Sales: UC LAW: Civil Law Review Notes On Sales

UC LAW: Civil Law Review Notes on
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SALES
I. Introduction
A. Definition of Sales (Arts. 1458, 1470)

B. Essential requisites of a contract of sale (Art. 1505)
C. Stages of contract of sale
D. Obligations created (Art. 1165)
E. Characteristics of a contract of sale
F. Sale is title and not mode
G. Sale distinguished from other contracts
H. Contract of sale/contract to sell
II. Parties to a Contract of Sale
A. Capacity of parties (Arts. 1489-1492)

B. Absolute incapacity (Arts. 1327, 1397, 1399)
C. Relative incapacity: married persons
D. Special disqualifications (Arts. 1491-1492)
III. Subject Matter
A. Requisites of a valid subject matter (Arts. 1459-1465)

B. Particular kinds
IV. Obligations of the Seller to Transfer Ownership
A. Sale by a person not the owner at time of delivery (Arts. 1462, 1505, 1459)
1. Exceptions
B. Sale by a person having a voidable title (Arts. 1506, 559)
V. Price
A. Meaning of price (Arts. 1469-1474)

B. Requisites for a valid price
C. How price is determined
D. Inadequacy of price (Arts. 1355, 1470)
E. When no price agreed (Art. 1474)
F. Manner of payment must be agreed upon
G. Earnest money vs. Option money (Art.1482)
VI. Formation of Contract of Sale
A. Preparatory (Art. 1479)
1. Offer (Art. 1475)

2. Option contract (Arts. 1479, 1324)
3. Right of first refusal
4. Mutual promise to buy and sell (Art. 1479)
B. Perfection (Arts. 1475, 1319, 1325, 1326)
C. Formalities of the contract, Art. 1403 (d) (e)

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VII. Transfer of Ownership
A. Manner of transfer (Arts. 1477, 1496-1501)

B. When delivery does not transfer title
C. Kinds of delivery
D. Double sales (Art. 1544)
E. Property Registration Decree
1. Requisites for registration of deed of sale in good faith
2. Accompanied by vendor‘s duplicate certificate of title, payment of capital gains tax, and documentary tax
registration fees
VIII. Risk of Loss
A. General rule (Arts. 1263, 1189)

B. When loss occurred before perfection
C. When loss occurred at time of perfection (Arts. 1493 and 1494)
D. When loss occurred after perfection but before delivery
E. When ownership is transferred (Art. 1504)
IX. Documents of Title
A. Definition (Art. 1636)

B. Purpose of documents of title
C. Negotiable documents of title
D. Non-negotiable documents of title
E. Warranties of seller of documents of title (Art. 1516)
F. Rules on levy/garnishment of goods (Arts. 1514, 1519, 1520)
X. Remedies of an Unpaid Seller
A. Definition of unpaid seller (Art. 1525)

B. Remedies of unpaid seller
XI. Performance of Contract
A. Delivery of thing sold
1. Sale of movables (Arts. 1522, 1537, 1480)

2. Sale of immovables (Arts. 1539, 1543)
3. Inspections and acceptance
B. Payment of price
XII. Warranties
A. Express warranties
B. Implied warranties (Art. 1547)
C. Effects of warranties
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D. Effects of waivers
E. Buyer‘s options in case of breach of warranty (Art. 1599)
XIII. Breach of Contract
A. Remedies of the seller (Arts. 1636, 1594)

1. Sale of movables
B. Recto Law: sale of movables on installment (Arts. 1484-1486)

C. Sale of immovables
1. P.D. 957, Secs. 23, 24
2. Sale of immovables on installment (Maceda Law)
D. Remedies of the buyer

1. Sale of movable
2. Sale of immovables
XIV. Extinguishment of the Sale
A. Causes (Arts. 1600, 1231)

B. Conventional redemption (Art. 1601)
C. Equitable mortgage (Arts. 1602-1604)
D. Distinguished from option to buy (Art. 1602)
E. Period of redemption (Art. 1606) 22
F. Exercise of the right to redeem (Art. 1616)
G. Legal redemption (Art. 1619)
H. Age redemption (Art. 1619)
XV. The Subdivision and Condominium Buyers' Protective Decree (P.D. 957)
XVI. The Condominium Act (R.A. 4726)
I. INTRODUCTION
Q: What is a contract of sale?
A: By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. (Art. 1458, NCC)
Q: When is a sale absolute?
A: The sale is absolute where the sale is not subject to any condition whatsoever and where the title passes to the buyer upon
delivery of the thing sold.
Q: When is a deed of sale considered absolute in nature?
A: A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is
reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period.
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Q: When is a sale conditional?
A: It is conditional where the sale contemplates a contingency, and in general, where the contract is subject to certain conditions,
usually in the case of the vendee, the full payment of the agreed purchase price and in the case of the vendor, the fulfilment of
certain warranties.
Q: What are the elements of a contract of sale?
A: ANE
1. Accidental elements – dependent on parties‘ stipulations; Examples: a. Conditions b. Interest c. time & place of
payment d. penalty
2. Natural elements – those that are inherent even in absence of contrary provision. E.g. warranties
3. Essential elements – for validity: a. Consent b. Determinate subject matter c. Consideration
Q: What is the effect and/or consequence of the absence of consent of the owner in a contract of sale of said property?
A: The contract of sale is void. One of the essential requirements of a valid contract of sale is the consent of the owner of the
property.
 OBLIGATIONS CREATED:
Obligations of the buyer

1. Payment of the price
GR: the seller is not bound to deliver unless the purchase price is paid
EXCEPTION: A period for payment has been fixed
2. Accept the delivery of the thing sold
3. Pay for the expenses of delivery
Other Obligations of buyer
1.To take care of the goods without the obligations to return, where the goods are delivered to the buyer and he rightfully
refuses to accept (Art. 1587);
2. He is liable as a depositary if he voluntarily constituted himself as such;
3. To pay interest for the period between the delivery of the thing and the payment of the price in the following cases:
a) should it have been stipulated;

b) should the thing sold and delivered produces fruits or income; or
c) should he be in default, from the time of judicial and extra-judicial demand for the payment of the price.
Obligations of the seller

1. Deliver the thing sold (Art. 1495);
2. Deliver the fruits, accessions and accessories accruing from the perfection of the sale ( Art. 1537);
3. Transfer the ownership;
4. Warranties;
5. Take care of the thing, pending delivery, with proper diligence;
6. Pay for the expenses of the deed of sale unless there is a stipulation to the contrary.
 CHARACTERISTICS OF A CONTRACT OF SALE:
1. Consensual- perfected by mere consent;
In the case of Gabelo Vs CA the Supreme Court held that actual delivery of the subject matter or payment of the price
agreed upon are not necessary components to establish the existence of a valid contract of sale; and their non-performance
do not also invalidate or render void a sale that has began to exist as a valid contract at perfection. Non-performance
merely becomes a legal basis for remedies of either specific performance or rescission with damages in either case.
2. Bilateral- imposes obligations on the part of both parties;

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3. Commutative- a contract wherein a thing of value is exchange for an equal value;
TEST: so long as the party believes in all honesty that he is receiving equal value for what he gave up for, then it comply
for the commutative character of the sale and would not be deemed a donation or an aleatory contract.
4. Principal-can stand on its own and does not depend upon another contract for its validity;
5. Title not a mode of transferring ownership;
Mode is a legal means by which ownership is created, transferred or destroyed; title constitute the legal basis by which to
effect ownership. Therefore, sale by itself does not transfer ownership. The most it does is it does create an obligation to
transfer ownership. It is delivery that transfers ownership.
6. Onerous- imposes a valuable consideration;
7. Reciprocal- the performance of one is designated to be equivalent and condition for the performance of another;
8. Nominate- given a particular name in law.
 DISTINCTION OF THE CONTRACT OF SALE WITH OTHER CONTRACTS
1. Sale v. Donation
SALE DONATION
Onerous Gratuitous/Onerous
Consensual Formal contract
Law on sales Law on donation
2. Sale v. Barter
SALE BARTER
Consideration is giving of money as payment Consideration is giving of thing
If the consideration is partly by money and partly by thing- look at the manifests intention of the parties. If
intention is not clear then apply Art. 1468
Value of the thing is equal or less than the amount of Value of the thing is more than the amount of money =
money =sale barter
Both are governed by the law on sales
3. Sale v. Agency to Sell

SALE AGENCY TO SELL
Buyer pays for the price of the object Agent is not obliged to pay for the price; must account
for the proceeds of the sale
Buyer becomes the owner of the thing Principal remains the owner even if the object is
delivered to the agent
Seller warrants Agent assumes no personal liability as long as he acts
within the authority given
Not unilaterally revocable May be revoked unilaterally even without ground
Seller receives profit Agent not allowed to profit
Real contract Personal contract
4. Sale v. Dacion En Pago

SALE DACION EN PAGO
No pre-existing credit Contract where property is alienated to extinguish pre-
existing credit/debt
Buyer-seller relationship Novates creditor-debtor relationship into seller-buyer
There is greater freedom in determination of the price There is less freedom in determining the price
The giving of the price may generally end the obligation The giving of the object in lieu of the credit may
of the buyer extinguish completely or
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5. Sale v. Lease
SALE LEASE
Obligation to absolutely transfer ownership of Use of thing is for specified period only with
thing obligation to return
Consideration is the price Consideration is the rental
Seller needs to be owner of thing to transfer ownership. Note: Lease with option to buy – really a
contract of sale but designated as lease in name.
6. Sale v. Contract for a Piece of Work
SALE CONTRACT FOR A PIECE OF WORK

Goods are manufactured or procured in the ordinary Goods are manufactured for customer upon his special
course of business order
For the general market Specially for customer
Contract for a piece of work: Contractor binds himself to execute a piece of work for the employer in consideration of a certain
price or compensation.
If the article ordered by the purchaser is exactly such as the plaintiff makes or keeps on hand for sale to anyone, and no change or
modification of it is made at defendant‘s request, it is a contract of sale , even though it may be entirely made after and in
consequence of the defendant‘s order for it.
 CONTRACT TO SELL
Q: What is a contract to sell?
A: It is one form of conditional sale where ownership or title is retained by the seller until the fulfillment of a positive
suspensive condition, normally the payment of the purchase price by the buyer in the manner agreed upon. (Gomez v.
CA, et. al., G.R. 120747, Sept. 21, 2000)
Q: Distinguish a contract to sell from a contract of sale.
CONTRACT OF SALE CONTRACT TO SELL

As regards transfer of ownership
Ownership is transferred to the buyer upon delivery of Ownership is transferred upon full payment of the
the object to him. Note: Vendor has lost and cannot purchase price. Note: Prior to full payment, ownership is
recover ownership until and unless the contract is retained by the seller.
resolved or rescinded
As to numbers of contracts involved
There is only one contract executed between the seller There are two contracts: 1. The contract to sell Note:
and the buyer. Conditional or preparatory sale 2. The deed of absolute
sale Note: The principal contract is executed
after full payment of the purchase price.

Payment as a condition
Non-payment of the price is a resolutory condition. Full payment of the price is a positive suspensive
Vendor loses ownership over the property and cannot condition. Note: Failure to fully pay the price is not a
recover it until and unless the contract is resolved or breach but an event that prevents the obligation of the
rescinded. vendor to convey title from becoming effective
Remedies available
1. Specific 2. Performance 3. Rescission 4. Damages 1. Resolution 2. Damages
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II. Parties to a Contract of Sale
A. Capacity of parties (Arts. 1489-1492)
Art. 1489 of NCC, All persons who are authorized by this Code to obligate themselves may enter into a contract of sale.
B. Absolute incapacity (Arts. 1327, 1397, 1399) -a party cannot bind himself in any case as stated in Articles 1327-
1328 of NCC ( MInD-CI)
1. Minors
Doctrine of Parens Patriae-The State is obliged to minimize the risk to those who because of their minority are as yet
unable to take care of themselves fully. Voidable because the right itself is not restricted but merely its exercise under
certain conditions. Effects:
a. If both parties are incapacitated- Unenforceable

b. If only 1 party is incapacitated- Voidable except:
i. ratification of the minor upon reaching the age of majority

ii. entered thru a guardian and the court having jurisdiction approved it;
iii. Contracts for necessaries (everything that is indispensable for sustenance, dwelling, clothing, or medical
attendance in accordance with the social position of the family)Art 1489, NCC. If necessaries are sold and delivered to
an incapacitated person: must pay a reasonable price therefore.
iv. Estoppel- the minor misrepresented his age and the other party has been misled. ( Mercado vs. Espiritu)
> on the ground that they were minors when they executed it, the questions submitted to the decision of this court consist in
determining whether it is true that the plaintiffs were then minors and therefore incapable of selling their property on the date
borne by the instrument Exhibit 3; and in case they then were such, whether a person who is really and truly a minor and,
notwithstanding, attests that he is of legal age, can, after the execution of the deed and within legal period, ask for the annulment
of the instrument executed by him, because of some defect that invalidates the contract, in accordance with the law (Civ. Code,
arts. 1263 and 1300), so that he may obtain the restitution of the land sold.
> The courts, in their interpretation of the law, have laid down the rule that the sale of real estate, made by minors who pretend to
be of legal age, when in fact they are not, is valid, and they will not be permitted to excuse themselves from the fulfillment of the
obligations contracted by them, or to have them annulled; and the judgment that holds such a sale to be valid and absolves the
purchaser from the complaint filed against him does not violate the laws relative to the sale of minors' property, nor the juridical
rules established in consonance therewith.
2. Insane or Demented Persons (does not require judicial declaration)
GR: Presumption of Sanity stated Under Art. 800, NCC the law presumes that every person is of sound mind, in the
absence of proof to the contrary;
Exception: He who alleges insanity must prove such:
1. Manresa- No need for a judicial declaration of insanity by the court is required, as long as it is shown that at the time
of contracting, the person was really insane.
2. Even if declared insane it does not necessarily mean that at the time of contracting such obligation, said person was
still insane because it can happen that they contracted a sale/ any obligation thereof during lucid interval. Of course in this case,
the sanity must be proved.
3. Deaf-Mute who do not know how to write (read)
Exception:
a. If does not know how to write but knows how to read he is considered capacitated considering that he is able to
convey his consent thereto in any ways.
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4. Civil Interdiction- It shall deprive the offender during the time of his sentence of the rights of parental authority, or
guardianship either as to the person or property of any ward, of marital authority, of the right to manage his property and of the
right to dispose of such property by any act or any conveyance inter vivos. ( But can make a will- because it is disposition of
property mortis causa)
5. Judicially Declared Incompetents

-Prodigals
-Imbeciles
-Absence & Presumption of Death
-Persons not of unsound mind but by reason of age, disease, weak mind, and other similar causes, cannot take care of
themselves and manage their property without outside aid ( Easy prey for deceit and exploration)
6. Drunkenness- Temporary insanity

Which temporarily results in complete loss of understanding and may therefore be equivalent to temporary insanity.
7. Hypnotized- Incapable of intelligent consent

