LAW ON SALES
CONTRACT OF SALE There’s an agreement to that effect,
CONCEPT: (Article 1458)
By the contract of sale, one of the
contracting parties obligates himself to
transfer ownership of and to deliver a
determinate thing, and the other to pay
therefore a price certain in money or its
equivalent.
A contract may be absolute or conditional:
 Absolute- sale is not subject to any
condition. Transfer of ownership is
passed to buyer upon delivery of a
determinate thing.
 Conditional- sale contemplates
contingency. To be able to transfer
the ownership, the vendee must first
comply with certain conditions of the
vendor which is usually the full
payment.
-delivery transfers the ownership, buyer
agad w/ no question unless may
agreement.
Loss of the thing
Loss before perfection (deterioration in
quality included)
Complete loss, sale is void cos of absence
of object.
Partial loss, buyer may choose: withdraw
from contract (recission) & demand the
remaining part and paying a proportionate
price (Art. 1493,1494)
Loss after perfection but before delivery
Seller bears the risk of loss (art.1504),
buyer is not obliged to pay the price
After perfection, goods remains at seller’s
risk until ownerhip is transferred to buyer bu
delivery. However, notwithstanding that the
ownership is not transferred to buyer, goods
are at buyer’s risk:
J. Delos Santos
ownership is retained at seller’s to secure the
performance by buyer, when actual delivery
has been delayed by fault of buyer.
Delivery (Art.1497) delivered na if na kay
vendee.
KINDS OF DELIVERY
1. Actual Delivery- when the thing sold
is place in the control & possession
of vendee which involves physical
delivery of things. It shall be done be
done by passing a moveable thing
from hand to hand.
- This is not always essential to
passing of title. It may be
stipulated that transfer may only
be done after full payment.
- Delivery is generally evidenced
by written acknowledgement –
delivery receipts.
- Actual delivery is identified as
one (1) when deemed made, (2)
not always essential in passing of
title, and (3) proof of delivery.
- Based on (Article 1497 –
SECTION 2: DELIVERY OF
THE THING SOLD) the thing
sold shall be understood as
delivered, when it is placed in
the control and possession of
the vendee.
- Additional info:
Concept of
traditional/delivery: tradition is a
derivative mode of acquiring
ownership by virtue whine 1 hhas
the right and intention to alienate
corporeal things.
Importance of tradition:
consummation of contract of
sales occurs when thing is
delivered and paid.
2. Constructive Delivery- occurs when
the thing is transferred through the
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 custody and title by the law since
actual transfer is not possible. It
means that there is a change in legal
character w/o visible changes in
actual/visible custody.
- (Article 1498)when the sale is
made through public
instrument, the execution
thereof shall be equivalent to
the delivery of the things 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.
2.1. Tradition Symbolica-
symbolic when the parties uses a
token symbol to represent a thing
delivered to effect the delivery.
- Delivery of thing is same as
delivery of key where the thing is
stored.
- Art. 1498
e.g. delivery of keys of a house
2.2 Tradition Longa Manu-
-when the vendor transfer the
thing to the vendee. This takes
place by the mere
consent/agreement of contracting
parties. (Delivery w/ long hands)
-note that by agreement if thing
sold can’t be transferred to
vendee’s possession.
2.3 Tradition Brevi Manu
- The vendee has the possession
of the thing sold already by
virtue of another title. Instead of
the vendee turning over the thing
to the vendor and the vendor
delivering it back to vendee is
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considered done. (delivery
w/short hand) ex: lease
-2.2. & 2.3 is based on Article
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.
2.4 Tradition Constitum
Possessorium
- Opposite of tradition brevi
manu.
-When vendor continues in
possession of property sold in
another capacity and not as
owner.
- Constitum Possessorium
Agreement- instead of vendor
delivering the vendee a thing so
that the vendee may deliver it
back to vendor.
- (Article 1500) There may also
be tradition constitum
possessorium.
e.g. from owner to lessee- si
seller binenta niya yung property
but need nya po so nilease back
kay buyer magiging lessor si
buyer.
2.5. Delivery by Legal
Formalities
- applies to real and personal
properties, where the delivery is
made through the execution of a
public document.
- general rule: there is
presumption of deliver
2.6. Quasi Traditio
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 -delivery of rights, credits or - Sufficient of subj. matter is
incorporeal real property, made capable of being made
by placing the titles of ownership determinate whereas it does not
in the hands of the vendee or need another or further
lawyer, by execution of a public agreement.
instrument, or by allowing the - Article 1460. A thing is
vendee to use his rights as new determinate when it is
owner with the consent of the particularly designated or
vendor. physical segregated from all
- Art. 2.5 & 2.6 is Based on others of the same class.
Article 1501. With respect to The requisite that a thing be
incorporeal property, the determinate is satisfied if at the
provisions of the first time the contract is entered
paragraph of article 1498 shall into, the thing is capable of
govern. In any other case being made determinate
wherein said provisions are not without the necessity of a new
applicable, the placing of the or further agreement between
titles of ownership in the the parties.
possession of the vendee or the 1.3. Consideration- cause. Refers to
use by the vendee of his rights, price certain in money or its
with the vendor's consent, shall equivalent.
be understood as a delivery. - Absence of price is to be
ELEMENTS OF CONTRACT OF SALE: distinguished from failure to pay
price agreed upon.
1. Essential Elements (essential 2. Natural Elements- elements that are
requisites of a contract of sale) presumed to exist and inherent to the
1.1. Consent- meeting of the minds. contract of sale even if there is no
Refers to the consent given by both stipulation of the parties.
vendor and vendee to transfer and 2.1. Warranty Against Eviction 1548-
deliver as for the former and to pay 1560
as for the latter. -
- Must have a legal capacity to give 2.2. Warranty Against Hidden Defects
consent. & Encumbrances 1561-1581
- When the seller accepts the -
payment, it indicates his consent on 3. Accidental Elements- stipulated
the contract. elements on contract. Add-ons and not
1.2. Subject Matter which should be a necessary to perfection of contract but to
determinate thing- refers to a accessorize.
determinate thing or at least of
CHARACTERISTICS OF A
capable of being one. The reason for
CONTRACT OF SALE:
such is when both parties differ in
regard to the thing sold, there’ll be 1. Consensual- contract is perfected by
no meeting of minds. mere consent. There shall be meeting of the
- Subject must also be licit and minds.
w/in the commerce of man.
Article 1475. The contract of sale
is perfected at the moment there is

