeeded to register the
deed and to obtain a transfer certificate of title over the
property in his own name. Who has a better right over
the parcel of land, RR or PP? Why? Explain the legal
basis for your answer. (2001, 2004 Bar)
It depends on whether or not RR is an innocent
purchaser for value. Under the Torrens System, a
deed or instrument operated only as a contract
between the parties and as evidence of authority to
the Register of Deeds to make the registration. It is
the registration of the deed or the instrument that is
the operative act that conveys or affects the land (Sec.
51, P.D. No. 1529).
In cases of double sale of titled land, it is a well-settled
rule that the buyer who first registers the sale in good
faith acquires a better right to the land (Art. 1544).
Persons dealing with property covered by Torrens
title are not required to go beyond what
appearsonitsface (Orquiola v. CA 386, G.R. No. 141463,
August 6, 2002; Spouses Domingo v. Races, G.R. No.
147468, April 9, 2003). Thus, absent any showing that
RR knew about, or ought to have known the prior sale
of the land to PP or that he acted in bad faith, and
being first to register the sale, RR acquired a good and
a clean title to the property as against PP.
Juliet offered to sell her house and lot, together
with all the furniture and appliances therein to
Dehlma. Before agreeing to purchase the
property, Dehlma went to the Register of Deeds to
verify Juliet's title. She discovered that while the
property was registered in Juliet's name under
the Land Registration Act, as amended by the
Property Registration Decree, it property, Dehlma
told Juliet to redeem the property from Elaine,
and gave her an advance payment to be used for
purposes of releasing the mortgage on the
property. When the mortgage was released, Juliet
executed a Deed of Absolute Sale over the
property which was duly registered with the
Registry of Deeds, and a new TCT was issued in
Dehlma's name. Dehlma immediately took
possession over the house and lot and the
movables therein. Thereafter, Dehlma went to the
Assessor's Office to get a new tax declaration
under her name. She was surprised to find out
that the property was already declared for tax
purposes in the name of XYZ Bank which had
foreclosed the mortgage on the property before it
was sold to her. XYZ Bank was also the purchaser
in the foreclosure sale of the property. At that
time, the property was still unregistered but XYZ
Bank registered the Sheriff's Deed of Conveyance
in the day book of the Register of Deeds under Act.
3344 and obtained a tax declaration in its name.
Was Dehlma a purchaser in good faith?
Who as between Dehlma and XYZ Bank has a
better right to the house and lot? (2008 Bar)
Yes, Dehlma is a purchaser in good faith. She
learned about the XYZ tax declaration and
foreclosure sale only after teh sale to her was
registered. She relied on the certificate of title of
her predecessor-in-interest. Under the Torrens
system, a buyer of registered lands is not
required by law to inquire further than what the
Torrens certificated indicates on its face. If a
person proceeds to buy it relying on the title, that
person is considered a buyer in good faith.
The “priority in time” rule could not be invoked
by XYZ Bank because the foreclosure sale of the
land in favor of the bank was recorded under Act
No. 3344, the law governing transactions
affecting unregistered land, and thus, does not
bind the land.
Between Dehlma and the bank, the former has a
better right to the house and lot.
In December 1985, Salvador and the Star
Semiconductor Company (SSC) executed a Deed of
Conditional Sale wherein the former agreed to
sell his 2,000 square meter lot in Cainta, Rizal, to
the latter for the price of P1,000,000.00, payable
P100,000.00 down, and the balance 60 days after
the squatters in the property have been removed.
If the squatters are not removed within six
months, the P100,000.00 down payment shall be
returned by the vendor to the vendee.
Salvador filed ejectment suits against the
squatters, but in spite of the decisions in his favor,
the squatters still would not leave. In August,
1986, Salvador offered to return the P100,000.00
down payment to the vendee, on the ground that
he is unable to remove the squatters on the
property. SSC refused to accept the money and
demands that Salvador executed a deed of
absolute sale of the property in its favor at which
time it will pay the balance of the price.
Incidentally, the value of the land had doubled by
that time.