Whether induced by drugs/ by deliberate/ unintentional hypnotism or while a person walks during his sleep because incapable of
giving intelligent consent.
8. Somnambulism
C. Relative incapacity: married persons (Art. 1490)
Relative Incapacity- exists only with reference to certain persons or a certain class of persons.
Discussion: Reason why generally, a Husband and Wife Cannot Sell to each other:
a. To avoid prejudice to third persons
b. To prevent one spouse from unduly influencing the other;
c. To avoid by indirection the violation of the prohibition against donations;
GR: a sale by one spouse to another is void. Who can assail the validity of the sale? a. heirs of either spouse/ creditors before or
at the time of the transaction because they have been prejudiced by the transfer. -SPOUSES CANNOT avail themselves the
illegality of the sale. The law will generally leave them as they are.
FIRST, ART. 1490. The husband and the wife cannot sell property to each other, except: ( Art. 87, spouses during the
marriage cannot donate to each other properties, also applied to common-law spouses)
(1) When the separation of property was agreed upon in the marriage settlements; (Art. 143,) or ( elected prior
the marriage)
ART. 143. Should the future spouses agree in the marriage settlements that their property relations during marriage shall be
governed by the regime of separation of property, the provisions of this code is suppletory.
 If in the marriage settlement the future spouses agreed on the system of complete separation of property, this cannot
be later on converted during the marriage into the conjugal partnership of gains
(2) When there has been a judicial separation of property under Article 191 (Art. 134 Judicial Separation of
Property)-elected during the marriage
ART. 134. In the absence of an express declaration in the marriage settlements, the separation of property between spouses
during the marriage shall not except by judicial separation of property may either be voluntary or for sufficient cause.
 Only applicable where the property regime of the spouse is other than a complete separation of property.
In effect: if there has been a legal separation a sale between former spouses can be validly done because one of the effects of
legal separation is the dissolution of the conjugal partnership, upon dissolution the system that will prevail is the separation of
property system.
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Effects: Sale between spouses is VOID. Such is also applied to common law spouses ( Calimlim-Canulas Vs. Fortun, 1984) -if
already sold to 3rd persons who relied on the title of his immediate seller reconveyance to the seller is no longer available. ( Cruz
vs. CA, 1997)
- the prohibition is primarily for the protection of third persons who, relying upon supposed property of either spouse,
enters into a contract with either of them only to find out that the property relied upon was transferred to the other spouse
( Manresa)
SECOND, Aliens are not allowed to acquire real properties in the Philippines, SECTION 7, ART XII-National Economy
and Patrimony Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Exception:
a. Hereditary Succession- Intestate Succession only as ruled in Testate Estate of Ramirez vs. Vda De Ramirez, Feb 15,
1982 that the provision which enables aliens to acquire lands does not extend to testamentary succession for otherwise the
prohibition will be for naught and meaningless. Any alien would circumvent the prohibition by paying money to a Philippine
Land Owner in exchange for a devise of a piece of land. However, testamentary succession is allowed if the Alien/ foreigner is a
Compulsory heir of the decedent and not a mere devisee.
b. Condominium Act- It expressly allows foreigners to acquire condominium units and shares in condominium
corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned corporation. Thus, the land is
owned by the Condominium Corporation and the unit owner is simply a member in this Condominium.
However as cited in the case of Lee vs. Republic, October 3, 2001, an alien who acquired the property and
subsequently transferred to a Filipino Citizen no one can question anymore the validity of the sale between the owner and the
Foreigner because the disqualification has been cured by the transfer/ sale of property to a Qualified Filipino Citizen.
RELATIVELY PROPERTIES STATUS OF SALE RATIFICATION

INCAPACITATED TO INVOLVED
BUY
Agents Property entrusted to them Voidable Can be ratified after the
for administration or sale inhibition has ceased
XPN: When principal gave Reason: the only wrong that
his consent subsists is the private wrong
to the ward, principal or
estate; and can be condoned
by the private parties
themselves
Guardian Property of the ward during Voidable Can be ratified after the
period of guardianship Note: inhibition has ceased
Contracts entered by Reason: the only wrong that
guardian in behalf of ward subsists is the private wrong
are rescissible if ward suffers to the ward, principal or
lesion by more than ¼ of the estate; and can be condoned
value of property. by the private parties
themselves
Executors and administrators Property of the estate under Voidable Can be ratified after the
administration inhibition has ceased
Reason: the only wrong that
subsists is the private wrong
to the ward, principal or
estate; and can be condoned
by the private parties
themselves
Court officers and Property and rights in Void Cannot be ratified Reason: It
employees litigation or levied upon on is a private wrong.
execution before the court
under their jurisdiction
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Others specially disqualified by law Void Cannot be ratified Reason: It is a

private wrong.
Pubic officers and Property of the State Void Cannot be ratified Reason: It
employees entrusted to them for is a private wrong.
administration
Note: Prohibitions are applicable to sales in legal redemption, compromises and renunciations. In the case of Rubias v. Batiller
(51 SCRA 120), it sought to declare the difference in the nullity between contracts entered into by guardians, agents,
administrators and executors, from the contracts entered into by judges, judicial officers, fiscals and lawyers.
Persons specially disqualified by law to enter into contracts of sale:
1. ALIENs who are disqualified to purchase private agricultural lands (Art. XII Secs. 3 & 7)
2. Unpaid seller having a right of lien or having stopped the goods in transitu, is prohibited from buying the goods either directly
or indirectly in the resale of the same at public/private sale which he may make (Art. 1533 [5]; Art. 1476 [4])
3. The Officer holding the execution or deputy cannot become a purchaser or be interested directly or indirectly on any purchase
at an execution. (Sec. 21 Rule 39, Rules of Court)
4. In Sale by auction, seller cannot bid unless notice has been given that such sale is subject to a right to bid in behalf of the
seller. (Art. 1476)
III. Determinate Subject Matter (Arts. 1459 – 1465)
1. Licit Object
 Licit means lawful, that is within the commerce of man
 Things may be illicit:
>per se (of its nature)

>per accidens (made illegal by provision of law)
 If the object of the sale is illicit, the contract is null and void and cannot therefore be ratified
2. Vendor must have the right to transfer ownership at the time the thing is delivered
 It is essential for a seller to transfer ownership and therefore the seller must be the owner of the subject sold
 This is in accordance with the principle that nobody can dispose of that which does not belong to him ( nemo dat quad non
habet)
 However, he need not be the owner at the time of the perfection of the contract. It is sufficient that he is the owner at the time
the object is delivered. Otherwise, he may be held liable for breach of warranty against eviction.
 Contract of sale is not a mode of acquiring ownership. The contract transfers no real rights, but it merely causes certain
obligation to arise.
 While there can be a sale of future property, there can be generally no donation of future property
3. Determinate thing
>particularly designated or physically segregated from all others of the same class
 This 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
 It is not essential that at the time of the perfection of the contract, the object be already specific. It is sufficient that it is capable
of being determinate without need of new agreement
 If new agreement is needed to determine the amount and the quality of the object sold, this necessarily constitutes an obstacle
to the perfection of the contract.
Other things that may be the subject matter of the contract of sale:
1. Things having potential existence

2. Existing goods, future goods, and goods whose acquisition by the seller depends upon contingency
3. Sale of undivided interest
4. Fungible goods
5. Thing subject to resolutory condition
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Future thing that may be sold. Eg. All my rice harvest next year. , young animals, ungrown fruits
 2nd paragraph, art. 1461, ― The efficacy of the sale of a mere hope or expectancy deemed subject to the condition that the
thing will come into existence‖
>the hope or expectancy already exists; what does not yet exist is the expected thing. Therefore, it should refer to a sale of an
expected thing‘, not the hope or expectancy itself.
Distinguish Emptio res speratae and Emptio Spei:
1. The first refers to the sale of a thing having a potential existence, whereas the second refers to the sale of a mere hope or
expectancy
2. In the first, the uncertainty is with regard the quantity and quality but not with regard to the existence of the thing; in the
second, the uncertainty is with regard to the existence of the thing
3. In the first, contract deals with a future thing; in the second, contract deals with a present thing – the hope or expectancy
4. In the first, sale is subject to a condition that the thing should exist. If it does not, there is no contract for lack of an essential
requisite; in the second, the sale produces effect even though the thing itself does not come into existence since the subject matter
is the hope itself.
 Vain hope or expectancy is void. Be it noted that it is not an aleatory contract for while in aleatory contract there is an element
of chance, here there is completely no chance.
IV. Obligations of the Seller to Transfer Ownership
The owner need not be the owner of the goods at the perfection of the contract of sale.
Future Goods as Object of the Contract of Sale (Art. 1462):

a. Manufactured
b. Raised- young of animals whether conceived or not
c. Acquired by the seller after perfection -*hereafter- acquired property
d. Things whose acquisition depends upon a contingency which may or may not happen\
e. NOTE: Sale of Future inheritance is void for being contrary to public policy
However, the vendor must have a right to transfer the ownership thereof at the time it is delivered (Art. 1459) He must be the
owner at the time of delivery base on the principle that nobody can dispose of that which does not belong to him ( nemo dat quad
non habet)
Sale by a Person not the Owner at Time of Delivery:
General Rule: The buyer merely acquires the seller‘s right. (Art. 1505) If the seller is not the owner at the time of delivery, the
sale will be void for the there is no object to speak of.
Exceptions:
1. The owner of the goods is by his conduct precluded from denying the seller‘s authority to sell. (estoppel)
2. The provisions of any factor‘s acts, 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
Example:
a. Sale of large cattle- no transfer of large cattle shall be valid unless the same is registered, and a certificated of transfer is
obtained
b. Land Registration Law- Torrent
c. Sale of vessels- record at each principal port of entry
V. PRICE
The sum stipulated as equivalent of the thing sold
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REQUISITES OF A VALID PRICE
1. Must be real
2. Must be in money or its equivalent
3. Must be certain or ascertainable at the time of perfection of the contract
4. Manner of payment provided for
1. Must be Real
 When the buyer has an intention to pay and seller has an expectation to receive the price
 It must not be Fictitious or Simulated
 if it is fictitious or simulated, the contract of sale is VOID for lack of cause or consideration
o however, it may be shown to have been in reality a donation or some other contract (Art. 1471)
Provided that all the essential requisites of such contract is present
o Action for annulment is not essential (De Belen v. Collector of Customs, 46 Phil 241)
o If a mother sells to her child property at a price very much lower than what she had paid for it only 3 months before, it is an
indication that the sale is fictitious.
 Presumption: that there is sufficient consideration for a contract (Rule 131, Section 3r, Rules of Court)
 Gross Inadequacy of Price – Valid contract (Art. 1470)
o The stipulation in a contract of sale which states that the consideration is P1 and other valuable considerations‖ does not make
the contract void.
o Exceptions:
This may indicate a defect in the consent (fraud, mistake or undue influence)
● Shocking to the conscience of man or the court in judicial sale (i.e. a land valued at P60,000 was only sold for P867
(Dir. of Lands v. Abarca, 61 Phil 90)
● However, when buyer of the a property in an auction sale sold it at a much higher price will not affect the validity of
the price in the auction sale. (Vda. de Syquia v. Jacinto, 60 Phil 861)
● Askay v. Cosolan, 46 Phil 179 - Askay, an illiterate old man, sold a mining clam in Tublay (Pet Kel Mineral Claim)
to his nephew, Cosalan, for only 107 cash, 1 sheep, cow and 2 carabaos in 1914. The deed of sale was notarized and the content
was fully explained to him upon execution. In 1923, or 9 years after the sale, he filed an action to cancel the sale and for recovery
of his mining claim. He alleges that the price was so inadequate. The court held that although the price is inadequate, this will not
affect the validity of the sale because there is no sufficient proof to show that this is tantamount to a vitiated consent.
It may indicate that the contract was in reality a donation or some other contract
Inadequacy would make the contract rescissible where a contract was entered into by the guardian of a ward or a
representative of an absentee, without the court‘s approval, and the owner suffers lesion by more that ¼ of the value of the things
sold (Art. 1381 (1))
2. Must be in Money or its Equivalent

 Example of equivalent: Letters of Credit
If the price is partly in money and partly in thing

o Manifest intent of the parties
o Cannot be ascertained
Value of the thing > money = Barter
Value of the thing ≤ money = Sale
3. Must be Certain or Ascertainable at the Time of Perfection of the Contract

 Ascertainable (Art. 1469 and Art. 1472)
o Fixed with reference to another thing certain
o The price 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
o The determination thereof be left to the judgment of a special person or persons.
When the third person:

Unable or unwilling to fix it = contract is inefficacious, unless the parties subsequently agree upon the price.
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Acted in bad faith or by mistake = the courts may fix the price.
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.
4.Manner of Payment provided for: Non fixing of the manner of payment of the price is tantamount to no agreement as to the
price (Toyota Shaw v. CA, G.R. No. 116650)
VI. FORMATION OF A CONTRACT OF SALE (STAGES OF A CONTRACT OF SALE)
1. NEGOTIATION/PREPARATORY -the period of negotiation and bargaining ending at the moment of agreement of the
parties.
A. OFFER
RULES: OFFER IS FLOATED AND IT IS:

Offer is Floated Prior to acceptance, may be withdrawn at will by offeror
but authority to modify it
With a period Must be accepted within the period, otherwise,
extinguished at the end of period and may be withdrawn
at will by offeror but must not be arbitrary, otherwise,
liable for damages
With a condition Extinguished by happening/ non-happening of condition
Without period/condition Continues to be valid depending upon circumstances of
time, place and person
With a counter offer Original offer is extinguished
B. OPTION CONTRACT (1479, 1324)
- a contract granting a privilege in one person for which he has paid a consideration which gives him the right to buy certain
property at anytime within the agreed period at a fixed price.
NOTE: Consideration in an option contact is anything or undertaking of value unlike in sale where it must be a price certain in
money. 1324: When the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the option is founded upon a consideration as something paid or
promised.
CONTRACT OF SALE V. OPTION CONTRACT
1. Contract of sale is bilateral giving rise to reciprocal obligations; Option contract is unilateral because the right to buy or sell is
without obligation on the part of option-holder aside from the consideration for the offer.
2. Contract of sale is a sale of property; option contract is a sale of right to purchase.
 Nature of an option contract

It is a separate and distinct contract. If the option contract is perfected, it does not result in a perfected contract of sale.
EFFECTS IN AN OPTION CONTRACT
1. with separate consideration

a) contract is valid
b) offeror cannot withdraw offer until after expiration of the option
c) is subject to rescission and damages, but not to specific performance
2. without separate consideration

a) option contract not deemed perfected
b) offer may be withdrawn at anytime prior to acceptance
C. RIGHT OF FIRST REFUSAL

- It is the right of first priority, all things and conditions being equal, identity of the terms and conditions offered to the optionee
and all other prospective buyers with optionee to enjoy the right of first refusal.
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Q: NDC and Firestone entered into a contract of lease wherein it is stipulated that Firestone has the right of first refusal to
purchase the leased property "should lessor NDC decide to sell the same”. After the rumor that NDC will transfer the lot to PUP,
Firestone instituted an action for specific performance to compel NDC to sell the property in its favor. PUP moved to intervene
arguing that the Memorandum issued by then President Aquino ordered the transfer of the whole NDC compound to the
Government, which in turn would convey it in favor of PUP. Can Firestone exercise its right of first refusal?
A: Yes. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal
duty to the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain price and the
lessee has failed to accept it.
The lessee has a right that the lessor's first offer shall be in his favor. (PUP v. CA, G.R. No. 143513, Nov. 14, 2001)
Note: It is necessary that the right of first refusal be embodied in a written contract because such grant must be clear and
express. Right of first refusal may also be waived.
Option contract Right of First Refusal

Principal Contract Accessory Contract
Needs a separate consideration No need for a separate consideration
Subject matter and price must be valid Subject matter is important but not price
Not conditional Conditional
Not subject to specific performance Subject to specific performance
D. MUTUAL PROMISE TO BUY AND SELL (1479)
1. Accepted Unilateral Promise to Buy or Sell
An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promissory if the
promise is supported by a consideration distinct from the price.
Ex. A promises to sell his car to B for P500, 000. B accepts the promise to sell but does not promise to buy (merely an
acceptance of the option). A is not bound to sell his car.
BUT if B accepted the promise supported by a consideration distinct from the price, it results in a perfected contract (there is
already a meeting of the minds).
B. Bilateral Promise to Buy and Sell
A promise to buy and sell a determinate thing for a price certain is reciprocally demandable
Ex. A promises to sell his car to B for P250, 000 to be exercised within a period of one month. B, in turn, promises to buy
the same car from B.
Even without consideration distinct from the price, the promise to buy and sell is reciprocally demandable. SANCHEZ V.
RIGOS: If acceptance is made before a withdrawal, it constitutes a binding contract of sale although the option is given
without consideration. The offeror cannot arbitrarily revoke offer without being liable for damages.
Note: There is therefore a difference between acceptance of the offer of option (which results in the contract of option) and
acceptance of the object being offered for sale or acceptance of the offer of sale (which results in a perfected contract of sale).
2. PERFECTION OF SALE
General Rule: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of
the contract and upon the price; consensual contract. Exception: when the sale is subject to a suspensive condition
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I. REQUIREMENTS:
1. When parties are face to face- when there is absolute acceptance of an offer that is certain.
2. When thru correspondence or telegram- whan the offeror recievs or had knowledge of the acceptance
3. When the sale subject to a suspensive condition- from the moment the condition is fulfilled
NOTES: Qualified acceptance: mere counter –offer which needs to be absolutely accepted to give rise to perfected contract of
sale. Business ads are mere invitations to make an offer except when it appears to be otherwise.
II. RULES GOVERNING AUCTION SALES
1. Sales of separate lots by auction are separate contracts of sale

2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid at the auction provided such right was reserved and notice was given to that effect
III. EARNEST MONEY
1. Money given as part of purchase price.