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J. Delos Santos
 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.
2. Principal – because it can
independently exist. The reason for such
is that for the contract to validly exist,
there is no necessity for it to depend
upon the existence of another valid
contract. Does not depend on another
contract
3. Bilateral- both contracting parties are
bound to fulfil their obligations with
each other. Reciprocal obligations.
4. Onerous- thing sold is conveyed in
consideration of price and the price is
conveyed in consideration of the thing
sold.
- A contract of sale is onerous
because, to acquire the rights,
valuable consideration must be
given. Cause or consideration is a
general requirement for the
existence of contract.
5. Commutative- thing sold is
considered equivalent of price paid and
the price paid is equivalent to the thing
sold.
- Parties exchange almost equivalent
values
- On the contrary, contract may
aleatory (1 or both parties
reciprocally binds themselves to
give or to do something in
consideration of what the other
shall give or do upon the
happening of event which is
uncertain at an indeterminate
time).
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6. Nominate- because it is given a
special name/designation in the civil
code- sale.
RULES ON THE OBJECT OF A
CONTRACT OF SALE:
Requisites:
a. The thing must be within the commerce
of men- refers that a private ownership of a
person of a thing, meaning it shall be within
his control and he has the rights to such.
- Example of things outside the commerce of
man: public ownership: streets, bridges,
parks & common to everybody: sunlight and
air.
b. The thing must not be contrary to laws,
morals, good customs, public orders and
public policy- the thing must be licit or
lawful.
- The thing may not be considered as licit
and rather is an illicit if the thing per se (of
its nature) ex: decayed food unit prohibited
lottery ticket
- and per accidens ) cos of some provisions
of law declaring it illegal) ex: prohibited
drugs
c. The thing must be determinate – a
thing is determinate if its particularly
designated or physically segregated from
all others of the same class. - A
determinate thing is identified based on
individuality. (ex: my car, the house located
beside sm marilao)
Based on:
Article 1459. The thing must be licit and
the vendor must have a right to transfer
the ownership thereof at the time it is
delivered.
Article 1460. A thing is determinate when
it is particularly designated or physical
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segregated from all others 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.
OTHER RULES ON OBJECT:
1. The seller must have the right to transfer
the ownership of the thing at the time that
is delivered; it is not necessary that the
seller be the owner of the thing at the time
of sale.
- only one can sell what he owns according
to Art.1458. vendor must be the owner or at
least be authorized by the owner to sell the
things.
2. Things having potential existence may
be the object of sale. However, the thing
must come into existence, otherwise the
sale will not be effective for not having an
object.
- According to Article 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.
- However, sale of hope or expectancy is
valid even if the thing hoped for or expected
does not come into existence, unless the
hope/expectancy is in vain – sale is void.
(sweepstakes ticket).
a. Emptio rei spratae – sale of future thing;
- maybe the object of the contract of sale.
There may be a valid sale of a thing, which
though not yet in existence, is reasonably
certain to come into existence as the natural
increment or usual incident of something
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already in existence , & then belonging to
the vendor , & the title will vest in the buyer
the moment the thing comes into existence.
Ex:
1.) Wine is expected to be produced by a
vineyard.
2.) The future wool grown on a sheep.
b. Emptio Spei – Sale of Hope (e.g. Lottery,
Gacha)
- either the thing nor its quantity & quality
are certain to exist.
Ex: Sale of sweepstakes or raffle ticket that
is yet to be drawn.
3. The goods which form the subject of a
contract of sale may either be:
a. Existing Goods- owned and possessed by
seller
b. Goods to be Manufactured – Future
Goods to be manufactured, raised, or
acquired. (Art 1460)
According to Article 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.
RULES ON PRICE:
Concept - The price is the sum that will be
paid for the property that is sold.
1. Certain- there can be no sale w/o a price
because the contract of sale is settled with a
price certain in money or its equivalent. Art.
1469.
2. The price is considered certain if:
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a. It is a fixed amount- agreed upon
amount
b. It is certain with reference to another
certain thing- (Art.1472). Applicable only
when no specific amount is stipulated by
parties.
Article 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. (1448)
c. The determination is left to the
judgment of a specified person or
persons- Applicable only when no specific
amount is stipulated by parties.
3. Fixing of the price cannot be at the sole
discretion of one party. However if the
price fixed by one of the parties is accepted
by the other, the sale is perfected.
Based on:
Article 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
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against the party in fault as are allowed
the seller or the buyer, as the case may be.
RULES WHEN A THIRD PERSON OR
PERSONS DETERMINES THE PRICE
OF AN OBJECT
General rule: the price fixed by the third
person specified by the parties is binding
upon them. However, there are exceptions
1. 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. Art.
1469.
2. If the third person or persons acted in
bad faith or by mistake, the courts may fix
the price. But note that mere error in
judgment cannot serve as a basis for
disregarding the price fixed.
3. 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.
- may have a choice of rescission or
fulfilment, with damages in either case. If
fulfilment is chosen by the innocent party,
court shall fix the price.
Based on: Article 1469
EFFECT IF PRICE CANNOT BE
FIXED:
There is no meeting of the minds, therefore
the contract is inefficacious or without
effect. Art. 1475
GROSS INADEQUACY OF PRICE:
Gross inadequacy of price means the price
is insufficient to satisfy the real/actual price
of the object of sale. It doesn’t affect the
validity of sale.
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Does not affects the validity of a contract of
sale. However, it may indicate:
• A defect in the consent; or
• The Parties really intend a donation or
some other act or Contract.
Effect of gross inadequacy of price in
voluntary sales:
General Rule: mere inadequacy of
price/fact that bargain was a hard one does
not affect the validity.
Low price indicated defect in consent:
fraud, mistake, undue influence
WHO MAY BE PARTIES TO A the wife cannot sell property to each
CONTRACT OF SALE?
All parties who are capacitated may enter
into a contract of sale.
1. Minors – where necessaries are sold and
delivered to a minor or other person without
capacity to act, he must pay a reasonable
price thereafter. In here contract is valid but
has the right to recover any excess above
reasonable value paid by him. (Note that
generally, contracts entered into by minors
and incapacitated persons are voidable).
Based on: Article 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.
2. Sale between spouses are considered
VOID, this also applies to common law
Spouses.
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- The reason for such is not based on union
of the personality and/or weakness of
spouses and/or possibility of inducing his
wife to engage in ruinous operations.
- The prohibition is for the safety and
protection of the third person relying upon
the supposed property of either of the
spouses.
EXCEPTIONS:
• When a separation of property was agreed
in the marriage settlement; or
• When there has been a judicial separation
or property.
Based on: Article 1490. The husband and
other, except:
(1) When a separation of property was
agreed upon in the marriage settlements;
or
(2) When there has been a judicial
separation of property under article 191.
RELATIVE INCAPACITY TO BUY
AND SELL:
The following cannot acquire by purchase,
even at public or judicial auction sales or in
legal redemption, compromises and
renunciations, either in person or through
mediation of another:
a. The Guardian- the property of the person
or persons who may be under his
guardianship;
b. Agents- the property whose
administration or sale may have been
intrusted to them, unless the consent of the
principal has been given;
c. Executors and Administrators- the
property of the estate under administration;
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d. Public Officers and Employees the
property of the State or any subdivision
thereof or of any GOCC 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;
e. Justices, Judges, and Prosecuting
Attorneys, Clerk of Superior or 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;
Reason for prohibition:
To prevent frauds on the aforementioned
persons and minimize temptations to the
exertion of undue and improper influence.
Due to the fear of greed might get to the
sentiments.
Based on: Article 1491.
PERFECTION OF A CONTRACT OF
SALE:
Based on: Article 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.
A contract of sale is perfect at the moment
there is meeting of the minds upon:
J. Delos Santos
a. The Subject of the sale; and
b. The Price
(stages: negotiation, perfection,
consummation)
Form of a Contract of Sale
Based on: Article 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.
Subject to the provisions of the Statute of
Frauds and any other applicable Statute, a
Contract of sale may be in any of the
following terms:
a. In writing
b. By word of Mouth
c. Partly in writing partly by word of mouth
d. By the conduct of the parties.
Gen. rule: contract may be entered into any
form provided all essential requisites for its
validity are present.
Contract covered by statue of frauds: should
be in writing subscribed by party charged.
RULES IN CASE OF SALE BY
AUCTION: (ART. 1476)
The auction is perfected by the fall of the
hammer, or in any other manner.
Rights of parties before perfection:
a. Any bidder may retract his bid- seller is
merely making an invitation to those present
to make offers in the bidding.
b. The Auctioneer may withdraw the goods
from the sale unless the auction has been
announced to be without reserve.
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Withdraw the goods from sale any time
before hammer falls.
Rights of the parties after the perfection.
a. The winning bidder cannot retroact his
bid nor the auctioneer withdraw the goods
since there is already a perfected contract.
(Applicable by the time after the hammer
falls). Contract is only perfected by the fall
of hammer.
Based on: Article 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.
Rights of the seller to bid – The seller may
bid at the auction provided the following
requisites are present:
a. The right to bid have been reserved
expressly by or on behalf of the seller.
J. Delos Santos
b. His right to bid must not be prohibited by
law or stipulation;
c. Notice must be given that the sale is
subject to a right to bid by or on behalf of
the seller.- if no notice, it shall be
unlawfulfor the seller to bid directly or
indirectly fro the auctioneer to bid on behalf
of seller’s.
RULES ON PROMISE TO BUY/SELL:
1. Bilateral Promise – both parties promises
to each other to buy/sell a determinate thing
at an agreed price.
a. This is as good as a perfect sale; for
enforceability, the rules in Statue of
Frauds must be observed
2. Unilateral Promise – A promise to
buy/sell is made by one of the parties.
a. If not accepted – No legal effect
b. If accepted with consideration – the
promise is binding upon the promisor.
c. If accepted without consideration – the
promise is not binding upon the promisor.
Based on: Article 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 promisor if the promise
is supported by a consideration distinct
from the price.
EARNEST MONEY AND OPTION
MONEY:
1. Earnest Money – The money is given as
part of the purchase price and as proof of the
perfection of the contract; paid by the buyer
to show his legitimate interest and earnest
desire to purchase the thing.
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a.k.a. aras or smthn of value to show that the
buyer is really earnest & given to seller to
bind the bargain.
2. Option Money – Is the consideration paid
for the purpose of holding one to his
promise to buy or sell a determinate thing
for a certain period of time, which
consideration is separate and distinct from
the purchase price.
Effect: Offeror (seller) can’t withdraw the
offer until after the expiration of option
Binigay to so buyer would have the option
whether to buy the thing or not.
Based on: Article 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.
SALE BY SAMPLE, DESCRIPTION,
SALE OR RETURN, SALE ON
APPROVAL:
1. Sale by Sample – The parties contract
solely with reference to the sample.
- it must appear that the exhibition of the
sample by the seller was an inducement of
the sale or formed the sole basis thereof.
- shall conform with the kind, character, and
quality.
2. Sale by Description – The parties contract
solely with reference to the description.
-If goods aren’t the same as the description,
contract may be rescinded.
3. Sale by sample by Sample and
Description – The seller warrants that the
bulk of the goods delivered corresponds
with both the sample and the description.
4. Sale or Return – The buyer has the option
to return the thing within the time fixed in
the contract or within a reasonable time.
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5. Sale on approval or on trial or on
satisfaction – ownership of the object
remains with the seller despite delivery, but
shall be transferred to the buyer in the ff.
cases:
• When the buyer signifies his approval or
acceptance of the goods.
• When he does an act adopting the
transaction (e.g. makes use or consumes the
thing)
• If he does not signify his approval or
acceptance of the goods but retains the
1wrdgoods without giving notice of
rejection within the time fixed in the
contract.
Based on: Article 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.
RULES ON DOUBLE SALE:
The determination of who has preferred
right (who becomes the owner) in case the
same thin g had been sold to different buyers
is governed by the following:
1. Movables – ownership shall be
transferred to the person who may have first
taken possession thereof in good faith;
(possession may either be actual or
constructive)
2. Immovable property
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a. The buyer who first registered in good
faith; (registry of property)
b. Should there be no inscription or
registration, ownership shall pertain to the
person who in good faith was first in the
possession; and
c. Oldest Title
Based on Article 1544
Applicable when:
1. 2 or more transactions constitutes valid
sales.
2. 2 or more sales transactions must pertain
exactly to the same subj. matter.
3. 2 or more buyers at odds over the rightful
ownership of the subj. matter must each
represent conflicting interests.
4. 2 or more buyers at odds over the rightful
ownership of subj. matter must each both
bought fr. the very same seller.
SALE OF PROPERTY IN
INSTALLMENTS:
Recto Law (Article 1484)
Coverage sale of personal property where
price is payable in several instalments-more
than 2 dapat
In contracts of sale of Personal Property on
Instalment basis, the vendor may exercise
any of the following alternative remedies:
1. Exact fulfilment of the obligation should
the vendee fail to pay;
2. Cancel the sale, should the vendee’s
failure to pay cover two or more instalments;
or
3. Foreclose the chattel mortgage.
Remedies of vendor in sale of personal
property payable in instalments:
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1. Elect fulfilment upon the vendee’s failure
to pay. (for 1 payment missed)
2. Cancel the sale if the vendee has failed to
pay. (This is only applicable if vendee failed
to pay 2 or more instalments)
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 (1454—a)
Chattel mortgage- security contract where
buyer uses a personal property as security
for his obligation and registered with the
chattel mortgage registry.
Nature of remedies:
It’s an alternative.
It is not to be exercised
cumulatively/successively and election of
one, ma waive yung right to resort to other.
Hence, if nag ask si vendor kay vendee to
pay the unpaid sum of price, other remedies
are waived.
Right of vendor to recover unpaid
balance of purchase price:
1. Remedy of specific performance-
fulfilment of obligation.
2. Remedy of cancellation- if vendor chooses
recission/cancellation, pwede nlng
marecover ni vendee is yung amount paid na
unless may agreement abt forfeiture.
3. Remedy of Foreclosure- recovery of
unpaid balance and lahat ng agreement
contrary to that is void.
Maceda Law (R.A. No. 6552)  "Realty
Installment Buyer Act."
AN ACT TO PROVIDE PROTECTION TO
BUYERS OF REAL ESTATE ON INSTALLMENT
PAYMENTS
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It’s a public policy to protect buyers of real estate
on instalment payments against onerous and
oppressive conditions.
The Maceda Law applies to contracts of sale
of real estate on instalment payments
including residential condominium
apartments. It likewise covers contracts to
sell.
NOTE: Maceda law only covers sale or
financing of real estate.
1. Maceda Law does not apply to:
a. Sale of industrial lots
b. Sale of Commercial Buildings
c. Sale to Agricultural Tenants
d. Straight sale or sale not on instalment
basis.
2. Maceda Law cannot be invoked by the
following person
a. The highest bidder in the foreclosure sale,
if the seller opted to foreclose the mortgage;
b. The developer-seller or his successor.
RULES IN MACEDA LAW
1. If the buyer has paid less than two years
instalment:
a. Grace Period – the buyer may pay within
60 days from the date the instalment become
due. More time to pay your loan.
b. Cancellation – in case of non-payment
within the 60-day grace period, the seller
may cancel the sale after 30 days from
receipt of the buyer of the notice of
cancellation or demand for rescission.
Pwede lang cancel w/in 30 days from notice
by seller thorugh a notarial act.
2. If the buyer has paid at least two years
instalment: (seller shall give the buyer a
grace period of not less than sixty days from
the date the installment became due.)
J. Delos Santos
a. In case of defaults, the buyer has a grace
period of one month for every year of
instalment payment. The buyer can pay the
unpaid instalment interest free during this
grace period.
b. The foregoing right shall be exercised by
the buyer only once in every five year of the
life of the contract.
c. The seller could cancel the sale if the
buyer still failed to pay within the grace
period. The following must be complied
with if the seller wishes to cancel:
i. Give a notarized notice of cancellation or
demand for recission of the contrary by a
notarial act;
ii. There must be full payment of the cash
surrender value, if any.
iii. The actual cancellation shall take place
after 30 days from receipt by the buyer of
the notice of cancellation or the notarial
demand for rescission and upon full
payment of the cash surrender value.
iv. Amount of cash surrender value – 50% of
the total payments made plus after five years
of instalments, an addition 5% every year.
v. The amount of CSV should not exceed
90% of the total payment made; and down
payments, deposits and options on the
contract shall be include in the computation
of the total number of instalment payments
made.
OBLIGATIONS OF THE SELLER:
1. To transfer the ownership of the thing
sold- ownership of the thing is acquired by
vendee from the moment the thing is
delivered to him. (Art.1496)
2. To deliver the thing sold- vendor is
bound to deliver the thing sold and its
accessions accessories in the condition in
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which they were upon the perfection of the
contract. All fruits shall pertain to the
vendee from the day on which the contract is
perfected. (Art. 1537)
3. To warrant the thing sold- vendor is
liable for breach of warranty against eviction
and warranty against hidden defect or
encumbrances (Art. 1547)
4. To take care of the thing sold with the
diligence of a good father of a family
unless the law or the stipulation of the
parties requires another standard of care.
Based on: Article 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.
SALE BY A PERSON WHO IS NOT
THE OWNER OF THING SOLD
The buyer acquires no better title than the
seller had, except in the following cases:
a. When the sale is made under authority or
with the consent of the owner;
b. When the owner is precluded by his
conduct from the denying the seller’s
authority;
c. When the sale is made under the
provisions of any factor’s acts, recording
laws or any other provisions of law enabling
the apparent owner to dispose of the goods
as if he were the true owner thereof;
d. When the sale is made under a statutory
power of sale or under the order of court of
competent jurisdiction;
e. When the purchase is made in merchant’s
store or in fairs or markets.
Based on: Article 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,
J. Delos Santos
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.
TIME & PLACE OF DELIVERY OF
THE THING SOLD:
Place of delivery:
• Place stipulated in the contract
• If no stipulation, place fixed by usage or
trade;
• In the absences of both, the seller’s place
of business if he has one; if none, the seller’s
place of residence.
Time for delivery of goods:
• Time stipulated
• If there is no stipulation, delivery must be
made within a reasonable time from the
execution of the contract.
• Demand or tender of delivery must be
made at a reasonable hour to be effectual.
**Art. 1523
Expenses of Delivery  
The sellers bears the expenses of an
incidental to putting the goods into a
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deliverable state, unless otherwise
stipulated.
When is a seller not bound to deliver the
thing sold?  • Reject the whole of the goods if they are
a. If the vendee has not paid him the price; 
b. If no period for the payment
of the prices has been fixed in
the contract.
c. If a period has been fixed
for the payment of the price,
the seller is bound to deliver
the thing sold. However, the
seller is not bound to deliver if
the buyer loses the right to
make use of the period.
Based on Article 1524, the
vendor shall not be bound to
deliver the thing sold if
vendee has not paid the
price, or if no period for the
payment has been fixed in
the contract.
What are the rights of the
buyer when quantity or
quality of goods delivered is
different from that which
the seller contracted to sell?
Reject the goods- cos the creditor can’t be
compelled to accept partial payment.
Accept the goods- buyer must pay for the
goods at the contract rat e. If the buyer has
used or disposed of the goods before he
know that the seller is not going to perform
his contract in full, buyer shall not be liable
for more than the fair value to him of the
goods received. (Art.1552).
What if the quantity delivered is MORE
than that which the parties agreed upon?
The buyer may:
J. Delos Santos
• Accept the goods agreed upon and reject
the rest;
• Accept the whole of the goods delivered
and pay them at the contract rate;
indivisible. (Art. 1522)
What if the goods delivered are mixed
good of different description? The buyer
may:
a. Accept the goods agreed upon and reject
the rest, if the sale is divisible;
b. Reject the whole of the goods if the sale is
indivisible.
Unpaid Seller
One who has not been paid or tendered the
whole of the price or who has received a bill
of exchange or other negotiable instrument
as conditional payment and the condition
under which it was received has been broken
by reason of the dishonour of the instrument,
the insolvency of the buyer, or otherwise.
Seller is upaid within the definition whether
title has or has not passed.
Tender of payment is not same w/
performance. Seller is not unpaid after
tender of price
Article 1528-1535: unpaid seller
RIGHTS OF AN UNPAID SELLER:
Possessory Lien
1. Or a right on the goods or right to retain
them while he is in possession of them.
ART.1526, Unpaid seller is allowed a lien
and kindred remedies is the inherent
injustice of depriving him of goods w/ which
he has not finally parted where it’s evident
that he has not been or will not be paid the
price when due.
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2. When Available – This right is available
to the seller and notwithstanding that he
may be in possession of the goods as agent
or Bailee for the buyer in the following
instances: ART.1527
a. Where the goods have been sold without
any stipulation or credit- sale w/o
stipulation as to credit means that in a credit
sale, seller binds himself to give the goods to
buyer w/o receiving the time payment for it.
In the absence of stipulation, seller is entitle
to rhe payment when he transfers ownership.
b. Where the goods have been sold on
credit, but the credit term has expired;
expiration of the term credit- even where the
parties agree upon a sale on credit, seller’s
right of lien may be exercised.
- buyer is entitle to possession even if not
yet paid but if term of credit expires and
price becomes due, he loses his right to
such.
c. Where the buyer is insolvent- lien of
seller in possession is revived even the time
of payment has not yet arrived. Based on
bilateral contract.
3. Lien where there is partial delivery:
a. Where an unpaid seller has made part
delivery of the goods, he may exercise his
rights 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.1528
part of goods are delivered- unpaid seller
has a lien on the remainder of the remaining
or proportion of price that is due on account
of goods retained.
Part of goods as symbolic delivery- waiver
of any right of retention, lien is lost.
J. Delos Santos
b. When lien is lost – the unpaid seller
loses his lien on the goods in the following
cases:
i. 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.
delivery to agent/bailee of buyer- seller may
stop goods while on way to buyer after
delivery to baille for buyer but it can’t be
said that seller has still any lien on it.
ii. When the buyer or his agent lawfully
obtains possession of the goods.
Possession by buyer/his agent- if buyer
already has the possession of goods at time
of bargain, it is clear that seller has not lien
once it’s transferred.
iii. By waiver thereof- waiver of lien means
that when seller may lose his lien by
agreement to surrender it.
RIGHT OF STOPPAGE IN TRANSITU:
1. This right involves the right of the
unpaid seller to resume possession of the
goods at any time while they are in transit
and he will then become entitled to the
goods as he would have had if he never
parted with the possession. Art.1530
- If the seller already lost his
possession, he may still exercise
the 2nd right of stoppage in
transitu.
- He may have the possession
again if buyer become insolvent.
2. When the right available Art.1530- This
right is available after the unpaid seller has
parted with the possession of the goods and
the buyer is or becomes insolvent. –
judicially declared dapat para considred as
insolvent based on Art.1636.
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3. How it is exercised: Art.1530&1532
• By obtaining actual possession of the
goods;
• By giving notice of his claim to the carrier
or other bailee in whose possession the
goods are.
4. Effects of exercise of right of stoppage
in transit: Art.1531
• The goods are no longer in transit
- Buyer/his agent obtains delivery
of goods before arrival at
destination.
- After arrival, carrier/other
bailee acknowledges to the
buyer/his agent that he holds the
goods on behalf.
- Carrier/other bailee wrongfully
refuses to deliver the goods to
buyer/his agent
• The contract of carriage ceases; the carrier
shall be liable as depositary or other bailee
• The carrier must redeliver the goods to, or
according to the instructions, the seller;
However, if a negotiable document of the
title has been issued for the goods, the
carrier will not be bound to deliver the
goods unless the document of title is first
surrendered to him for cancellation.
5. When goods are in transit. Art.1531
• From the time are delivered to the carrier
or other bailee for the purpose of
transmission to the buyer, until the buyer or
his agent, takes delivery of them from such
carrier or other bailee;
- After delivery to carrier/bailee &
before the buyer/agent takes
delivery of them
• If the goods are rejected by the buyer, and
the carrier or other bailee continues in
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possession of them, even if the seller has
refused to received them back.
- goods are rejected by buyer &
carrier/bailee continues in possession.
6. When the goods are NO LONGER in
transit. Art.1531
• If the buyer obtains delivery of the goods
before arrival at the appointed destination;
• If the carrier or other bailee acknowledges
to the buyer or his agent, that he is holding
the goods in his behalf, after arrival of the
goods at their appointed destination.
• If the carrier or other bailee wrongfully
refuses to deliver the goods to buyer or his
agent.
RIGHTS OF RESALE (Art.1533):
1. The right of Resale becomes available
when:
• The buyer has defaulted in the payment of
the price- unpaid in an unreasonable time.
• The seller has the right of lien or has
stopped the goods in transit- then resell the
goods and wouldn’t be liable to orig. buyer
but may recover damages from buyer for
any loss by breaching of contract.
• Title to the goods has passed on to the
buyer-
2. Grounds for Resale:
• The goods are of a perishable nature
• The seller has expressly reserved the right
to resell the goods in case the buyer should
make default
• The buyer has been in default for an
unreasonable time- buyer delays payment of
price.
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3. How resale is made – the seller may
resell the goods in a public or private sale.
He is bound to exercise reasonable care and
judgment in making the resale. He cannot
directly and indirectly, buy the goods.
4. Effects of Resale:
a. The seller shall not be liable to the
original buyer upon the contract of sale or
for any profit made by such resale- seller is
not liable for any profit made but if he sells
for less than the price, he has the right to sue
for balance.
b. He may recover damages from the buyer
for any loss occasioned by the breach of
contract of sale.
c. The new buyer requires a good title
against the original buyer.
Based on Article 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
J. Delos Santos
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. (n)
RIGHT TO RESCIND THE SALE
(Art.1434):
1. The Right to Rescind Sale becomes
available when:
• The buyer has defaulted in the payment of
the price- unreasonable time dapat. Seller
may rescind the transfer of title and resume
ownership. Seller is not liable but may
recover damages for any loss briught by
breaching.
• The seller has the right of lien or has
topped the goods in transit;
• Title to the goods has passed on the buyer-
transfer of title shall not be held to have
been rescinded until he has manifested by
notice to buyer or by some overt act an
intention to rescind.
2. Grounds for rescission:
• The seller has expressly reserved the right
to rescind the sale in case the buyer should
make default;
• The buyer has been in default in the
payment of the price for an unreasonable
time.
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3. How rescission is made:
a. By giving notice to the buyer of the
intention to rescind;
b. By doing an overt act manifesting the
intention to rescind.
4. Effects of rescission:
a. The seller shall not be liable to the buyer
upon the contract of sale;
b. He may recover from the buyer damages
for any loss occasioned by the breach of the
contract of sale;
c. The seller resumes ownership of the
goods.
WHAT HAPPENS TO A CONTRACT
OF SALE SUBJECT TO A CONDITION
THAT IS NOT FULFILLED?
The other party may choose to do any of the
following:
a. Refuse to proceed with the contract – he
may also treat the non-performance of the
condition as a breach of warranty;
b. Waive the performance of the condition
and proceed with the contract.
Based on: 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 non-performance 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
J. Delos Santos
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.
(n)
Condition- uncertain event/contingency on
the happening of which obligation of
contract depends.
WARRANTIES
Implied and Express warranties:
1. Warranties may be express/implied-
implied warranties are natural elements of a
contract of sale.
2. Express Warranties(Art.1545) of the
seller – an express warranty is an affirmation
of fact or any promise by the seller relating
to the thing if the natural tendency of such
affirmation or promise is to induce the buyer
to purchase the same, and if the buyer
purchase relying thereon.
Rooted from the word itself, seller is
expressing an affirmation of fact regarding
the product to engage the buyer to
purchase.
3. Implied Warranties of the Seller- Unless
a contrary intention appears, the following
are deemed included in a contract of sale
even without an express stipulation:
Implied warranties is that which law derives
by implication/inference from nature of
transaction/relative situation of parties
Art.1547.
a. Warranty against Eviction/Warranty in
case of eviction- vendee is deprive of the
thing in whole/part by virtue of final
judgment.
Elements: vendee is deprive of the thing,
deprived by virtue of final judgment,
judgment is based on a right prior to sale/act
imputable to vendor, vendor was summoned
in suit of eviction, no waiver on vendee’s
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part. If one is missing, breach of warranty
can’t be declared.
Article 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)
• The warranty may be eliminated by
stipulation, so long as the stipulation was
agreed upon in good faith;
- Art. 1548, warranty is not an
essential element in ca contract
of sale so it may be increased,
diminished, or suppressed by
agreement of parties.
• Any stipulation exempting the vendor from
the obligation to answer for eviction shall be
void if he acted in bad faith.
Based on Article 1553. Any stipulation
exempting the vendor from the obligation
to answer for eviction shall be void, if he
acted in bad faith. (1476)
Effect of vendor’s bad faith- vendor sold a
property and sold it again to another he can’t
be exempt from warranty against eviction.
Effect of vendee’s bad faith- If he knew
about the defect of the tile and proceeded
with the contract, he can’t hold the vendor
liable for his legal and peaceful possession.
4. Requisites for the enforcement of
warranty in case of eviction: (Art.1548)
a. The vendee has been evicted;
J. Delos Santos
b. The eviction was by virtue of final
judgment; (Art.1557)
-2 essential elements: deprivation in
whole/part of thing sold & existence of final
judgment.
Based on Article 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)
c. The eviction was based on the ground on
right prior to the sale or an act imputable to
the vendor and;
d. The seller must be summoned in the suit
for eviction at the instance of the buyer.
(Art.1558)
- Before a vendee may be legally liable, he
should be summoned for a suit of eviction.
Object of law gives him the opportunity to
prove that what is being interposed by
vendee is unjust.
Based on Article 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)
5. Waiver of Warranty in case of eviction –
may be conciente or intentionada:
a. The waiver is conciente when the buyer
made the waiver without the knowledge of
the risks of eviction – the seller shall only
pay the value which the thing sold had at the
time of the eviction;
b. The waiver is intentionada when the
buyer made the waiver with knowledge of
the risks of eviction and assumed its
consequences – seller is NOT liable.
Based on Article 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
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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).
LIABILITIES OF THE SELLER IN
CASE OF BREACH OF THE SAID
WARRANTY (ART.1555):
When the warranty has been agreed upon or
nothing has been stipulated, when eviction
occurs, the buyer shall demand from the
seller:
a. 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;
Return of value of thing- if the value of the
propeperty is more or less than the value at
the time of sale due to
dtoriation/improvement at the time of
eviction, vendor shall pay the excess/not
suffer the damage.
b. The income or fruits if he has been
ordered to deliver them to the party who
won the suit against him;
Income/Fruit of thing- vendee is liable to the
party who won the suit against him for
income/fruits received, only if decreed by
court. Vendee has the right to use and free
from liability for usage of such sale.
c. The costs of the suit which caused the
eviction and in a proper case, those of suit
brought against the vendor for the
warranty;
Cost of suit- vendee shall be entitled to the
cost of litigation as well as the costs of the
action brought against the vendor to enforce
his warranty. However, travelling expense in
defending himself is not part of this.
Recovery of damages is possible only when
vendor acted in bad faith.
J. Delos Santos
d. The expense of the contract, if the
vendee has paid them.
If stipulation is not present, execution and
registration of sale is borne by vendor. If
vendor paid for it, he has the right to
demand it.
e. The damages and interest ornamental
expenses if the sale was made in bad Faith.
Vendee’s right to demand damages and
interests and ornamental expenses is
qualified by the condition that the sale was
made in bad faith.
If presumed in good faith, vendee is not
entitled to recover damages.
WARRANTY AGAINST HIDDEN
DEFECTS:
This is an implied warranty that the thing
shall be free from any hidden faults or
defects or any change or encumbrance not
declared or known to the buyer; (Art.1561)
Based on Article 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)
Requisites: defect is important/serious,
hidden, exist at time of sale, vendee must
gives notice of defect to vendor at a
reasonable time, actions for rescission or
reduction of price must be brought within
proper period of time- 6mos from delivery
or w/in 40 days from date of delivery for
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animals, no waiver of warranty on vendee’s
part.
a. These refer to defects which would
render the thing unfit for the use for which
it is intended or should they diminish its
fitness for such use to such an extend that,
had the vendee been aware thereof he
would not have acquired it would have
given a price for it.(Art. 1561)
- if vendee has been aware of the state of the
thing as it is unfit, he would not have
acquired such thing.
b. Remedies (within 6mos. period from
delivery) (Art. 1567):
i. Withdrawing from the contract also known
as accion redhibitoria with damages
ii. Demanding a proportionate reduction of
the price also known as recoupment with
damages- accion quanti minoris
Note: same right is given to sale of animals
w/ redhibitory effect.
WARRANTIES UNDER THE
CONSUMER ACT (RA NO. 7394)
1. Consumer products are goods which are
primarily for personal, family, household, or
agricultural purposes shall include but not
limited to goods, drugs, cosmetics and
devices;
2. Any seller or manufacturer who gives an
express warranty for consumer products is
required to do the following:
a. Set the times of warranty in clear and
readily understandable language and clearly
identify himself as the warrantor;
b. Identify the party who the warranty is
extended;
c. State the products or parts covered;
d. State what the warrantor will do in the
event of a defect, malfunction or failure to
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conform to the written warranty and whose
expenses;
e. State what the consumer must do to avail
of the warranty rights;
f. Stipulate the warranty period.
PERIOD OF WARRANTY:
It is also mandated that all written warranties
or guarantee issued by a manufacturer,
producer, or importer shall be operative
from the moment of sale. The period of
warranty shall be:
a. The parties may stipulate the period
within which the express warranty shall be
enforceable. If the implied warranty on
merchantability accompanies an express
warranty, both will be of equal durations;
b. Any other implied warranty shall endure
not less than 60 days nor more than one year
following the sale of new consumer
products.
REDHIBITORY DEFECT OF
ANIMALS:
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
(Art.1576)
- redhibitory vice/effect is a defect in the
article sold against which defect the seller is
bound to warrant.
- To be considered as redhibitory, defect
must not only be hidden but must be of such
nature that expert knowledge is not enough
to discover it.
Based on Article 1576. If the hidden
defect of animals, even in case a
Page | 21
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.
(1495)
a. The sale of animals suffering from
contagious diseases shall be void.
(Art.1575)
- sale of such animals is void against public
interest & nit merely subject to rescission or
reduction in price.
Article 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. (1494a)
b. A contract of sale of animals shall also be
void if the use or service for which they are
acquire has been stated in the contract and
they are found to be unfit therefore;
- good and/or services, as required under the
c. If a veterinarian, through ignorance or
bad faith should fail to discover or disclose
it, the veterinarian shall be liable for
damages;
- Based on Article 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
J. Delos Santos
disclose it, he shall be liable for damages.
(1495)
d. Prescriptive period – the redhibitory
action based on the faults or defects of
animals, must be brought within 40 days
from the date of their delivery to the vendee
- Redhibitory action based on animals’ fault
shall be barred unless brought within 40
days from delivery date.
- If defects are patent, no warranty against
such defects but there is a redhibitory vice.
Based on Article 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.
(1496a)
PRICE TAG ACT
One Price Tag Requirement
Every retailer is required to display a price
tag to indicate the price of each consumer
Consumer Act of the Philippines.
The price tag must be written clearly,
indicating the price of the consumer product
including Value Added Tax (VAT)
whenever the consumer product is
VATABLE. Service charge, if any, shall not
be included in the price tag.
PHILIPPINE LEMON LAW
Republic Act No. 10642 is an Act
Strengthening Consumer
Page | 22
Protection in the Purchase of Brand New
Motor Vehicles which aims to promote full
protection to the rights of consumers in the
sale of motor vehicles against business and
trade practices which are deceptive, unfair,
or otherwise inimical to consumers and the
public interest.
The Philippine Lemon Law protects owners
of brand-new vehicles purchased in the
Philippines within a period of twelve (12)
months after the date of the original delivery
of the brand-new motor vehicle or within the
first twenty thousand (20,000) kilometers of
operation after delivery of the vehicle,
whichever comes first. It gives the owner the
right to report any non-conformity with the
vehicle’s manufacturer or distributor’s
standards or specifications.
The owner/ consumer should notify in
writing the manufacturer, distributor,
authorized dealer, or retailer of the
unresolved complaint and his intention to
avail of the Lemon
Law rights.
Exclusions:
a. Noncompliance by the consumer of the
obligations under the warranty;
b. Modifications not authorized by the
manufacturer, distributor, authorized dealer,
or retailer;
c. Abuse or neglect of the brand-new motor
vehicle; and
d. Damage to the vehicle due to accident or
force majeure.
After the notification in writing, the
owner/consumer should bring the vehicle to
the manufacturer, distributor, authorized
dealer, or retailer from where the vehicle
was purchased for a final attempt to address
the complaint of the consumer to his or her
satisfaction.
J. Delos Santos
OBLIGATIONS OF THE BUYER:
The obligations of the buyer/vendee are as
follows:
Article 1582. The vendee is bound to
accept delivery and to pay the price of the
thing sold at the time and place stipulated
in the contract.
If the time and place should not have been
stipulated, the payment must be made at
the time and place of the delivery of the
thing sold. (1500a)
1. To accept delivery; when are the goods
deemed accepted?
a. He intimates to the seller that he accepting
them;
b. When he does any act in relation to the
goods which is inconsistent with the
ownership of the seller;
express acceptance- buyer intimates to seller
verbally/written that he has accepted after
delivery.
Implied acceptance- takes place when (1)
buyer after delivery, does any act
inconsistent w/ seller’s ownership, as when
he sell/attempts to sell the goods/uses them
or makes alteration that only owner should
have had. (2) When after lapse of
reasonable time, buyer retains goods w/o
intimating his rejection
Article 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)
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c. When he retains the goods after the lapse
of a reasonable time without intimating to
the seller that he has rejected them
(Art.1585).
- Implied acceptance
2. To pay price of the thing sold at the time
and place stipulated in the contract.
• When can the vendee suspend payment
of the price?
a. Should the vendee be disturbed in the
possession or ownership of the thing
acquired or;
b. Should he have reasonable grounds to
fear such disturbance, by a vindicatory
action or a foreclosure of mortgage.
- provision of Art. 1590: vendee has no
cause of action fo rescission before final
judgment because the vendor might become
the victim of collusion (secret agreement/
cooperation of fraudulent purpose) between
the vendee & 3rd person.
-Remedy of buyer is rescission and not
suspension of payment.
c. The suspension is effective until vendor
has cause 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.
Based on Article 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
J. Delos Santos
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)
WHAT ARE THE REMEDIES OF
EACH PARTY IN CASE THE OTHER
BREACHES HIS OR HER
OBLIGATION?
1. Specific Performance:
a. The ownership of the goods has passed to
the buyer and he wrongfully neglects or
refuses to pay for the goods according to the
terms of the contract of sale (Art. 1595)
b. The price is payable on a certain day,
irrespective of delivery or of transfer of title
and the buyer wrongfully neglects or refuses
to pay such price (Art. 1595)
c. When the buyer refused to receive the
goods upon the seller’s offer to deliver (Art.
1595)
Article 1595. Where, under a contract of
sale, the ownership of the goods has passed
to the buyer and he wrongfully neglects or
refuses to pay for the goods according to the
terms of the contract of sale, the seller may
maintain an action against him for the price
of the goods.
Where, under a contract of sale, the price is
payable on a certain day, irrespective of
delivery or of transfer of title and the buyer
wrongfully neglects or refuses to pay such
price, the seller may maintain an action for
the price although the ownership in the
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
Page | 24
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)
2. Action for damages
Article 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
J. Delos Santos
seller would have made if the contract or the
sale had been fully performed shall be
considered in awarding the damages. (n)
3. Rescission by the seller
a. Repudiated the contract of sale;
b. Has manifested his ability to perform his
obligations, or;
c. Has committed a breach thereof, the seller
may totally rescind the contract of his
election so to do to the buyer.
Giving of notice required: the right granted
to seller follows the general rule in
reciprocal obligations that a party to a
contract injured by nonfulfillment, may
rescind the contract and ask for damages
(Art.1191)
Seller should give notice of his election to
seek rescission. Formal notice is not a
requisite and bringing an action immediately
for restitution is sufficient.
Based on Article 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)
EXTINGUISHMENT OF SALE:
1. A contract of sale is extinguished by:
a. The same causes as all other obligations-
are also means of extinguishing all other
contracts like payment, loss of thing,
condonation, etc.
b. Conventional redemption
c. Legal Redemption
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Based on Article 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)
2. Conventional Redemption – also known
as Sale con Pacto de Retro. By express
agreement, the seller is given the right to
repurchase the thing sold.
Based on Article 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)
a. Period :
i. Within the period agreed upon which
should not exceed ten years from the date of
the contract;
ii. In the absence of an express agreement,
the seller should redeem within four years
from the date of the contract.
Article 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)
b. Requisites:
i. Give his express intention to repurchase;
J. Delos Santos
ii. Payment or valid tender of the
redemption price. The redemption price
consists of the following:
a) The price of the sale;
b) The expenses of the contract
c) Necessary and useful expenses made
on the thing sold
c. Effects of redemption – Redemption has
the following effects:
i. Any money, fruits or other benefits to be
received by the vendee as rent or otherwise
shall be considered as interest which shall be
subject to usury law;
ii. The apparent seller may ask for the
reformation of the instrument;
iii. The buyer is subrogated to the seller’s
rights and actions.
• Failure to redeem shall have the effect of
consolidation of ownership in the person of
the vendee.
ARTICLE 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
Page | 26
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)
EQUITABLE MORTGAGE:
- Shows the intention of parties to
make the property subject of the
contract as a security for the
fulfilment of an obligation.
A sale with a right to repurchase or even a
deed of absolute sale shall be presumed to
be an equitable mortgage in any of the
following cases:
a. When the price of a sale with right to
repurchase is unusually inadequate;
b. When the seller remains in possession as
lessee or otherwise;
c. 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;
d. When the purchaser retains for himself a
part of the purchase price;
e. When the seller binds himself to pay taxes
on the thing sold;
f. In any other case where it may be fairly
inferred that the real intention of the parties
that the transaction shall secure payment of a
debt or the performance of any other
obligation
i. In case of doubt, a contract purporting to
be a sale with right to repurchase shall be
construed as an equitable mortgage.
Based on ARTICLE 1602 and
J. Delos Santos
Article 1603. In case of doubt, a contract
purporting to be a sale with right to
repurchase shall be construed as an
equitable mortgage. (n)
LEGAL REDEMPTION:
Is the right to be subrogated, upon the same
terms and conditions stipulated in the
contract, in the place of tone who acquires a
thing by purchase or dation in payment or by
any other transaction whereby ownership is
transmitted by onerous title. (Art.1619)
- Conventional redemption arises
from voluntary agreement, legal
redemption, on the other hand,
arises from law.
- It is the nature of a mere
privilege created partly for
reason of public policy and
partly for benefit and
convenience of the redemptioner
to afford him a way out of what
may be inconvenient association
which he has been thrust.
CONDOMINIUM
An interest in real property consisting of a
separate interest in a unit in a residential,
industrial or commercial building and an
undivided interest in common, directly or
indirectly, in the land on which it is located
and in other common areas of the building.
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 LAW ON CREDIT TRANSACTI