Salvador consigned the P100,000.00 in court, and
filed an action for rescission of the deed of
conditional sale, plus damages. Will the action
prosper? Explain (1996 Bar)
No, the action will not prosper. The action for
rescission may be brought only by the agrreived party
to the contract. Since it was Salvador who failed to
comply with his conditional obligation, he is not the
aggrieved party who may file the action for rescission
buy the Star Semiconductor Company. The company,
however, is not opting to rescind
the contract but has chosen to waive Salvador’s
compliance with teh condition which it can do under Art.
1545, NCC.
[OBLIGATIONS OF THE VENDEE]
LT applied with BPI to purchase a house and lot in
Quezon City, one of its acquired assets. The amount
offered was
P1,000,000.00 payable, as follows:
P200,000.00 down payment, the balance of
P800,000.00 payable within 90 days from June 1, 1985.
BPI accepted the offer, whereupon LT drew a check for
P200,000.00 in favor of BPI which the latter thereafter
deposited in its account. On September 5, 1985, LT
wrote BPI requesting extension until October 10, 1985,
within which to pay the balance, to which BPI agreed.
On October 5, 1985, due to the expected delay in the
remittance of the needed amount by his financier from
the United States, LT wrote BPI requesting a last
extension until October 30, 1985, within which to pay
the balance. BPI denied LT’s request because another
had offered to buy the same property for P1,500,000.00,
cancelled its agreement with LT and offered to return to
him the amount of P200,000.00 that LT had paid to it.
On October 20, 1985, upon receipt of the amount of
P800,000.00 from his US financier, LT offered to pay the
amount by tendering a cashier’s check therefor but
which BPI refused to accept. LT then filed a complaint
against BPI in the RTC for specific performance and
deposited in court the amount of P800,000.00.
Is BPI legally correct in cancelling its contract with LT?
(1993 Bar)
BPI is not correct in cancelling the contract with LT. In Lina
Topacio v. Court of Appeals and BPI Investment (G.R. No.
102606, July 3, 1993, 211 SCRA 291), the Supreme Court held
that the earnest mone is part of the purchase price and is
proof of the perfection of the contract. Secondly, notarial or
judicial rescission under Art. 1592 and 1991 of the Civil
Code is necessary (Taguba v. De Leon, 132 SCRA 722).
Priscilla purchased a condominium unit in Makati City
from the Citiland Corporation for a price of P10 Million,
payable P3 Million down and the balance with interest
thereon at 14% per annum payable in sixty (60) equal
monthly installments of P198,333.33. They executed a
Deed of Conditional Sale in which it is stipulated that
should the vendee fail to pay three (3) successive
installments, the sale shall be deemed automatically
rescinded without the necessity of judicial action and
all payments made by the vendee shall be forfeited in
favor of the vendor by way of rental for the use and
occupancy of the unit and as liquidated damages. For 46
months, Priscilla paid the monthly installments
religiously, but on the 47th and 48th months, she failed
to pay. On the 49th month, she tried to pay the
installments due but the vendor refused to receive the
payments tendered by her. The following month, the
vendor sent her a notice that it was rescinding the Deed
of Conditional Sale pursuant to the stipulation for
automatic rescission, and demanded that she vacate the
premises. She replied that the contract cannot be
rescinded without judicial demand or notarial act
pursuant to Article 1592 of the Civil Code.
Is Article 1592 applicable?
Can the vendor rescind the contract?(2000, 2014
Bar)
A:
Article 1592 of the Civil Code does not apply to a
conditional sale. In Valarao v. CA, 304 SCRA 155, the
Supreme Court held that Article 1592 applies only to a
contract of sale and not to a Deed of Conditional Sale
where the seller has reserved title to the property until
full payment of the purchase price. The law applicable is
the Maceda Law.
No, the vendor cannot rescind the contract under the
circumstances. Under the Maceda Law, which is the law
applicable, the seller on installment may not rescind the
contract till after the lapse of the mandatory grace
period of 30 days for every one year of installment
payments, and only after 30 days from notice of
cancellation or demand for rescission by a notarial act.
