AGENCY TO SELL (1467) PG 171

 PRINCIPAL AND AGENT RELATIONSHIP – FIDUCIARY

 ONCE SALE IS CONSUMMATED, ONCE AGENT CLOSED TRANSACTION =
BINDING CONTRACT OF SELL BETWEEN THE PRINCIPAL AND BUYER; MUST
HAVE SPA
 AGENT USUALLY HAS COMMISSION

BARTER – PRICE IS TO THING (Art. 1641)

THING OR MONEY IN EXCHANGE FOR THING OF MONEY = TEST WILL BE THE INTETION
OF THE PARTY; IF NO CLEAR MANIFESTATION – RULE: if value of thing > amt of money or
its equivalent
DATION – OBLIGATION CREATED: Transfer of ownership
Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction of a
debt in money, shall be governed by the law of sales.

LEASE OF THINGS: OWNERSHIP IS NOT TRANSFERRED; INSTEAD THE RIGHT TO

POSSESSION AND USE OF PROPERTY

DONATION
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor
of another person, who accepts it. Sale is essentially an onerous contract, whereas donation is
a gratuitous contract. A sale is perfected by mere consent, whereas donation, being a solemn
contract, although consent is also required, must comply with the formalities mandated by law
for its validity.
ONEROUS BECAUSE: THE OTHER PARTY EXACTS THE OBLIGATION OF ANOTHER
PARTY; BIND THEN OBLIGATE TO DELIVER OR TRANSFER IT TO BUYER; THERE IS
BURDEN BECAUSE THERE IS PAYMENT; THE MOMENT YOU PAY, CREATES BURDEN TO
THE OTHER

ELEMENTS OF VALID SALE:

A. THING sold must be:

1. Determinate (Art.1458)

A thing is DETERMINATE when it is: 1. Particularly designated; 2. Physically segregated; or 3.

Capable of being made determinate without the necessity of a new or further agreement
between the parties. (Art. 1460) Example: specific mention of some lots plus the phrase “lots
needed for the city hall site avenues and parks, according to the Arellano development plan of
the Municipality”
2. Licit (1459)

pg. 1
A thing is LICIT if it is NOT: (Art. 1409)
1. Contrary to law, morals, good customs, public order, or public policy; - e.g. dangerous drugs;
land acquired by homestead or free patent- within 5 years from issuance of patent or grant,
except if sale in favor of the Gov.t or any of its units, braches or institutions (CA 141)
2. Outside the commerce of men; e.g. property of public dominion such as a river (Martinez v.
CA, 1974)
3. Actual or Possible (Arts. 1461 & 1462)
A thing is
o ACTUAL when it is existing,
o POSSIBLE when it is has a potential existence.
- sale of “future goods” (goods to be manufactured, raised, or acquired by the seller after the
perfection of sale): VALID
- sale of a mere hope or expectancy: subject to the CONDITION that the thing will come into
existence
- sale of a vain hope or expectancy: VOID

 Future inheritance cannot be the object of sale (Art.1347(2)) but heir may sell his hereditary
rights (Art.1088) – FUTURE INHERITANCE CANNOT BE SOLD, BUT RIGHT TO FUTURE
INHERERITANCE MAY BE -RISK TO THE BUYER
The following may be objects of sale:
1. Undivided interest in a thing (Art.1463) DEFINE
2. Things under litigation; BUT if without the knowledge and approval of the litigants or of the
court, sale rescissible (Art.1381(4))
3. Things subject to a resolutory condition (Art. 1465) - e.g. things acquired under a legal or
conventional right of redemption
B. PRICE must be:
1. Certain (Art. 1458)
Price is CERTAIN when it is:
1. Fixed by agreement of the parties (Art. 1473)
2. Certain with reference to another thing certain (Art. 1469) - e.g. 10% below invoice price
(SRP); IN PROPERTY – ADJACENT PROPERTIES/ ZONAL EVALUATION
3. The price which the thing sold would have on a definite day, or a particular exchange or
market, or a certain amount above or below such price (Art. 1472)
4. To be fixed by a third person (Art. 1469)

pg. 2
- If 3rd person unable or unwilling to fix price: sale inefficacious (NOT EFFECTIVE) UNLESS the
parties subsequently agree upon the price
- If 3rd person acts in Bad Faith or by mistake: courts may fix price
- If 3rd person prevented from fixing price by fault of the buyer or seller: party not in fault may
avail of remedies against the other
o If price CANNOT be determined: - sale INEFFICACIOUS
- BUT if the thing or part thereof has been delivered to and appropriated by the buyer, he must
pay a reasonable price therefor (Art.1474)