(ACC 110 – RFBT)

I. PROVISIONS COMMON TO PLEDGE &

MORTGAGE:

a. That they be constituted to secure the

fulfilment of a principal obligation;

- They’re both purely accessory contract like

guarantee. It is not independent on its own.
Hence, w/o a valid obligation, it can’t exist.

• Rule: The obligation must be valid. Accessory

contracts, etc., owe their existence upon the
principal obligation However, a pledge or
mortgage may secure:

• All kinds of obligations, whether pure or

subject to a Suspensive or Resolutory
condition or even;

• Voidable, Unenforceable, or Natural

Obligations.

b. That the pledger or mortgagor be the

absolute owner of the thing pledge or
mortgaged;

- It is essential that the contract is constituted

ONLY by the absolute owner of thing
pledged/mortgaged. Otherwise, it is void. Thus,
di ma pledge/mortgage yung thing.

• The pledger must be the absolute owner of

the property being pledged at the time of the
pledge, a pledge on a future property is void;

• Third persons may pledge or mortgage their

property – NOT required for the validity of a
pledge or mortgage that the debtor be the
owner of thing pledged or mortgaged. Third
persons may pledge or mortgage their property
to secure another person’s debt. However, they
can be held liable only to the extent of the value
of their property. With respect to mortgage,
they may be held liable for any deficiency in
case of foreclosure if they expressly agreed to
assume the principal obligation;

Page | 28
J. Delos Santos
Art. 2086. The provisions of Article 2052 are applicable
to a pledge or mortgage. (n)
c. That the persons constituting the pledge or
mortgage
Art. have
2087. It is also of thethe free
essence disposal
the
of these contractsof
that when the principal obligation
property, and in the absence thereof,becomes
they due, that
the
things in which the pledge or mortgage consists may
be legally authorized for the purpose.
be alienated for the payment to the creditor. (1858)
- Pledgor/mortgagor has free disposal of the
property or has legal authority.
e. Appropriation of the thing pledged or
- pledger/mortgagor must have the capacity/ Art. 2089. A pledge or mortgage is indivisible, even though the
mortgaged
authority/consent of the owner to pledge or debt may be divided among the successors in interest of the
mortgage cos yung pag pledge & mortgage is right orofof the
debtor creditor
creditor.to appropriate the thing

an act of strict ownership dun sa thing na pledged/mortgaged: sale of subject property- if

Therefore, the debtor's heir who has paid a part of the debt
pledge/mortgage kasi na transmit yung real debtoraskfails
cannot to pay,
for the creditorextinguishment
proportionate is merely entitled to
of the pledge
rights dun sa property. sell
or the thing
mortgage as longpledged.
as the debt& prohibition
is not against
completely satisfied.
appropriation- creditor can’t appropriate the
Neither can the creditor's heir who received his share of the
• Free disposal means the property being given thingreturn
debt to himself nor
the pledge dispose
or cancel thethe thing toasthe
mortgage, if prejudice
he’s
in pledge or mortgage is free from claims or the
of theowner.q
other heirs who have not been paid.
encumbrances.
From these provisions
• Pactum is expected
Commissorium – the
thiscase in which,
is an there being
agreement
d. Can the thing pledge or mortgaged be sold several things given in mortgage or pledge, each one of them
whereby the creditor automatically becomes
guarantees only a determinate portion of the credit.
or alienated to pay the debt? the owner of the thing given by way of pledge
The debtor, in thisor
or mortgaged case, shall have
dispose a right in
of them to case
the extinguishment
of non-
• Before Maturity – No, except if the pledger or of the pledge or mortgage as the portion of the debt for which
payment.
mortgagor fails to fulfill certain conditions such each thing is specially answerable is satisfied. (1860)
a violation would make the debt due. The • It 2090.
Art. is a stipulation which
The indivisibility of a enables
pledge or the mortgagee
mortgage is not
reason for such is that the creditor is only or pledgee
affected by theto
factacquire ownership
that the debtors ofsolidarily
are not the pledgeliable. (n)
holding the thing mortgaged/pledge as a or mortgaged property without the need of any
security na magpay si debtor to him. foreclosure proceeding or public auction.
• At Maturity – Upon default of the debtor to • Pactum Commissorium is null and void
pay the obligation at maturity, the thing stipulation doesn’t affect the principal contract
pledged or mortgaged may be sold or otherwise of pledge/mortgage itself as it remains valid.
alienated to pay the creditor.
• Distinguished from dacion en pago – In Dacion
enArt.
Pago
2085.the
Theproperty was given
following requisites to the creditor
are essential to the
tocontracts
extinguish the
of pledge andmonetary
mortgage: debt. While in
Pactum Commissorium the property was
(1) That they be constituted to secure the fulfillment of
initially given as a security but later was
a principal obligation;
appropriated without the benefit of foreclosure.
(2) That the pledgor or mortgagor be the absolute
owner of the thing pledged or mortgaged;
Art. 2088. The creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose of (3) That the persons constituting the pledge or
them. Any stipulation to the contrary is null and void. mortgage have the free disposal of their property, and
(1859a) in the absence thereof, that they be legally authorized
for the purpose. Third persons who are not parties to
f.the
As principal
a rule, obligation
a pledgemay secure the latter
or mortgage by
is indivisible,
pledging or mortgaging their own property. (1857)
even though the debt may be divided among
the successors in interest of the debtor or of

Page | 29
J. Delos Santos
the creditor. This rule applies even if the a. Requisites of Conventional or Voluntary
debtors are jointly liable. Pledge:

• Exception: The pledge or mortgage is divisible
if several things are given in pledge or mortgage
and each one of them guarantees only a
determinate portion of the credit.
• The pledge must be constituted to secure the
fulfilment of a principal obligation;
• Can a newly incurred obligation be secured by
an already existing pledge? Yes, provided such
obligation is accurately described.

• The pledgor must be the absolute owner of

the thing pledge or mortgaged;

• The pledgor must have free disposal of the

property;

• The thing pledge should be should be placed

in the possession of the creditor or of a third
person by common agreement – Actual delivery
must be made and not symbolic delivery.

• To take effect against third persons the

description of the thing pledged and the date of
the pledge must appear in a public instrument.

Based on Art.2085 & \\\

Art. 2093. In addition to the requisites prescribed in
Article 2085, it is necessary, in order to constitute the
contract of pledge, that the thing pledged be placed in
II.the
PLEDGE
possession of the creditor, or of a third person by
common agreement. (1863)
Is an accessory contract by virtue or which
personal property delivered to the creditor as a
security for an obligation with the agreement b. Subject Matter of Pledge
that it can be sold at public auction in case of
non-payment to answer for the unpaid • Only personal or movable properties
obligation or for the creditor to return the same susceptible of possession.
in case the principal obligation is paid. It may be
conventional or voluntary pledge or legal or by Art. 2094. All movables which are within commerce
operation of law. may be pledged, provided they are susceptible of
possession. (1864)
-it’s a contract where debtor delivers a movable
or instruments evidencing incorporeal rights to
• Incorporeal rights – evidenced by negotiable
a creditor/3rd person for security to the
instruments, bills of lading, shares of stocks,
fulfilment of obligation. If once fulfilled, creditor
bonds, etc.
shall deliver it back with all its fruits and
accessions.

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J. Delos Santos

- Limited to personal property and di for
real property and dapat w/in the
commerce of man ung thing.
- Incorporeal rights evidenced by
documents (negotiable or not) may be
pledgeed alsp. If negotiable, yung
document dapat must be indorsed in
favour to the creditor.
Art. 2102. If the pledge earns or produces fruits,
income, dividends, or interests, the creditor shall
compensate what he receives with those which are
owing him; but if none are owing him, or insofar as the
amount may exceed that which is due, he shall apply it
to the principal. Unless there is a stipulation to the
contrary, the pledge shall extend to the interest and
earnings of the right pledged. In case of a pledge of
animals, their offspring shall pertain to the pledgor or
owner of animals pledged, but shall be subject to the
pledge, if there is no stipulation to the contrary.
(1868a)

Art. 2095. Incorporeal rights, evidenced by negotiable

instruments, bills of lading, shares of stock, bonds,
c. Rules in Possession
warehouse receipts and similar documents may also
• The pledgee has the right to retain the thing
be pledged. The instrument proving the right pledged
shall be delivered to the creditor, and if negotiable, until the debt is paid;
must be indorsed. (n)
- Possession of pledge constitutes
• Fruits – If the thing pledged earns or produces security to creditor. Debtor can’t
fruits, income, or dividends, the creditor shall: demand for it to be returned if he hasn’t
fulfilled his obligation yet. BUT the right
• Compensate what he receives with those of retention is limited to the fulfilment
which are owing him; of principal obligation for which pledge
is created.
• But if none are owing him, or insofar as the
amount
Art. 2098.mayTheexceed
contract that which
of pledge is due,
gives a righthe
to shall
the
apply it to the principal. Unless there is a
creditor to retain the thing in his possession or in that
stipulation to the
of a third person contrary,
to whom thedelivered,
it has been pledge until
shall
the debt is paid. (1866a)
extend to the interest and earning of the right
pledged;
• The pledgor cannot alienate the thing pledged
- Pledgee has no right to use the thing before the obligation becomes due unless there
pledged/appropriate the fruits w/o the is consent on the part of the pledgee –
authority of owner. However, the ownership of the thing pledged is transferred to
pledgee may apply the fruits, income, the vendee or transferee as soon as the pledgee
dividends, or interest earned, if owing & consents to the alienation but the latter shall
thereafter to principal of his credit. continue in possession;
• Offsprings of Animals – shall pertain to the • The creditor-pledgee shall take care of the
pledgor or owner or animals pledged, but shall thing pledged with the diligence of a good
be subject to the pledge if there is no father of a family; he has a right of
stipulation to the contrary; reimbursement of the expenses made for its
preservation and is liable for its loss or
deterioration;

Art. 2099. The creditor shall take care of the thing

pledged with the diligence of a good father of a family;
he has a right to the reimbursement of the expenses
made for its preservation, and is liable for its loss or
deterioration, in conformity with the provisions of this

Page | 31
J. Delos Santos
• The pledgee cannot deposit the thing pledged
with a third person, unless there is a stipulation
authorizing him to do so;
Art. 2117. Any third person who has any right in or to
the thing pledged may satisfy the principal obligation
as soon as the latter becomes due and demandable.(n)
• The creditor-pledgee may bring actions which
pertain to the owner of the thing pledged in
order to recover it from or defend it against a
third person;
• The creditor cannot use the thing pledged
without the authority of the owner, and if he
should do so, or should misuse the thing in any
other way, the owner may ask that it be
judicially or extrajudicially deposited.
• The notice must state the date for which the
public sale is to be made.
• If at the first auction sale the thing is not sold,
a second one with the same formalities shall be
held; and if at the second auction there is no
sale either, the creditor may appropriate the
thing pledged. In this case, the creditor shall be
obliged to give an acquittance for his entire
claim.
• At the public auction, the pledgor or the
owner may bid. He shall moreover, have a
better rightUnless
Art. 2103. if he should
the thingoffer theissame
pledged terms as
expropriated,
the highest bidder. The pledgee may thereof.
the debtor continues to be the owner also bid
Nevertheless, the creditor may bring the actions which
but his offer shall not be valid if he is the ONLY
pertain to the owner of the thing pledged in order to
bidder.
recover it from, or defend it against a third person.
(1869)
• The pledgor or owner has no right to redeem
the property after the public auction. However,
there is equity of redemption, that is pledgor or
owner may satisfy the obligation after it
becomes due and before the public sale.

• Art.
EXCEPT:
2113. At If
thethe
publicpreservation of the
auction, the pledgor thing
or owner
pledged
may bid.requires its use ithave
He shall, moreover, musta better
be used
rightby the
if he
should offer the same terms as
creditor but only for that purpose.the highest bidder. The
pledgee may also bid, but his offer shall not be valid if
he is the only bidder. (n)
Art. 2104. The creditor cannot use the thing pledged,
Art. 2114. All bids at the public auction shall offer to without the authority of the owner, and if he should
pay the purchase price at once. If any other bid is do so, or should misuse the thing in any other way, the
accepted, the pledgee is deemed to have been owner may ask that it be judicially or extrajudicially
received the purchase price, as far as the pledgor or deposited. When the preservation of the thing pledged
owner is concerned. (n) requires its use, it must be used by the creditor but
only for that purpose. (1870a)
Art. 2115. The sale of the thing pledged shall
extinguish the principal obligation, whether or not the
d.proceeds
Public of the sale –are
Auction equal
the to the amount
creditor to whom of the
the
principal obligation, interest and expenses in a proper
credit has not been satisfied in due time, may
case. If the price of the sale is more than said amount,
proceed
the debtor before a be
shall not notary
entitledpublic to theunless
to the excess, sale itof
the thing pledged.
is otherwise agreed.This shall
If the be:of the sale is less,
price
neither shall the creditor be entitled to recover the
• deficiency,
Made at anotwithstanding
public auction;any stipulation to the
contrary. (n)
• With notification to the debtor and the owner
ofArt.
the2116.
thingAfter the public
pledged in a auction,
proper the pledgee shall
case;
promptly advise the pledgor or owner of the result
thereof. (n)