In this case, the refusal of the seller to accept payment
from the buyer on the 49th month was not justified
because the buyer was entitled to 60 days grace period
and the payment was tendered within that period.
Moreover, the notice of rescission served by the seller
on the buyer was not effective because the notice was
not by a notarial act. Besides, the seller may still pay
within 30 days from such notarial notice before
rescission may be effected. All these requirements for a
valid rescission were not complied with by the seller.
Hence, the rescission is invalid.
X sold a parcel of land to Y on 01 January 2002,
payment and delivery to be made on 01 February
2002. It was stipulated that if payment were not to
be made by Y on 01 February 2002, the sale
between the parties would automatically be
rescinded. Y failed to pay on 01 February 2002,
but offered to pay three days later, which payment
X refused to accept, claiming that their contract of
sale had already been rescinded. Is X’s contention
correct? Why? (2003 Bar)
No, X is not correct. In the sale of immovable
property, even though it may have been stipulated, as
in this case, that upon failure to pay the price at the
time agreed upon the rescission of the contract shall
of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for
rescission of the contract has been made upon him
either judicially or by a notarial act (Art.1592). Since
no demand for rescission was made on Y, either
judicially or by a notarial act, X cannot refuse to
accept the payment offered by Y three (3) days after
the expiration of the period.
[BREACH OF CONTRACT]
Peter and Paul entered into a Contract to Sell
whereby Peter, the lot owner, agreed to sell to
Paul his lot on November 6, 2016 for the price of
P1,000,000.00 to be paid at the residence of Peter
in Makati City at 1 :00 p.m. If the full price is paid
in cash at the specified time and place, then Peter
will execute a Deed of Absolute Sale and deliver
the title to Paul.
On November 6, 2016, Paul did not show up and
was not heard of from that date on. In view of the
nonperformance by Paul of his obligation, Peter
sent a letter to Paul that he is expressly and extra-
judicially declaring the Contract to Sell rescinded
and of no legal and binding effect. Peter further
stated that failure on the part of Paul to contest
the rescission within thirty (30) days from receipt
of said letter shall mean that the latter agreed to
the rescission.
Paul did not reply to this letter for five (5) years.
Thus, Peter decided to sell his lot to Henry in
2021. After hearing that Henry bought the lot,
Paul now questions the sale of the lot to Henry
and files a complaint for nullification of the sale.
Is the exercise by Peter of his power to rescind
extra-judicially the Contract to Sell the proper
and legal way of rescinding said contract?
Explain.
In case Paul made a downpayment pursuant
to a stipulation in the Contract to Sell, what is
the legal remedy of Peter? (2016 Bar)
A:
What are the so-called "Maceda" and "Recto"
laws in connection with sales on installments?
Give the most important features of each law.
(1999 Bar)
The MACEDA LAW (RA 6552) is applicable to sales
of immovable property on installments. The most
important features are (Rillo v. CA, G.R. No. 125347,
June 19, 1997):
After having paid installments for at least two
years, the buyer is entitled to a mandatory grace
period of one month for every year of installment
payments made, to pay the unpaid installments
without interest.
If the contract is cancelled, the seller shall refund
to the buyer the cash surrender value equivalent
to fifty percent (50%) of the total payments made,
and after five years of installments, an additional
five percent (5%) every year but not to exceed
ninety percent (90%) of the total payments made.
In case the installments paid were less than 2
years, the seller shall give the buyer a grace
period of not less than 60 days. If the buyer fails
to pay the installments due at the expiration of
the grace period, the seller may cancel the
contract after 30 days from receipt by the buyer
of the notice of cancellation or demand for
rescission by notarial act.