2. Acceptance is the proof that contract of sale exists
3. Nothing in law prevents partiesfrom treating earnest money differently
4. Old concept : subject to forfeiture when BUYER backs out
5. New concept: cannot be forfeited – part of purchase price; must be restored
6. Qualification: if old concept is stipulated –VALID
7. Presumption of perfection of contract of sale and such earnest money as part of purchase price is disputable.
Art.1483. subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in
writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the
parties.
FORMS OF SALES
1. Form not important in validity of sale

a) Sale being consensual, may be oral or written, perfected by mere consent as to price and subject matter.
b) If particular form is required under the statute of frauds: valid and binding between parties but not binding to 3 rd
persons
c) Reason: purposes of convenience only and not for validity and enforceability; cause of action is granted to sue and
compel other party to execute the document
2. When form is important for validity; exemption by specific provision of law;

a) power to sell a piece of land granted to an agent- otherwise VOID
b) sale of large cattle; must also be registered with municipal treasurer- otherwise Void
c) sale of land by non Christian if not approved by Governor- VOID
3. When form is important for enforceability (STATUTE OF FRAUDS Article 1403 (2))
a) a sale agreement which by its terms is not to be performed within a year from the making thereof;
a) a sale agreement which by its terms is not to be performed within a year from the making thereof;
b) an agreement for the sale of goods, chattels or things in action, at a price not less than P500.00; and
c) a sale of real property or of an interest therein.
IV. Exceptions TO COVERAGE OF STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in writing and subscribed to by party or his agent (contains essential terms of the
contract)
2. When there has been partial performance/execution (seller delivers withintent to transfer title receives price)
3. When there has been failure to object to presentationof evidence (oral)
4. When sales are affected through electronic commerce
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3. CONSUMMATION STAGE/PERFORMANCE STAGE
NOTE: Stage where parties both comply with their obligation . Nature of diligence required:diligence of a good father of the
family unless other requirement is sti
VII. TRANSFER OF OWNERSHIP
A. MANNER OF TRANSFER
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.
GENERAL RULE: Ownership is transferred to the vendee/buyer upon DELIVERY. (including any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee)
What to deliver:
The Thing Sold
Fruits
Accessions and Accessories
(Improvements by nature and by time)
Where to deliver:
Place stipulated
Usage of Trade
Seller‘s Place of Business (Office)
Seller‘s Residence
When to deliver: Absent any stipulation as to time, delivery must be made within a reasonable time; demand or tender of delivery
shall be made at a reasonable hour.
Exceptions:
1. On Sale or Return – this is a sale that depends on the discretion of the buyer
- ownership passes upon delivery but buyer may revest ownership in the seller within the time
fixed in the contract, or if no time has been fixed, within a reasonable time.
Q: What is the difference between ―on sale or return‖ and delivery of property with option to purchase?
A: In the first, ownership is transferred at once; in the second, there is no transfer of ownership till the owner agrees to buy.
Note: But buyer is liable for the price even if it becomes impossible to return the goods.
2. Sale on Approval or on Trial or Satisfaction- ownership passes only to the buyer when:
a. He signifies his approval or acceptance to the seller or does any other act adopting the transaction;
b. He retains the goods without giving notice of rejection on the expiration of the time fixed for the return of the goods;
or
c. On the expiration of reasonable time, if no period has been fixed. (Reasonable time is a question of fact.)
3. Executory Sales
a. where the seller reserves the right of possession or ownership in the goods until certain conditions have been fulfilled
notwithstanding delivery to the buyer/carrier or bailee;
b. where ownership in the thing shall not pass to the purchaser until he has paid the price (Art. 1478);
4. Sale by Description and/or Sample (Art. 1480)

- despite delivery, the contract may be rescinded if the bulk of the goods do not correspond with the description or
sample
- if the contract is both by description and sample, both must concur
5. Invalid Sales
6. When Seller is Not the Owner (Art. 1505)

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Gen Rule: “Nemo dat quod non habet”- meaning, one cannot give what he does not own; pulated Consequence: Seller will be
guilty of breach if thing is lost through his fault.
Exceptions:
1. Estoppel
2. Sale under Court Order
3. When goods are purchased in a merchant‘s sotre, in fairs or markets;
4. Registered land bought in good faith;- As a rule, the buyer need not go beyond the Torrens Title; exception, when he has
knowledge of any fact and circumstances that would impel a reasonably cautious man to make inquiry.
B. WHEN DELIVERY DOES NOT TRANSFER TITLE
1. Sale on return-
-Goods delivered to the buyer on ―sale on return‖

Ownership passes upon delivery but buyer may revest ownership in the seller by returning or tendering the goods within the
time fixed in the contract, if no time is fixed, within reasonable time
Buyer remains liable for the price even if it becomes impossible to return the goods.
Non-exercise of the privilege of return rendered the sale absolute and the buyer becomes liable for the price
Sale with Option to Return Sale on Approval

Title passes upon DELIVERY of the price Title passes upon PAYMENT or APPROVAL
Subject to RESOLUTORY condition Subject to SUSPENSIVE condition
Depends on the WILL OF THE BUYER Depends on the CHARACTER OR QUALITY of the
goods
2. Sale on Approval, Trial, or Satisfaction-
-it is a contract in the nature of an option to purchase if the goods proved to be satisfactory. The approval of the buyer is a
condition precedent.
Ownership passes to the buyer when:

1. he signifies his approval or acceptance to the seller or does any other act adopting the transaction, OR 2. he retains the goods
without giving notice of rejection on the expiration of the time fixed for the return of the goods, OR
3. on the expiration of a reasonable time, if no period has been fixed
Note: Sale on return and Approval. There must be a clear agreement of such effect, otherwise, the provisions of art 1502 cannot be
invoked. -Such agreement must be in writing as provided under uniform sales act. Sale providing that the buyer would be permitted
to return them unless they measured up to the description was sale with option to return and not a sale on approval.
3. Express reservation of title in the seller, title does not pass; a. Until payment (Art. 1478) b. Until fulfillment of the condition
(1503, par.1)
4. Implied reservation of title arises when-
a. Goods are deliverable to the order of the shipper or agent (Art. 1503, par. 2)
But where goods are deliverable to the order of the buyer or his agent and the seller retains the bill of lading (Art. 1503, par.
3), title passes subject to the lien of the seller for security purposes.
b. If a bill of lading is transmitted with a draft attached (1503, par.4), in which case title passes upon acceptance;
The title is retained until the bill of exchange is paid
Payment is a condition precedent for the transfer of title
o But, if the bill provides that the goods are deliverable to the buyer, or the order of the buyer, or it is indorsed in
blank, the bill transfers title to the buyer for value and without notice that the draft was not honored.
5. Sale to two different persons by the same seller
6. Sale by description and/or Sample
Contract may be rescinded:

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1. if the bulk of the goods delivered does not correspond with the description or sample
2. contract is by sample and description
-it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description.
CASES: Mendoza vs David, 2004 Pacific Commercial Co., vs Ermita Market and Cold Store, 1932
Sale by Description Sale by Sample

―where the buyer has not seen the article sold and relies ―when a small quantity is exhibited by the seller as a fair
on the description given by him by the seller, or has seen specimen of the bulk, which is not present and there is no
the goods, but the want of identity is not apparent on opportunity to examine the same.‖ Requirements: 1. the
inspection‖ Seller‘s description of the goods -made part of parties contracted solely with reference to the sample,
the basis of the transaction -creates a warranty that the with the understanding that the bulk was like it; 2. the
goods will conform to that description exhibition of the sample by the seller was the
inducement of the sale or formed the sole basis thereof;
3. the vendor warrants that the thing sold and to be
delivered by him shall conform with the sample in kind,
character, and quality.
Aznar vs. Yapdiangco(1965)

7. In an Invalid Sale
when the owner has lost or has been
8. When Seller in not the owner
Gen. Rule: one cannot give what one does not have unlawfully deprived of a movable, he may
recover it even from a buyer in good faith
Exceptions:
a. estoppel Limitation: if buyer in goodfaith acquired
b. sale under court order
-in execution sale, the buyer merely steps into the shoes of the judgment debtor it in public sale, the owner must
c. when goods are purchased in a merchant‘s store, fair, or market reimburse the price paid therefor
d. registered land bought in good faith
gen. rule: buyer need not go beyond the Torrens title

Exception: when he has actual knowledge of the facts and circumstances that would impel a reasonably cautious man to man
further inquiry
C. KINDS OF DELIVERY
Types of tradition/delivery:
1. Actual or physical delivery
2. Constructive delivery
In Froilan vs Pan Oriental Shipping Co. ( 12 SCRA 276), the SC held that in the absence of any stipulation to the contrary,
ownership of the thing sold passes to the buyer upon the actual or constructive delivery thereof.
I. Actual or Physical Delivery

- Article 1497 of the Civil Code provides that the sold shall be understood delivered when it is placed in the control and
possession of the vendee. Case: Smith, Bell and Co. vs Gimenez (L-17167, June 29, 1963)
II. Constructive delivery

- Article 1496 of the Civil Code provides that aside from delivery, ownership over the subject of the sale is transferred
in any manner signifying an agreement that the possession is transferred from the vendor to the vendee.
 Essence of constructive delivery is the existence of an agreement between the seller and the buyer, and the
latter is understood to have control of the subject-matter of the sale.
 Constructive delivery requires the following before ownership is transferred:
a. The seller must have control over the thing;
b. Buyer must be put under control;

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c. There must be intention to deliver the thing for purposes of ownership.
KINDS OF CONSTRUCTIVE DELIVERY
1. Constructive delivery by legal formalities ( 1st Paragraph, Article 1498)

General rule: Execution of public instrument (i.e. deed of sale) is equivalent to delivery.
HOWEVER, in the case of Addison vs Felix (38 Phil 404), the SC held that for the symbolic delivery to have the same
effect of tradition, it is necessary that the vendor shall have such CONTROL over the thing sold at the moment of the
sale.
A. When execution of public instrument is sufficient.
- when there is no impediment whatsoever to prevent thing sold from passing into the tenancy of the purchaser by the
sole will of vendor, symbolic delivery through the execution of public instrument is sufficient.
B. When not sufficient

- notwithstanding the execution, the purchaser cannot have the enjoyment and tenancy of the thing and make use of it
himself or through another in his name because such tenancy are opposed by the interposition of another will --- then there is no
delivery.
EXCEPTION:
- If sale had been made under the express agreement of imposing upon the purchaser the obligation to take
necessary steps to obtain the material possession of the thing sold, and it was proven that he knew that the thing was in
possession of a third person claiming to have property rights therein, such agreement would be perfectly valid and it is
understood that there is full compliance by the seller of his obligations under the sale by mere execution of public
instrument.
In the case of Pasagui vs Villablanca ( 68 SCRA 18), an additional element can be inferred. Not only must the seller have actual
control of the object of the sale at the execution but that such control or ability to transfer physical possession and enjoyment
must subsist for a reasonable length of time after the instrument‘s execution.
2. Symbolic delivery
- As to movables, constructive delivery may also be made by the delivery of the keys of the place or depository where the
movable is stored or kept.
In the case of Lorenzo Dev. Corp vs CA, the SC held that issuance of acknowledgment receipt of partial payment for the property
bought cannot be taken to mean a transfer of ownership.
Case: North Negros Sugar Co. vs Co. General de Tabacos ( L-9277, March 29, 1987)
The SC held that if the parties in a sale intended that the copra sold should be placed then and there under the control of the buyer
by the issuance of a quedan , delivery is effected upon the execution of the quedan, and the subsequent loss of the thing sold
should be borne by the purchaser.
3. Transfer Longa Manu

- Article 1499 of the Civil Code provides that the delivery of movable property may be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be transferred to the possession of the buyer at the same time of sale.
Ex. When the seller points the property subject matter of the sale by way of delivery without need of actually delivering
possession.
4. Tradition Brevi Manu

- pertains to the situation that before the sale, the would-be-buyer was already in possession of the would-be-subject matter of the
sale, say as lessee and pursuant to the sale, he would now hold possession in the concept of an owner.
5. Constitutum Possessorium
- takes effect when at the time of the perfection of sale, the seller held possession of the subject matter in the concept of the
owner, and pursuant to the contract, the seller continues to hold physical possession no longer in the concept of an owner, but as
lessee or any other form of possession other than in the concept of owner.
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6. Delivery of Incorporeal Property

Manner of delivery:
a. By delivery under first paragraph of Article 1498 of the Civil Code;
b. By placing of titles of ownership in the possession of buyer;
c. The use and enjoyment by the buyer of the rights pertaining to the incorporeal property with seller‘s consent.
7. Delivery through carrier

General Rule: In the absence of stipulation or circumstances to the contrary, delivery to carrier is deemed delivery to the buyer,
the premise being that the carrier acts as an agent of the buyer.
FREE ALONGSIDE
- The seller pays all charges and is subject to risk until the goods are placed alongside the vessel. Delivery of goods alongside the
vessel completes the effect of tradition.
FREE ON BOARD
- Only when the vessel has arrived at the point of destination would there be delivery to the buyer and prior to that point in time,
the risk of loss over the subject matter of the sale will be borne by the seller.
CIF Sales ( Cost, insurance, and freight)

- Under this arrangement, the amount quoted by the seller, and agreed to by the buyer, cover not only the cost of insurance and
freight.
D. DOUBLE SALES
WHAT IS DOUBLE SALE?
it is the sale of the same thing by the same seller to several vendees who have conflicting interests over the ownership of the
thing sold.
REQUISITES OF DOUBLE SALE

1. two or more valed sales
2. same subject matter
3. two or more buyers with conflicting interests
4. same seller
Note: Double sales are governed by Article 1544 of the New Civil Code with other civil law principles in property law and
special laws on registration of land and other real estates.
GLOBAL RULES ON DOUBLE SALE

1. Property Registration Decree principle that:
the one who registers first has a better title

Applicable only to a land registered under the Torrens System
2. 3. Act 3344 for sale of unregistered land subject to conventional sale Principle; Registration is without prejudice to a
third party with a better right.
Rules of Court – purchaser or highest bidder in an execution sale takes only the rights of the judgment obligor Applicable
only to unregistered land
3. article 1544
Article 1544: Who has a better title? The Rules on Preference
I. Movable Property
Among several vendees, the one who may have first taken possession in Good Faith of the property Principle:
Article 559, possession of movable in good faith is equivalent to title. (subject to exceptions)
II. Immovable
a. the one who first recorded the sale in Good Faith in the Registry of Property
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principle: the general rule that a sale of land is valid regardless of the form it may have been entered into applies only
to the contracting parties. But as to third parties, the one who is able to effect registration of his purchase is preferred.
b. if no inscription, the one who possessed the property in Good Faith
b. the one who presents the oldest title oldest title—any document showing acquisition of land.
NOTE:
THE RACE IS WITH THE SECOND BUYER ONLY. KNOWLEDGE BY THE FIRST BUYER OF THE SECOND
SALE DOES NOT MAKE HIM IN BAD FAITH. BUT KNOWLEDGE BY THE SECOND BUYER OF THE FIRST
SALE IS CONSTRUCTIVE REGISTRATION OF THE FIRST SALE BY THE FIRST BUYER.
Article 1544 does not apply when (first in time priority in right applies):
1. Not all the elements are present – what governs? first in time is preferred in right
2. when first sale perfected when Land was unregistered and second sale perfected when sale registered.
E. PROPERTY REGISTRATION DECREE
Registration
any entry in the book of the Registry of Property which records solemnly and permanently the right of ownership and other
real rights.
Sec. 51, PD 1529: Property Registration Decree

Xxx The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned xxx
When it comes to sale of real or immovable property, usually lands, it is necessarily required that the same be registered with
the register of deeds in order to bind third persons. Otherwise, the sale is binding only as between the seller and the buyer.
Registration is also essential in order to protect the rights and interests of the purchaser over the purchased property
especially in cases where there is double sale because under the law, the purchaser who first registers the sale in good faith is
given preferential of ownership over the purchased property.
GOVERNING PRINCIPLE IN DOUBLE SALE
“First in time, stronger/ priority in right”
Generally, the first buyer is the preferred buyer and has a better right over the purchased property as opposed to the second
or subsequent buyer by simply registering his sale.
The first buyer‘s right cannot be defeated even if he has subsequently acquired or gained knowledge of the subsequent sale,
because his good faith as first buyer remains throughout.
EXCEPTION: where the second buyer first registers the second sale in good faith.
The second buyer may defeat the rights of the first buyer or may acquire ownership over the purchased property is for him to
register first the second sale in good faith ahead of the first sale.
Mere registration is not enough. Good faith must concur with the registration.
REGISTRATION OF DEED OF SALE IN GOOD FAITH
Ignorance of the rights of the first vendee