Page | 32
J. Delos Santos
e. Rules on Deficiency and Excess
• Deficiency cannot be recovered – the sale of
the thing pledged shall extinguish the principal
obligation, whether or not the proceeds of the
auction sale are equal to the amount of the
principal obligation, interest and expenses in a
proper case. The creditor is not entitled to
recover the deficiency even if there is a
stipulation to the contrary;
• Excess belong to the creditor-pledgee - if the
price of the sale is more than the amount of the
obligation, the debtor shall not be entitled to
the excess. Exceptions:
• If it otherwise agreed.
• In legal pledge or pledge by operation of law,
after payment of the debt and expenses, the
remainder of the price of the sale shall be
delivered to the obligor.
Art. 2115. The sale of the thing pledged shall
extinguish the principal obligation, whether or not the
proceeds of the sale are equal to the amount of the
principal obligation, interest and expenses in a proper
case. If the price of the sale is more than said amount,
the debtor shall not be entitled to the excess, unless it
is otherwise agreed. If the price of the sale is less,
neither shall the creditor be entitled to recover the
deficiency, notwithstanding any stipulation to the
contrary. (n)
Effect of sale of thing pledged:
1. price of sale > amount due = debtor is NOT
entitled to excess unless there’s a stipulation.
2. price of sale < amount due = neither is the
creditor entitled to recover deficiency.
General Rule on right of debtor to excess: not
entitled to excess unless may agreement.
f. Extinguishment of Pledge
• If the thing pledged is returned by the pledgee
to the pledgor or owner and any stipulation to
the contrary shall be void.
J. Delos Santos
- 1 of the essential requisites is that the
object shall be placed in creditor/3 rd
person’s possession. Thus, if returned by
pledgee, extinguished na siya.
- Presumption: possession of thing
pledged by debtor/owner subsequent to
perfection of pledge gives rise to prima
facie – presumption na thing is returned
na so extinguished na dapat. Pwede
mag argue against this na nireturn lang
for substitution dun sa thing na pledge.
Art. 2110. If the thing pledged is returned by the
pledgee to the pledgor or owner, the pledge is
extinguished. Any stipulation to the contrary shall be
void.
If subsequent to the perfection of the pledge, the thing
is in the possession of the pledgor or owner, there is a
prima facie presumption that the same has been
returned by the pledgee. This same presumption exists
if the thing pledged is in the possession of a third
person who has received it from the pledgor or owner
after the constitution of the pledge. (n)
• A statement in writing by the pledgee that he
renounces or abandons the pledge is sufficient
to extinguish the pledge. For this purpose,
neither the acceptance by the pledgor or owner
nor the return of the thing pledged is necessary,
the pledgee becoming a depositary.
- Renunciation/abandonment MUST be in
writing in order to extinguish the
pledge. Such renunciation is not
conditioned upon pledgor’s
acceptance.The waiver transforms the
pledgee into a depositary w/ rights &
obligations of one.
III. REAL ESTATE MORTGAGE:
a. Governing Law
• Art. 2124 – 2131 of the Civil Code; and
• Act No. 3135
Page | 33
- real estate mortgage is a contract whereby the
debtor secures to the creditor fulfillment of a
principal obligation.
- it’s a real, accessory, and subsidiary contract.
- It’s also a unilateral contract cos it creates an
obligation only on the part of the creditor who
must free the property from encumbrance.
b. Subject – only immovable properties or real
rights over such immovable may be the subject
of a REM.
• Buildings are immovable properties distinct
from the land on which they are built, hence,
building may be the subject of a separate REM.
• There are instances when certain movables
are treated as a real property because of
estoppel – if the parties are aware that the
subject property is a movable and yet then
execute a REM on such property. The parties
are precluded from denying the existence of the
REM in order to protect the interest of third
persons;
Art. 2124. Only the following property may be the
object of a contract of mortgage: (1) Immovables; (2)
Alienable real rights in accordance with the laws,
imposed upon immovables.
c. Nature of REM – REM is an encumbrance on
real property. The registered mortgage follows
the property even if there is a change in
ownership.
• Security interest – only security interest is
acquired, the right to possession is not included
unless otherwise stipulated;
• In case of several mortgages constituted over
the same property, the first registered
mortgagee has superior right over junior
mortgagees or attaching creditors;
J. Delos Santos
• Registration – a real estate mortgage must be
registered with the Registry of Deeds where the
subject property is located in order to affect
third persons. However, an unregistered
mortgage is valid between the parties.
d. After-acquired property and after-incurred
obligations
• The parties may stipulate that after acquired
property are automatically included in the
mortgage;
• After-incurred or future obligations may be
covered by REM if the same is expressly
provided; In the absence of stipulation, the
general rule is that the mortgage must be
limited to the amount mentioned in the
mortgage;
• Dragnet clause – a stipulation wherein all
debts of the mortgagor will be secured by the
current REM; A mortgage with a dragnet clause
makes available future loans without the need
to execute another set of security documents.
e. Foreclosure of REM
• Concept – Foreclosure is the remedy available
to the mortgagee by which he subject the
property mortgaged to the satisfaction of the
obligation secured;
• Ground for foreclosure;
• When the principal obligation is not paid
when due;
• When there is any violation of any condition,
stipulation or warranty by the mortgagor.
Kinds of foreclosure:
Judicial foreclosure-
Page | 34
by bringing an action for that purpose in the
RTC of the province/city where the real
property/any part thereof lies. If may balance
due to mortgagee after applying proceed of sale
ordered by court, entitled pa rin siya to recover
deficiency.
A foreclosure made through the filing of a
petition in court
• If the defendant fails to pay the amount due
within the time directed by the court, the
property shall be sold;
• The proceeds of the sale shall be distributed
as follows:
• The cost of the sale;
• The claim of the person foreclosing the
mortgage;
• Claims of junior encumbrances in the
order of their priority;
• Balance after all of the above shall be
paid to the mortgagor or his agent.
• Deficiency Judgment – if the proceeds of
the sale are not sufficient to satisfy the
claim of the creditor, the court, upon motion,
shall render the judgment against the debtor,
for such balance
Extrajudicial foreclosure- where there is
inserted in contract a clause giving the
mortgagee the power, upon default of debtor,
to foreclose the mortgage through extrajudicial
sale.
This is made in compliance with the provisions
of Act No. 3135 in the following cases:
• Where there is a stipulation in the mortgage
contract that the mortgage may be foreclosed
extrajudicially; or
J. Delos Santos
• Where such extra-judicial foreclosure sale is
made under a special power of attorney
inserted in the contract.
Art. 2131. The form, extent and consequences of a
mortgage, both as to its constitution, modification and
extinguishment, and as to other matters not included
in this Chapter, shall be governed by the provisions of
the Mortgage Law and of the Land Registration Law.
(1880a)
Redemption
f. Redemption
• A transaction through which the mortgagor,
or one claiming in his right, by means of
payment or the performance of the condition,
reacquires or buys back the value of the title
which may have passed under the mortgage.
- the mortgage owner wil buy again the
property w/in certain period.
Kinds of redemption:
Equity of Redemption – this refers to the right
of the mortgagor to redeem the mortgaged
property after his default in the performance of
his obligation but before the property is sold.
- In judicial foreclosure, mortgagor may
exercise his equity of redemption before
the sale is confirmed by court and NOT
after.
• Available only in judicial foreclosure of REM,
the mortgagor is given not less than 90 days to
pay the mortgage debt before the property is
sold;
Right of Redemption – this refers to the right of
the mortgagor to repurchase the property
within a certain period after it was sold for the
payment of the mortgage debt.
Page | 35
• In judicial foreclosure, the mortgagor may
redeem the property after the sale and before
the confirmation by the court of the sale.
- Mortgagor can’t exercise his right of
redemption after sale is confirmed.
• In extrajudicial foreclosure, the mortgagor has
one year from the date of registration of the
sale to redeem the property.
- in all cases of extrajudicial sale,
mortgagor may deem the property w/in
the term of 1yr from and after the date
of registration of sale.
• Exception: if the owner of the property is a
juridical person, the right of redemption may be
exercised until the registration of the certificate
of foreclosure sale with the Registry of Deeds
which in case shall be more than 3 months after
foreclosure, whichever is earlier
IV. CHATTEL MORTGAGE
- It is an accessory contract by virtue of
which personal property is recorded in
the Chattel Mortgage Registry as
security for the performance of an
obligation.
Subject Matter – It covers personal or movable
properties including incorporeal properties,
shares of stocks and interests in business. The
exception in estoppel is also applicable in
chattel mortgage.
- It’s an accessory (performance of
principal obli.), formal (for validity,
rehistration in chattel mortgage register
is indispensable), and unilateral contract
(produces only an obligation on part of
creditor to free it from encumbrance).
Required formalities in Chattel Mortgage:
J. Delos Santos
• CM must be registered in the Chattel
Mortgage Registry of the Registry of Deeds
where the mortgagor resides or if he resides
outside the Philippines, in the place where the
property is situated. An unregistered mortgage
is binding between the parties but not on third
persons. Under chattel mortgage law, if
property is located in a province different from
that in which the mortgagor resides,
registration must be in both registers otherwise
chattel mortgage is void.
• Affidavit of good faith – a document executed
by the parties attesting that the loan on which
the personal property secures in entered into in
good faith. Absence of affidavit of good faith
vitiates/impair a mortgage only against 3rd
persons w/o notice like creditors & subsequent
encumbrances.
After incurred obligations and after acquired
properties:
• A chattel mortgage can cover only obligations
EXISTING at the time of the mortgage is
constituted. IT CANNOT cover after incurred
obligations;
• Chattel Mortgage shall be deemed to cover
only the property described therein and not like
or a substituted properties thereafter acquired;
Right of Redemption – There is no right of
redemption after the foreclosure sale; there is
only equity of redemption before the
foreclosure sale – mortgagor is given not less
than 90 days to pay the mortgage debt before
the property is sold.
Right of redemption:
1. When condition of CM is broken, the f.f. may
be redeemed: mortgagor, person holding a
subsequent mortgage, or a subsequent
attaching creditor.
Page | 36
2. An attaching creditor who redeems shall be
subrogated to rights of the mortgage & entitled
to foreclose the mortgage in same manner that
mortgagee could foreclose.
3. The redemption is made by paying/delivering
to the mortgagee the amount due on such
mortgage & the cost & expenses incurred by
breach of condition before the sale.
Deficiency after foreclosure – after foreclosure,
the mortgagee may generally recover any
deficiency that may result after applying the
proceeds of the foreclosure sale to the
obligation.
• EXCEPTION: When the transaction secured is
sale of personal property on installment basis
under the Recto Law
Right of mortgagee to recover deficiency:
1. Creditor may maintain an action for
deficiency even if CML is silent.
2. If CM is constituted as security for purchase
of personal property payable in instalments that
is not for a loan, no deficiency judgments can be
asked. Agreements to contrary is void.
Art. 2140. By a chattel mortgage, personal property is
recorded in the Chattel Mortgage Register as a security
for the performance of an obligation. If the movable,
instead of being recorded, is delivered to the creditor
or a third person, the contract is a pledge and not a
chattel mortgage. (n)
Art. 2141. The provisions of this Code on pledge,
insofar as they are not in conflict with the Chattel
Mortgage Law shall be applicable to chattel
mortgages. (n)
V. ANTICHRESIS
• Antichresis is an accessory contract whereby
the creditor acquires the right to receive the
fruits of an IMMOVABLE property of his debtor
with the obligations to apply them to the
payment of the interest, if owing, and
thereafter to the principal of his credit.
Art. 2134. The amount of the principal and of the
J.interest
Delos shall
Santos
be specified in writing; otherwise, the
contract of antichresis shall be void. (n)
- Accessory contract cos it secures the
performance of a principal obligation.
• The property involved is an immovable that is
delivered to the antichretic creditor as a
security – ownership is not transferred. The
debtor cannot reacquire the enjoyment of the
immovable until full payment of his obligation.
• Antichresis is also indivisible and the rules that
apply to mortgage and pledge regarding
indivisibility applies to Antichresis
Art. 2132. By the contract of antichresis the creditor
acquires the right to receive the fruits of an immovable
of his debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter to the
principal of his credit. (1881)
• Required formalities – The amount of the
principal and the interest shall be specified in
writing, otherwise the contract of Antichresis is
void.
• Measurement of value – the actual market
value of the fruits at the time of the application
thereof to the interest and principal shall be the
measure of the application of fruits to the
obligation.
- Contract doesn’t cover immovable
properties but ONLY its fruits. Fruits of
immovable which is the object of
antichresis must be appraised at their
actual market value at the time of
application.
• The contracting parties may stipulate that the
interest upon the debt be compensated with
the fruits of the property which is the object of
the Antichresis;
Page | 37
 Art. 2133. The actual market value of the fruits at the
time of the application thereof to the interest and
principal shall be the measure of such application. (n)

• If the value of the fruits should exceed the • The creditor in order to exempt himself from
amount of interest allowed by the law against the obligations imposed upon him to pay the
usury, the excess shall be applied to the abovementioned expenses may always compel
principal. the debtor to enter again upon the enjoyment
of the property, except then there is a
Art. 2138. The contracting parties may stipulate that stipulation to the contrary.
the interest upon the debt be compensated with the
fruits of the property which is the object of the • The creditor does not acquire the ownership
antichresis, provided that if the value of the fruits
- Antichretic creditor is under the of the real estate for non-payment of the debt
should exceed the amount of interest allowed by the
obligation
laws against toexcess
usury, the applyshall
the be
fruits of property
applied to the within the period
Art. 2137. agreed upon.
The creditor Everyacquire
does not stipulation
the
principal.in satisfaction, first, or whatever
(1885a) toownership
the contrary
of theshall be void;
real estate for non-payment of the
interest on debt is due and secondly, to debt within the period agreed upon. Every stipulation
• toThe
theremedies of the
contrary shall creditor
be void. in case
But the of may
creditor non-
the payment of principal.
payment of court
petition the debt for
within the period
the payment of theagreed
debt orupon
the
- Fruits must be appraised on basis of
(the fruits are not enough) are as follows: of
sale of the real property. In this case, the Rules
their actual market value at time of Court on the foreclosure of mortgages shall apply.
application. If the value shall exceed the • To abandon the security and file an
(1884a)
amount of interest allowed by Usury action for specific performance; action
law, excess shall be applied to the for specific performance.
principal.
• Petition the court for the payment of
• Obligations of the antichretic creditor the debt or the sale of the real property –
the rule 68 of rules of court on the
• To pay the taxes and charges upon the
foreclosure of mortgages shall apply.
estate, unless there is a stipulation on the
However, parties may agree on an
contrary – to be deducted from the fruits.
extrajudicial foreclosure.
If creditor doesn’t pay he is required to
pay indemnity for damages to debtor. - Creditor does not acquire ownership of
the immovable property in case of non-
Art. 2135. The creditor, unless there is a stipulation to
payment since what was transferred is
the contrary, is obliged to pay the taxes and charges
upon thenot the ownership but the merely the
estate.
right to receive the antichresis.
He is also bound to bear the expenses necessary for its
- A stipulation authorizing the antichretic
preservation and repair.
creditor to appropriate the property in
The sums spent
case of for the purposes is
non-payment stated
void.in this article
shall be deducted from the fruits. (1882)

• To bear the expenses necessary for its

preservation and repair – to be deducted
from the fruits;

Page | 38
J. Delos Santos
 LAW ON Credit
Transactions reviewer
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LAW ON CREDIT TRANSACTIONS

1.1 PLEDGE, REAL MORTGAGE AND CHATTEL
MORTGAGE
1.2 CONTRACT OF AGENCY
Direction: Read and select the best answer for
the following questions:
1. The following requisites are essential to the
contracts of pledge, real estate mortgage,
except
a. That they be constituted to secure the
fulfillment of a principal obligation such as
contract
of loan.
b. That the pledger or mortgagor be the
absolute be the absolute owner of the thing
pledged
or mortgaged.
c. That the persons constituting the pledge or
mortgage have the free disposal of their
property, and in the absence thereof, that they
be legally authorized for the purpose.
d. That when the principal obligation becomes
due, the things in which the pledge or mortgage
consists may be alienated for the payment of
the creditor.
e. That the thing pledged or mortgaged be place
in the possession of the creditor, or of a third
person by common agreement.

Page | 39
J. Delos Santos
2. The following are the kinds of principal
obligations that may be secured by a contracts
of pledge,
or real estate mortgage or of chattel mortgage,
except
a. Pure obligations
b. Conditional obligations whether suspensive
condition or resolutory condition
c. Obligations with a period whether suspensive
period (ex die) or resolutory period (in diem)
d. Natural obligations
e. Rescissible obligations
f. Voidable obligations
g. Unenforceable obligations
h. Null and void obligations
3. When is the pledger or mortgagor required to
be the owner of the thing pledged or
mortgaged
for the validity of contracts pledge, of real
estate mortgage or of chattel mortgage?
a. At the time the principal obligation is
constituted.
b. At the time the contract of pledge or
mortgage is constituted.
c. At the time of the failure to pay the principal
obligation.
d. At the time the thing to be pledged or
mortgaged is to be delivered.
4. D borrowed P1,000,000 from C. G, a third
person, mortgaged his land to secure the
fulfillment
of D’s loan. Is the contract of mortgage valid?
a. No. because D must be the owner of the
mortgaged land.
b. Yes, provided G will deliver the land to C.
c. Yes because third persons who are not parties
to the principal obligation may secure the
latter by pledging or mortgaging their own
property.
d. No, because G is no privy to the contract of
loan.
5. It is a stipulation whereby the thing pledged
or mortgaged shall automatically become the
property of the creditor in the event of non-
payment of the debt within the term fixed.
a. Pactum creditarium
b. Pactum commissorium
c. Pactum debitarium
J. Delos Santos
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d. Pactum crematorium
6. D borrowed P10,000 from C. To secure the
fulfillment of the loan, D pledged his laptop. The
contract of pledge provides that the creditor-
pledgee may appropriate the laptop upon
failure of
the debtor-pledgor to pay the loan. On the date
of maturity of the loan, D failed to pay the loan.
Which of the following statements is correct?
a. C becomes the owner of the laptop.
b. The laptop cannot be alienated for the
payment of the loan.
c. C does not become the automatic owner of
the laptop upon D’s failure to pay the loan
because that provision is considered pactum
commissorium which is contrary to law and
public policy.
d. The contract of pledge is null and void
because of pactum commissorium provision.
7. D borrowed P20,000 from C. To secure the
fulfillment of the loan, D mortgage a land
owned by
his ailing father. Which of the following
statements is correct?
a. The contract of mortgage is valid because
future property may be pledged or mortgaged.
b. The contract of loan is null and void because
the contract of mortgage is null and void.
c. The contract of mortgage will become valid
upon the death of D’s father.
d. The contract of mortgage is null and void
because the mortgagor must be the owner of
the
property mortgaged at the time it is constituted
but the contract of loan remains to be valid.
8. ABC Inc. borrowed P2,000,0000 from BPI.
ABC Inc. is under receivership. To secure the
fulfillment of the loan, ABC mortgaged its
administrative building. Which of the following
statements is correct?
a. The contract of mortgage is null and void
because the mortgagor has no free disposal of
the
thing.
b. The contract of mortgage is valid because the
mortgagor is the absolute owner of the
Page | 40
property mortgaged at the time the mortgage is
constituted.
c. The contract of mortgage is null and void
because only natural person may enter in a
contract of mortgage.
d. The contract of mortgage is voidable.
9. The following are the instances where the
thing pledged or mortgaged may be sold or
alienated
to pay the principal obligation, except
a. If the pledgor or mortgagor fails to fulfill
certain conditions and such violation would
make
the debt due and demandable.
b. If the debtor has lost the right to make use of
the period or where there is an acceleration
clause in the payment of installment.
c. Upon default to pay the obligation at
maturity.
d. Before maturity of the principal obligation.
10. What is the nature of a contract of pledge,
or chattel mortgage, of real estate mortgage or
of
antichresis?
a. It is divisible if the principal contract is joint.
b. It is indivisible if the principal contract is
solidary.
c. It is divisible whether the principal contract is
joint or solidary.
d. It is indivisible whether the principal contract
is joint or solidary.
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11. D borrowed P10,000 from C and pledged his
ring and watch with P4,000 and P6,000 value
respectively. After several days, D pays P4,000
to C. which of the following statements is
correct?
a. The contract of pledge is extinguished.
b. The contract of loan is extinguished.
c. D cannot demand the release of his ring
because a contract of pledge is invisible.
d. D may compel C to return the ring because
P4,000 of the loan is already paid.
12. D borrowed from C P100,000 secured by a
mortgage on D’s two lots (lot 1 and lot 2). D dies
leaving E and F as heirs with E inheriting lot 1
and F lot 2. F pays P50,000 of the loan. Which of
the following statements is correct?
J. Delos Santos
a. F may ask for the extinguishment of the
mortgage on lot 2.
b. The contract of mortgage is extinguished.
c. The contract of loan is extinguished.
d. F cannot ask for the extinguishment of the
mortgage on lot 2.
13. Using the same data in preceding number,
suppose it is C who dies leaving X and Y as heirs.
If D
pays X P50,000, which of the following
statements is correct?
a. X may cancel the mortgage to the prejudice
of Y.
b. X cannot cancel the mortgage to the
prejudice of Y.
c. The contract of mortgage is extinguished.
d. The contract of loan is extinguished.
14. D borrowed P10,000 from C and pledged his
ring and watch with P4,000 and P6,000 value
respectively. They agreed that the ring will
secure P4,000 of the loan and the watch will
secure
the balance of the loan. After several days, D
pays P4,000 to C. which of the following
statements is correct?
a. The contract of pledge on the watch is
extinguished.
b. The contract of loan is fully extinguished.
c. D cannot demand the release of his ring
because a contract of pledge is indivisible.
d. D may compel C to return the ring because
contract of pledge on the ring is extinguished.
15. A and B jointly borrowed P10,000 from C. In
order to secure their respective obligations, A
pledge his cellphone while B pledge his laptop.
At the maturity date of the loan, A paid P5,000
of the loan. Which of the following statement is
correct?
a. The contract of pledge on the cellphone is
extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone
because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is
extinguished.
16. A and B jointly borrowed P10,000 from C. In
order to secure the obligation, A pledged his
Page | 41
cellphone while B pledged his laptop. At the
maturity date of the loan, A paid P5,000 of the
loan. Which of the following statements is
correct?
a. The contract of pledge on the cellphone is
extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone
because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is
extinguished.
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17. It is a contract by virtue of which the debtor
delivers to the creditor or to a third person a
movable, or instrument evidencing
incorporated rights for the purpose of securing
the
fulfillment of a principal obligation with the
understanding that when the obligation is
fulfilled,
the thing delivered shall be returned with all its
fruits and accessions.
a. Contract of pledge
b. Contract of chattel mortgage
c. Contract of real estate mortgage
d. Contract of antichresis.
18. In case the cause or consideration of the
contract of pledge is not stipulated, what is the
cause of
consideration of a contract of pledge?
a. It has no cause or consideration.
b. The cause or consideration of the principal
obligation or contract of loan.
c. The cause or consideration is the liberty of
the pledger.
d. The cause is the service remunerated.
19. The following are the characteristics of a
contract of pledge, except
a. Consensual – it is perfected by mere consent.
b. Accessory – it has no independent existence
of its own because there must be contract of
loan.
c. Unilateral – it creates an obligation on the
part of the creditor to return the thing upon the
fulfillment of the principal obligation.
d. Subsidiary – the obligation incurred does not
arise until the fulfillment of the principal
obligation which is secured.
J. Delos Santos
20. The following are the essential requisites of
conventional pledge or contract of pledge,
except.
a. That it be constituted to secure the
fulfillment of a principal obligation or contract
of loan.
b. That the pledger be the absolute owner of
the thing pledged.
c. That the person constituting the pledge has
the free disposal of his property, and in the
absence thereof, that he be legally authorized
for the purpose.
d. That the thing pledged be placed in the
possession of the creditor, or third person by
common agreement or there must be delivery
of the thing pledged.
e. That the contract of pledged be constituted
in public document.
21. What is the nature of a contract to
constitute a pledge?
a. Consensual contract.
b. Real contract.
c. Formal contract
d. Solemn contract
22. What is the legal effect of a promise or
contract to constitute a pledge?
a. It is perfected by delivery of the thing pledge.
b. It is perfected through the notarization of the
promise.
c. It is perfected by mere consent and gives rise
only to a personal action between the
contracting parties.
d. It gives rise to a real action over the thing
pledged.
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23. The following statements pertaining to a
promise to constitute a pledge or mortgage are
correct,
except
a. It gives rise only to a personal action between
the contracting parties.
b. The contract perfected is a real contract.
c. It creates no real right in the property but
only a right to compel the fulfillment of the
promise but there is no contract of pledge or
contract of mortgage yet.
d. The promissor will be criminally liable if he
mortgages or pledges as unencumbered things
Page | 42
which he knew were subject to some burden.
24. what is the nature of a contract of pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
25. The following may become the object of a
contract of pledge, except
a. All movable
b. Personal property susceptible of possession.
c. Incorporeal rights which are evidenced by
negotiable instruments, bill of lading, shares of
stocks, bonds, warehouse receipts and similar
documents.
d. Real or immovable properties and rights
thereon.
26. What is the form of contract of pledge to
bind the contracting parties?
a. It must be in a private instrument.
b. It must be in a public instrument.
c. It must be registered in the registry of deeds.
d. It may be in any form because it is real
contract.
27. What is the form of contract of pledge to
bind or to effect third persons?
a. It must be registered in the chattel mortgage
registry.
b. It must be registered in the registry of deeds.
c. It must be in a public instrument showing a
description of the thing pledged and the date of
the pledge.
d. It must be recorded in the Intellectual
Property Office.
28. The contract of pledge shall cover the
following, except
a. The thing pledged.
b. The fruits, income, dividends or interests
earned or produced by the thing pledged,
unless
there is stipulation excluding them.
c. The offspring, when the thing pledged is an
animal, unless there is a stipulation excluding
them.
d. The future inheritance of the pledgor.
29. The following are the rights of the debtor-
pledgor, except
a. To alienate, with the consent of the pledgee,
the thing pledged.
J. Delos Santos
b. To continue to be the owner of the thing
pledged unless it is expropriated.
c. To become the owner of the offspring of the
animal pledged if there is not stipulation to the
contrary although such offspring but shall be
subject to the pledge.
d. To ask for the return of the thing pledged
after he has paid the debt and its interest, with
expense in a proper case.
e. To ask that the thing pledged be judicially or
extra-judicially deposited if it is used without
authority or for a purposes other than for its
preservation.
f. To require that the thing be deposited with a
third person if it is in danger of being lost or
impaired through the negligence or willful act of
the pledgee.
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g. To demand the return of the thing pledged,
upon offering another thing in pledge, provided
the latter is of the same kind and quality, if
there are reasonable ground to fear the
destruction or impairment of the thing pledged
without the fault of the pledgee. This right
is without prejudice to the right of the pledgee
to have the thing sold at a public sale.
h. To demand the return of the thing pledged
despite defaulting on the payment of the
secured
principal obligation.
30. In case the thing pledged is alienated by the
debtor-pledgor to third person, what is the
effect of
the consent of the pledgee to the alienation
made by the pledger of the thing pledged to
third
person?
a. The thing pledged remains to be owned by
the debtor-pledgor.
b. The ownership of the thing pledged is
transmitted to the buyer.
c. The creditor-pledgee losses possession of the
thing pledged.
d. The contract of pledge is already
extinguished.
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Page | 43
 A. Yes, because there was actual meeting of
StuDocu is not sponsored or endorsed by any college or university the minds of A’s offer
B. No, for B did not signify his acceptance
Test 2016, questions and of A’s offer
answers C. Yes, because A is already estoppels by
his signed letter
Bachelor of Science in Accountancy D. Yes, because the period of two (2)
(Ateneo de Naga University) months has not expired
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4. Mr. AB owes Mr. CD P150,000 due on