2. In money or its equivalent (Art. 1458) – checks, letters of check, bitcoin, gift check,
promissory note – not barter since it is money-equivalent
Price must be in
o MONEY or
o its EQUIVALENT - e.g. letter of credit (Baviera)

3. Real (Art 1471) 4. True (Art. 1353)

Price must be REAL, not simulated.
o Price is real when there is an intention (on the part of the buyer) to pay and an expectation on
the part of the seller) to receive it.
o If price is simulated: - sale is VOID - BUT the act may be shown to have been really a
donation or some other act or contract (Art.1471)

Price must be TRUE, not false.

o The price is false when the real consideration is not the same as that stated in the contract
(Mapalo v. Mapalo, 1966)
o If false price stated - sale void unless proved to be founded on another true and lawful price
(Art. 1353)
- SC says the contract is not void but is a relatively simulated contract; hence, the parties are
bound by their real agreement. (Balite v. Lim, 2004)

GROSS INADEQUACY of price does not affect a contract of sale, except that:
1. It may indicate a defect in the consent such as fraud, mistake, or undue influence (Arts.1470
& 1355)

pg. 3
2. It may indicate that the parties intended a donation or some other act or contract (Art1470)
e.g. when the price of a sale with right to repurchase is unusually inadequate, it is presumed to
be an equitable mortgage (Art1602(1))
3. Sale is rescissible if: a. the sale is entered into by a guardian or by a representative of an
absentee; b. the ward or absentee represented suffers lesion by more than ¼ of the value of the
thing sold; AND c. the sale is not approved by the court (Arts.1381(1)(2) & 1386)
4. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks one’s conscience as to justify the courts
to interfere; BUT such does not follow when the law gives the owner the right to redeem as
when a sale is made at public auction, upon the theory that the lesser the price, the easier it is
for the owner to effect redemption. (Hulst v. PR Builders, Inc. , 2007)

C. CONSENT perfects a contract of sale.

o Consent: meeting of offer and acceptance on the
1. thing sold
2. price - Manner of payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price (Toyota Shaw v. CA, 1995)
The buyer and the seller must have CAPACITY to enter into a contract of sale.
Absolute Incapacity:
1. Minors
2. Insane Except: during lucid interval (Art.1328)
3. Demented persons
4. Deaf-mutes who do not know how to write (Art. 1327)
5. Persons suffering civil interdiction (Art.34, RPC)
6. Drunk person
7. Hypnotized person (Art.1328) 8. Those judicially declared “Incompetent”
a) prodigals
b) hospitalized lepers
c) persons not being of unsound mind, but by reason of age, disease, weak mind, and other
similar causes, cannot, without outside aid, take care of themselves and manage their property,
becoming thereby an easy prey for deceit and exploitation (Sec.2, Rule 92,ROC)
o Status of sale:
- Where 1 party incapacitated: VOIDABLE (Art.1390(1))
- Where both parties incapacitates: UNENFORCEABLE (Art.1403(3))

pg. 4
o BUT when necessaries (those indispensable for sustenance, clothing, dwelling, medical
attendance, education, transportation) are sold and delivered to incapacitated person, he must
pay a reasonable price therefor. (Art.1489)
Relative Incapacity to buy
1. Husband/Wife - What: property of spouse - Except: when property regime is separation of
property (marriage settlement or judicial order) - Prohibition applies to common-law spouses
(Matabuena v. Cervantes, 1971)
2. Guardian - What: property of ward
3. Agent - What: property of principal - Except: principal consents
4. Executor/Administrator - What: property of estate administered - Does NOT apply to sale of
hereditary right bec. it is not administered by the executor/administrator (Naval v Enriquez,
1904)
5. Public officers and employees - What: property of State, GOCC, institution administered -
Applies to judges and gov’t. experts who, in any manner, take part in the sale
6. Judicial officers and employees (justices, judges, prosecuting attorneys, court clerks, other
officers and employees connected with the administration of justice) - What: property or rights in
litigation or levied upon an execution before the court within their territorial jurisdiction
7. Lawyers - What: property and rights object of any litigation handled by them (Art. 1491)
8. Others specially disqualified by law - e.g. aliens, wrt private land in the Philippines (Art.12,
sec.7, Constitution) o Status of sale: VOID (Art. 1409(7))
o BUT sale to guardians, agents, executors/administrators can be “ratified” by the execution of a
new contract, making the sale valid from the time the new contract is executed, unlike sale to
public or judicial officers and employees and lawyers which cannot be so “ratified” because it is
contrary to public policy (Rubias v. Batiller, 1973)