The RECTO LAW (Art. 1484) refers to sale of movables
payable in installments and limiting the right of seller,
in case of default by the buyer, to one of three
remedies:
Exact fulfillment;
 Cancel the sale if two or more installments have
not been paid;
Foreclose the chattel mortgage on the things sold, also in
case of default of two or more installments, with
[EXTINGUISHMENT OF SALE]
On March 13, 2008, Ariel entered into a Deed of
Absolute Sale (DAS) with Noel where the former
sold his titled lot in Quezon City with an area of
three hundred (300) square meters to the latter
for the price of P300,000.00. The prevailing
market value of the lot was P3,000.00 per square
meter. On March 20, 2008, they executed another
"Agreement To Buy Back/Redeem Property"
where Ariel was given an option to repurchase the
property on or before March 20, 2010 for the
same price. Ariel, however, remained in actual
possession of the lot. Since Noel did not pay the
taxes, Ariel paid the real property taxes to avoid a
delinquency sale.
On March 21, 2010, Ariel sent a letter to Noel, attaching
thereto a manager's check for P300,000.00 manifesting
that he is redeeming the property. Noel rejected the
redemption claiming that the DAS was a true and valid
sale representing the true intent of the parties. Ariel
filed a suit for the nullification of the DAS or the
reformation of said agreement to that of a Loan with
Real Estate Mortgage. He claims the DAS and the
redemption agreement constitute an equitable
mortgage. Noel however claims it is a valid sale with
pacto de retro and Ariel clearly failed to redeem the
property.
As the RTC judge, decide the case with reasons. (2016
Bar)
A:I will decide in favor of Ariel and allow the reformation of
the agreement. The DAS and the redemption agreement
constitute an equitable mortgage and Ariel may ask for the
reformation of the agreement to that of a Loan with Real
Estate Mortgage as allowed by Article 1605 of the Civil Code.
The circumstances clearly show that the agreement is an
equitable mortgage, such as the: a) price of the lot was
inadequate since it was only sold at P300, 000 when the
prevailing market value of such was P900, 000; b) the
vendor, Ariel, remained in the actual possession of the
property after the purported sale; and c) Ariel was the one
who paid the real property taxes. Under the circumstances,
a presumption arise under Art. 1602, CC that what was
really executed was an equitable mortgage. Moreover, Art.
1603, CC provides that in case of doubt, a contract
purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.
On 20 December 1970, Juliet, a widow, borrowed from
Romeo P4,000.00 and, as security therefore, she
executed a deed of mortgage over one of her two (2)
registered lots which has a market value of P15,000.00.
The document and the certificate of title of the property
were delivered to Romeo.
On 2 June 1971, Juliet obtained an additional sum of
P3,000.00 from Romeo. On this date, however, Romeo
caused the preparation of a deed of absolute sale of the
above property, to which Juliet affixed her signature
without first reading the document. The consideration
indicated is P7,000.00 She thought that this document
was similar to the first she signed. When she reached
home, her son X, after reading the duplicate copy of teh
deed, informed her that what she signed was not a
mortgage but a deed of absolute sale. On the following
day, 3 June 1971, Juliet accompanied by X, went back to
Romeo and demanded the reformation. Romeo
prepared and signed a document wherein, as vendee in
the deed of sale above mentioned, he obligated and
bound himself to resell the land to Juliet or her heirs
and successors for the same consideration as reflected
in the deed of sale (P7,000.00) within a period of two
(2) years, or until 3 June 1973. It is further stated
therein that should the Vendor (Juliet) fail to exercise
her right to redeem within the said period, the
conveyance shall be deemed absolute and irrevocable.
Romeo did not take possession of the property. He did
not pay the taxes thereon.
Juliet died in January 1973 without having repurchased
the property. Her only surviving heir, her son X, failed
to repurchase the property on or before 3 June 1973. In
1975, Romeo sold the property to Y for P50,000.00.
Upon learning of the sale, X filed an action for the
nullification of the sale and for the recovery of the
property on the ground that the so-called deed of
absolute sale executed by his mother was merely an
equitable mortgage, taking into account teh inadequacy
of the price and the failure of Romeo to take possession
of the property and to pay the taxes thereon. Romeo and
Y maintain that there was a valid absolute sale and that
the document signed by the former on 3 June 1973 was
merely a promise to sell.
If you were the Judge, would you uphold the theory
of X?