TEST BANK
August 1, 2010. Mr. AB executed mortgage
SALES, AGENCY and PLEDGE
in favor
1.Unless there is stipulation to the contrary
of Mr. CD on Mr. AB’s building to guaranty
the expenses for the execution or registration
the obligation. On August 10, 2010, the
of the
mortgage building was totally lost due to a
sale shall be borne by:
strong typhoon. On August 12, 2010, Mr.
A. The Vendee
CD
B. The Vendor demanded payment from Mr. AB. Is Mr.
C. The Vendee and Vendor
CD’s demand valid?
D. The agent or broker
A. No, the obligation is one with a definite
2. A offered to sell his lot to B for P100,000.
period, thus the creditor cannot demand
In his offer to sell it was stated that he is
fulfillment of the obligation as such would
given 60
the prejudicial to the rights of the debtor.
days to prepare the P100,000 and as soon as
B. No, the obligation is extinguished
B is ready with the money, A will execute a
because the obligation is lost through a
deed
fortuitous
of sale. Before the end of 60 days, A
event.
informed B that price of the lot was
C. Yes, the debt becomes due at once
increased to
because the guaranty was lost even
P120,000. May B, compel A to accept
through a
P100,000 offered previously by A and make
him fortuitous event. Unless the debtor can
execute the deed of sale? mortgage another property that is equally
A. Yes, because A already signed his offer satisfactory.
D. Yes, the debt becomes due at once
B. No, For B never signified his
because, from the tenor benefit is given
acceptance of A’s offer.
solely to the
C. Yes, because there was actual meeting of
creditor thereby giving the creditor the right
minds of the parties
to demand performance even before the
D. Answer not any of the above.
date.
3. A wrote a letter to B wherein A offered to
5. Mrs. Go sold and delivered her diamond
sell a piece of land to B for P200,000. B
ring to Mrs. Pat. It was agreed upon that
signified
after ten
his desire to buy the land. In A’s letter he
(10) days Mrs. Pat will name and fix the
gives B a period of two (2) months within to
price. On the tenth (10th) day, Mrs. Pat
produce the P200,000. After 45 days, A told
called up by
B that the price of the land is now P250,000.
telephone Mrs. Go and stated the price at
Can B compel A to accept the P200,000 first
P10,000. Mrs. Go agreed. IS the sale
offered by A and execute the deed of sale?
perfected?

Page | 44
J. Delos Santos
A. Yes, the price stated and named by one
of the contracting parties was accepted by
the other.
B. No, at the time of the sale the price was
not fixed.
C. No, the price was left to the discretion of
one of the parties
D. No, at the time of the sale the price is not
known.
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6. Mr. Sy sold a parcel of land to Mr. Tan
for P200,000. Mr. Sy delivered the transfer
Certificate
of Title of the land to Mr. Tan. Later, Mr.
Tan wanted to register the land to his name
and he
needed a Deed of Sale. What can Mr. Tan
do?
A. Mr. Tan can compel Mr. Sy to execute
a Deed of Sale
B. Mr. Tan cannot compel Mr. Sy to refund
the P200,000 because the contract is not
enforceable
C. Mr. Tan can sue Mr. Sy enriching himself
at the expense of another.
D. Mr. Tan can possess and utilize the land
as a buyer in good faith.
7. Bonds which are not secured by any
specific mortgage lien of pledge or corporate
property
but by the general corporation are:
A. Guaranteed bonds
B. Debenture bonds
C. Income bonds
D. Redeemable bonds
8. The buyer of a thing has the right to the
fruits of the thing:
A. From the time the thing bought is
delivered
B. From the time the sale is perfected
C. From the time the obligation to deliver
the thing bought arises.
D. From the time the fruits are delivered.
9. Three (3) of the following are option
money. Which is the earnest money?
A. Given when contract of sale is
perfected.
J. Delos Santos
B. Given when there is no contract of sale.
C. Given to bid the offer or in a unilateral
promise to sell or to buy.
D. Given as a separate consideration from
purchase price.
10. In a sale, this is actual delivery.
A. Execution and signing of the sale
document.
B. When the goods sold are placed in the
control and possession of the buyer.
C. Delivery by the seller to the buyer of the
key where the goods sold are kept.
D. The buyer is already in actual possession
of the goods.
11. This is a mode to extinguish an agency:
A. Death of the principal, but the agency is
for the interest of the principal and agent.
B. Partial accomplishment of the agency.
C. Upon withdrawal of the principal.
D. Insanity of principal or agent.
12. D pledged his Singer Sewing Machine to
C for P8,000. D was unable to pay the
obligation
60 days after it was due. C sold the machine
at public auction for P6,000.
A. C cannot recover the deficiency of
P2,000 even if there is stipulation that he
can.
B. C can recover the deficiency of P2,000
even without stipulation.
C. C cannot recover the deficiency of P2,000
D. C can recover the deficiency of P2,000.
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13. In a sale, the buyer is entitled and has the
right to the fruit of the thing sold from the
time:
A. The obligation to deliver the thing sold
arises
B. The sale is perfected
C. The thing sold is delivered
D. The fruit of the thing sold is delivered.
14. Mr. AB offered in writing to sell his
house and lot for P750,000 to Mr. CD on
July 1, 2010.
Mr. CD requested Mr. AB to give him 60
days within which to raise the P750,000. On
Page | 45
August 15, 2010 Mr. AB informed Mr. CD
that the price is raised and now at
P1,000,000.
Can Mr. CD compel Mr. AB to sell his
house and lot at P750,000 which was offered
in
writing by Mr. AB?
A. Yes, because Mr. AB is already stopped
by his written offer.
B. Yes, because the 60 days offer has not yet
expired
C. No, because Mr. CD has not accepted
the offer of Mr AB.
D. Yes, there was meeting of the minds.
15. In distinguishing Earnest Money from
Option money, earnest Money is:
A. Given when there is no contract of sale,
B. Given only when there is perfected
contract of sale.
C. Given to bind the offer or in a unilateral
promise to sell or buy
D. Given as a separate consideration from
the purchase price.
16. Gay appointed May to sell the former’s
car for P200,000. May sold the car to Pam,
Pam
inspected the car and found hidden defects
in the car. Can Pam file an action against
Gay
even when May acted in her own name?
A. No, under “Caveat Emptor” let the buyer
beware.
B. Yes, because this is contract involving
property belonging to the principal
C. No, because, May acted in her own name
not of the principal.
D. No, because the contract of sale is
already perfected.
17. Mr. San authorized Mr. Soy to sell his
car for p200,000 with 5% agent’s
commission. Mr.
Soy sold the car to Mr. Dy for P250,000. For
how much is Mr. Soy accountable to Mr.
San?
A. P200,000
B. P190,000
C. P250,000
J. Delos Santos
D. P240,000
18. B pledged his Rolex to C for P4,000. B
failed to pay C the P4,000 on due date. C
sold the
Rolex watch at a public auction to the
highest bidder at P3,500.
A. C can recover the deficiency of P500
from B.
B. C can recover the deficiency of P500
even without stipulation.
C. C cannot recover the deficiency of P500
unless there is stipulation.
D. C cannot recover the deficiency of
P500 even if there is stipulation.
19. Which of the following may not be the
object of sale?
A. Things having potential existence
B. The sale of a vain hope or expectancy
C. Future goods
D. Answer not given.
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20. When delivery takes place by the mere
consent or agreement of the contracting
parties as
when the vendor merely points to the thing
sold which shall thereafter be at the control
and
disposal of the vended if the thing sold
cannot be transferred to the possession of the
vendee
at the time of sale, delivery is effected:
A. By tradition symbolica
B. By traditio longa manu
C. By traditio brevoi manu
D. Answer not given
21. The distinction between a chattel
mortgage and a pledge is that in chattel
mortgage:
A. The delivery of the personal property is
necessary
B. The registration of the property in the
Registry of Property is not necessary
C. The excess over the amount due after
foreclosure, goes to the debtor
D. Answer not given.
22. Sale is distinguished from dation in
payment in that in sale
Page | 46
A. There is a pre-existing obligation or
credit
B. The cause is the price
C. It is a mode of extinguishing an
obligation in the form of payment.
D. Answer not given.
23. Mr. Mar orders for his workers 1,000
pieces of T-shirt ranging in size from small
to large
from RDG Garments Mfg. Corp. The
specified sizes, although not then available,
are
manufactured by said corporation and
consigned to its sales outlets regularly. The
contract
entered into by Mr. Mar with the RDG
Garments Mfg. Corp. is a:
A. Contract for a piece of work.
B. Contract subject to a resolutory condition
C. A contract of sale
D. Answer not given
24. Mr. Amado owes the BIR P100,000 in
delinquent taxes and penalties. In order to
evade the
payment of said liability, he executed a deed
of sale of his only parcel of land valued for
P200,000 in favor of his brother Pedro,
where P20,000 was stated as the purchase
price but
the BIR has evidence that said price had
never been paid, the purpose of the sale
being to
prevent the BIR to levy upon the land to
satisfy the tax liability of Mr. Amado. In this
case:
A. The BIR may not levy upon the land
because the sale is void
B. The BIR without annulling the sale
may levy upon the land of Amado
pursuant to
the provisions of the National Internal
Revenue Code
C. The BIR should first annul the sale before
it may levy upon the land pursuant to the
provisions of the National Internal Revenue
Code.
D. Answer not given.
J. Delos Santos
25. Mr. Rene owns a mango tree bearing
fruits, ready for harvest. He sells all the
fruits of that
tree to Mr. Mar who pays Mr. Rene the sum
of P5,000. Rene tells Mar that he can just
harvest the fruits anytime he likes pointing
at the particular tree. For legal purposes,
Rene has
fulfilled his obligation to deliver the mango
fruits to Mar by:
A. Traditio brevi manu
B. Traditio longa manu
C. Traditio simbolica
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D. Answer not given
26. Mar Garci, before going to Spain
appointed Jc Legaspi as his agent to
administer his
properties in the Philippines. Afterwards,
Legaspi wrote Garci that he ( Legaspi) was
withdrawing from the agency because of
failing health. Legaspi, in the same letter
said that
he appointed Eg Legaspi as his substitute
and that Mar should extend a new
appointment to
Eg. Eg took over the duties of Jc but Mar did
not bother to appoint Eg to act as his agent
until Mar’s death. Now Mar’s heirs brought
an action against Eg for accounting. Eg
raised
the defense that he was not validly
constituted as an agent of Mar. In the case at
bar, defense
is not tenable because there is:
A. An actual agency
B. An implied agency
C. A general agency
D. Answer not given
27. Maria is authorized by Dulfo to sell the
latter’s washing machine for P5,000 each at
10%
commission. One day, Dulfo sells one
washing machine to Carla on credit (payable
in 90
days) but for a price of P6,000. If Dulfo does
not ratify this sale on credit, he can collect
cash
Page | 47
payment from Maria:
A. P4,500 (P5,000 less P500 commission)
B. P5,000 (the price without commission)
C. P5,400 (P6,000 less P600)
D. Answer not given
28. Tony sold a piece of land to Rene
binding himself not to sell the same to
another person. On
the following day, Tony sold the land to
Carla who immediately took possession in
good
faith. In the case at bar, the proper remedy of
Rene is to:
A. Institute an action for the annulment of
the sale to Carla
B. Institute an action for the recovery of the
land
C. Institute an action for damages against
Tony
D. Answer not given
29. Ces kidnapped and tortured Ed for
refusing to sell his (Ed’s) land to Ces. Ed
who could no
longer bear the physical pains inflicted upon
him signed a document of sale in favor of
Ces.
This sale is:
A. Void
B. Voidable
C. Valid
D. Answer not given
30. A sold a residential land to B. B paid the
consideration. When B wanted to register
the sale at
the Register of Deeds, the latter refused to
register and requires the presentation of the
certificate of capital gains tax payment.
What can B do?
A. B may sue A to refund the consideration
paid by B under the maxim, “no one shall
enrich
himself at the expenses of another.”
B. B cannot compel A to return the selling
price because the contract is not enforceable
C. B may possess the residential land as a
buyer in good faith
J. Delos Santos
D. B may compel A to pay the capital
gains tax and secure the certificate of
capital
gains tax payment
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31. A Seller sold to a Buyer a piece of
jewelry at a price of P20,000. The contract
provides that
the Buyer will pay Seller a micro wave oven
worth P5,000. What is the nature of the
contract?
A. Sale
B. Partly sale and partly barter
C. Barter
D. Commodatum
32. Mr. A. Abad signed a letter addressed
and delivered to Mr. B. Baje. The terms of
the letter
are:
1. An offer to sell a 500 sq.m. lot for
P300,000
2. An option time up to October 31, 2010 for
Mr. Baje to raise the P300,000
3. Upon payment of the P300,000, Mr. Abad
will execute and sign a Deed of Sale
4. On October 31, 2010, Mr. A Abad sent a
letter to Mr. B. Baje asking for a new price
of
P350,000 for the 500 sq. m. lot.
Can Mr. B. Baje compel Mr. A. Abad to
accept the P300,000 and make him sign and
execute
a Deed of Sale?
A. No, Mr.B. Baje did not accept the offer
of Mr. A. Abad
B. Yes, Mr. A. Abad is already stopped by
his sighing the letter and offer.
C. Yes, there was actual meeting of the
minds.
D. Yes, the contract is perfected
33. Mr. A mortgaged his residential land to
Mr. B as a guarantee for the payment of
P400,000
obligation of Mr. A. They agreed that Mr. A
shall not sell the land while the obligation
exists. The maturity of the mortgaged, C
offered to buy the land from Mr. A.
Page | 48
A. A cannot sell the land to Mr. C because
of the agreement not to sell
B. A can sell the land to Mr. C only if B
consents in writing
C. A can sell the land to Mr. C despite the
agreement not to sell (?)
D. A cannot sell the land to Mr. C unless A
pays the obligation
34. Mr. D. Dy constituted Mr. S. Sim as his
authorized agent to sell the former’s Lancer
car for
P300,000 and to pay him a 5% commission
on the selling price. Mr. S. Sim sold the car
for
P320,00. Mr. S. Sim shall remit to Mr. D
Dy:
A. P300,000
B. P320,000
C. P285,000
D. P305,000
35. Ownership of the thing sold is
transferred / acquired / retained:
A. Retained by the seller in “sale of return”
B. Transferred to the buyer upon
constructive or actual delivery of the
thing sold
C. Acquired by the buyer upon
D. Transferred to the buyer upon acceptance
of the price.
36. If redemption is made, which of the
following will not be paid by the seller to the
buyer
A. Price paid by the buyer
B. Expenses in the execution of the sales
contract paid by the buyer
C. All necessary expenses on the thing sold
and to be redeemed
D. Interest of the price paid by the buyer
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37. The following are requisites of Pledge
except:
A. The disposal of the pledge
B. The absolute ownership of the property
pledged
C. The thing pledge may be placed in the
possession of a third person
J. Delos Santos
D. To bind a third person, it must be
recorded in the office of the Register of
Deeds
38. The leviable properties of the debtor are
transferred to the creditors to be sold and
from the
proceeds, the creditor are paid;
A. Pledge
B. Cession
C. Dacion en pago
D. Chattel mortgage
39. A characteristic of the Contract of Sale
which involves exchange of value, it is
A. Commutative
B. Nominate
C. Bilateral
D. Consensual
40. The principal is not liable for expenses
incurred by the agent:
A. When it was stipulated that the agent
would only be allowed a certain sum
B. When the agent has complied with his
obligations by acting according to the
principal’s
instructions
C. When the agent incurred them with the
knowledge that an unfavorable result would
ensue
and the principal was aware of it
D. When the expenses were incurred without
the fault of the agent
41. An assignor of credit warrants:
A. Solvency of the debtor
B. Existence and legality of credit
C. Collectibility
D. Assurance of payment
42. A appoints B to sell his land
Example 1. If the authority of B is oral and
B sells the land in writing. The sale is valid.
Example 2. If the authority of B is in writing
and B sells the land orally. The sale is valid
A. Both examples are true
B. Both examples are false
C. First example is true, but the second
example is false
D. First example is false but the second
example is true
Page | 49
43. Which of the following is not a
characteristic of Sale?
A. Bilateral
B. Gratuitous
C. Consensual
D. Nominate
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44. The following are the alternative
remedies, except one available to the buyer
in case of
breach of warranty by the seller:
A. Keep the goods and ask for damages
B. Refuse to accept the goods and ask for
damages
C. Rescind the sale and retain the goods
D. Keep the goods and set up against the
seller by way of recoupment in price.
45. Which of the following statements is
true and correct?
A. In a Contract of Sale, the full payment of
the price is in the nature of a suspensive
condition in that the seller is obligated to
transfer ownership of the thing sold.
B. The seller need not be the owner of the
thing sold at the perfection of the sale.
C. There may be a transfer of ownership
over the thing even if the seller has not
delivered
the thing sold to the buyer.
D. In a Contract of Sale, the buyer becomes
the owner of the thing sold upon full
payment of
the purchase price.
46. X, Y and Z were appointed by R as his
agents to administer his building which was
rented by
various tenants while R was abroad for three
years. In the course of management, X cause
through his fault damage to the building
which was assessed at P30,000. R can claim:
A. P10,000 from each of X, Y and Z.
B. P30,000 from X
C. P30,000 from Y and Z
D. P30,000 from either X, Y and Z
47. Pledge and Mortgage are accessory
contracts because they:
J. Delos Santos
A. Are meant to secure the fulfillment of a
principal obligation.
B. Cannot exist if the principal obligation is
void.
C. Can exist by themselves.
D. Cannot secure fulfillment of rescissible
obligation.
48. Mr. A offered to sell his land to Mr. B
for P300,000. Mr. B accepted the offer and
paid Mr. A
the purchase price. Mr. A delivered the
owner’s certificate of the Transfer certificate
of Title
to the land. Mr. B wants to register the land
in his name but the Register of Deeds asks
Mr. B
for the Deed of Sale. What can Mr. B do ?
A. He may occupy the land as a buyer in
good faith.
B. He cannot compel Mr. A to return the
payment because the contract is
unenforceable.
C. He may compel Mr. A to execute the
Deed of Sale because the contract is valid.
D. He may sue Mr. A to return the purchase
price under the legal principle that no one
may
enrich himself at the expense of another.
49. Pacto de retro sale as distinguished from
mortgage:
A. There is redemption by payment
principally of the debt.
B. There is no transfer of possession of the
thing sold
C. There is no foreclosure unless it is
declared as an equitable mortgage.
D. There is no transfer of ownership of the
thing sold.
50. A is authorized by B to sell the latter’s
books for P100 each. A sells 10 books to C
on credit
but for a price of P120 each. After ratifying
the sale on credit, B can collect. After
ratifying
the sale on credit, B can collect cash
payment from C.
A. P1,000
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B. P1,200
C. P1,080
D. P 900
which is the object of the sale.
II. Payment of price is essential to delivery
of the thing sold.
A. Both statements are true.
B. Both statements are false
C. First statement is true, second
statement is false.
D. First statement is false, second statement
is true.
52. Three of the following are essential
requisites of a contract of mortgage. Which
one is not?
A. The person instituting the mortgage has
the free disposal of his property.
B. The contract must be in writing.
C. The mortgagor is the absolute owner of
the thing mortgaged.
D. The mortgage is constituted to secure the
fulfillment of a principal obligation.
53. In real mortgage, the following rules are
valid, except one:
A. A stipulation in the mortgage contract
prohibiting the owner from alienating the
immovable mortgaged is valid.
B. The mortgage may alienate the mortgage
credit or assign to a third person in whole or
in
part.
C. Any stipulation allowing the mortgage
creditor to appropriate the property
mortgaged is null and void.
D. If alienation of the mortgage credit is not
registered, it is still valid between the
parties.
54. A wrote a letter to B wherein A offered
to sell his piece of land to B for P200,000. B
signified his desire to buy the land. In A’s
letter, he gives B a period of two (2) months
within which to produce the P200,000. After
45 days, A told B that the price of the land is
now P250,000. Can B compel A to accept
the P200,000 first offered by A and execute
the
deed of sale?
J. Delos Santos
A. Yes, there was actual meeting of the
minds of the parties
B. No, for B did not signify his acceptance
of A’s offer.
C. Yes, because A is already stopped by his
signed letter
D. Yes, because the period of two months
has not expired.
55. A and B are good friends. A sold and
delivered his car to B. It was agreed and
understood
that on the next Sunday A will name and fix
the price of the car. Sunday came. A called
B by
phone and stated and fixed the price at
P150,000. Is the sale perfected?
A. Yes. The price was stated and fixed on
the date agreed upon.
B. No. The price was left to the discretion of
the seller.
C. No. at the time of the sale, the price is not
fixed.
D. No. The price fixed by the seller was
not accepted by the buyer.
56. In sale, this is actual delivery:
A. Execution and signing of the sales
document.
B. When the goods sold are p0laced in the
control and possession of the buyer.
C. Delivery by the seller to the buyer of the
key where the goods are kept.
D. The buyer is already in actual possession
of the goods.
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57. This is a mode of extinguishing an
agency:
A. Death of the principal, but the agency is
for the interest of the principal and agent.
B. Partial accomplishment of the agency.
C. Upon withdrawal of the principal.
D. Insanity of the principal or agent.
58. D pledged his Singer Sewing Machine to
C for P8,000. D was unable to pay the
obligation
60 days after due date. C sold the machine at
public auction for P6,000.
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A. C cannot recover the deficiency of
P2,000 even if there is stipulation that he
can.
B. C can recover the deficiency of P2,000
even without stipulation.
C. C cannot recover the deficiency of P2,000
D. C can recover the deficiency of P2,000.
59. In a contract wherein a person binds
himself to render special service to do
something in
behalf of another with consent of the latter.
A. Contract of piece of work
B. Contract of service
C. Contract of agency
D. Contract of exchange
60. Which of the following obligations of
the vendor cannot be waived:
A. To allow the buyer to examine the goods
sold.
B. To transfer ownership to the buyer.
C. To pay the expenses of the deed of sale.
D. To warrant the thing sold.
61. A appoints B as his agent to sell his land,
which of the following is valid:
A. The authority of B is in writing and the
sale of the land in favor of C is oral.
B. The authority of B from A is by way of
letter and B sells the land to C in writing.
C. The authority of B is oral and B sells the
land to C for P50,000 in a written contract of
sale.
D. When goods are delivered to an agent to
be sold by him and the agent is not liable to
the
manufacturer of the goods.
62. A stipulation whereby the pledge or
mortgagee automatically becomes the owner
of the thing
pledged or mortgaged:
A. Pactum commisorio
B. Consolidation of ownership
C. Conventional redemption
D. Consignation
63. Which of the following statements is
true and correct:
A. Pledge and mortgage are accessory
contracts because they cannot exist by
J. Delos Santos
themselves.
B. In both pledge and mortgage, the creditor
is entitled to deficiency judgment.
C. Where an obligation is secured by a
pledge or mortgage and it is not paid when
due the
pledge or mortgagee may dispose of the
thing pledged or mortgaged if there is an
agreement to that effect between the parties.
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D. Unless otherwise agreed upon by the
parties, the sale of the mortgage property
extinguishes in full the obligation of the
mortgagor to the mortgagee.
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------------------------------------------------------
---------
64. I. A sales contract is a real contract
because no ownership is transferred unless
there is
delivery.
II. A sales contract is a real contract because
the seller suffers the risk of loss until the
object of the sale has been delivered.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
65. A sells to B for P25,000 all the mango
fruits to be harvested from the mango
orchard which
A plans to buy.
I. The sale is valid because the mango fruits
have potential existence.
II. The sale is valid because the object of the
contract need not exist at the time of the
contract.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
66. A who plans to buy a piece of land from
B, enters into contract of sale respecting the
same
Page | 52
land with X for the price of P100,000. The A gave B thirty days to raise the amount and
contract is in writing. as soon as B is ready they will sign the deed
I. The sale is not valid because a seller of
cannot sell that which he does not own. sale. On the 25th day, A notified B that he is
II. The sale is not valid because a public no longer willing to sell the property unless
document is required. the
A. First statement is true, second statement price is increased to P550,000.
is false. I. B can compel a to accept the P500,000
B. First statement is false, second statement first offered because there exists a bilateral
is true. offer to
C. Both statements are true. sell and to buy a definite property for a
D. Both statements are false definite price.
67. Husband owes C. Subsequently, husband II. B cannot compel A to accept the
sold his car to his wife. If husband cannot P500,000 because this is merely an
pay C unaccepted unilateral
on due date: promise to sell.
I. C can question the sale because the sale A. First statement is true, second statement
prejudices C, a creditor. is false.
II. C can question the sale because husband B. First statement is false, second
is relatively disqualified to enter into this statement is true.
kind of C. Both statements are true.
sale. D. Both statements are false
A. First statement is true, second statement 70. I. A promise to buy and sell a
is false. determinate thing for a price certain is
B. First statement is false, second statement reciprocally
is true. demandable.
C. Both statements are true. II. An accepted unilateral promise to buy or
D. Both statements are false to sell a determinate thing for a price certain
68. A sells his TV set to B for P50,000 on is
sale or return. Subsequently, the TV set is binding upon the promissor if the promise is
lost by supported by a consideration distinct from
fortuitous event. the price.
I. The risk of loss pertains to the seller A. First statement is true, second statement
because the buyer is not at fault. is false.
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II. The risk of loss pertains to the seller until is true.
the buyer signifies to the seller that he C. Both statements are true.
accepts D. Both statements are false
the TV set. 71. A specific boat was sold to B for the
A. First statement is true, second statement price of P1 million on credit. Shortly after
is false. perfection of
B. First statement is false, second statement the sale but before delivery, the boat was
is true. destroyed by a fortuitous event.
C. Both statements are true. I. The seller suffers the loss because at time
D. Both statements are false of loss he was still the owner.
69. A offered to sell for P500,000 his house
and lot to B who was interested in buying
the same.