The purchaser is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.
The purchaser must have purchased the property of another without notice that some other person has a right or interest in
such property.
Purchase must be for valuable consideration

The second buyer must be a purchaser for value, meaning, he pays a full and fair price for the property at the time of
purchase or before he has notice of the claim or interest of some other person in the property.
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REASON: Since the operative doctrine under Art. 1544 or the law on double sales is that the second buyer is being granted an
opportunity to take the purchased property from the clutches of the first buyer by positive act, he may do so only when he acts
with equity, that is, if he is an innocent purchaser for value and in good faith.
Continuation of good faith

The mere fact that the second contract of sale was perfected in good faith is not sufficient if, before title passes, the second
vendee acquires knowledge of the first transaction.
The second buyer must show that he acted in good faith from the time of acquisition until title is transferred to him through
prior registration.
Obligation to investigate known facts/ Duty to look beyond the certificate of title
GEN. RULE:
Purchaser in good faith is one who must have purchased the property of another without notice that some other person has a
right or interest in such property or one who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it.
Where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, the purchaser
is not required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate
right that may defeat his right thereto. (Mirror Principle
EXCEPTIONS:
Actual lack of knowledge of any flaw in the title of the transferor or seller is not enough to constitute a buyer to be in good
faith where there are circumstances which would excite suspicion or put a reasonable man upon his guard and prompt him to
investigate or inspect further the title of the seller. The purchaser cannot close his eyes to such facts or circumstances, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor.
Instances when buyer is under obligation to investigate known facts or to look beyond the certificate of title
Land in adverse possession – the fact that there were already occupants on the property should put a buyer on inquiry as to the
status or nature of possession of the occupants.
Annotation of adverse claim or lis pendens – where the purchaser purchased a land with certificate of title containing
annotation of adverse claim or notice of lis pendens places any subsequent buyer of the registered land in bad faith
Where the seller is not the registered owner himself
Existence of relationship –sale to one‘s daughter and sons will give rise to the conclusion that the buyers, not being really
third parties, knew of the previous sales and cannot be considered in good faith, since the buyers are deemed to have
constructive knowledge of the sale by virtue of their relationship to the seller.
The court refused to recognize good faith in the person of the buyer who lived in the same area and was familiar to the
members of the family of the seller.
Where the purchaser is a bank or financing institution – unlike private individuals, they must exercise greater care and
diligence before entering into a contract of sale. It is a standard and indispensable part of their operation to ascertain the status or
condition of the property and the validity of the vendor‘s title.
BURDEN OF PROOF
Generally, good faith is presumed. Burden of proof rests upon those who allege bad faith on the part of the subsequent
purchaser.
EXCEPTION
The burden of proving the status of one as a purchaser in good faith and for value lies upon him who asserts that status, in
cases where the seller had none to transmit to the purchaser and the other claimant is himself a purchaser in good faith from the
original title holder.
VIII. RISK OF LOSS
A. Generic Things
- An obligation to deliver generic thing is not extinguished by loss.
B. Specific Things
Before Perfection Res perit domino- seller is the owner so seller bears the loss
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At Perfection Contract shall be without any effect- the seller bears the
loss since the buyer is relieved of his obligation under the
contract
After Perfection but before Delivery Two views:
1. Buyer: except:
a. When the object sold consists of fungible goods for a
price fixed
b. When the seller is guilty of fraud, negligence, default, or
violation of the contractual terms;
2. Seller;
But, the deterioration and fruits- buyer bears the loss

After Delivery Res perit domino Buyer becomes the owner so buyer bears
the loss
WHEN OWNERSHIP IS TRANSFERRED
General Rules:
1. Owner bears risk of loss
2. Ownership is not transferred until delivery

Except: Contrary Stipulation See: Brothers Appliances vs. Perez, 1963
3. Security Title: Goods are delivered but retains ownership merely to secure payment
Buyer, as beneficial owner, bears risk of loss at time of delivery
4. Delay through fault of the buyer or seller

-risk is on party at fault. IX. Documents of Title Reported by: Leia Fidelis Gisela F. Castro
A. Definition (Art. 1636 par 1)

- Documents of title to goods includes any bill of lading, dock warrant, quedan, or warehouse receipt or order, for the delivery of
goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession
or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by
indorsement or by delivery, goods represented by such document.
Most common forms of documents of title

1. bill of lading – a contract and a receipt for the transport of goods and their delivery to the person named therein, to order, or to
bearer. It usually involves three persons – carrier, shipper and consignee. - it can also be called a shipping receipt, a forwarder‘s
receipt, or receipt for transportation
2. Dock warrant – an instrument given by dock owners to an importer of goods warehoused on the dock as a recognition of the
importer‘s title to the said goods, upon production of the bill of lading
3. warehouse receipt – a contract or receipt for goods deposited with a warehouseman containing the latter‘s undertaking to hold
and deliver the said goods to a specified person, to order, or to bearer.
 Quedan is a warehouse receipt usually for sugar received by a warehouseman
Laws governing documents of title

1. Civil Code for documents of title except warehouse receipts
2. Warehouse receipts law
3. The Code of Commerce for bills of lading issued by common carriers
B. Purpose of documents of title

1. Receipt of, or orders upon, a bailee of goods represented
- refer to goods and not to money
2. Evidence of transfer of title and possession of the goods and contract between the parties
- acts as a symbol of the goods it covers - evidence of transfer of title, of possession, of contract
Classes of Documents of Title

1. Non-negotiable DOT
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2. Negotiable Documents of Title
C. Negotiable documents of title (Art. 1507) - A document of title in which it is stated that the goods referred to
therein will be delivered to the bearer or to the order of the person named in such document.
A negotiable document of title may be negotiated by delivery (Art 1508):

1. If it is deliverable to bearer
2. Or if the document is indorsed in blank
A negotiable document of title may be negotiated by indorsement of the person to whose order the goods are deliverable
(Art. 1509)
1. Indorsement in blank
2. Indorsement to bearer
3. Indorsement to specified person
Art. 1510. If a negotiable document of title is marked with words like ―not negotiable, non negotiable or the like‖ such
document may nevertheless be negotiated by the holder and is still considered a negotiable document of title. The words have no
effect on its being a negotiable DOT
Who may negotiate a negotiable DOT (Art. 1512)

1. The owner
2. Any person to whom the possession or custody of the document has been entrusted by the owner
 Difference with negotiable instruments law where bill of exchange or promissory note can be negotiated by any
holder even a thief or finder
However, look at Art. 1518. The validity of a negotiable document of title is not impaired by the fact that the negotiation was a
breach of duty on the part of the person making the negotiation or by the fact that the owner of the document was deprived of the
possession of the same by loss, theft, fraud, accident, mistake, duress, or conversion, if the person to whom the document was
negotiated paid value thereof in good faith without notice of the breach of duty, loss, theft, fraud, accident, mistake, duress or
conversion.
 The negotiation in Art. 1518 is invalidated by the fact that the owner of the document was deprived of its possession
by loss or theft.
Rights of a person to whom a negotiable DOT has been duly negotiated (Art. 1513)
1. Acquires the title of the person negotiating the document over the goods covered by the document
2. Acquires title of the person (depositor or owner) to whose order by the terms of the goods were to be delivered, over such
goods;
3. Acquires the direct obligation of the bailee (warehouseman or carrier) to hold possession of the goods for him
 Buying from a thief gives purchaser no right over the goods as the thief has no right to transfer even if the purchaser
is innocent. Unless the owner is estopped from asserting his title.
Rights of a person to whom document has been transferred but not negotiated (Art 1514)
1. The title to the goods as against the transferor
2. The right to notify the bailee of the transfer thereof
3. The right, thereafter, to acquire the obligation of the bailee to hold the goods for him.
 But the rights of the transferor are not absolute, it is subject to the terms of any agreement with the transferor.
Rights of a person to whom transfer of order document of title is made without indorsement (Art. 1515)
1. the right to the goods as against the transferor
2. The right to compel the transferor to indorse the document.
 If the intention of the parties is that the document be merely transferred, the transferor has no right to compel
indorsement
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Once the document is properly indorsed, the time of negotiation is deemed from the time of indorsement and not from
the time of delivery.
Non-Negotiable Documents of Title
 If a document of Title which contains an undertaking by a carrier, warehouseman or other bailee to deliver the goods to bearer,
to a specified person or order of a specified person or which contains words of like import, has placed upon it the words ―not
negotiable, ―non- negotiable‖ or the like, such document may nevertheless be negotiated by the holder and is a negotiable
document of title within the meaning of this Title. But nothing in this Title contained shall be construed as limiting or defining
the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a document of title or placing thereon the
words ―not negotiable‖, ―non- negotiable‖, or the like.
What are non- Negotiable documents of title

o They are delivered only to a specified person;
o Carrier will not deliver the goods to any holder of the document or to whom such document may have been endorsed by the
consignee;
o Must present the deed of sale or donation in his favour.
What are the warranties of seller of documents of title:
o Genuiness of the Document
o Legal right to negotiate or transfer
o No knowledge of fact which would impair the validity or worth of the document
o Right to transfer Title to the goods and merchantability or fitness for a particular purpose, whenever such warranties would
have been implied had the contract transfer the goods without a document.
I. RIGHTS OF A TRANSFEREE
Article 1514 refers to the rights of a person to whom:

a. A negotiable document of title, not negotiated has been transferred;
b. Transferee of a non-negotiable instrument.
Their rights are as follows:

1. Acquires title to the goods
- As against the transferor
- Not absolute, Subject to the terms of any agreement with the transferor
- Transferee merely steps into the shoes of the transferor
2. Right to notify bailee of the transfer

- Acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document
II. RULES REGARDING LEVY AND GARNISHMENT OF GOODS
1. In case of a non-negotiable document of title the creditor of the transferor can defeat the rights of the transferee
Prior to notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of the transferee
to the goods and the right to acquire the obligation of such bailee may be defeated by the transferor‘s creditor by the levy of an
attachment or execution upon the goods.
*** Transfer of non-negotiable Document of Title does not affect delivery of the goods covered by it.
 Before notification, bailee is not bound to the transferee whose right may be defeated by a levy of an attachment or
an execution upon the goods by the creditor of the transferor or by a notification to such bailee of the subsequent sale of the
goods (sec 42 Warehouse Receipts law)
2. In case the Document of Title is negotiable, the goods cannot be attached, garnished, or levied upon while they are in
the bailee’s possession. (Article 1519)
The bailee shall in no case be compelled to deliver the actual possession of the goods until the document is:
a. When the document is first surrendered;
b. When its negotiation is enjoined; or,
c. document is impounded by the court.
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*** Since the goods themselves in the bailee’s possession cannot readily be attached or levied upon by ordinary legal process, a
creditor is entitled to such aid from the courts of appropriate jurisdiction by injunction or otherwise. (Article 1520)
- This prohibition is for the protection of the bailee since he could be made liable to a subsequent purchaser for value in good
faith.
- Article 1519 does not apply

 if the person depositing is not the owner of the goods (thief) or
 if the person depositing is one who has no right to convey title to the goods binding upon the owner.
 in actions for recovery or manual delivery of goods by the real owner
 when attachment is made before the issuance of the Document of Title
X. Remedies of an Unpaid Seller
WHO IS AN UNPAID SELLER
Article 1525. The seller of the goods is deemed to be an unpaid seller within the meaning of this title:
1. When the whole of the price has not been paid or tendered.
2. When a Bill of Exchange or other negotiable instrument has been received as conditional payment, and the condition on which
it was received has been broken by reason of dishonor of the instrument, insolvency of the buyer or otherwise.
* Mere delivery of the negotiable instrument does not extinguish the obligation of the buyer to pay.
* Insolvency need not be juducially declared.
Note that seller as contemplated in Article 1525 includes:
1. Agent of the seller to whom a Bill Of Exchange has been indorsed;
2. A consignor or agent who has himself paid or directly responsible for the price; and
3. Any other person in the position of a seller.
REMEDIES OF AN UNPAID SELLER
Ordinary Remedies:
1. Action for Price
2. Action for Damages
Special Remedies:
1. Possessory lien
2. Stoppage of goods in transitu
3. Right of Resale
4. Right of Rescission
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* We may also include Recto and Maceda law in case of sale by installment involving personal and real estate, respectively.
ACTION FOR PRICE, WHEN AVAILABLE.
Article 1595. When the buyer wrongfully neglects or refuses to pay for the price and:
1. Ownership of goods has passed to the buyer;
* As when machines were sold to buyer. Buyer reguses to pay. Hence, seller may sue for price.
2. Price is payable on a day certain, irrespective of delivery of transfer of title; and
* Agreed payment was July 15, delivery on July30. Seller mey sue for price from July15.
* Defenses available to the buyer:
a. inability to perform on the part of the seller, or
b. intention not to performon the part of the seller.
3. Goods cannot be readily resold for a reasonabe price even if ownership has not passed provided, Article 1596 par 4 does not
apply.
* As when agreed payment and delivery is on July 15. Seller offers to deliver, buyer refuses to receive. Seller can say. " I am
holding the goods no longer as seller, but as yur depositary. Ylu now own them. "
Provided however:
a. it canot be readily resold for a reasonable price, and
b. par 2, Art.1596 not applicable
* Repudiation or countermand by the buyer before the goods were placed in a deliverable state -- what is available here is action
for damages. Note that repudiation orcontermand fall under action for price must be after the goods were placed in a deliverable
state.
ACTION FOR DAMAGES, WHEN AVAILABLE.
Article 1596
1. Wrongful neglect or refusal to accept and pay for the goods;
* This is action for damages for non-acceptance.
2. Ownership in the goods not passed and action for price cannot be maintained;
* As in the aforementioned, when it cannot be readily resold for a reasonable price.
3. Buyers repudiationor cpuntemand before the goods were placed in a deliverable state; and 4. Goods not yet identified at the
time of contract or subsequently.
MEASURE FOR DAMAGES

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GR: Estimated loss directly and naturally resulting in the ordinary course of events from the buyers breach.
When there is available market: The difference between the conract price and the market or current price. The latter is construed
from the date of acceptance. Ehen there is no time fixed for acceptance, at the time of refusal.
In case of repudiation or countermand, damages based on:
1. expenses incurred, and
2. profit that the seller would have obtained under the contract.
I. Possessory Lien
When may be exercised:

1. Where the goods have been sold without any stipulation as to credit
2. When the goods have been sold on credit, but the term of credit has expired
3. Where the buyer becomes insolvent
When lost:
1. Delivery of the goods to a carrier or bailee for the purpose of transmission to the buyer without reserving ownership or right of
possession
2. When the buyer lawfully obtains possession of the goods
3. By waiver of the lien
Possessory lien is lost after the seller loses possession but his lien as an unpaid seller remains; hence he is still an unpaid creditor
with respect to the price of specific goods sold. His preference can only be defeated by the governments claim to the specific tax
on the goods themselves (Arts. 2247 and 2241).
The bringing of an action to recover the purchase price is not one of the ways of losing the possessory lien. An unpaid seller does
not lose his lien by reason that he has obtained a money judgement or decree for the price of goods (Art. 1529, last paragraph).
II. Stoppage of goods in transitu
Requisites:
1. Seller must be unpaid
2. Buyer must be insolvent
3. Goods must be in transit
4. Seller must either:
a. actually take possession of the goods sold OR
b. give notice of his claim to the carrier or other person in possession
5. Seller must surrender the negotiable document of title, if any, issued by the carrier or bailee
6. Seller must bear the expenses of delivery of the goods after the exercise of the right
GOODS ARE CONSIDERED IN TRANSITU:
1. after delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them; and
2. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them
GOODS ARE NO LONGER CONSIDERED IN TRANSITU:
1. after delivery to the buyer or his agent in that behalf;

2. if the buyer or his agent obtains possession of the goods at a point before the destination originally fixed;
3. if the carrier or the bailee acknowledges to hold the goods on behalf of the buyer; and
4. if the carrier or bailee wrongfully refuses to deliver the goods to the buyer
Effects of the exercise of the right

1. The goods are no longer in transit.
2. The contract of carriage ends; instead the carrier now becomes a mere bailee, and will be liable as such.
3. The carrier should not deliver anymore to the buyer or the latter‘s agent; otherwise he will clearly be liable for damages.
4. The carrier must redeliver to, or according to the directions of the seller.
WAYS OF EXERCISING THE RIGHT TO STOP:

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1. By taking actual possession of the goods
2. By giving notice of his claim to the carrier or bailee
III. Special Right of Resale
May be exercised only when the unpaid seller has either a right of lien OR has stopped the goods in transitu AND under ANY of
the following conditions:
1. Where the goods are perishable in nature
2. Where the right to resell is expressly reserved in case the buyer should make a default
3. Where the buyer delays in the payment of the price for an unreasonable time
IV. Rescission
Types:
1. Special Right to Rescind Under Art. 1534 – If the seller has either the right of lien OR a right to stop the goods in transitu
AND under either of 2 situations:
a. Where the right to rescind on default has been expressly reserved
b. Where the buyer has been in default for an unreasonable time
2. Under Art. 1597 (“technical rescission”)
XI. Performance of Contract
A. Performance by the vendor: DELIVERY OF THING SOLD
Completeness of Delivery
I. MOVABLES
a. If quantity is LESS THAN that agreed upon, buyer may:
i. Reject
ii. Accept
PRICE: (1) contract rate if he knew that no more were to be delivered;

(2) FMV if he did not know that the seller is going to be guilty of a breach of contract, but in no case shall it exceed the contract
price
b. If quantity is MORE THAN that agreed upon, buyer may:

i. Reject all
ii. Accept goods agreed upon and reject the rest
iii. Accept all at the contract rate
c. If quality is DIFFERENT/ MIXED

i. Accept the goods which are in accordance with the contract and reject the rest
ii. REJECT the whole- only if the object is indivisible
II. IMMOVABLES
a. If area is LESS than the number stated in the contract (Art. 1539)
REMEDIES:
i. Proportional reduction of the price
ii. Rescission of contract – provided that the lack in area be not less than that 1/10 of that stated in the
contract
- In cases of other immovable, inferior value of the thing sold exceeds 1/10 of the price agreed upon
- Exception to the rule that the lack in area be at not less than 1/10: If the vendee would not have
bought the immovable had he known of its smaller area or inferior quality.
b. GREATER AREA (Art. 1540)

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REMEDIES:
i. Accept what is included in the contract and reject the rest
ii. Accept whole area- pay at the contract rate
 However rescission is not applicable in Lump Sum sale of Real Estate (with boundaries stated in the contract) or in a
sale of two or more immovables sold for a single price.
RATIONALE: Law presumes that the purchaser had in mind a determinate piece of land and he ascertained its area and quality
ART. 1537: Vendor is bound to deliver the thing sold and its accessories in the condition in which they were upon the perfection
of the contract.
Fruits pertain to the vendee from the day or when the contract was perfected.
EXCEPTION to the 2nd paragraph
1. Contrary stipulation
2. Later date may be set
ART. 1480 -Any injury or benefit from the thing sold after the contract has been perfected, from the moment of the perfection of
the contract to the time of delivery shall be governed by ART. 1163, 1166,1262.
i. ART 1163 – degree of diligence: proper diligence of a good father of a family, unless another standard is
provided;
ii. ART 1166 – obligation to give determinate thing – include accessions and accessories
iii. ART 1262 – lost or destruction of determinate thing results to extinguishment
GENERAL RULE: Buyer bears the risk

PERFECTION DELIVERY
EXCEPTION:
1. Object sold is generic
2. Seller is guilty of fraud, negligence, default or in violation of contractual term
3. FUNGIBLES
- If thing s are sold for a price fixed according to weight, number or measure, risk should not be imputed to the vendee
until they have been weighted, counted or measured and delivered, unless the vendee has incurred in delay.
Note: FUNGIBLES as used in Art 1480 = CONSUMABLE
B. PERFORMANCE BY THE VENDEE
1. Acceptance of delivery of the thing sold;

2. Payment of the price of the thing sold at the time and place stipulated in the contract;
3. Bearing the expenses for the execution and registration of the sale and putting the goods in a deliverable state, if this has been
stipulated in the contract.
1. ACCEPTANCE
BUYER’S RIGHT TO EXAMINE OR INSPECT THE GOODS
1. The buyer must be given reasonable opportunity to examine the goods delivered before they are accepted, to see if they are in
conformity with the contract, unless there is a contrary stipulation.
2. In the absence of a contrary agreement, if there is a request from the buyer, the seller must give reasonable opportunity to the
buyer to examine the goods tendered for delivery by the seller if they are in conformity with the contract.
3. In cases wherein the goods are delivered to a carrier, upon request from or agreement with the buyer, the inspection of the
goods is a condition precedent to the payment of the price.
Exception: When the goods are sent to the carrier upon the terms that the goods shall not be delivered by the carrier to the buyer
until he has paid the price. This is usually made by indicating that the purchase price shall be collected upon delivery or by
marking the goods ―C.O. D.‖ (collect on delivery).
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Note: even if the goods are delivered C.O.D., the buyer must still be given the right to inspect the goods before payment of the
purchase price if this has been agreed upon or it is permitted by the usage of the trade.
If upon request by the buyer, the seller refused to allow opportunity for the inspection of the goods, the buyer may rescind
the contract and recover the price or any part of it that he has paid.
KINDS OF ACCEPTANCE
1. Express acceptance- it takes place when the buyer, after delivery of the goods, intimates to the seller, verbally or in writing,
that he has accepted them.
2. Implied acceptance
a. When the buyer, after delivery of the goods, does any act inconsistent with the ownership of the seller; (e.g. when the buyer
attempts to sell the goods; or when he uses or makes alteration in them in a manner proper only for an owner)
b. When the buyer, after the lapse of a reasonable time, retains the goods without intimating his rejection.
Acceptance of the goods by the buyer does not relieve the seller from liability in case of breach of any promise or warranty,
provided there is no contrary stipulation and that the buyer gave notice of the breach to the seller within a reasonable time after
the buyer knows or ought to know of such breach.
REFUSAL TO ACCEPT THE GOODS
1. Refusal with just cause

In the absence of any contrary stipulation, the buyer may refuse to accept the goods if they are not in conformity with the
contract or when there are other just causes justifying the non acceptance.
The buyer is not bound to return the goods to the seller, however, he is bound to notify the seller of his refusal to accept the
goods.
Duties of the buyer if he rightfully refused acceptance of the goods:

a. He must notify the seller that he refuses to accept the goods delivered;
b. He must observe reasonable care over the goods;
c. He must take care of the goods and return them to the seller and must observe the other duties of a depositary if he voluntarily
constitutes himself as a depositary of the goods.
After notice has been given to the seller, the latter has the burden of taking delivery of the goods.
2. Refusal to accept delivery is without just cause.

If the buyer unjustly refuses to accept delivery, he shall be liable for damages.
When the goods are delivered to a carrier without a stipulation that the delivery to the carrier is a delivery to the buyer, and
the buyer unjustly refuses to accept them, the title over the goods passes to him from the moment they are placed at his disposal.
2. PAYMENT OF PRICE
The payment of the purchase price is the most important obligation of the vendee.
The time of payment is subject to the stipulations of the parties thus it may be extended.
If the period for the payment of the price has expired and the vendee has been given a grace period, no demand is necessary
to put him in default. This is because the grace period is a right and not an obligation.
A request for an indefinite period for the payment of the purchase price may be denied outright by the seller.
Rules:
1. In the absence of any stipulation, the buyer is not shall not be liable for the payment of the purchase price in case the seller is
not ready and does not comply with his obligation to transfer the ownership of and deliver the thing sold.
2. If only the place of delivery has been stipulated, then the buyer must pay at the place of delivery.
3. If there has been no stipulation for the time of payment but the period for delivery has been fixed in the contract, the buyer is
liable even prior to the delivery of the goods.
4. In case a corporation purchases another corporation, the purchasing corporation shall assume the obligations of the dissolved
corporation which are not of considerable value.
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Even if the obligations of the dissolved corporation are of considerable value, but its business is continued, the
purchasing corporation shall still assume the obligations of the former.
XII. Warranties
CONDITIONS AND WARRANTIES CONDITION (ART. 1545)

A condition as used in Article 1545, means an uncertain event or contingency on the happening of which the obligation of the
contract depends. In such case, the obligation of the contract does not attach until the condition is performed.
Effect of Non-fulfillment of condition:

1. If the obligation of either party is subject to a condition and such condition is not fulfilled, such party may either:
a) Refuse to proceed with the contract; or
b) Proceed with the contract, waiving the performance of the condition.
2. If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by
the other party as a breach of warranty.
NOTE:
Failure to comply with condition imposed upon perfection of the contract results in failure of a contract while Failure to comply
with a condition imposed on the performance of an obligation only gives the other party the option either to refuse to proceed
with sale or waive the condition (Laforteza v. Machuca, 333 SCRA 643)
The parties may introduce various kinds of restrictions or modalities, the lack of which will not, however, affect the validity of
the contract. Thus, a provision “this Contract of Sale of rights, interests and participations shall become effective only upon the
approval by the Honorable Court,” in the event of non-approval by the courts, affect only the effectivity and not the validity of
the Contract of Sale. (Heirs of Pedro Escanlar v. Court of Appeals, 281 SCRA 176 (1997))
WARRANTY : A statement or representation made by the seller of goods, as part of the contract of sale, having reference to the
character, quality, or title, of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he
then represents.
KINDS: May either be express or implied.
WARRANTY CONDITION
Purports to be the performance of an obligation Purports to be the existence of an obligation
Need not be stipulated to form part of the obligation by provision Must be stipulated to form part of the obligation
of law
Relates to the subject matter itself or to obligation of the seller as May attach itself to obligation of seller to deliver or transfer
to the subject matter of the sale possession.
EXPRESS WARRANTIES
Any 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 purchases the thing relying thereon. (Art. 1546)
It includes all warranties derived from the language of the contract, so long as the language is express.
Requisites of express warranties? (AIR)

a) It must be an Affirmation of fact relating to the subject matter of sale
b) Natural tendency is to Induce buyer to purchase subject matter
c) Buyer purchases the subject matter Relying thereon
Q: What is the liability of the seller for breach of express warranties?

A: The seller is liable for damages. (Villanueva, p. 249) The law allows considerable latitude to seller's statements, or dealer's
talk; and experience teaches that it is exceedingly risky to accept it at its face value. The refusal of the seller to warrant his
estimate should have admonished the purchaser that that estimate was put forth as a mere opinion; and we will not now hold the
seller to a liability equal to that which would have been created by a warranty, if one had been given.(Songco v. Sellner,
December 4, 1917) Reported by:
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IMPLIED WARRANTIES
An implied warranty is that which the law derives by implication or inference from the nature of the transaction or the relative
situation or circumstance of the parties irrespective of any intention of the seller to create it. It is presumed to exist even though
nothing has been said in the contract on the subject.
Implied warranties are facts considered agreed upon by the parties even if not stipulated, unless otherwise excluded. They are
warranties deemed included in all contracts of sale by operation of law.
I. WARRANTY AGAINST EVICTION (1547-1559)
In a contract of sale, unless a contrary intention appears, there is an implied warranty on the part of the seller that when the
ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession
EVICTION: It is a juridical process 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 part of the thing purchased.
Requisites: JPENS
a. Buyer is Evicted in whole or in part from the subject matter of sale
b. Final Judgment
c. Basis of eviction is a right Prior to sale or act imputable to seller
d. Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party
complaint brought by buyer
e. No waiver on the part of the buyer
Coverage of warranty against eviction

It covers eviction 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. (Art. 1548, NCC)
EFFECT OF STIPULATION WAIVING LIABILITY FOR EVICTION

If seller was in good faith Exemption is valid but without prejudice to Article1554 (not
liable)
If seller was in bad faith Stipulation is VOID. (vendor is liable to pay the value which the
thing sold had at the time of eviction)
If buyer was in bad faith Not entitle to warranty against eviction and damages.
WAIVER OF WARRANTY BY THE BUYER

WAIVER CONSCIENTE (waiver without knowledge of the The vendor shall only pay the value which the thing sold had at
risk of eviction) the time of eviction. BASIS: Solution Indebiti or payment by
mistake
WAIVER INTENTIONADA (waiver with knowledge of the Vendor is not liable provided he did not act in bad faith. BASIS:
risks of eviction coupled with assumption of its consequences) Contract of Sale becomes Aleatory.
Effect of a breach of warranty against eviction (TOTAL EVICTION)
The buyer shall have the right to demand the seller: (Article 1555)
1. The return of the value which the thing sold had at the time of the eviction, be it greater or lesser than the price of the sale
2. The income or fruits, if he has been ordered to deliver them to the party who won the suit against him
3. The costs of suit which caused the eviction, and, in a proper case, those of suit brought against the vendor for the warranty
4. The expenses of contract if buyer has paid them
5. The damages and interests and ornamental expenses if sale was made in bad faith.
Effect of a breach of warranty against eviction (PARTIAL EVICTION)

1. Restitution (with obligation to return the thing w/o other encumbrances than those which it had when he acquired it)
2. Enforcement of warranty against eviction ( Art. 1556) The above rule is applicable when:
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a) The vendee is deprived of a part of the thing sold if such part is of such importance to the whole that he would not
have bought the thing without said part (par. 1); or
b) Two or more things are jointly sold whether for a lump sum or for a separate price for each, and the vendee would
not have purchased one without the other. (par.2)
III. WARRANTY AGAINST ENCUMBRANCES (1560)
Requisites:
a) That the encumbrances be hidden, not stated in the contract, and not recorded in the Registry of Property.
b) That the vendee would have not acquired the property had he known of the encumbrances.
c) That the action to enforce the warranty must be brought within the proper period.
VENDEE’S RIGHT WHEN PROPERTY IS BURDENED BY NON-APPARENT EASEMENT
(a) within one year to be computed from the execution of the Deed of Sale , to ask for:
i. Rescission
ii. Damages
(b) After one year from date of sale : vendee can only ask for DAMAGES, within a period of one year from the discovery of the
easement.
When vendor not liable:

a) When the easement is apparent.
b) When the easement is recorded in the Registry of Property, unless there is an express warranty that the thing is free from
burdens and encumbrances.
c) When the buyer had knowledge of the encumbrances
IV. WARRANTY AGAINST HIDDEN DEFECTS
What is a hidden defect?

- A hidden defect is one which is : unknown to the buyer, or could not have been known to the buyer upon inspection.
NOTE: Not every defect will give rise to an action for recovery on account of hidden defects. Under the CC, the requisites to
recover on account of hidden defects are:
1. Defect must be important or serious.

-- as to render the thing unfit for the use for which it is intended, or diminishes its fitness.
--to such an extent that had the buyer known of the defect, he:
would not have acquired it, OR
would have paid a lower price for it.
2. Defect must be hidden.
3. Existing at the time of the sale.

-- Defect must be shown by the buyer to have existed at the time the thing left the hands of the seller.
4. Action must be instituted within the prescribed period.
Ratio: The relations of the parties (buyer-seller) must not be left in a condition of uncertainty for an unreasonable length of
time.
5. There must be no waiver of warranty.

---If there is waiver but ―bad faith waiver‖, simply disregard the waiver.
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IV. IMPLIED WARRANTY OF QUALITY
A. WARRANTY OF FITNESS
- Seller warrants that the thing sold is fit for the KNOWN PARTICULAR PURPOSE for which it is acquired by the buyer.
GEN. RULE: The seller does not warrant the fitness of the thing for a special/particular purpose of the buyer. EXCEPTION:
Art 1562 (par 1).
There is an implied warranty that the goods shall be reasonably fit for the buyer‘s SPECIAL PURPOSE when:
Implied warranty of fitness
1. Buyer expressly or impliedly makes known to the seller the PARTICULAR purpose for which the goods are acquired.
2. Buyer- relied on the Seller‘s skill/judgment.
B. WARRANTY OF MERCHANTABILITY
- Seller warrants that the goods are reasonably fit for the GENERAL PURPOSE for which they are sold.
 Merchantability means a condition of the goods whereby a reasonably prudent man would accept/buy under the
circumstances, either for his own use or for resale.
o Ex. Sale of Food
1. Art. 1562(par.2) – Sale by Description :

Described article must be identical as to quality and character as that delivered. It must likewise be fit for the
general purpose for which it is sold.
2. Art. 1565- Sale by Sample

Basis of warranty of merchantability is the sample.
If buyer inspects sample and it is merchantable, he has the right to expect that the bulk must also be merchantable.
If buyer inspects sample and it is not merchantable, no right to expect that the bulk will be merchantable.
Can the seller invoke good faith as a defense? (that he is NOT AWARE of the hidden defects of the thing sold)
NO because when it comes to hidden defects, the rule that we follow is CAVEAT VENDITOR. (―let the seller beware”) as
found in Art. 1566. This means that the seller shall be responsible for hidden defects of the thing sold, even though he was not
aware of them.
Rationale for caveat venditor: A sound price warrants a sound article.
Compare: caveat emptor (let the buyer beware): still applicable in sheriff‘s sale and double sales.
May there be an exception to the principle of caveat venditor?