If you decide in favor of Romeo and Y, would you
uphold the validity of the promise to sell? (1991
Bar)
A:
I will not uphold the theory of X for the
nullification of the sale and for the recovery of the
property on the ground that the so-called sale
was only an equitable mortgage. An equitable
mortgage may arise only if, in truth, the sale was
one with the right of repurchase. The facts of the
case state that the right to repurchase was
granted after the absolute deed of sale was
executed. Following the rule in Cruzo v. Carriaga
(174 SCRA 330), a deed of repurchase executed
independently of the deed of sale where the two
stipulations are found in two instruments instead
of one document, the right of repurchase would
amount only to one option granted by the buyer
to the seller. Since the contract cannot be upheld
as a contract of sale with the right to repurchase,
Art. 1602 of the Civil Code on equitable mortgage
will not apply. The rule could have been different
if both deeds were executed on the same occasion
or date, in which case, under the ruling in
spouses Claravall v. CA (190 SCRA 439), the
contract may still be sustained as an equitable
mortgage, given the circumstances expressed in
Art. 1602. The reserved right to repurchase is
then deemed an original intention.
If I were to decide in favor of Romeo and Y, I
would not uphold the validity of the promise to
sell, so as to enforce it by an action for specific
performance. The promise to sell would only
amount to a mere offer and, therefore, it is not
enforceable unless it was sought to be exercised
before a withdrawal or denial thereof.
Even assuming the facts given at the end of the
case there would have been no separate
 consideration for such promise to sell. The
contract would at most amount to an option
which again may not be the basis for an action for
specific performance.
On July 14, 2004, Pedro executed in favor of
Juan a Deed of Absolute Sale over a parcel of land
covered by TCT No. 6245. It appears in the Deed of
Sale that Pedro received from Juan P120,000.00
as purchase price. However, Pedro retained the
owner's duplicate of said title. Thereafter, Juan, as
lessor, and Pedro, as lessee, executed a contract of
lease over the property for a period of one (1)
year with a monthly rental of P1,000.00. Pedro, as
lessee, was also obligated to pay the realty taxes
on the property during the period of lease.
Subsequently, Pedro filed a complaint against
Juan for the reformation of the Deed of Absolute
Sale, alleging that the transaction covered by the
deed was an equitable mortgage. In his verified
answer to the complaint, Juan alleged that the
property was sold to him under the Deed of
Absolute Sale, and interposed counterclaims to
recover possession of the property and to compel
Pedro to turn over to him the owner's duplicate of
title. Resolve the case with reasons. (2005 Bar)
An equitable mortgage arises from a transaction,
regardless of its form, which results into a security, or an
offer or attempt to pledge land as security for a debt or
liability. Its essence is the intent of the parties to create a
mortgage, lien or charge on the property sufficiently
described or identified to secure an obligation, which
intent must be clearly established in order that such a
mortgage may exist.
Defendant’s defense that he acquired the land
through an Absolute Deed of Sale and not through
pacto de retro is untenable. The presumption of
equitable mortgage under Art. 1602 of the Civil Code,
equally applies to a contract purporting to be an
absolute sale (Art. 1604, NCC). The facts and
circumstances that Pedro retained possession of the
Owner’s
Duplicate Copy of the Certificate of Title; that he
remained in possession of teh land as lessee; that he
bound himself to pay the relaty taxes during the
period of lease, are matters collectively and strongly
indicating that the Deed of Absolute Sale is an
equitable mortgage. In case of doubt, the Deed of
Absolute Sale should be considered as a loan with
mortgage, because this juridical relation involves a
lesser transmission of rights and interests.
If the transaction is proven to be an equitable
mortgage, Pedro’s prayer for reformation of the
instrument should be granted in accordance with Art.
1605 of the Civil Code. Thus, in case of non-payment,
he may foreclose the mortgage and consolidate his
ownership of the land. In that event, Juan’s
counterclaim to recover possession of the land and to
compel Pedro to surrender the Owner’s Duplicate
Copy of the title becomes a consequential right.
On January 2, 1980, A and B entered into a
contract whereby A sold to B a parcel of land for
and in consideration of P10,000.00, A reserving to
himself the right to repurchase the same. Because
they were friends, no period was agreed upon for
the repurchase of the property.