Page | 53
J. Delos Santos
II. The buyer suffers the loss because if it
were not for the fortuitous event ownership
would
have transferred to him.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
72. I. Should fungible things be sold for a
price independently and for a single price,
the risk of
loss before perfection pertains always to the
seller.
II. Should fungible things be sold for a price
fixed according to weight, number or
measure
the risk of loss pertains to the buyer after
perfection even before delivery.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
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D. Both statements are false
73. Maria purchased a quantity of bed sheets
which were wrapped up in bales. The sale
was done
in the warehouse of Seller. Some bed sheets
were pulled out from the bales displayed and
fount to be all right. Maria then purchased
100 bales and paid the price. After delivery,
Maria
discovered that some of the bed sheets
contain holes.
I. Maria can return the bed sheets and
recover the money she paid.
II. Maria cannot return the bed sheets and
recover the money she paid because the
principle
“caviat emptor” applies.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
J. Delos Santos
C. Both statements are true.
D. Both statements are false
74. A entered into a contract of sale of his
car to B for a price of P50,000. The terms
are: Upon
payment of P20,000 A shall deliver the car
and the balance to be paid after one month.
B also
executed a chattel mortgage on the car to
secure the payment of the balance. B
defaulted in
the payment of the balance, therefore A
foreclosed the mortgage. The proceeds
realized in
the foreclosure sale were not sufficient to
pay the entire balance.
I. A can still recover the deficiency.
II. A cannot recover the deficiency because
the law prohibits him from doing so.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
(?)75. Guardian sells the property of the
ward to X for a price certain. The property is
rural land,
area 1 /2 hectare. X already owns rural land.
Guardian is an adjacent owner of 1/ 4 area
and
the other adjacent owner is C of 1/ 2 hectare.
I. Guardian cannot legally redeem because
he is relatively incapacitated.
II. Guardian cannot legally redeem because
he is the owner of a lesser area.
76. S owns 10 sacks of rice for sale in his
store. B came into the store and buys the 10
sacks at
the price of P1,200 per sack and promised S
to pay as soon he is paid for the bags of
cement
which are then being unloaded from a truck
parked opposite the store. Upon request of
B, S
Page | 54
ordered the loading of the sacks of rice on
the truck, continuously watching the
loading.
After the sacks of rice were loaded on the
truck, B did not appear to pay the price. So S
again
ordered the unloading of the sacks of rice.
At this moment, the driver of the truck
objected to
the unloading of the sacks of rice claiming
the he purchased the sacks of rice from B
and
therefore acquired ownership thereof.
I. S cannot order the unloading because B
acquired ownership when the sacks or rice
were
loaded on the truck.
II. S cannot order the unloading because
ownership was transferred to the driver by B
who
had ownership of the sacks of rice.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
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77. I. If seller has ownership he can always
transfer ownership.
II. If seller has ownership but no possession
he cannot transfer ownership by constructive
delivery.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
78. I. A contract of “sale or return” is a sale
with a resolutory condition.
II. A contract of “sale on trial or approval” is
a sale with a suspensive condition.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
J. Delos Santos
D. Both statements are false
79. I. If the bill of lading covering the goods
sold is by its terms the goods described
therein are
deliverable to the order of the seller, and
retained by the seller, the seller has reserved
his
ownership over the goods.
II. If the bill of lading is by its terms the
goods described therein are deliverable to
the order
of the buyer and retained by the seller, the
seller ha reserved his right of possession of
the
goods as against the buyer.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
80. B bought a pair of shoes from shoe store
and repair shop. It was later discovered that
the pair
of shoes bought by B belonged to a
customer who left it there for repair.
I. B acquired ownership provided he acted in
good faith.
II. B did not acquire ownership because a
seller cannot transfer ownership if he
himself has
no ownership.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
81. I. An unpaid seller loses his possessory
lien after he has delivered the goods to a
carrier for
the purpose of transmission to the buyer
without reserving the ownership in the
goods or
the right to the possession thereof.
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II. The unpaid seller who loses his
possessory lien does not lose his lien for the
payment of
the purchase price.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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82. I. Once the goods have been accepted by
the buyer, the seller is no longer responsible
to
him for any breach of warranty.
II. Acceptance by the buyer does not as a
general rule release the seller from liability
for
breach of warranty.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statement are false.
83. A enters into a contract of sale with B
respecting 2 immovables for P200,000, the
boundaries
are mentioned and the area is 20,000 sq.
meters.
I. The seller shall suffer a proportionate
reduction in price if the area delivered is less
than
the area specified in the contract even
though the boundaries were followed.
II. The seller shall also be entitled to a
proportionate increase in price if the area
exceeds the
number specified in the contract.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
J. Delos Santos
84. S sells his piece of land to B for
P100,000. Consequently, another contract
was entered into
between the parties whereby B leases the
land to S.
I. This contract shall be construed as an
equitable mortgage.
II. This contract is a contract of sale with
leaseback.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
85. A sold his piece of land to B last
November 10, 2009.
I. S shall repurchase the land within 4 years
from date of sale.
II. S shall have within 10 years from date of
sale to repurchase the land so long as the
period
of repurchase shall not exceed 10 years.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
86. A, B and C are co-owners of rural land
with an area of 9 hectares. A sold his
undivided
interest to X who does not own rural land.
I. B and C cannot legally redeem because
the sale was an absolute sale.
II. B and C as co-owners can legally redeem
for the purpose of reducing the number of
coownership.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
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D. Both statements are false.
87. I. Conventional redemption is a
privilege.
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II. Legal redemption is a right granted by
law.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
88. A sold his piece of land to B with a right
of repurchase when A has sold his car.
I. A can repurchase within 4 years from date
of sale.
II. A can repurchase within 4 years from
date of sale of his car.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
89. P authorized his agent to direct and
administer his commercial business, among
others “to
collect sums of money and exact their
payment by legal means.”
I. A can bring a court action for collection
provided he brings it in the principal’s name
under his agency.
II. A needs a special power of attorney to
bring a court action because the agency of A
pertains only to acts of administration.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
90. I. A special power to mortgage includes
the special power to constitute a second
mortgage.
II. A special power to mortgage does not
include the power to sell.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
J. Delos Santos
D. Both statements are false.
91. Agent was authorized by Principal to sell
the latter’s TV set for P10,000 on the
installment
plan. A was able to sell it for P10,000 cash
basis.
I. The sale is not binding upon the principal
unless the principal ratifies it.
II. The sale is not binding upon the principal
because the agency was performed in a
manner
not included in the agency.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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92. I. An agency cannot revoked at
principal’s will if the agency depends upon a
bilateral
contract.
II. An agency cannot be revoked at
principal’s will if the agency is for a
compensation.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
93. A and B were appointed simultaneously
by P as his agents. Solidary liability of the
agents
was stipulated.
I. Any one of the agents shall be liable for
any damage suffered by the principal for the
nonperformance of the agency.
II. Solidary liability will apply in case of
damages suffered by the principal caused by
the
negligence of either agent provided the
agent acted within the scope of his authority.
A. First statement is true, second statement
is false.
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B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
94. On September 1, 2010, P owns a piece
of land gave a general power of attorney to
A. On
October 1, 2010, P, without the knowledge
of A executed in favor of C a special power
of
attorney to sell said piece of land. November
10, 2010, A as attorney-in-fact of P executed
a is true.
deed of sale over the piece of land in favor
of X. On the same date, C under the special
power given by P, sold the same piece of
land t Y. Both purchasers acted in good
faith. X
registered his sale. Y did not.
I. The sale in favor of X must be respected
because he registered it in good faith.
II. The sale in favor of Y must be respected
because C was specially granted with
authority to sell.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
95. A, B and C appointed Z as their agent to
sell their separate houses. The appointment
was
made under one special power of authority.
I. A, B and C shall be solidarily liable under
the agency to Z
II. A, B and C shall be jointly liable under
the agency to Z even though the
appointment was
made in one common instrument because A,
B and C are not co-owners.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
J. Delos Santos
96. I. The pledge extends to the interest and
earnings of the thing pledged unless there is
a
stipulation to the contrary.
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II. In case of pledge of animals, their
offsprings shall be subject to the pledge if
there is a
stipulation to that effect.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
C. Both statements are true.
D. Both statements are false.
97. If there are reasonable grounds to fear
the destruction or impairment of the thing
pledged
without the fault of the pledge: First
statement is true, second statement is false.
I. The right of the pledgor to demand the
return of the thing, upon offering another
thing in
pledge, provided the latter is of the same
kind as the former and not of inferior quality
must always be respected.
II. The right of the pledge to cause the thing
pledged to be sold at a public sale is
subordinate
to the above right of the pledgor.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
98. I. The creditor pledge cannot appropriate
the thing pledged.
II. But he can dispose of the thing pledged
with the consent of the pledgor.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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99. I. A mortgage or pledge is indivisible
although the principal obligation is divisible.
II. The principal obligation must be
necessarily indivisible because the mortgage
or pledge
securing is indivisible.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
100. A borrows P10,000 from B, so A
delivered his diamond ring to B as a pledge
to secure his
obligation. The contract of pledge was
executed in a public document but the
description of
the ring and the date of the pledge did not
appear thereon. A, pledgor alienates the ring
in
favor of C.
I. C has to respect the pledge because the
contract of pledge is in a public document.
II. C has to respect the pledge if the
alienation of the pledged was consented to
by the pledge.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
101.I. A stipulation in a contract of pledge
allowing the pledge to purchase the thing
pledged at
the current purchase price if the debt is not
paid on time is valid.
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II. A stipulation in a contract of pledge
allowing the pledgor to assign the thing
pledged to
the pledge in payment of the debt due is not
paid on time is valid.
A. First statement is true, second statement
is false.
J. Delos Santos
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
102.I. Future property cannot be the object
of a pledge or mortgage unless there is a
stipulation
to the contrary.
II. Future property cannot be the object of a
pledge or mortgage unless there is a
stipulation
to the contrary.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
103.I. Two things are prohibited in a pledge
or mortgage, which are: (a) the appropriation
by the
pledge or mortgagee of the object of the
pledge or mortgage and (b) the disposition
of
the object by the pledgor or mortgagor.
II. Two things are prohibited in a pledge or
mortgage, which are: (a) the disposition of
the
object by the pledgee or mortgagee and (b)
the return of the pledge or mortgage to the
pledgor or mortgagor before debt is fully
paid.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
104.A, minor borrows P10,000 from B. To
secure A’s debt, X a good friend of A
pledges his
gold watch to B.
I. The pledge is not valid because the
principal obligation is not valid.
II. The pledge is not valid, the thing pledged
should belong to the debtor.
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A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
105.I. In mortgage and chattel mortgage
there is recovery of deficiency as a general
rule.
II. In pledge, absolutely, there is no recovery
of deficiency.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
106.A and B are co-owners of a piece of
land. They mortgaged their land in favor of
C. While
the mortgage debt is pending, A and B
partitioned the land between them. On due
date, A
paid his share of the debt of C.
I. The mortgage on A’s share of the land is
extinguished.
II. The mortgage on A’s share cannot be
extinguished unless B pays his share of debt.
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A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false.
107. I. Unless there is stipulation to the
contrary, the debtor mortgagor can alienate
the property
mortgage.
II. The debtor mortgagor can alienate the
property mortgaged with the consent of the
mortgagee.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
J. Delos Santos
D. Both statements are false.
108. A, minor borrows money from B. The
contract although voidable is secured by a
pledge or
mortgage of A’s property.
I. A can validly constitute a pledge or
mortgage of his personal or real property.
II. The pledge or mortgage constituted by a
minor is valid provided he is the absolute
owner
of the property pledged or mortgaged.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
109.A, agent is authorized by Principal to
lend money of the principal.
I. A, the agent can borrow the money
provided the loan is without interest.
II. A, the agent cannot borrow the money if
the loan is with interest.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
110.I. Agency is a nominate, principal,
unilateral, preparatory, commutative and
generally
onerous contract.
II. Agency is a nominate, accessory,
bilateral, preparatory, commutative and
generally
onerous contract.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
111. I. A general power of authority may
also include a special power.
II. A special power of authority does not
include a general power.
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A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
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D. Both statements are false.
112 I. If the third person contracts with the
agent knowing that the agent exceeds the
scope of
his authority, the contract is void not only as
against the principal but also as between
agent and the third person.
II. If a third person contracts with the agent
knowing that the agent exceeds the scope of
his
authority the contract is void as against the
principal but valid between the agent and the
third person.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
sold the necklace to Y for P20,000. Which
of the following statements is correct?
A. X has got a voidable title because at the
time of sale, she is a minor
B. X can ask for rescission of the sale to Y
because she suffered a lesion of more than ¼
of
the value of the property.
C. If Y is in bad faith, Y becomes the
owner of the necklace upon delivery to
him but
his title is voidable.
D. X can ask for the annulment of the sale to
Y because at the time of sale she is a minor.
3. This serves as a proof of the perfection of
the contract of sale
A. Dacion en pago
B. Option money
C. Delivery
D. Arras
4.A contract of sale is not a(an)
A. Onerous contract
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C. Both statements are true. B. Accessory contract

D. Both statements are false. C. Commutative contract
113.I. In mortgage the mortgagor may D. Bilateral contract
alienate the property mortgaged. 5.Warranty against hidden defects is
II. In mortgage the mortgagee may alienate A. An essential element
the mortgage credit. B. A natural element
A. First statement is true, second statement C. An accidental element
is false. D. An artificial element
B. First statement is false, second statement 6.
is true. 7. When a sale of a piece of land or any
C. Both statements are true. interest therein is through an agent, the
D. Both statements are false. authority of the
agent shall be in writing, otherwise the sale
SALES (cpar)
1.As a rule, this contract of sale involving a is
piece of land is void, A. Valid
A. Between a minor and a capacitated B. Voidable
person. C. Unenforceable
B. Between two insane persons who did not D. Void
act during lucid interval 8. The sale of an expected thing
C. Between first degree cousins A. Dacion en pago
B. Payment by cession
D. Between husband and wife
2. X, 17 years old, sold to Z, of legal age, C. Emptiospei
her necklace worth P20,000 for P15,000. D. Emptio rei-speratae
Later, Z 9. The sale of the hope itself