The OFFER must be CERTAIN (Art. 1319) as to the object and the price (Villanueva v. PNB,
2006).
o Offer a.k.a. imperfect promise or policitacion (Litonjua v. L&R Corp., 2000)
o The ff. are not definite offers but mere invitations to make an offer, unless the contrary
appears:
1. Business advertisements of things for sale (Art.1325)
2. Advertisements for bidders (Art.1326)

pg. 5
The ACCEPTANCE must be ABSOLUTE. (Art. 1319)
o Qualified acceptance= counter-offer

Consent must not be VITIATED, otherwise sale is VOIDABLE. (Arts. 1330 &1390(2))
o Vices of consent:
1. Fraud
2. Mistake
3. Violence
4. Intimidation
5. Undue influence
Payment of EARNEST MONEY is considered as proof of the perfection of sale. (Art. 1482)
o BUT mere payment of earnest money is not sufficient proof of a perfected sale when some
element (e.g. agreement on terms of payment) is admittedly lacking (Velasco v. CA, essential
1973)

III. TRANSFER OF OWNERSHIP

A perfected contract of sale per se does NOT transfer ownership over the thing sold. For
ownership to transfer, there must be:
1. Right to transfer ownership at the time of delivery (Art.1459)
a. owner (Art. 428)
b. authorized by owner
2. Delivery (Art. 1496)
3. Intention to transfer ownership (Norkis Distributors Inc. v. CA, 1991)
4. If delivery is symbolic, control of the seller over the thing sold that its material delivery could
have been made. (Vda. de Sarmiento v. Lesaca, 1960)

A. RIGHT TO TRANSFER OWNERSHIP

1. When the seller has NO TITLE
Gen. Rule: One cannot give what one does not have (Nemo dat quod non habet)
o Art. 559: When the owner has lost or has been unlawfully deprived of a movable, he may
recover it even from a buyer in good faith (Aznar v. Yapdiangco, 1965)

pg. 6
 - limitation: if buyer in good faith acquired it in a public sale, the owner must reimburse the price
paid therefor
Exceptions:
a. Estoppel: when the owner is by his conduct precluded from denying the seller’s authority to
sell (Art. 1505)
b. Sale under court order (Art. 1505) o But in execution sale, the buyer merely steps into the
shoes of the judgment debtor (Rule 39, sec. 33, ROC)
c. When goods are purchased in a - merchant’ store, - fair, or - market (Art. 1505) d. Registered
land bought in good faith
- Gen rule: buyer need not go beyond the Torrens title
- Exception: when he has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make further inquiry

 No factors’ acts or recording laws (referred to in Art1505(1)) in the Philippines (Baviera)

2. When the seller has a voidable title which has not been avoided at the time of the sale, a
buyer in good faith acquires a good title to the goods. (Art.1506)
o BUYER in GOOD FAITH is one who buys property from another
- without notice that some other person has a right to or interest in it, AND
- who pays a full and fair price therefor at the time of the purchase or before receiving such
notice. o When the seller voluntarily delivers the thing sold to the buyer but is swindled,
- the seller is not “unlawfully deprived” of the thing under Art. 559; the buyer who practiced
fraud acquires a voidable title which, if not avoided at the time of sale, confers a good title on a
subsequent buyer in good faith and for value
- a good title means an indefeasible title even as against the original owner. (Tagatac v.
Jimenez, 1957; Edca v. Santos, 1990)

B. DELIVERY
o Ownership over the thing sold is transferred by DELIVERY or tradition (Aznar v. Yapdiangco,
1965)
o Sale without delivery gives the buyer no rights over the property except those of a creditor
(Kuenzle & Streiff v. Macke & Chandler, 1909)
o Delivery may be actual or constructive

Insert: Reciprocal obligations of the seller and buyer

pg. 7
Delivery through carrier (Art. 1523)