YES. Art. 1566, par 2 allows contrary stipulation. = WAIVER (good faith waiver)
Requisites: (1) There must be a waiver AND (2) Seller must not be aware of the defect.
If bad faith waiver, then waiver is void. Apply caveat venditor.
When then is bad faith/ good faith material?

When it comes to the extent of liability of the seller when the defective thing is LOST.
LOSS OF THE DEFECTIVE THING
A. Due to Hidden defects

1. Seller aware (BF) ----- Seller bears the loss. Liable for PED. – return the price; refund the expenses of the contract; damages.
2. Seller Not aware (GF) ---- Seller liable for PIE: return the price with interest; refund the expenses of the contract
B. Loss due to fortuitous event or fault of buyer
1. Seller aware (BF)---- Return price less value at the time of loss, PLUS Damages.
2. Seller Not aware (GF)--- Return price less value at the time of loss.
The above rules apply to judicial sales. But no award of damages against the judgment debtor because sale was
involuntary. There could be no opportunity for the judgment debtor to execute an act amounting to bad faith.
WARRANTY IN SALE OF ANIMALS RULES:

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1. Joint sales: If two or more animals are sold together, either for a lump sum or at a separate price for each—the redhibitory
defect of one or some but not all will give rise to a redhibitory action only as to the defective animal.
UNLESS: vendee would not have bought the sound animal without the defective one.
Team, pair, set, yoke.

E.g.. lovebirds
This rule applies to sale of other things.
2. THERE IS NO WARRANTY AGAINST HIDDEN DEFECTS OF ANIMALS SOLD AT: (FPC)

Fairs
Public auction – e.g. animals impounded and not redeemed
Livestock sold as condemned—It must be communicated to the buyer that the animal is being sold as condemned. Otherwise,
seller will be liable for hidden defects.
3. VOID SALES OF ANIMALS

Sale of animals with CONTAGIOUS DISEASE
Reason: the object of the sale is not within the commerce of man. Public interest.
Sale of animals where the use/service has been stated in the contract, and they turn out UNFIT for such use/service.
E.g. Bought a horse-for racing. Horse delivered was fit only for picture-taking.
4. DEATH OF THE ANIMAL
a) Death due to hidden defect—if animal dies within 3 days from date of sale (not delivery): seller liable provided it is proved
that the disease causing the death existed at the time the animal left the hands of the seller.
Extent of liability: P-E-D or P-I-E (depending on whether seller is in BF or GF)
b) Death due to fortuitous event or fault of buyer

Seller aware: price less value (loss) plus damages
Seller not aware: price less value (loss)
Note: Check the given disease. If contagious disease, do not apply this rule. Simply regard the sale as void.
REMEDIES OF BUYER IN CASE OF BREACH OF WARRANTY
-remedies will depend on the kind of warranty involved.
BREACH OF IMPLIED WARRANTY AGAINST HIDDEN DEFECTS (alternative)

1.accion redhibitoria + damages -withdraw from the contract
2. accion quanti minoris + damages -proportional reduction of price.
WHEN?
1. other things: within 6 months from delivery of the thing.
2.animals: within 40 days from delivery.
In sale of animals, buyer has a special obligation:
If buyer chooses accion redhibitoria- he must return the animal in the same condition as it was when sold or delivered.
If animal sustains injury because of buyer‘s negligence-Buyer will be liable to Seller.
BREACH OF IMPLIED WARRANTY AGAINST EVICTION- (see discussion above)
BREACH OF EXPRESS WARRANTY: (Art. 1599)
1. Accept/Keep goods + recoupment

-set up against seller the breach of warranty:
In action for price brought by the unpaid seller:
-Plaintiff seller
-Defendant buyer- can recoup so as to diminish or extinguish liability for price.
2. Accept/ Keep goods + maintain action for damages

-buyer does not seek to avoid his obligation; he only seeks to enforce seller‘s obligation & deduct it from his liability
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3. Refuse to Accept + maintain action for damages
4. Rescind contract- to cancel the sale and restore the parties to their condition before the sale.
-refuse to receive or return/offer to return
-recover price
The four remedies are alternative. The choice of one excludes that of the others. But 1599 says: “without prejudice to the
provisions of Art. 1191, par.2)”
If buyer chooses remedies 1 or 2, and the same becomes impossible, he can later choose rescission.
BUYER CANNOT RESCIND: (KFC)
1. knew of the defect and accepted w/o protest
2. failed to notify seller of his choice to rescind
3. fails to return in the substantially as good condition as they were in at the time of transfer of ownership.
EXCEPT: If deterioration was due to the breach of warranty itself- simply return the thing.
EFFECTS OF RESCISSION: (CBL)
1. ceases to be liable for price
-If he already paid- Reimbursement.
When? Concurrent with the return of the thing, or immediately after an offer to return. (kaliwaan)
2. bailee for seller if seller refuses the offer to return.
3. Lien on the goods (for the value of the price) as if unpaid seller.
PERIOD TO AVAIL OF REMEDIES: 4 years from delivery- general rule on rescission
Suppose: 6 months already elapsed -Does the buyer still has remedy for hidden defects? YES. Action for quasi-delict- Art
2176
Prescribes in 4 years. (Coca-cola Bottlers vs CA Oct. 18 1993 – it does not matter that there’s a contract of sale)
NO IMPLIED WARRANTY against Hidden Defects (JEAPS)
1. judicial sale of animals

2. If the buyer is an expert- because of his trade/profession he should have known of the defect
3. As is where is sale-
Vendor makes no warranty as to the quality or workable condition of the goods.
Vendee takes them in the condition in w/c they are found & from the place where they are located.
4. sale under a trademark/ patent: no warranty of fitness (particular purpose)– except: contrary stipulation
5. Sale of second hand articles. Gen. Rule: No warranty of fitness of 2nd hand goods
EXCEPT:
a) Buyer makes known to the seller the particular purpose (fitness)
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b) Seller expressly warrants.
XIII. Breach of Contract
ACTIONS FOR BREACH OF THE CONTRACT OF SALE OF GOODS
>‖Goods‖ include all chattels personal but not things in action or money of legal tender in the Philippines. The term includes
growing fruits or crops.
>Actions for breach of the contract of sale of goods are governed primarily by the provisions of Chapter 6 (Arts. 1595-1599) and
secondarily, by the other provisions of the Title on Sales so far as said provisions can apply.
>Provisions concerning the sale of immovable property have no application to the sale of goods.
Actions available: In general, the actions available for breach of the contract of sale of goods are the following:
1. Action by the seller for payment of the price (Art. 1595)
2. Action by the seller for damages for non-acceptance of the goods (Art. 1596)
3. Action by the seller for rescission o the contract for breach thereof (Art. 1597)
4. Action by the buyer for specific performance (Art. 1598), and
5. Action by the buyer for rescission or damages for breach of warranty (Art. 1598)
>Items # 1-3 pertain to remedies of the seller and items 4 and 5 pertain to remedies available to buyer.
Art. 1595: Seller’s right of action for the price

Under this article, it provides the three cases when an action for the price of the goods under a contract of sale can be maintained
by the seller:
a. When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the price
b. When the price is payable on a certain day and the buyer wrongfully neglects or refuses to pay such price, irrespective of
delivery or of transfer of title
c. When the goods cannot be readily be resold for a reasonable price and the buyer wrongfully refuses to accept them even before
the ownership in the goods has passed, if the provisions of Art. 1596, 4th paragraph are not applicable.
NOTE: the seller cannot maintain an action for the price if the ownership in the goods has not passed to the buyer, (1) unless the
price is payable on a certain day or (2) unless the goods cannot readily be resold for a certain price and the provisions of Art.
1596, 4th paragraph are not applicable.
Art.1596: Seller’s right of action for damages

a. If the buyer without lawful cause neglects or refuses to accept and pay for the goods he agreed to buy, the seller may maintain
an action against him for damages for non-acceptance
b. In an executor y contract, where the ownership in the goods has not passed, and the seller cannot maintain an action to recover
the price, the seller‘s remedy will be also an action for damages
c. If the goods are not yet identified at the time of the contract or subsequently, the seller‘s right is necessarily confined to an
action for damages
Measure of damages for non-acceptance

The measure of damage is the estimated loss directly and naturally resulting from the buyer‘s breach of contract. It is
conveniently expressed by the formula-the difference between the contract price that is the amount of the obligation which the
buyer failed to fulfill, and the market or current price that is the value of the goods which the seller has left upon his hands. This
follows the general rule that damages comprehend not only the actual loss suffered but also unrealized profit.
>As the market price varies with time and place, the market price is fixed at the time when and place where the goods ought to
have been accepted or, if no time was fixed, at the time of refusal to accept.
>If there is no available market in which the goods can be sold at the time, the seller is entitled to the full amount of damage
which he has really sustained by a breach of the contract.
>Article 1596(par.3) allows the seller under special circumstances proximate damages of a greater amount than the difference
between the contract price and market price when such damages may be reasonably attributed to the non-performance of the
obligation.
Measure of damages for repudiation or countermand
In case the buyer repudiates the contract or notifies the seller to proceed no further therewith, the measure of damages to which
the seller is entitled would Include:
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1. The labor performed and the expenses incurred for materials before receiving notice of the buyer‘s repudiation, and
2. The profit he would have realized if the sale had been fully performed.
Art.1597: Seller’s right of rescission before delivery (aka Technical Rescission)

The article specifies the cases when the seller may rescind a contract of sale of goods which have not yet been delivered to the
buyer.
a. When the buyer has repudiated the contract of sale
b. When the buyer has manifested his inability to perform his obligations
c. When the buyer has committed a breach of the contract of sale
Requisites:
1. Goods have not yet been delivered
2. Buyer has repudiated the sale or manifested his inability to perform his obligations or committed a breach thereof
3. Notice to rescind given to the buyer
NOTE: the seller is required to give notice of his election to seek rescission. The way in which election must be manifested may
vary in different cases. Formal notice is certainly not a requisite, and bringing an action promptly for restitution is sufficient. Art.
1191 establishes the principle that all reciprocal obligations are rescindable in the event that one of the parties bound should fail
to perform that which is incumbent upon him. In the contract of sale, the obligation to pay the price is correlative to the
obligation to deliver the thing sold. Non-performance by one of the parties authorizes the other to exercise the right conferred
upon him by the law, to elect to demand the performance of the obligation or its rescission, together with damages in either event.
Rescission abrogates the contract from its inception and requires a mutual restitution of benefits received. The right of the seller
to rescind the sale for non-performance on the part of the buyer is not absolute.
1. The law subordinates it to the rights of third persons who are legally in the possession of the object of the contract and to
whom bad faith is not imputable (Ocejo Perez & Co. vs. International Bank, 37 Phil. 631).
2. Moreover, the general rule is that rescission of a contract will not be permitted for a slight or casual breach but only for such
substantial breach as would defeat the very object of the parties in making the agreement. The question of whether a breach of a
contract is substantial depends upon the attendant circumstances (Corpus vs. Alikpala, 22 SCRA 104).
3. Except as provided in Article 1597, and in the absence of express stipulation authorizing the seller to extrajudicially rescind a
contract of sale, the seller cannot unilaterally and extrajudicially rescind the contract (Ayala Corporation vs. Rosa-Diana Realty
and Development Corp., 346 SCRA 663).
RECTO LAW: SALE OF MOVABLES ON INSTALLMENT (Arts. 1484-1486)
The vendor of personal property payable in installments may exercise any of the following remedies:
1. Elect fulfillment upon the vendee‘s failure to pay
2. Cancel the sale, if the vendee shall have failed to pay two or more installments
3. Foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more installments
Requisites:
a. There must be a contract
b. The contract must be one of sale (an absolute sale)
c. What is sold is personal property >These remedies are alternative and exclusive.
Right of vendor to recover unpaid balance of purchase price
1. Remedy of Specific Performance
The vendor who has chosen to exact the fulfillment of the obligation is not limited to the proceeds of the sale of the mortgaged
goods. He may still recover from the purchaser the unpaid balance of the price, if any on the real and personal properties of the
purchaser not exempt by law from attachment or execution (Southern Motors, Inc. vs. Magbanua, 101 Phil. 155). The mere fact
that the seller secures possession of the personal property through an attachment after filing an action for collection of the unpaid
balance, with a prayer for an issuance of a writ of preliminary attachment does not necessarily mean that he intends to resort to a
foreclosure of the mortgage. Unlike in a judicial foreclosure sale, there is no need for the court to confirm the sale on execution
(Palma vs. CA, 232 SCRA 714).
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2. Remedy of Cancellation
If the vendor chooses rescission or cancellation of the contract upon the vendee‘s failure to pay two or more installments, the
latter can demand the return of payments already made unless there is a stipulation about forfeiture. On the part of vendor, he
must return all the installments (including the down payment) that had been received by him (in view of the rule on mutual
restitution). In case of forfeiture, such stipulation is valid provided it is not unconscionable under the circumstances.
3. Remedy of Foreclosure
If the vendor has chosen the remedy of foreclosure of the chattel mortgage if one has been given on the property, he is not
obliged to return to the vendee the amount of the installments already paid should there be an agreement to that effect. But he
shall have no further action against the vendee for the recovery of any unpaid balance of the price remaining after the foreclosure
and actual sale of the mortgaged chattel, and any agreement to the contrary is void.( Zayas, Jr. vs. Luneta Motor Company, 117
SCRA 726)
The principal object of Article 1484 (3) is to remedy the abuses committed in connection with foreclosure of chattel mortgages
by selling at a low price and then suing for the deficiency. Otherwise, the buyer would find himself without the property, and still
indebted. (BachrachMotor vs. Millan, 61 Phil. 405)
The proviso on non-recovery of the deficiency is constitutional in view of the public policy involved. Moreover, it does not
unduly impair the obligation of contracts, inasmuch as it is not retroactive. (Int. Harvester vs. Mahinay, 39 O.G. 1874).
Art. 1485: Lease of Personal Property with Option to Buy
This may really be considered a sale of personal property in installments. The purpose of Article 1485 is to prevent an indirect
violation of Art. 1484. Even if the word ―lease‖ is employed, when a sale on installment is evidently intended, it must be
construed as a sale. (Abello vs. Gonzaga, 56 Phil. 132).
Art. 1486: Non-Return of Installments Paid
In sales of personal property by installments or leases of personal property with option to buy, the parties may stipulate that the
installments or rents paid are not to be returned. Such a stipulation is valid ―insofar as the same may not be unconscionable
under the circumstances‖; otherwise, the court has the power to order the return of a portion of the total amount paid in
installments or rents. (Zaragosavs. Dimayuga 62 O.G. 702)
BREACH OF CONTRACT - IMMOVABLE
REMEDIES OF THE BUYER
Right of the vendee to suspend payment of the price.
Q: when vendee has right to suspend payment of the price?

A: vendee has the right to suspend the payment of the price in two cases only:
If he is disturbed in the possession or ownership of the thing bought; or

If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of
mortgage.(art.1590 NCC)
Q: When vendee has no right to suspend payment of the price?

A: the vendee has no right to suspend payment of the price in the following cases:
1) If the vendor gives security for the return of the price in the proper case;
2) If it has been stipulated that notwithstanding any such contingency, the vendee must make payment;
3) If the vendor has caused the disturbance or danger to cease;
4) If the disturbance is a mere act of trespass; and
5) If the vendee has fully paid the price.
Problem:
Rey sold and delivered to Polio a parcel of land for P4M payable within 30days from the date of the contract. After the sale,
Tusuk claims ownership over the land by virtue of a prescriptive title.
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Q: may Polio suspend payment of the price?