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J. Delos Santos
A. Dacion en pago correct?
B. Payment by cession A. DD may compel V to accept the
C. Emptio spei P12,000,000 first offered.
D. Emptio rei-speratae B. V may compel DD to pay P15,000,000
10. One of the following is not correct C. V and DD should shoulder the
A. Things subject to a resolutory condition P3,000,000 difference
may be the object of the contract of sale. D. DD cannot compel V to accept the
B. A thing is generic when it is P12,000,000 first offered
particularly designated or physically 13. If the object of the contract is specially
segregated from made or manufactured at the specific order
all others of the same class. of
C. Things having a potential existence may another, it is a contract for a piece of work.
be the object of the contract of sale. This is
D. The sole owner of a thing may sell an A. English rule
undivided interest therein B. Massachusetts rule
11. X needs a size of 10 of model 101 of C. New York rule
Leather Shoes regularly available to the D. Chicago rule
public for her 14. If the article already exists and
boyfriend Z, but the same is out of stock so subsequently acquired by another, it is a
she placed an order for one. On the other contract of sale, and
hand, Z if the article is still to be manufactured at the
placed an order for size No. 8, colored instance of another, it is a contract for a
violet, (something not ordinarily made by piece
the of work. This is
company) to be given to X. Which is A. English rule
correct? B. Massachusetts rule
A. Both are contracts of sale C. New York rule
B. Both are contracts for a piece of work D. Chicago rule
C. First is a contract of sale second is a 15. If the material used in the manufacturer
contract for a piece of work of the article is more valuable, it is a
D. First is a contract for a piece of work, contract of
second is a contract of sale sale, and if the labor or skill is more
12. V offered to sell for P12,000,000 her valuable than the material used in the
house and lot to DD who was interested in manufacture of
buying the the article, it is a contract for a piece of
same. In her letter to DD, V stated that she is work. This is
giving DD a period of one month within A. English rule
which B. Massachusetts rule
to raise the amount and that as soon as DD is C. New York rule
ready, they will sign the deed of sale. Five D. Chicago rule
days 16. The rule observed in the Philippines is
before the expiration of the one month A. English rule
period. V went to DD and told her that she is B. Massachusetts rule
no C. New York rule
longer willing to sell the property unless the D. Chicago rule
price in increased to P15,000,000. Which is
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J. Delos Santos
17. The Realty Installment Buyer Protection
Act applies to all transactions involving the
sale or
financing of real estate on installment but it
excludes the following except:
A. Sale or financing of industrial lots
B. Sale or financing of commercial building
C. Sale to tenants under the Land Reform
Code
D. Sale of residential condominiums
18. Delivery by merely pointing to the
object of sale if it cannot be delivered to the
vendee at the
time of the sale is
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
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19. Effected when the object of sale is
already in the possession of the vendee at
the time of sale
so that delivery need no longer be made is
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
20. When the owner of the thing sells it to
vendee, but continues to have possession or
occupation of the thing not as owner but as
tenant or lessee
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
21. Goods are deemed in transit
A. When the buyer accepts delivery of the
goods upon arrival at destination
B. When the buyer intercepts and lawfully
takes possession of the goods at any point
before
destination.
C. From the time they are delivered by
the seller to a common carrier or other
bailee
for transmission to the buyer, up to the
time that the buyer or his agent takes
J. Delos Santos
delivery of the goods from the carrier or
bailee.
D. When the carrier or bailee, upon arrival
of the goods at destination acknowledges to
the
buyer or his agent that he is holding the
goods as bailee for the latter.
22. Goods are deemed no longer in transit
A. If the goods are rejected by the buyer for
a valid reason and the carrier or other bailee
continues in possession of them, even if the
seller has refused to receive them back.
B. From the time they are delivered to a
carrier by land, water or air for the purpose
of
transmission to the buyer.
C. From the time they are delivered to a
bailee for the purpose of transmission to the
buyer
until the buyer or his agent in that behalf,
takes delivery of them from such bailee.
D. If the carrier or other bailee
wrongfully refuses to deliver the goods to
the buyer or
his agent in that behalf.
23. X sold to V orally a parcel of land for
P200,000. X effected the delivery of the
land. The
payment of the price was to be made three
month later. At the end of three month
period
A. V may refuse to pay claiming in his
defense the Statute of Frauds
B. V may return the parcel of land to X
C. X can collect from V because the
contract has already been executed
D. V may refuse to pay on the ground that
there is no written contract to support the
sale.
24. On January 15, 2010, X sold for P2M
her house and lot to V. It was agreed that
delivery of
the house and lot, and the payment therefore,
would be made on March 10, 2010.
Unfortunately, Z a stranger negligently set
the house on fire on February 25, 2010, and
the
Page | 63
house was completely destroyed. Which is
correct?
A. V is not required to pay the P2M since
the contract had no subject matter.
B. X must still deliver the lot but is
excused from delivering the house, while
V must
still pay the P2M
C. X must deliver the lot while V should pay
only the amount equivalent to the value of
the
lot.
D. X need not deliver the lot while V need
not pay the P2M
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25. If immovable property should have been
sold to different vendees, the ownership
shall be
transferred to the person
A. Who have first taken possession in good
faith
B. Who presents the oldest title in good faith
C. Who in good faith first recorded it in
the Registry of Property
D. Who have paid in good faith the purchase
price in full
26. Using the preceding number, if movable
property, it shall belong to the person
A. Who have paid in good the purchase
price in full
B. Who in good faith first recorded it in the
Registry of Property
C. Who presents the oldest title in good faith
D. Who have first taken possession in
good faith
27. Action by the vendee against the vendor
to nullify the sale due to some vices or
defects
which render the object of sale unfit for the
use intended or knowledge of which the
vendee
should not have bought the thing
A. Accion quanti minoris
B. Accion reinvidicatoria
C. Accion pauliana
D. Redhibilitory action
J. Delos Santos
28. Action to seek a corresponding reduction
in price by reason of some vices or defects
in the
thing purchased
A. Accion quanti minoris
B. Accion reinvidicatoria
C. Accion pauliana
D. Redhibilitory action
29. The redhibitory action based on the
faults or defects of animals must be brought
within
A. 30 days from delivery to the vendee
B. 40 days from delivery to the vendee
C. 45 days from delivery to the vendee
D. 6 months from delivery to the vendee
30. In contract of sale, if the price is
absolutely simulated, the sale is
A. Unenforceable
B. Voidable
C. Void
D. Rescissible
31. 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, except
A. Exact fulfillment of the obligation,
should the vendee fail to pay any installment
B. Cancel the sale, should the vendee’s
failure to pay cover two or more installment
C. 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
D. Rescind the sale should the vendee fail
to pay any installment.
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32. The right of the seller to stop goods in
transit, upon discovering that the buyer does
not have
the funds to pay for the goods
A. Pre-emptive right
B. Appraisal right
C. Voting right
D. Right of stoppage in transit
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33. A sold to B a parcel of land for P3.8M.
The sale is evidenced by a memorandum of
agreement of sale written in the Bicolano
dialect. One week later, A sold the same
parcel of
land to C for P4M. This is evidenced by a
formal deed of sale. Upon buying the
property, C,
who was aware of the first sale immediately
took possession of the lot. When informed
of
the second sale, B subsequently registered
an adverse claim to the property. Later, C
registered the deed of sale in her favor. The
parcel of land shall belong to
A. B because he has got an older title
B. C because he is the first to register
C. C because he is the first to take
possession
D. No one as both sales are void
34. Voluntary renunciation made by the
buyer of his right to warranty against
eviction where in
case the buyer is evicted, the seller is liable
to the value of the thing at the time of
eviction.
A. Waiver intentionada
B. Waiver consciente
C. Waiver cursunada
D. Waiver inocente
35. Using the preceding number, where the
seller is no longer liable
A. Waiver intentionada
B. Waiver consciente
C. Waiver cursunada
D. Waiver inocente
36. A contract of sale whereby the seller
acquires the right to redeem or repurchase
the object of
the sale from the buyer within a certain
period agreed upon
A. Equitable mortgage
B. Absolute sale
C. On sale or return
D. Pacto de retro sale
J. Delos Santos
37. A sold to B his car and promised to
deliver ten days later. The next day, after the
sale to B,
A sold the same car to C and immediately
affected delivery. On the day agreed upon, A
did
not deliver the car to B. Which is correct?
A. B can cancel the contract between A and
C, because the contract between A and B
was
perfected ahead of the contract between A
and c
B. B should make the demand to make A in
default
C. A is liable to B for the value of the car
plus damages after B makes a demand
D. A is liable to B for damages and is in
default without need of any demand
38. X sold to V her Yamaha organ. It was
agreed that X would fix the price a week
later. At the
agreed time, X named the price P10,000. V
agreed. Was the sale perfected?
A. No, because the price was left to the
discretion of one of the contracting parties
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B. No, because at the time of sale the price
was not fixed
C. Yes, because the price fixed by one of
the parties was accepted by the other
D. Yes, because there was agreement that X
would fix the price
39. Not an implied warranty in a contract of
sale
A. Right to sell the thing at the time of
perfection of the contract
B. Reasonably fit for the purpose they are
acquired
C. Merchantable in quality
D. Free from charges or encumbrances not
declared or known to the buyer
40. After the death of C, A, C’s son, sold his
inheritance though its amount has not yet
been
determined to B for a consideration of
P1,000,000. Which is correct?
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A. The contract is valid if the value of
inheritance is at least equal to P1,000,000
B. The contract is valid even though the
inheritance to be turned over to B is less
than
P1M
C. The contract is void as future inheritance
cannot be the object of sale
D. The contract is unenforceable
41. X stole a fountain pen from P and sold it
to Z Merchandise, a “store for pens”, which
paid for
it in good faith, not knowing it was stolen.
The “store” then sold it to C, a
student.Which is
correct?
A. C cannot be considered as the owner
because the original seller (X) is not the real
owner.
B. P may recover the fountain pen from C
without reimbursement because he is the
legal
owner.
C. C became the owner because he
purchased the pen from a merchant store
D. C became the owner regardless of
whether the seller is a store for pens or not
because C
bought it in good faith.
42. When goods are delivered to the buyer
on “sale or return” for period of seven days,
ownership of the goods passes to the buyer
A. Upon perfection of the contract
B. Upon acceptance by the buyer of the offer
of the seller
C. Upon expiration of seven days
D. Upon delivery of the goods
43. Quasi-traditio is equivalent to
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Execution of a public instrument
44. Vi imported radios from Taiwan and
asked for 220 volts radios. The radios
arrived clearly
J. Delos Santos
labeled 220 volts and Vi sold them to the
public as such. Later the customer
complained that
the radios have been mislabeled by the
manufacturer and that they were good only
for 110
volts. As a consequence
A. Vi is liable to the vendees for any
hidden defects even though he is not
aware.
B. Vi is not liable because he is in good faith
C. Vi is not liable under the principle of
“caveat emptor” or let the buyer beware
D. The vendees may hold the manufacturer
liable but not Vi because Vi specifically
asked
for 220 volts
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45. If the redemption is to be made by the
seller, one of the following need not be
given to the
Buyer
A. Expenses of the contract
B. Interest on the price of the sale
C. Necessary expenses on the thing sold
D. Price of the sale
46. Not an element of the sellers right of
stoppage in transit
A. The goods must be in transit
B. The buyer must be insolvent
C. The seller must be in possession of the
goods
D. The seller must be unpaid
47. A sold his only car to B for P300,000 to
be paid as follows: P150,000 upon delivery
of the
car to B and the balance at P10,000 per
month until full payment of the purchase
price. Later
the car gets burned in the possession of B
through fortuitous event and without B’s
fault,
before full payment of the balance. Is B
obliged to pay the balance?
A. No, because the car was lost through
fortuitous event and without B’s fault, hence
B’s
Page | 66
obligation is extinguished.
B. No, because the loss should be borne by
the seller as this an installment sale so until
the
buyer pays the full amount of the price of
the sale, A remains to be the owner.
C. Yes, but A must give another car to B
because of the principle “genus nunquam
peruit” or
generic thing never perishes
D. Yes, because the principle “res perit
domino” or the thing perishes with the
owner.
48. A, B and C are co-owners of an
undivided parcel of land, A sold his 1/ 3
interest to B
absolutely. Which is correct?
A. C may exercise his right of redemption of
the interest sold by A to B
B. C cannot exercise the right of
redemption because the sale was made in
favor of a
co-owner
C. The sale made by A to B is void because
it was not made in favor of a stranger
D. C may redeem only 1 /2 of the interest
sold by A to B
49. Using the preceding number, suppose,
instead of selling his interest to B, A sold it
to D, who
can exercise the right of redemption?
A. Both B and C
B. B but not C
C. C but not B
D. A, B and C
50. Which of the following cannot be the
object of a contract of sale?
A. Sale of credit
B. Young animal not yet conceived at the
time of perfection
C. Land which the seller expects to buy
D. Future inheritance
51. A offered for sale to B 20 cavans of
wagwag rice and fixed the price per cavan at
P10 over
the price offered at Z’s store in Cainta
Market. The price is
J. Delos Santos
A. Not certain because the price at Cainta
Market is not stated
B. Certain because it has got reference to
another thing which is certain
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C. Certain because there is a price ceiling for
price of land
D. Not certain so court may fix the price
52. X sold his motor vehicle to V who
bought it for P200,000. It turned out
however, that X has
2 motor vehicles: Toyota valued at P230,000
and Lancer valued at P220,000. Which is
correct?
A. There is no contract of sale between X
and V
B. The parties may ask for interpretation or
reformation
C. The parties can ask for annulment of the
contract
D. V may choose between the Toyota or
Lancer
53. X offers to V 100 electric fans for
P80,000 payable in 60 days with 12 %
interest per annum.
V accepted the offer by telegram provided
that interest is reduced to 6%. If there is no
further communication between X and V
relating to the terms
A. The contract is perfected because of the
acceptance by V
B. There is no contract yet between X and
V because V made a counter offer
C. The contract is perfected under the terms
of X
D. There is no contract yet unless v gives
earnest money
54. X owns 50 mango trees bearing fruits,
ready for harvest. She told all the fruits of all
the trees
to V who paid P100,000. X told V that he
can harvest her fruits anytime he likes and
pointing at the mango trees. For legal
purposes, X has fulfilled her obligation to
deliver the
mango fruits to V by
A. Traditio longa manu
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B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Execution of a public instrument
55. X sold her specific car to V for P200,00
payable in 5 equal installments. X delivered
the car
to V but a mortgage was constituted on the
car to answer for the unpaid installments. V
paid
the first 2 installments but failed to pay the
last 3 installments. X foreclosed the
mortgaged
property and sold it at public auction for
P100,000. Which is correct?
A. X can recover from V the balance of
P20,000 even if there is no stipulation to that
effect
B. X can recover from V the balance of
P20,000 if there is stipulation to that effect
C. X cannot recover the deficiency except if
there is stipulation to that effect
D. X cannot recover the deficiency even if
there is stipulation to the contrary
56. Ownership of the thing sold is
A. Retained by the seller in “sale or return
B. Transferred to the buyer upon
constructive or actual delivery of the
thing sold
C. Acquired by the buyer upon perfection of
the contract
D. Transferred to the buyer upon acceptance
of the price
57. X sold his horse to Y for P40,000. No
payment has yet been made and the sales
document
does not provide the date of delivery. Before
delivery and payment the horse gave birth to
a payment of the sale. After 12 months V was
baby horse, which is correct?
A. Y is entitled to the baby horse which
was born after the perfection of the
contract
B. X is entitled to the fruit (baby horse) as Y
has not paid the price yet
C. X is entitled to the (baby horse) because
it was born before his obligation to deliver
arises
J. Delos Santos
D. Y should pay additional amount for the
baby horse to be entitled to it
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58. A contract of sale is in the stage of
conception when
A. There is meeting of the minds
B. Negotiations are in progress
C. The parties come to an agreement
D. The contract is perfect
59. A seller sold to a buyer a piece of
jewelry at a price of P25,000. The contract
provides that
the buyer will pay the seller cash, P20,000
and for the balance, the buyer will give the
seller
a micro oven worth P5,000. What is the
nature of the contract?
A. Sale
B. Partly sale partly barter
C. Barter
D. Commodatum
60. X, the guardian of V, sold V’s house and
lot worth P480,0000 for P430,000
A. The contract can be rescinded because
of inadequacy of price
B. The contract cannot be rescinded because
there is no fraud, mistake or undue influence
C. The contract cannot be rescinded because
all the elements of a contract are present
D. The contract can be rescinded by X.
61. X leased to V a 5 Freezer for two years
at a lease rental fee of P1,000 per month and
signed
an option in favor of V to buy the freezers at
the end of the term of the lease at P50,000.
All
rental fee paid are to be considered as partial
able to pay the rental fee for 9 months and
was in arrears for three months. X
terminated the
lease contract and repossessed the freezers.
The consequence of the transaction is
A. X can collect the rental fees for three
months which are in arrears.
B. X can collect the rental fees for the
unexpired 12 months of the lease contract.
Page | 68
C. When X took possession of the generator, B. First statement is false, second statement
he has no further action against V is true.
D. X in terminating the lease and C. Both statements are true.
repossessing the generator is obliged to D. Both statements are false
refund the 9 65. I. If the price is grossly inadequate, the
months rental fee, paid by V even if there is sale is void.
a stipulation to the contrary. II. Whenever option money is given in a
62. X sold his car to Z for P60,000. No date contract of sale, it shall be considered as part
was fixed for the performance of the of the
obligation of price and a proof of the perfection of the
the seller and the buyer. The obligation of X contract.
is A. First statement is true, second statement
A. To deliver the car immediately because is false.
the sale is a perfected contract B. First statement is false, second statement
B. To deliver the car only after Z writes to X is true.
demanding the delivery of the car. C. Both statements are true.
C. To deliver the car only after Z pays the D. Both statements are false
P60,000 66. I. Earnest money and option money both
D. To rescind the contract because there is apply to perfected sale.
no time fixed for the delivery II. In a contract of sale of personal property
63. I. The vendor need not be the owner at the price of which is payable in installment,
the time the sale is perfected. It is sufficient the
that he is vendor may cancel the sale should the
the owner at the time the thing sold is vendee fail to pay.
delivered. A. First statement is true, second statement
II. The sale of a vain hope or expectancy is is false.
voidable. B. First statement is false, second statement
A. First statement is true, second is true.
statement is false. C. Both statements are true.
B. First statement is false, second statement D. Both statements are false
is true. 67. I. Should the vendee’s failure to pay,
C. Both statements are true. cover two or more installments, the vendor
D. Both statements are false may
64. I. There may be a contract of sale of foreclose the chattel mortgage on the thing
goods, whose acquisition by the seller sold but he shall have no further action
depends upon a against
contingency which may or may not happen. the purchaser to recover any unpaid balance
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of the price, except if there is an agreement

II. If the consideration of the contract
to
consists partly in money and partly in
the contrary.
another thing, it
II. Sale is a consensual contract, therefore
shall be considered a barter if the value of
delivery or payment is not essential for
the thing given as a part of the consideration
perfection.
exceeds the amount of the money or its
A. First statement is true, second statement
equivalent.
is false.
A. First statement is true, second
B. First statement is false, second
statement is false.
statement is true.