7. Where the seller is authorized or required to send the goods, delivery to a carrier for
transmission to the buyer is deemed delivery to the buyer
Exceptions:
a. contrary stipulation
b. contrary intent - A specification in the contract relative to the payment of freight may indicate
the intention of the parties as to the place of delivery (i.e., the owner pays for the freight);
however the terms “F.O.B.,” “c.i.f.,” and “F.a.S.” merely make rules of presumption which yield to
proof of contrary intention. - the best indication of the intention of the parties as to the place of
delivery is the manner and place of payment of the price.
Note: Study F.O.B. (free on board) - Seller bears the expenses of transportation up to the f.o.b.
point – buyer is liable for goods during transit
c.i.f. (cost, insurance, freight) - Price quoted includes the costs of the goods, insurance, and
freight charges on the goods up to the place of destination – seller is responsible/ liable for
goods during transit
F.a.S. (free alongside) - Seller bears the expenses of transportation until he delivers the goods
alongside a vessel at a named port – once loading process begins, buyer is liable
c. under bill of lading, goods deliverable to the seller or his agent or to the order of the seller of
his agent (seller reserves ownership in the goods) - cf. under bill of lading, goods deliverable to
the order of the buyer or his agent, but the seller or his agent retains possession of the BoL-
only right of possession reserved (Art.1523 in rel. to Art. 1503)
o The expenses for the execution and registration of the sale shall be borne by the seller, unless
there is a contrary stipulation. (Art.1487)
Incoterms

 Behn Meyer vs Yangco

Bill of Lading: (Art. 1503, par. 2)

Ownership does not go to the buyer unless payment is made in full

WARRANTY
- may be express or implied o cf. condition on performance of obligation:

- if condition not performed, party whose obligation is subject to the condition may refuse to proceed with
the contract OR may waive performance of the condition.

- Example of condition on performance of obligation: obligation of the buyer to pay the balance of the
purchase price made subject to the condition that the seller first deliver the reconstituted title of the house
and lot (Laforteza v. Machuca, 2000)

pg. 8
o If seller has promised that the condition should happen or be performed, the buyer may treat the
nonperformance of the condition as a breach of warranty. (Art.1545)

A. EXPRESS WARRANTY – stipulated in writing (i.e. “warranty provision in contracts)

There is an EXPRESS warranty when:

1. The seller makes an affirmation of fact or any promise relating to the thing sold;

2. The natural tendency of such affirmation or promise is to induce the buyer to buy; AND

3. The buyer buys the thing relying thereon.

 Affirmation of the value of the thing or statement of the seller’s opinion only is NOT a warranty unless: o
The seller made it as an expert; AND o It was relied upon by the buyer. (Art.1546)

 Cf. Dealer’s talk (usual exaggerations of trade) o Ordinarily, what does not appear on the face of the
written instrument should be regarded as dealer's or trader's talk; conversely, what is specifically
represented as true in said document cannot be considered as mere dealer's talk. (Moles v. IAC, 1989)

o 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. A man who relies upon an
affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his
property does so at his peril, and must take the consequences of his own imprudence. (Songco v. Sellner,
1917)

 Examples of express warranty: o certification that the machine sold was in “A-1 condition” (Moles v.
IAC, 1989) o express intimation that all taxes and duties had already been paid (Harrison Motors
Corporation v. Navarro, 2000)  An express warranty can be made by and also be binding on the seller
even in the sale of a secondhand article. (Moles v. IAC, 1989)

 Cf. fraud: in fraud, there must be an intention to deceive or mislead the other party to his prejudice
(Philippine Manufacturing Co. v. Go Jucco, 1926)

B. IMPLIED WARRANTY

Not applicable in

 “as is, where is” sale

 Second hand goods

IMPLIED warranties (unless a contrary intention appears)10: (Art.1547)

1. Implied Warranty of Title

2. Implied Warranty against Encumbrance – ensure that properties are free from encumbrance

Requisites: 1. things is immovable

2.burden is first not apparent, not mentioned in the agreement, and the buyer would not have bought it if
he was aware, and not registered in ROD