Until when must A exercise his right of
repurchase?
If A fails to redeem the property within the
allowable period, what would you advise B to
do for his better protection? (1993 Bar)
A:
A can exercise his right of repurchase within four
(4) years from the date of the contract (Art. 1606,
Civil Code).
I would advise B to file an action for consolidation
of title and obtain a judicial order of consolidation
which must be recorded in the Registry of
Property (Art. 1607, Civil Code).
Sancho and Pacifico are co-owners of a parcel
of land. Sancho sold the property to Bart. Pacifico
sued Sancho and Bart for annulment of the sale
and reconveyance of the property based on the
fact that the sale included his one-half pro-
indiviso share. Pacifico had a notice of lis pendens
annotated on the title covering the property and
ordered the cancellation of the notice of lis
pendens. The notice of lis pendens could not be
cancelled immediately because the title over the
property was with a bank to which the property
had been mortgaged by Bart. Pacifico appealed
the case. While the appeal was pending and with
the notice of lis pendens still uncancelled, Bart
sold the property to Carlos, who immediately
caused the cancellation of the notice of lis
pendens, as
well as the issuance of a new title in his name.Is Carlos
(a) a purchaser in good faith, or (b) a transferee
pendente lite? (1995, 2002 Bar)
Carlos is a buyer in bad faith. The notice of lis pendens was
still annotated at the back of the title at the time he bought
the land from Bart. The uncancelled notice of lis pendens
operates as constructive notice of its contents as well as
interests, legal or equitable, included therein. All persons
are charged with the knowledge of what it contains. In an
earlier case, it was held that a notice of an adverse claim
remains effective and binding notwithstanding the lapse of
the 30 days from its inscription in the registry. This ruling is
even more applicable in a lis pendens. Carlos is a transferee
pendente lite insofar as Sancho’s share in the co-ownership
in the land is concerned because the land was transferred to
him during the pendency of the appeal.
If your answer is (a), how can the right of Pacifico as co-
owner be protected? Explain.
Pacifico can protect his right as a co-owner by pursuing his
appeal; asking the Court of Appeals to order the re-
annotation of the lis pendens on the title of Carlos; and by
invoking his right of redemption of Bart’s share under Art.
1620.
Betty and Lydia were co-owners of a parcel of land. Last
January 31, 2001, when she paid her real estate tax,
Betty discovered that Lydia had sold her share to Emma
on November 10, 2000. The following day, Betty offered
to redeem her share from Emma, but the latter replied
that Betty's right to redeem has already prescribed. Is
Emma correct or not? Why? (2001 Bar)
No, Emma, the buyer, is not correct. Betty can still enforce
her right of legal redemption as a co-owner. Art. 1623 of the
Civil Code gives a co-owner 30 days from written notice of
the sale by the vendor to exercise his right of legal
redemption. In the present problem, the 30-day period for
the exercise by Betty of her right of redemption had not
even begun to run because no notice in writing of the sale
appears to have been given to her by Lydia.

Adela and Beth are co-owners of a parcel of land. Beth

sold her undivided share of the property to Xandro, who
promptly notified Adela of the sale and furnished the
latter a copy of the deed of absolute sale. When Xandro
presented the deed for registration, the register of
deeds also notified Adela of the sale, enclosing a copy of
the deed with the notice. However, Adela ignored the
notices. A year later, Xandro filed a petition for the
partition of the property. Upon receipt of summons,
Adela immediately tendered the requisite amount for
the redemption. Xandro contends that Adela lost her
right of redemption after the expiration of 30 days from
her receipt of the notice of the sale given by him. May
Adela still exercise her right of redemption? Explain.
(2001, 2002 Bar)

Yes, Adela may still exercise her right of redemption

notwithstanding the lapse of more than 30 days from notice
of the sale given to her because Art. 1623 of the New Civil
Code requires that the notice in writing of the sale must
come from the prospective vendor or vendor as the case
may be. In this case, the notice of the sale was given by the
vendee and the Register of Deeds. The period of 30 days
never tolled. She can still avail of that right.