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J. Delos Santos
C. Both statements are true.
D. Both statements are false
68. I. The ownership of the thing sold shall
be transferred to the vendee upon perfection
of the
contract.
II. An unaccepted unilateral promise to buy
or to sell a determinate thing for a price
certain
is binding upon the promissory.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
69. I. The husband and the wife cannot sell
property to each other, as a rule.
II. The sale of a piece of land or interest
therein when made thru an agent is void
unless the
agent’s authority is in writing even if the
sale itself is in s public instrument and has
been
registered.
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A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
70. I. The expenses for the execution and
registration of the sale shall be borne by the
vendee,
unless there is a stipulation to the contrary.
II. If the same thing should have been sold
to different vendees the ownership shall be
transferred to the person who may have
taken possession thereof in good faith.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
J. Delos Santos
71. I. Any stipulation exempting the vendor
from the obligation to answer for eviction
shall be
void.
II. The vendor is responsible to the vendee
for any hidden faults or defects in the thing
sold
only if he was aware thereof.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
72. I. If the animal sold should die within
three (3) days after its purchase, the vendor
shall be
liable to the vendee.
II. The fixing of the price can never be left
to the discretion on one of the contracting
parties.
However, if the price fixed by one of the
parties is accepted by the other, the sale is
perfected.
A. First statement is true, second statement
is false.
B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false
73. I. Option money is considered as part of
the purchase price while earnest money is
not.
II. The Maceda Law refers to the sale of
personal property by installments while the
Recto
Law refers to the sale of real property by
installments.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
74. I. If two or more animals are sold
together, whether for lump sum or for a
separate price for
Page | 70
each of them, the redhibitory defect of one
shall give rise to the redhibition of the
others.
II. There is no warranty against hidden
defects of animals sold at fairs or at public
auctions
or of livestock sold as condemned.
A. First statement is true, second statement
is false.
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B. First statement is false, second
statement is true.
C. Both statements are true.
D. Both statements are false
75. I. The ownership in the thing shall not
pass to the purchaser until he has fully paid
the price.
II. If at the time the contract of sale is
perfected, the thing which is the object of
the contract
has been partially lost, the contract shall be
without effect.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
76. I. 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.
II. 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
sale.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
J. Delos Santos
77. I. Unless otherwise agreed, the buyer of
goods is not bound to accept delivery thereof
by
installment.
II. In case of doubt, a contract purporting to
be an equitable mortgage shall be construed
as a
sale with a right to repurchase.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
78. I. The creditors of the vendor cannot
make use of the right of redemption against
the
vendee, until they have exhausted the
property of the vendor.
II. Sale is a real contract because delivery is
necessary to transfer ownership to the buyer.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false
CREDIT TRANSACTIONS (Cpar)
PLEDGE AND MORTGAGE
1.Which of the following statements is true?
A. Any stipulation in a contract of pledge
authorizing the pledge to sell the thing
pledged if
the pledgor cannot pay is void.
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B. In mortgage, the mortgagee is entitled to
the entire proceeds of the sale of the thing
mortgaged.
C. In mortgage and in pacto de retro sale, the
title to the property which is the subject
matter
of the contract is transferred to the other
party.
D. Real estate mortgage is an accessory
contract.
2. In real estate mortgage, the mortgagor can
sell the property mortgaged
Page | 71
A. Only if with the oral consent of the
mortgagee
B. Only if with the written consent of the
mortgagee
C. If not prohibited to sell
D. Even without the consent of the
mortgagee
3. Elements of contracts of pledge and
mortgage, except
A. Pledgor or mortgagor must be the
absolute owner
B. Pledgor or mortgagor must have the free
disposal of the thing pledged.
C. The thing pledged or mortgaged may
be appropriated if the debtor cannot pay.
D. Pledge and mortgage are accessory
contracts
4.A borrowed P100,000 from B with A’s
ring given to B by way of pledge. It was
stipulated that
in case of non-payment on due date, the ring
would belong to B. This for feature is
A. Caveat emptor
B. Dacion en pago
C. Pactum comisorio
D. Pacto de retro
5.A borrowed P100,000 from B, and as a
security A pledged his ring to B. After the
obligation
falls due, A goes to b relinquishing
ownership of the ring in favor of B. This is
A. Caveat emptor
B. Dacion en pago
C. Pactum comisorio
D. Pacto de retro
6.A borrowed P30,000 from B, and as
security, he pledged his ring, pair of earrings
and
necklace. On due date, A paid P20,000. As a
result,
A. A can demand the return of one (1) of the
things pledged
B. A can demand the return of any two (2)
of the things pledged
C. A can demand the return of the ring
D. A cannot demand the return of any of
the things pledged
J. Delos Santos
7. A mortgaged his residential land to B as a
guarantee for the payment of P400,000
obligations
to B. They agreed that A should not sell the
land while the obligation exists. Before the
maturity of the mortgage, C offered to buy
the land from A. Which is correct?
A. A cannot sell the land to C because of the
agreement not to sell
B. A can sell the land to C only if B
consents in writing
C. A can sell the land to C despite the
agreement not to sell
D. A cannot sell the land to C unless A pays
the obligation
8. S, minor of 16 years old, sold her bracelet
to B for P8,000. Later, B, needing money to
pay
her daughter’s tuition fee, borrowed P15,000
from C and as a security, pledged the
bracelet
to the latter. B failed to pay C resulting into
auction sale of the bracelet in favor of D for
P10,000 only. Which of the following
statements is correct?
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A. The title of B over the bracelet is not
valid, hence the pledge, as well as the sale of
said
bracelet is likewise defective. The pledgor
must be the owner of the thing pledged.
B. The deficiency of P5,000 may still be
recovered by C from B if there is a
stipulation to
this effect.
C. C can no longer recover the deficiency
of P5,000 from B. The pledge together
with
the sale is valid. The voidable title of B is
valid because it is not yet annulled.
D. If D was a purchaser in bad faith as he
knew of the defective title of B over the
bracelet
from S, ownership will not pass to him (D).
9. In the preceding number, assuming what
was executed by B in favor of C was valid
chattel
Page | 72
mortgage which was eventually foreclosed
and the bracelet was old to D at the public
auction for the same amount, which
statement is correct?
A. The title of B over the bracelet is not
valid, hence the chattel mortgage, as well as
the sale
of said bracelet is likewise defective. The
mortgagor must be the owner of the thing
mortgaged.
B. The deficiency of P5,000 may still be
recovered by C from B
C. C can no longer recover the deficiency of
P5,000 from B as the mortgage, together
with
the foreclosure sale, was valid. The title of B
was still valid.
D. If D was a purchaser in bad faith as he
knew of the defective title of B over the
bracelet,
ownership will not pass to him (D).
10. S sold to b a specific car for P200,000
payable in four equal installments. S
delivered the car
to B but required B to mortgage it back to S
to answer for the unpaid installments. B paid
the
1st and 2nd installments but he failed to pay
the balance. S foreclosed the mortgaged
property
and sold it at public auction for P80,000. As
a result,
A. S can recover from B the balance of
P20,000
B. S can recover from B the balance of
P20,000 if there is stipulation to that effect.
C. S cannot recover the deficiency any
more even if there is stipulation to that
effect
D. S cannot recover the deficiency except if
there is stipulation.
PLEDGE
11. I. The creditor cannot appropriate the
things given by way of pledge or mortgage,
or
dispose of them, except if there is a
stipulation to the contrary.
J. Delos Santos
II. The indivisibility of a pledge or mortgage
is affected by the fact that the debtors are
solidarily liable.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
12. I. A pledge or mortgage is indivisible,
except if the debt may be divided among the
successors in interest of the debtor or of the
creditor.
II. In case of pledge of animals, their
offspring shall pertain to the pledge of the
animals.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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13. I. The creditor can use the thing pledged
even without the authority of the pledgor.
II. If through the negligence or willful act of
the pledge, the thing pledge is in danger of
being lost or impaired, the pledge may cause
the same to be sold at a public auction.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
14. I. If the thing pledged is returned by the
pledge to the pledgor or owner, the pledged
is
extinguished, except if there is stipulation to
the contrary.
II. If subsequent to the perfection of the
pledge, the thing is in the possession of the
pledgor
or owner there is a conclusive presumption
that the same has been returned by the
pledge.
Page | 73
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
15. I. A statement in writing by the pledge
that he renounces or abandons the pledge is
sufficient to extinguish the pledge only if
accepted by the pledgor or owner and the
thing
pledged is returned.
II. At the public auction, the pledge may
also bid and his ofer shall be valid even if he
is the
only bidder.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
16. I. The sale of the thing pledged shall
extinguish the principal obligation provided
the
proceeds of the sale are equal to the amount
of the principal obligation.
II. If the price of the sale is more than the
amount of the obligation, the debtor shall be
entitled to the excess, unless it is otherwise
agreed.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
17. I. If the price of the sale is less than the
amount of the obligation the creditor shall
not be
entitled to recover the deficiency except if
there is a stipulation to the contrary.
II. If two or more things are pledged, the
pledgor may choose which he will cause to
be sold,
unless there is a stipulation to the contrary.
J. Delos Santos
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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18. I. A pledge shall not take effect against
third person if a description of the thing
pledged and
the date of the pledge do not appear in a
public instrument.
II. If after the auction sale, the thing pledged
is not sold, the pledge can appropriate the
thing
pledged.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
19. I. Z pledged his ring to B for P20,000. Z
failed to pay his obligation on time. B sold
the ring
at a public auction for P16,000. B cannot
recover P4,000 from Z even if there is
stipulation.
II. Using the same facts, if the proceeds of
sale is P24,000, Z can recover the excess of
P4,000 if stipulated.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
20. I. In sale at public auction, the pledgor or
owner may be abider and shall have a better
right
if he should offer the same terms as the
highest bidder.
II. Pledge is a real contract.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
Page | 74
C. Both statements are true. auction but the proceeds is less than the
D. Both statements are false. collectible amount, B cannot recover the
MORTGAGE deficiency.
21. I. A stipulation prohibiting the owner A. First statement is true, second
from alienating the immovable mortgaged statement is false.
shall be B. First statement is false, second statement
void. is true.
II. The equity of redemption refers to the C. Both statements are true.
right of the mortgagor to redeem the D. Both statements are false.
mortgaged 24. I. In real estate mortgage the mortgagor
property within a certain period of time after can sell the property mortgage even without
it was sold to third person. the
A. First statement is true, second consent of the mortgagee.
statement is false. II. In chattel mortgage, the mortgagor cannot
B. First statement is false, second statement sell the thing mortgage even with the written
is true. consent of the mortgagee appearing at the
C. Both statements are true. back of the mortgage.
D. Both statements are false. A. First statement is true, second
22. I. The right of redemption refers to the statement is false.
right of the mortgagor to redeem the B. First statement is false, second statement
mortgaged is true.
property after his default in payment but C. Both statements are true.
before the sale. D. Both statements are false.
II. The registration in the Registry of 25. I. Chattel mortgage like pledge is a real
Property is necessary for the validity of a contract.
contract of II. In chattel mortgage like pledge the
real estate mortgage. possession of the thing mortgaged is vested
A. First statement is true, second statement in the
is false. creditor.
B. First statement is false, second statement A. First statement is true, second statement
is true. is false.
C. Both statements are true. B. First statement is false, second statement
D. Both statements are false. is true.
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C. Both statements are true.
23. I. Except in case of sale of personal D. Both statements are false.
property in installments, if the proceeds of LOAN
the sale is 26. D deposits his momey by way of a
less than the principal obligation, the savings account with C Bank. The contract
creditor-mortgagee can recover the between D
deficiency. and C is
II. A borrowed P100,000 from B payable in A. Deposit
10 equal monthly installments. To secure B. Agency
payment of the loan, A executed chattel C. Commodatum
mortgage on his Mercedes Benz car. If A D. Mutuum
violates the condition of the mortgage, and 27. I. In mutuum or loan, one of the parties
the car was foreclosed and sold at a public delivers to another something not
consumable so

Page | 75
J. Delos Santos
that the latter may use the same for a certain
time and return it.
II.Mutuun is essentially gratuitous.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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28. I. In commodatum one of the parties
delivers money or consumable thing upon
the
condition that the same amount of the same
kind and quality shall be paid.
II.In commodatum and mutuum ownership
of the thing loan is transferred to the
borrower.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
29. I. Commodatum and mutuum involve
real and personal property.
II. The bailee in commodatum acquires the
use of the thing loaned and its fruits.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
30. I. The bailee in commodatum can lend or
lease the object of the contract to a third
person.
II. When there are two or more bailees to
whom a thing is loaned in the same contract,
they
are liable jointly.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
J. Delos Santos
31. I. A contract whereby one person
transfers the ownership of non-fungible
things to another
with the obligation on the part of the latter to
give things of the same kind, quantity and
quality shall be considered a loan.
II. Precarium is a kind of mutuum where the
bailor may demand the thing loaned at will.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
DEPOSIT
32. I. An agreement to constitute a deposit is
binding and is perfected from the moment
there is
meeting of minds.
II. Movable and immovable things may be
the object of judicial deposit.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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33. I. A contract of deposit must be in
writing.
II. The depositary can make use of the things
deposited even without the express
permission
of the depositor.
A. First statement is true, second statement
is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
34. I. Fixed, savings, and current deposits of
money in banks and similar institutions shall
be
governed by the provisions concerning
simple loan.
Page | 76
II. The depositary can demand that the
depositor prove his ownership of the thing
deposited.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
35. I. Unless there is a stipulation to the
contrary, the depositary cannot deposit the
thing with a
third person.
II. When the depositary has permission to
use the thing deposited, the contract loses
the
concept of a deposit and becomes a loan or
commodatum even when safekeeping is still
the principal purpose of the contract.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
36. I. The thing deposited shall be returned
with all its products, accessories and
accessions.
II. A contract of deposit is perfected from
the moment there is meeting of minds.
A. First statement is true, second
statement is false.
B. First statement is false, second statement
is true.
C. Both statements are true.
D. Both statements are false.
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TRUE OR FALSE. Write the word TRUE if
the statement is true and the word FALSE if
the statement is false coupled by an
explanation why the same is false.
1. Warranty against eviction is inherent
in a contract of sale; hence, it is an
essential element thereof.
J. Delos Santos
2. Dacion en pago partakes of the
nature of sale; hence, there is more
freedom in fixing the price of the
thing conveyed.
3. A contract for a piece of work must
comply with the Statute of frauds.
Accordingly, it must be in writing to
be enforceable if the price is PhP500
or more.
4. A sales contract requires the delivery
of the thing sold for its perfection.
5. As a rule, if the consideration
received for the thing is another
thing and a monetary consideration
and the intention of the parties does
not clearly appear, the contract will
be considered a contract of barter if
the value of the property
consideration is greater than the
monetary consideration.
6. In a contract to sell, the full payment
of the price is a suspensive condition
which upon fulfilment will require
the execution of a contract of sale.
7. It is not necessary that the vendor of
a thing must be the owner thereof at
the time of sale as long as he can
transfer its ownership to the buyer
upon delivery.
8. The sale of hope or expectancy does
not come into existence.
9. In a sale of a piece of land is made
through an agent, the authority of the
agent must be in writing for the sale
to be valid.
10. In sale by auction, any bidder may
retract his bid before the sale is
perfected.
11. If a by-bidder or puffer is employed
by a seller without notice in sale by
auction, the sale may be treated as
fraudulent by the buyer.
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 12. The ownership of the thing sold is
transferred upon the perfection of the
contract of sale.
13. A unilateral promise to buy or sell a
determinate thing at a certain price is
binding upon the promissor if the
promise is supported by a
consideration distinct from the price.
14. Earnest money is part of the
purchase price of a thing, hence,
deductible from the total selling
price.
15. In sale of personal property payable
by instalments, the seller may exact
fulfilment of the buyer’s obligation
when the buyer defaults in the
payment of one or more instalments.
16. In sale of real property where the
buyer has defaulted after paying at
least 2 years instalments, he shall be
entitled to pay without additional
interest the unpaid instalments due
within the grace period earned by
him.
17. A guardian may validly acquire by
purchase the property of the person
under his guardianship.
18. The buyer shall be entitled to the
fruits of the thing sold from the time
of the perfection of the contract.
19. The delivery of incorporeal property
may be made through the exercise by
the vendee of his rights with the
consent of the vendor.
20. If goods are sold on “sale or return”
the risk of loss of the thing sold
remains with the seller after its
delivery to the buyer
21. In “sale by approval” the buyer
becomes the owner of the thin upon
delivery but ay revert such
ownership to the seller by returning
it.
J. Delos Santos
22. The delivery of specific goods to a
carrier or other bailee for the purpose
of transmission to the buyer
generally transfers ownership of the
goods to the buyer.
23. When a thing is purchased from a
merchant’s store, fair or market, the
buyer acquires title to the thing
although the seller may have stolen it
or acquired it from a thief.
24. A warehouse receipt is also a
contract between the warehouseman
and the depositor of the goods.
25. A bearer document of title becomes
an order document of title if it is
specifically endorsed.
26. The delivery of an order document of
title without any endorsement does
not constitute as negotiation.
27. A negotiable document of title
becomes negotiable if it stamped
with the mark “non-negotiable”
28. If the goods sold are in the
possession of a third person, the
seller is deemed to have delivered
the goods to the buyer if the third
person acknowledges to the buyer
that he holds the goods in the buyer’s
behalf.
29. If a period has been fixed for the
payment of the price which has not
yet arrived, the seller in the
meantime is bound to deliver the
thing sold.
30. An unpaid seller exercising his right
to resell the goods may buy the
goods either directly or indirectly.
31. When an unpaid seller exercises his
right of stoppage in transit, the
contract of carriage ceases, the
carrier becomes liable is a
depositary.
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32. If real estate is sold for a lump sum,
the vendor is bound to deliver all that
is included within the boundaries
stated in the contract.
33. If the same immovable is sold to two
or more persons who are all in good
faith, ownership shall belong to the
buyer who first paid its price.
34. In order that the buyer may enforce
the seller’s liability for breach of
warranty against eviction, the
judgment depriving the buyer of the
thing must first be appealed by the
buyer.
35. The vendor’s liability for breach of
warranty against eviction may be
validly waived by the vendee.
However, the vendor will still be
liable if the waiver was made by the
vendee without knowledge of the
risk of eviction.
36. As a rule, the vendor shall not be
liable for a non-apparent easement
that is recorded in the registry of
property.
37. The vendor shall be liable generally
for any defect on the thing sold even
if he was not aware thereof.
38. When animals are sold as a pair, the
vendee may ask for the rescission of
the sale of both animals although
only one of them suffers from
redhibitory defect.
39. The sale of animals suffering from
contagious diseases is voidable.
40. There is no warrant against hidden
defects of animals sold at fairs or at
public auctions, or of animals sold as
condemned.
J. Delos Santos
PAR
QUIZ- Business
Law and
Taxation
CPARQUIZ- Business Law and Taxation
1. As a rule, this contract of sale involving D
a piece of land is void,
A. Between a minor and a capacitated
person.
B. Between two insane persons who did
not act during lucid interval
C. Between first degree cousins
D. Between husband and wife
2. X, 17 years old, sold to Z, of legal age, C
her necklace worth P20,000 for P15,000.
Later, Z sold the necklace to Y for
P20,000. Which of the following
statements is correct?
A. X has got a voidable title because at
the time of sale, she is a minor
B. X can ask for rescission of the sale to Y
because she suffered a lesion of more
than ¼ of the value of the property.
C. If Y is in bad faith, Y becomes the
owner of the necklace upon delivery to
him but his title is voidable.
D. X can ask for the annulment of the sale
to Y because at the time of sale she is a
minor
3. This serves as a proof of the D
perfection of the contract of sale
A. Dacion en pago
B. Option money
C. Delivery
D. Arras
4.A contract of sale is not a(an) B
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 A. Onerous contract
B. Accessory contract
C. Commutative contract
A. Things
D. Bilateral contracT
5.Warranty against hidden defects is B subject to a
A. An essential element
B. A natural element
C. An accidental element
resolutory
D. An artificial element
7. When a sale of a piece of land or any
interest therein is through an agent, the
D condition
authority of the agent shall be in writing,
otherwise the sale is may be the
A. Valid
B. Voidable
C. Unenforceable
object of the
D. Void
8. The sale of an expected thing
A. Dacion en pago
D contract of
B. Payment by cession
C. Emptiospei sale.
9. The sale of the hope itself

A. Dacion en pago
C
B. A thing is
B. Payment by cession
C. Emptio spei
D. Emptio rei-speratae
generic
speratae
B
when it is
10. One of particularly
the designated
following is or
not correct physically
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J. Delos Santos
 segregated thing may
from sell an
all others of undivided
the same interest
class. therein
C. Things
10. One of the following is not correct

A. Things subject to a resolutory

condition may be the object of the

having a contract of sale.

B. A thing is generic when it is particularly
designated or physically segregated from

potential all others of the same class.

C. Things having a potential existence
may be the object of the contract of sale.

existence D. The sole owner of a thing may sell an

undivided interest therein
11. X needs a size of 10 of model 101 of C

may be the Leather Shoes regularly available to the

public for her boyfriend Z, but the same
is out of stock so she placed an order for

object of the one. On the other hand, Z placed an

order for size No. 8, colored violet,
(something not ordinarily made by the

contract of company) to be given to X. Which is

correct?

sale. A. Both are contracts of sale

B. Both are contracts for a piece of work
C. First is a contract of sale second is a

D. The sole contract for a piece of work

D. First is a contract for a piece of work,
second is a contract of sale

owner of a 12. V offered to sell for P12,000,000 her D

house and lot to DD who was interested
in buying the same. In her letter to DD, V
stated that she is giving DD a period of

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J. Delos Santos
 one month within which to raise the
amount and that as soon as DD is ready,
they will sign the deed of sale. Five days
before the expiration of the one month
period. V went to DD and told her that
she is no longer willing to sell the
property unless the price in increased to
P15,000,000. Which is correct?
A. DD may compel V to accept the
P12,000,000 first offered.
B. V may compel DD to pay P15,000,000
C. V and DD should shoulder the
P3,000,000 difference
D. DD cannot compel V to accept the
P12,000,000 first offered
17. The Realty Installment Buyer
Protection Act applies to all transactions
involving the sale or financing of real
estate on installment but it excludes the
following except:
A. Sale or financing of industrial lots
B. Sale or financing of commercial
building
C. Sale to tenants under the Land Reform
Code
D. Sale of residential condominiums
8. Delivery by merely pointing to the
object of sale if it cannot be delivered to
the vendee at the time of the sale is
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
9. Effected when the object of sale is
already in the possession of the vendee
at the time of sale so that delivery need
no longer be made is
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
J. Delos Santos
20. When the owner of the thing sells it C
to vendee, but continues to have
possession or occupation of the thing not
as owner but as tenant or lessee
A. Traditio longa manu
B. Traditio brevi manu
C. Traditio constitutum possessorium
D. Traditio symbolica
21. Goods are deemed in transit C
A. When the buyer accepts delivery of
the goods upon arrival at destination
B. When the buyer intercepts and
lawfully takes possession of the goods at
any point before destination.
C. From the time they are delivered by
the seller to a common carrier or other
D bailee
for transmission to the buyer, up to the
time that the buyer or his agent takes
delivery of the goods from the carrier or
bailee.
D. When the carrier or bailee, upon
arrival of the goods at destination
acknowledges to the
buyer or his agent that he is holding the
goods as bailee for the latter
22. Goods
D
A
are deemed
no longer in
B
transit
A. If the
goods are
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 rejected by time they
the buyer for are
a valid delivered to
reason and a carrier by
the carrier or land, water
other bailee or air for the
continues in purpose of
possession transmission
of them, to the buyer.
even if the C. From the
seller has time they
refused to are
receive them delivered to
back. a bailee for
B. From the the purpose
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J. Delos Santos
 of deliver the
transmission goods to the
to the buyer buyer or
until the his agent in
buyer or his that behalf
agent in that 22. Goods
behalf, takes are deemed
delivery of no longer in
them from transit
such bailee. A. If the
D. If the goods are
carrier or rejected by
other bailee the buyer for
wrongfully a valid
refuses to reason and
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J. Delos Santos
 the carrier or land, water
other bailee or air for the
continues in purpose of
possession transmission
of them, to the buyer.
even if the C. From the
seller has time they
refused to are
receive them delivered to
back. a bailee for
B. From the the purpose
time they of
are transmission
delivered to to the buyer
a carrier by until the
Page | 85
J. Delos Santos
 buyer or his that behalf
agent in that
22. Goods are deemed no longer in
transit
A. If the goods are rejected by the buyer
for a valid reason and the carrier or other

behalf, takes bailee continues in possession of them,

even if the seller has refused to receive
them back.

delivery of B. From the time they are delivered to a

carrier by land, water or air for the
purpose of transmission to the buyer.

them from C. From the time they are delivered to a

bailee for the purpose of transmission to
the buyer until the buyer or his agent in

such bailee. that behalf, takes delivery of them from

such bailee.
D. If the carrier or other bailee wrongfully

D. If the refuses to deliver the goods to the buyer

or
his agent in that behalf

carrier or 23. X sold to V orally a parcel of land for

P200,000. X effected the delivery of the
C

other bailee land. The payment of the price was to be

made three month later. At the end of
three month period

wrongfully A. V may refuse to pay claiming in his

defense the Statute of Frauds
B. V may return the parcel of land to X

refuses to
C. X can collect from V because the
contract has already been executed
D. V may refuse to pay on the ground

deliver the
that there is no written contract to
support the sale

goods to the
4. On January 15, 2010, X sold for P2M B
her house and lot to V. It was agreed that
delivery of the house and lot, and the

buyer or
payment therefore, would be made on
March 10, 2010.
Unfortunately, Z a stranger

his agent in
negligently set the house on fire on
February 25, 2010, and the house was
completely destroyed. Which is correct?
A. V is not required to pay the P2M since

Page | 86
J. Delos Santos
 the contract had no subject matter.
B. X must still deliver the lot but is
excused from delivering the house, while
V must
still pay the P2M
C. X must deliver the lot while V should
pay only the amount equivalent to the
value of the lot.
D. X need not deliver the lot while V need
not pay the P2M

25. If immovable property should have C

been sold to different vendees, the
ownership shall be transferred to the
person
A. Who have first taken possession in
good faith
B. Who presents the oldest title in good
faith
C. Who in good faith first recorded it in
the Registry of Property
D. Who have paid in good faith the
purchase price in full

26. Using the preceding number, if D

movable property, it shall belong to the
person
A. Who have paid in good the purchase
price in full
B. Who in good faith first recorded it in
the Registry of Property
C. Who presents the oldest title in good
faith
D. Who have first taken possession in
good faith

27. Action by the vendee against the D

vendor to nullify the sale due to some
vices or defects
which render the object of sale unfit
for the use intended or knowledge of
which the vendee
should not have bought the thing
A. Accion quanti minoris
B. Accion reinvidicatoria
C. Accion pauliana
D. Redhibilitory action

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J. Delos Santos