A: Yes, Polio may suspend the payment of the price because of a reasonable fear that a reivindicatory action will be brought
against him. It is not necessary that the vindicatory action has already been brought, a reasonable fear is sufficient.
Right of the vendee to demand rescission.
Where the disturbance is caused by the existence of non-apparent servitude, the remedy of the vendee is not suspension of
payment but rescission.
Right to rescind or suspend payment until seller complies – in case the real estate developer fails to comply with
obligation according to approved plan in case of subdivision or condo projects.
REMEDIES OF THE SELLER
Right to rescind the sale of immovable(art.1591 NCC)
This article refers only to a sale of immovable or real property when the vendor has good reasons to fear the loss of the property
and its price. It contemplates a situation where there has been a delivery of the immovable property but the vendee has not yet
paid the price. Article 1591 NCC is applicable to both cash sales and to sales in installments as it does not extinguish between
one and the other. (Manresa)
RESCISSION OF SALE OF REAL PROPERTY (art.1592 NCC)
A. This is only applicable to a Sale of Real Property, not to a contract TO SELL real property or to compromise TO SELL Real
property-where title remains with the vendor until fulfillment of a positive suspensive condition such as the full payment of the
price.
 In the contract TO SELL
Ownership is retained by the seller and is not to pass until the full payment of the PRICE-such payment is a positive suspensive
condition, the failure of which is not a breach, casual or serious but an event that prevents the obligation of the vendor to convey
title from acquiring binding force.
B. Article 1592 applies whether or not there is a stipulation for AUTOMATIC RESCISSION the law says ―even though‖.
C. The demand may be:

1. Judicial
2. Extrajudicial (must be by Notarial Act)
D. The demand is NOT for the payment of the PRICE but for the RESCISSION of the contract. If the demand for such rescission
comes only AFTER the offer to pay the balance. (accompanied by a postal money order for the amount due), the AUTOMATIC
RESCISSION CANNOT of course legally take place.
E. The demand is not for the payment of the PRICE but for the rescission of the contract.
Problem
On February 15, A sold B a piece of land, Payment and delivery to be made on March 5. It was stipulated that should payment
not be made on March 5, the contract would automatically be rescinded on March 10, can B still pay?
ANS: YES, as long as there has been NO JUDICIAL/ NOTARIAL DEMAND for the rescission of the contract. But if, for
example on March 15, A had made a NOTARIAL DEMAND for such rescission then B will not be allowed to pay anymore, and
the court may not grant him a new term.
Note: The right of seller to rescind is not absolute. A seller cannot unilaterally and extrajudicially rescind a contract of sale of
immovable property where there is no express stipulation authorizing him to extrajudicially rescind (Laforteza vs. Machuca,
supra.) except as provided in article 1592.
(1) Court may grant buyer a new term – the right to rescind is not absolute and the court may extend the period for payment.
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(2) Seller may waive his right – the right of ―automatic rescission‖ stipulated in a contract of sale is subject to waiver. In a case,
the right was held waived by the seller who granted many extensions to the buyer and the seller never called attention to the
proviso on ―automatic rescission‖. (Pilipinas Bank vs. IAC, 151 SCRA 546)
(3) Written notice of cancellation must be given – it is indispensable in such case.

(4) Breach must be substantial – the general rule is that rescission of a contract must be by substantial breach and not slight or
casual.
Realty Installment Buyer Protective Act
Realty Installment Buyer Protective Act known as ―MACEDA LAW‖. It is embodied in R.A 6552 which provides for certain
protection to particular buyers of real estate payable on installments.
I. PURPOSE: The law declares as ―public policy to protect buyers on installment payments against onerous and oppressive
conditions.
Q: What are the transactions/Sale covered by the Maceda Law?

A: The law involves the sale of immovable on installment.
a) Coverage: Residential Real Estate

b) Transaction excluded from the coverage:
Industrial Lots
Commercial Buildings (and Commercial lots by implication)
Sales to tenants under agrarian laws.
II. RIGHTS GRANTED to a buyer:

1. Sell or assign rights to another.
2. Reinstate contract5 by updating within 30 days before cancellation.
3. Deed of sale to be done by notarial act.
4. Pay full installment in advance the balance of price anytime without interest.
5. Have full payment annotated in certificate of title.
Most important features of Maceda Law:

A. After having paid installments for at least 2 years, in case of default, the buyer is entitled to the following:
1. To pay without interest the balance within mandatory grace period of 1 month for every year of installment payments. Grace
period to be exercised once every 5 years.
2. When no payment made and the contract is cancelled, the seller shall refund to the buyer the CASH SURRENDER VALUE of
the payments on the property equivalent to 50% of the total payments made and after 5 years of installments, an additional 5%
every year but not to exceed 90% of the total payment made.
3. 30 days grace period from notice of cancellation or demand for rescission of the contract by notarial act.
Note: down payments, deposits or options on the contract shall be included in the computation of the total number of installments
made.
B. If buyer paid less than 2 years installment and he defaulted, he is entitled to the following rights:
1. Mandatory grace period of 60 days from due date without interest. Failure to pay within said period will cause the seller to
cancel the contract.
2. 30 days notice before final cancellation. Buyer can still pay what is due with interest.
Q: How cancellation of contract is effected?

A: Actual cancellation shall take effect after 30 days from notice of cancellation or demand for rescission of the contract by
notarial act and upon payment of the cash surrender value.
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IN CASE OF SUBDIVISION / CONDOMINIUM PROJECTS
Secs. 23 & 24 of P.D 957, provides that no installment payment made by the buyer in a Subd. /Condo. Project for the lot or unit
he contracts to buy shall be forfeited in favor of the owner/developer when the buyer, after due notice to the owner or developer
desists from further payment due to the failure of the owner/developer to develop the subd. /condominium project according to
the approved plans and within the time limit for complying with the same. These sections also grant to the buyer the option to be
reimbursed to the total amount paid.
Note: section 23 of P.D 957 does not require that notice be given first by the buyer to the seller before a demand for refund can
be made as the notice and demand can be made in the same letter or communication.
XIV. Extinguishment of the Sale
Causes of Extinguishment of Sales Article 1600
1. General Causes (PALO RECON CONO D-AFP-R)

a) Payment
b) Loss
c) Remission/Condonation
d) Confusion
e) Compensation
f) Novation
g) Death
h) Annulment
i) Fulfillment of Resolutory Condition
j) Prescription
k) Rescission
2. Special Causes (Redemptions)

a) Conventional
b) Legal
What is redemption? A mode of extinguishment wherein the seller reserves the right to repurchase of the thing sold upon the
return of the price.
What are the two kinds of redemption?
 Conventional
It is basically the right to repurchase or redeem.
 Legal
It is the right to be subrogated.
When does conventional redemption occur?

It occurs in pacto de retro sale which is an absolute sale except that it is subject to a resolutory condition of repurchase.
What is the nature of conventional redemption?
Accidental element – neither an essential nor inherent element. It is a product of stipulation of the parties. Based on stipulation –
It must be stipulated at perfection or execution of the contract otherwise, no right of repurchase exists. It must be the seller who
reserves the right.
Subject to a resolutory condition – the right of repurchase is extinguished upon the lapse of period to redeem. Period to redeem
is within 4yrs if no stipulation as to period and within 10 yrs if there is.
Real right against third person – the right of repurchase is available against third person only if the stipulation is contained in the
same document. If the stipulation is made in another document, it is not binding against third person; however, the contract is
valid between the seller a retro and the buyer a retro.
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How does conventional redemption happen?
Article 1601 says that the right of repurchase reserved by the seller is coupled with the obligation to return the price, expenses of
the contract, and necessary and useful expenses.
Price - it is the amount paid by the buyer not the fair market value at the time of sale or redemption.
Expenses of the contract – if incurred by the buyer must be returned like the execution and registration expenses if shouldered
by the buyer.
Necessary and useful expenses – no right to compel removal of useful improvements. The buyer a retro is considered in the
same category as a possessor in good faith. Refusal to return the expenses for necessary and useful improvement gives rise to
right of retention until payment by the buyer.
Effect of failure to redeem

The ownership of the property is consolidated to the buyer a retro. In real property, a judicial order of consolidation must be
obtained.
Notes: Tender of payment is not necessary mere offer to redeem is sufficient. No required form for the offer. Notice of the offer
to redeem is enough.
Equitable Mortgage
One which although lacking in some formality, form or words or other requisites demanded by statute nevertheless reveals the
intention of the parties to charge a real property as security for a debt, and contains nothing impossible or contrary to the law.
Art. 1602. The contract shall be presumed to be an equitable mortgage in any of the following cases:
1. When the price of the sale with right to repurchase is usually inadequate
2. When the Vendor remains in possession as lessee or otherwise
3. When the vendor 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. The purchaser retains for himself a part of the purchase price
5. When the vendor binds himself to pay the taxes of the thing sold
6. In any instances where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation
In any of the foregoing cases, any money, fruits or other benefits to be received by the vendee as a retro otherwise shall be
considered as interest which shall be subject to usury laws
Option to Buy= If a seller has been granted an option to buy within a certain period and the price paid by the buyer was
adequate, the sale is absolute and cannot be construed and presumed as an equitable mortgage, even if the period within which to
exercise the option is extended
= Buyer grants the vendor the right while in right of repurchase the right is reserved by the vendor
=Comes after a deed of sale
Example: A in an Absolute Sale sold to B a piece of land after which they executed an option to buy. After the period of option to
buy B sold to the land to C, A sued C for reformation of the Absolute Sale into an equitable mortgage as security for certain loan.
Contending art 1602 (3) that since the option to buy was extended referring to a sale a retro should be applied and therefore there
is a presumption that equitable mortgage was the agreement arrived at.
No. Once the instrument of Absolute Sale is executed, the seller can no longer reserve the right to repurchase and the right
thereafter granted by the buyer in a separate instrument, cannot be a right of repurchase but other right like option to buy.
Art. 1603 In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage
Art. 1604 The provisions of Art. 1602 shall also apply to contract purporting to be an absolute sale
1605 In the cases referred to in Art. 1602 and 1604, the apparent vendor may ask for the reformation of the instrument
Example: A, obtained a loan from a bank where they executed a mortgage as security therefore. They failed to pay thus the
property mortgaged was foreclosed. Before the period of redemption expired, A, borrowed from B to redeem the property for a
period of 10 yrs. needing security for the loan, they executed a Deed of Promise to sell. After which they again executed a Deed
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of Absolute Sale. On the Basis of the Deed of Absolute Sale, B was able to transfer the lot in his name. A, filed for a complaint
for declaration of sale as equitable mortgage and reconveyance of the property.
Granted the real intent was to give security for the loan. Remedy need not always be reformation in this case declaration of sale
as equitable mortgage.
1606. Period of Redemption

No Agreement = 4 years
With express agreement = 10 years
Reason: the law does not favor suspension of ownership, renewable but not to extend 10 years 10 years:
1. At anytime they have money
2. In March in any year
4 years
1. Right not to be exercised within 3 years from date of contact- 4 years from time right of repurchase can be exercised
But: Right not to be exercised within 8 years from date of contact- only two years for if 4 years amounts to 12 years exceeding
the 10 year limit
However the vendor may still exercise the right to repurchase within 30 days from the final judgment was rendered in a civil
action on the basis that the contract was a true sale with right of repurchase
Pre-requisite:
1. Denial that the agreement is one of pacto de retro sale with right to repurchase not to cases where the transaction is
conclusively a pacto de retro sale but the period to redeem has expired- buyer a retro believed that he had entered into an
equitable mortgage
2. Judgment is sale with pacto de retro
3. Vendor is of honest belief that the transaction is an equitable mortgage.
Rights of a vendor a Retro

1. Redemption
1.1 Right to redeem from buyer
1.2 Right to redeem from persons other than the buyer
2. Subrogation- Vendee is subrogated to the vendors rights and actions

-right to mortgage
-right to continue prescription
-right to receive fruits
Art. 1610 - The creditor of the Vendor cannot make use of the Right to repurchase against the vendee until they have
exhausted the property of the vendor. Rescission in case of fraud
But: Dacion en pago

Exhaustion not available to preferred or prior creditors, they can proceed immediately against the property.
Co-ownership
Article 1611 NCC- In sale with right to repurchase, the vendee of a part of an undivided immovable who acquires the whole
may thereof compel the vendor to redeem the whole property, if the latter wishes to make use of the Right to repurchase
A and S are co-owners of a house. S sold his share to B with Right of Repurchase. After Partition, the property was sold to B
subject to S‘s right of Repurchase. If S, wants to exercise Right to repurchase then the whole thing must be redeemed.
Article 1612 NCC- Connotes that property owned in common is sold by the co-owners jointly and in the same contract.
A, B and C jointly sold undivided piece of land with right to repurchase to X. If A wants to redeem the whole prior to
expiration, can X refuse?
Yes. A, B or C cannot redeem more than their respective shares.

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Same rule applies if the vendor dies leaving several heirs
Article 1613NCC is the Remedy of Vendee

X may ask A, B and C to come to an agreement to redeem the whole thing. X cannot be compelled to consent to partial
redemption.
Art.1614 -When Co-owners sell their shares separately
Problem:
A, B, and C are co-owners of undivided lot. A sold with tight of repurchase his share to X. Later X acquired B and C‘s right.
A, wants to redeem. X refuses and asks A to redeem the whole. Is A allowed to redeem only his share? Yes the sale had
been made separately
Art.1615 - Rule if Buyer dies Leaving Separate Heirs
Problem:
A sold a piece of land to B with right of repurchase. B dies leaving C, D and E as heirs. A brought an action for redemption
against C. Can C be compelled to sell his hare only?
As a rule C can be compelled to sell his share only whether the land still undivided or partitioned among C, D and E. But if
the inheritance has already been divided and the land sold has been awarded to C, then A can institute the action for
redemption against C for the whole.
Legal Redemption (Arts. 1619-1623)

Definition (Art. 1619):
-the right to be subrogated,
-upon the same terms and conditions stipulated in a contract,
- In the place of one who acquires a thing by onerous title ( such as sale or dation in payment) Instances of legal redemption,
period and price
To whom Granted Period Price

Co-owner/s (Art.1620, CC) 30 days from written notice by vendor of a. Price of the sale b. Expenses of the
the actual sale.( Art. 23, CC) * Actual contract and other legitimate payments
knowledge the person granted the right is made by reason of the sale; c. Necessary
immaterial, written notice is mandatory and useful expenses made on the thing
sold
Adjoining owner of rural land (Art.1621,CC)
Adjoining owner of urban land (Art.1622,CC)
Co-heirs (Art. 1088, CC) 1 month from written notice by
Applicant or his widow or legal heirs in case of sale of 5 yrs. from date of conveyance
homestead (Sec.119, Public Land Act)
Debtor in case a credit or incorporeal 30 days from the date the assignee a. Price paid b. judicial cost c. interest on
right in litigation is sold (Art.1634) demands payment from debtor the price from day of which the same was
paid
Taxpayer in case of tax sale (Sec. 1 year from date of forfeiture (UP Taxes and penalties together with the
215,NIRC) Reviewer) 1 year from day the sale was interest and cost of sale
registered( Paras Citing Techico V.
Serrano-1959)
Judgment debtor, successor-in-interest, or 1 year from the date of registration of the Mortgagee is:
creditor with subsequent lien, in case of certificate of sale Note: If redemption is 1. Bank (Gen Banking Act-Sec. 78)
execution sale (Rule 39, Sec.27,ROC) by redemptioner against other a) Amount fixed by court or under deed
redemptioner- 60 days from last of mortgage
redemption b) Interest at a rate specified in mortgage
c) All judicial cost and other expenses
incurred by reason of execution sale and
as a result of custody less income
received
2. Other than banks ( Rule 39, Sec. 28
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ROC)
a) Amount of purchase
b) Any assessment or taxes paid by
purchaser after purchase
c) 1% / month of all payments up to time
of redemption or 2% if redemptioner vs.
remptioner.
d) In case of redemptioner vs.
redemptioner- amount of liens held by
last redemptioner with interest.
Debtor-mortgagor, successors-in-interest, 1 year from registration of sale in office Follow Rule 39, Sec. 28 ROC
judicial/judgment creditor, any person of ROD
having a lien on the property, in case of
extrajudicial foreclosure of mortgage
(Act No.3135. Sec. 6.) (Right of
Redemption)
Debtor-mortgagor in case of judicial Not less than 90 days nor 120 days from Follow Rule 39, Sec. 28 ROC
foreclosure of real estate mortgage entry of judgment of foreclosure or even
( Equity of Redemption) after the foreclosure sale but before
judicial confirmation of sale. (Dean
RUA)
Note: If mortgagee is any bank, person redemptioning may exercise right of redemption or equity of redemption but if person
so redemptioning is a judicial person (eg. Corporation or partnership), redemption will be made until, but not after, the
registration of certificate of foreclosure sale with the applicable Registry of Deeds which in no case be more than 3 months after
foreclosure, whichever is earlier.
Redemption by co-owner/s
- Available only when the shares of any or all of the other co-owner are sold to 3 rd person (anyone not a co-owner
– if price is grossly excessive, redemptioner shall pay only a reasonable price] - If 2 or more co-owners want to redeem:
- They may do so in proportion to their respective shares
- The right of redemption of co-owners excludes that of adjoining owners.
- Purpose of this right is to eliminate / minimize co-ownership (law discourage co-ownership)
Redemption by adjoining owner of rural land
- Available when the area of land sold is 1 hectare or less, unless the grantees does not own any rural land
- available only to adjoining owners who are not separated by any permanent servitude such as brooks, drains, ravines, roads and
others.
- Priority if 2 or more adjoining owners want to redeem:
1. Owner of smaller adjoining land; or
2. If the same area, owner who first requested redemption
Redemption by adjoining owner of urban land

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- granted in addition to right of pre-emption

-available when urban land:
1. is so small and so situated that a major portion of it cannot be used for any practical purpose w/n a reasonable time;
2. Was bought merely for speculation;
3. Was resold - Priority if 2 or more adjoining owners want to redeem:
- Owner whose intended use of the land appears to be best justified
Redemption by co-heirs
-available when any of the heirs sold his hereditary right to a stranger before partition
Redemption of credit of incorporeal right

-is available when it is sold while in litigation. It is in litigation from the time the complaint is answered.
-not available when assignment in favor of:
1. Co-heir / co-owner of right assigned
2. Creditor in payment of credit
3. Possessor of a tenement or pieces of land which is subject to the right assigned.
XV. The Subdivision and Condominium Buyers' Protective Decree (P.D. 957)
LAW ON SALE OF SUBDIVISION AND CONDOMINIUM (PD 957)
Q: Are sales or dispositions of subdivision lots or condominium units prior to the effectivity of the decree exempt from
compliance with the requirements stated therein?
A: No. It shall be incumbent upon the owner or developer of the subdivision or condominium project to complete compliance
with his or its obligations as provided in the decree within two years from the date of effectivity of the Decree, unless otherwise
extended by the Authority or unless an adequate performance bond is filed.
Note: Failure of the owner or developer to comply with the obligations under this and the preceding provisions shall constitute a
violation punishable under Sections 38 and 39 of the Decree.
DEFINITION OF TERMS
Q: How is “sale” or “sell” defined under the Decree?

A: Shall include:
1. Every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, including the building and other
improvements thereof, if any, in a subdivision project or a condominium unit in a condominium project;
2. contract to sell;
3. contract of purchase and sale;
4. exchange;
5. attempt to sell;
6. option of sale or purchase
7. solicitation of a sale;
8. offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise; and
9 .a. privilege given to a member of a cooperative, corporation, partnership, or any association and/or b. the issuance of a
certificate or receipt evidencing or giving the right of participation in, or right to, any land in consideration of payment of the
membership fee or dues. (Deemed sale)
Q: How are the terms “buy” and “purchase” defined under the Decree?
A: Shall include any contract to buy, purchase, or otherwise acquire for a valuable consideration a subdivision lot, including the
building and other improvements, if any, in a subdivision project or a condominium unit in a condominium project.
Q: What is a subdivision project?

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A: A tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual
lots with or without improvements thereon, and offered to the public for sale, in cash or in installment terms.
Note: It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community
and public areas in the project.
Q: What is a subdivision lot?

A: Any of the lots, whether residential, commercial, industrial, or recreational, in a subdivision project.
Q: What is a complex subdivision plan?

A: A subdivision plan of a registered land wherein a street, passageway or open space is delineated on the plan.
Q: What is a condominium project?

A: The entire parcel of real property divided or to be divided primarily for residential purposes into condominium units,
including all structures thereon.
Q: What is a condominium unit?

A: A part of the condominium project intended for any type of independent use or ownership, including one or more rooms or
spaces located in one or more floors (or part of parts of floors) in a building or buildings and such accessories as may be
appended thereto.
REGISTRATION AND LICENSE TO SELL
Q: Upon what agency is exclusive jurisdiction to regulate real estate trade and business vested?
A: National Housing Authority
Q: After issuance of the registration certificate, may the owner or dealer already sell subdivision lots or condominium
units?
A: No. He must first obtain a license to sell the project within two weeks from the registration of such project.
Q: What is the purpose of the requirement of posting of a performance bonds before a license to sell may be issued?
A: It is to guarantee the construction and maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems,
and full development of the subdivision project or the condominium project and the compliance by the owner or dealer with the
applicable laws and rules and regulations.
Q: Is a license to sell and performance bond required in all subdivision and condominium projects?
A: No. The following transactions are exempt from said requirements:
1. Sale of a subdivision lot resulting from the partition of land among co‐owners and co‐heirs.
2. Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same lot.
3. Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary course of business when
necessary to liquidate a bona fide debt.
Q: When may a license to sell be suspended?

A: Upon verified complaint by a buyer of a subdivision lot or a condominium unit in any interested party, the Authority may, in
its discretion, immediately suspend the owner's or dealer's license to sell pending investigation and hearing of the case. The NHA
may motu proprio suspend the license to sell if, in its opinion, any information in the registration statement filed by the owner or
dealer is or has become misleading, incorrect, inadequate or incomplete or the sale or offering for a sale of the subdivision or
condominium project may work or tend to work a fraud upon prospective buyers.
Q: When may a license to sell or registration of a subdivision or condominium project be revoked?

A: The Authority may, motu proprio or upon verified complaint filed by a buyer of a subdivision lot or condominium unit,
revoke the registration of any subdivision project or condominium project and the license to sell any subdivision lot or
condominium unit in said project by issuing an order to this effect, with his findings in respect thereto, if upon examination into
the affairs of the owner or dealer during a hearing, it shall appear there is satisfactory evidence that the said owner or dealer:
1. is insolvent; or
2. has violated any of the provisions of this Decree or any applicable rule or regulation of the Authority, or any undertaking of
his/its performance bond; or
3. has been or is engaged or is about to engage in fraudulent transactions; or
4. has made any misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or
condominium project that has been distributed to prospective buyers; or
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5. is of bad business repute; or

6. does not conduct his business in accordance with law or sound business principles.
Note: Where the owner or dealer is a partnership or corporation or an unincorporated association, it shall be sufficient cause for
cancellation of its registration certificate and its license to sell, if any member of such partnership or any officer or director of
such corporation or association has been guilty of any act or omission which would be cause for refusing or revoking the
registration of an individual dealer, broker or salesman.
WARRANTIES OF THE OWNER OR DEVELOPER
Q: In making advertisements, does the owner or developer make warranties relative to such?
1. Advertisements that may be made through newspaper, radio, television, leaflets, circulars or any other form about the
subdivision or the condominium or its operations or activities must reflect the real facts and must be presented in such manner
that will not tend to mislead or deceive the public.
2. The owner or developer shall answerable and liable for the facilities, improvements, infrastructures or other forms of
development represented or promised in brochures, advertisements and other sales propaganda disseminated by the owner or
developer or his agents and the same shall form part of the sales warranties enforceable against said owner or developer, jointly
and severally.
Note: Failure to comply with these warranties shall also be punishable in accordance with the penalties provided for in this
Decree.
Q: Within what period must the owner or developer construct and provide the facilities, improvements, infrastructures
and other forms of development, including water supply and lighting facilities, which are offered and indicated in the
approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of
advertisement?
A: Within one year from the date of the issuance of the license for the subdivision or condominium project Such other period of
time as may be fixed by the Authority.
RIGHTS AND REMEDIES OF A BUYER
Q: May payment made by a buyer be forfeited in favor of the owner or developer in case the buyer desists from further
payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the
approved plan within the time limit provided for such? What is the buyer’s remedy in this case?
A: No, such forfeiture is not allowed. Such buyer may, at his option, be reimbursed the total amount paid including amortization
interests but excluding delinquency interests, with interest thereon at the legal rate.
Q: Does a defaulting buyer have any right under the Decree?
A: Yes. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the
owner or developer to develop the project shall be governed by Republic Act No. 6552. Where the transaction or contract was
entered into prior to the effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the
corresponding refund based on the installments paid after the effectivity of the law in the absence of any provision in the contract
to the contrary.
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Q: What is the owner or developer’s obligation in case the lot bought and fully‐paid by the buyer is mortgaged?
A: In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or
developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the
title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.
Q: May the parties waive compliance with the decree?
A: No. Any condition, stipulation, or provision in contract of sale whereby any person waives compliance with any provision of
the Decree or of any rule or regulation issued thereunder shall be void.
XVI. The Condominium Act (R.A. 4726)
Q: What is a condominium?
A: It is an interest in real property consisting of 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.
Note: It may include, in addition, a separate interest in other portions of such real property.
Q: What comprises a real right in condominium?
A: The real right in condominium may be ownership or any other interest in real property recognized by law, on property in the
Civil Code and other pertinent laws.
Q: What are the incidents of a condominium grant?
A: Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the incidents of a
condominium grant are as follows: 7.
GR: Each condominium owner has also the absolute right to sell or dispose of his condominium.
Exception: If the master deed contains a requirement that the property be first offered to the condominium owners within a
reasonable period of time before the same is offered to outside parties;
Q: May the management body may acquire and hold, for the benefit of the condominium owners, tangible and intangible
personal property and dispose of the same by sale or otherwise?
A: Yes, unless otherwise provided for by the declaration of restrictions.
Note: The beneficial interest in such personal property shall be owned by the condominium owners in the same proportion as
their respective interests in the common areas. A transfer of a condominium shall transfer to the transferee ownership of the
transferor's beneficial interest in such personal property.
Q: May a condominium corporation sell, exchange, lease or otherwise dispose of the common areas owned or held by it in
the condominium project?
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A: General Rule: During its existence, it cannot do so.

Exception: If authorized by the affirmative vote of all the stockholders or members.
Q: What is the consequence of voluntary dissolution of a condominium corporation?

A: General Rule: The corporation shall be deemed to hold a power of attorney from all the members or stockholders to sell and
dispose of their separate interests in the project.
Exception: Unless otherwise provided for in the declaration of restrictions
Q: If real property has been divided into condominiums, how will it be assessed for taxation purposes?
A: Each condominium separately owned shall be separately assessed, for purposes of real property taxation and other tax
purposes to the owners thereof and the tax on each such condominium shall constitute a lien solely thereon.
Q: Who should pay for an assessment upon any condominium made in accordance with a duly registered declaration of
restrictions?
A: It is an obligation of the owner thereof at the time the assessment is made.
Q: What are the rules as regards the notice of assessment?

A: The notice:
1. is to be registered with the Register of Deeds of the city or province where such condominium project is located.
2. shall state the following:
a. amount of such assessment and such other charges thereon as may be authorized by the declaration of restrictions,
b. a description of the condominium unit against which same has been assessed, and
c. the name of the registered owner thereof.
3. Such notice shall be signed by an authorized representative of the management body or as otherwise provided in the
declaration of restrictions.
Q: What is the effect if the management body causes a notice of assessment to be registered with the register of deeds?
A: The amount of any such assessment plus any other charges thereon, such as interest, costs (including attorney's fees) and
penalties, as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominium
assessed.
Note: Effect of payment: Upon payment of said assessment and charges or other satisfaction thereof, the management body
shall cause to be registered a release of the lien.
Q: What are the rules as regards the lien created in case of unpaid assessments, etc?
A: General Rule: Such lien shall be superior to all other liens registered subsequent to the registration of said notice of
assessment
Exceptions:
1. real property tax liens are superior;
2. when declaration of restrictions provide for the subordination thereof to any other liens and encumbrances.
Q: What is the rule as regards enforcement of the lien?

A: Such liens may be enforced in the same manner provided for by law for the judicial or extra ‐judicial foreclosure of mortgages
of real property.
Q: Can the management body bid in the foreclosure sale based on the lien for unpaid assessments?
A: General Rule: No, the management body shall have power to bid at foreclosure sale.
Exception: Unless otherwise provided for in the declaration of restrictions,
Note: The condominium owner shall have the same right of redemption as in cases of judicial or extra ‐judicial foreclosure of
mortgages.
TIPS IN BUYING SUBDIVISION HOUSE AND LOT OR CONDOMINIUM UNIT FROM A DEVELOPER/BROKER
BEFORE BUYING:
1. Check if the project has a Certificate of Registration and License to Sell.

HOW? Request for proof of the Registration and License to Sell of the Project from HLURB Office where it is located (this can
be verified by visiting the HLURB WEBSITE)
2. Visit the project site for a first-hand assessment of the site itself and its environment and to locate the lot/unit you intended to
purchase.
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WHEN BUYING:
1. Check if the broker/agent is registered with the HLURB;

2. Check with the Register of Deeds if the lot/unit has been previously registered to other buyers;
3. Check the nature and type of services/utilities to be provided if in accordance with the approved plan and the conditions for
their provisions to buyers;
4. Check your conformity with the conditions on membership with the Homeowners association for the project
BEFORE SIGNING THE CONTRACT TO SELL:

1. Read the Contract thoroughly, especially the terms and conditions in the fine print;
2. Be sure to have a copy and all other documents you have signed;
3. Check with the Register of Deeds if the Contract you signed has been registered;
4. Pay directly to the owner/developer or the authorized marketing agent;
5. Always ask for an official receipt on payments made.
WHEN ACCEPTING A HOUSING UNIT OR CONDOMINIUM UNIT:

1. Inspect the unit if it conforms with the approved plan/specifications;
Check if the amenities and facilities are in accordance with the approved plans and/or written representations made. LFGFC/

Sales: UC LAW: Civil Law Review Notes On Sales

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Sales: UC LAW: Civil Law Review Notes On Sales

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UC LAW: Civil Law Review Notes on

A. Definition of Sales (Arts. 1458, 1470)

II. Parties to a Contract of Sale

A. Capacity of parties (Arts. 1489-1492)

III. Subject Matter

A. Requisites of a valid subject matter (Arts. 1459-1465)

IV. Obligations of the Seller to Transfer Ownership

B. Sale by a person having a voidable title (Arts. 1506, 559)

A. Meaning of price (Arts. 1469-1474)

VI. Formation of Contract of Sale

A. Preparatory (Art. 1479)

1. Offer (Art. 1475)

B. Perfection (Arts. 1475, 1319, 1325, 1326)

C. Formalities of the contract, Art. 1403 (d) (e)

VII. Transfer of Ownership

A. Manner of transfer (Arts. 1477, 1496-1501)

1. Requisites for registration of deed of sale in good faith

VIII. Risk of Loss

A. General rule (Arts. 1263, 1189)

IX. Documents of Title

A. Definition (Art. 1636)

X. Remedies of an Unpaid Seller

A. Definition of unpaid seller (Art. 1525)

XI. Performance of Contract

A. Delivery of thing sold

1. Sale of movables (Arts. 1522, 1537, 1480)

XIII. Breach of Contract

A. Remedies of the seller (Arts. 1636, 1594)

B. Recto Law: sale of movables on installment (Arts. 1484-1486)

D. Remedies of the buyer

XIV. Extinguishment of the Sale

A. Causes (Arts. 1600, 1231)

XVI. The Condominium Act (R.A. 4726)

Q: What is a contract of sale?

Q: When is a sale absolute?

Q: When is a deed of sale considered absolute in nature?

Q: When is a sale conditional?

Q: What are the elements of a contract of sale?

Obligations of the buyer

Other Obligations of buyer

2. He is liable as a depositary if he voluntarily constituted himself as such;

a) should it have been stipulated;

Obligations of the seller

 CHARACTERISTICS OF A CONTRACT OF SALE:

1. Consensual- perfected by mere consent;

2. Bilateral- imposes obligations on the part of both parties;

3. Commutative- a contract wherein a thing of value is exchange for an equal value;

5. Title not a mode of transferring ownership;

6. Onerous- imposes a valuable consideration;

8. Nominate- given a particular name in law.

 DISTINCTION OF THE CONTRACT OF SALE WITH OTHER CONTRACTS

3. Sale v. Agency to Sell

4. Sale v. Dacion En Pago

6. Sale v. Contract for a Piece of Work

SALE CONTRACT FOR A PIECE OF WORK

Q: What is a contract to sell?

Q: Distinguish a contract to sell from a contract of sale.

CONTRACT OF SALE CONTRACT TO SELL

after full payment of the purchase price.

II. Parties to a Contract of Sale

A. Capacity of parties (Arts. 1489-1492)

a. If both parties are incapacitated- Unenforceable