Implied warranty against Hidden Defects o Requisites for breach: a. The defect renders the thing sold
unfit for the use for which it was intended OR diminishes its fitness for such use to such an extent that
had the buyer been aware thereof,

pg. 9
3. Implied warranty against Hidden Defects

o Requisites for breach: (Art. 1561)

a. The defect renders the thing sold unfit for the use for which it was intended OR diminishes its fitness for
such use to such an extent that had the buyer been aware thereof he would not have bought it or would
have paid a lower price;

b. The defect is not patent or visible;

c. The buyer is not an expert who, by reason of his trade or profession, should have known the defect

d. The seller is aware of the hidden fault or defect, OR even he is not aware thereof if there is no
stipulation to the contrary (Arts.1561 &1566)

o Implied warranty as to Merchantable Quality and Fitness of Goods

a. Merchantable Quality:

1) Where the goods are brought by description from a seller who deals in goods of that description
(Art.1562(2))

2) In a sale by sample, if the seller is a dealer in goods of that kind and the defect is not apparent on
reasonable examination of the sample (Art.1566) – vendor is liable to vendee even if the former is not
aware of the defect

b. Fitness for a particular purpose: Where the buyer expressly or impliedly makes known to the seller the
particular purpose for which the goods are acquired AND it appears that the buyer relies on the seller’s
skill or judgment (Art.1562(1))

o Implied warranty against Redhibitory Defect in the Sale of Animals

 Redhibitory defect- a hidden defect of animals of such nature that expert knowledge is not sufficient to
discover it, even in case a professional inspection has been made

 No warranty in case of: a. animals sold at fairs or public auctions b. livestock sold as condemned

 The following sales are void: a. sale of animals suffering from contagious diseases b. sale of animals
unfit for the purpose for which they are acquired as stated in the contract

 Veterinarian liable if he fails to discover or disclose the hidden defect through ignorance or bad faith

 Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of
sale.

OTHER WARRANTIES

1. Warranty in sale of CONSUMER GOODS

o Consumer goods- goods primarily for personal, family, household or agricultural purposes, which shall
include but not limited to food, drugs, cosmetics, and devices (Sec.4(q), RA 749311)

o Kinds of express warranty: 1. “Full warranty”- if the written warranty meets the minimum standards 2.
“Limited warranty- if the written warranty does not meet the minimum standards (Sec.6(c), RA7394)

o Minimum standard for warranties that the warrantor shall:

pg. 10
  Implied Warranty of Title o Seller’s right to sell at the time the ownership is to pass and the
buyer’s peaceful and legal possession of the thing from that time o Does NOT apply to a sheriff,
auctioneer, mortgagee, pledge, or other person professing to sell by virtue of authority in fact or
law. o Requisites for breach of warranty against eviction:
a. Buyer is deprived of the whole or a part of the thing sold;
b. Eviction is by final judgment
c. Final judgment based on

 A right prior to the sale OR

 An act imputable to the vendor d. Seller is summoned and made codefendant in the suit for eviction at
the instance of the buyer. (Arts. 1548, 1558, Power Commercial and Industrial Corp. v. CA, 1997)

Implied Warranty against Encumbrance o Requisites for breach:

a. thing sold is an immovable

b. burden or servitude encumbering the thing sold is

 non-apparent

 not mentioned in the agreement

 of such nature that it must be presumed that the buyer would not have bought it had he been aware
thereof

 not recorded in the Registry of Property UNLESS there is an express warranty that the thing is free
from all burdens and encumbrances (Art.1560)

OTHER WARRANTIES

1. Warranty in sale of CONSUMER GOODS

o Consumer goods- goods primarily for personal, family, household or agricultural purposes, which shall
include but not limited to food, drugs, cosmetics, and devices (Sec.4(q), RA 749311)

o Kinds of express warranty:

1. “Full warranty”- if the written warranty meets the minimum standards

2. “Limited warranty- if the written warranty does not meet the minimum standards (Sec.6(c), RA7394)

o Minimum standard for warranties that the warrantor shall:

1. remedy such consumer product within a reasonable time and without charge in case of a defect,
malfunction or failure to conform to such written warranty;

2. permit the consumer to elect whether to ask for a refund or replacement without charge of such product
or part, as the case may be, where after reasonable number of attempts to remedy the defect or
malfunction, the product continues to have the defect or to malfunction

 BUT the warrantor will not be required to perform the above duties if he can show that the defect,
malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use
thereof. (Sec.68(d), RA 7394)

2. Warranty in sale of SUBDIVISION LOT or CONDOMINIUM UNIT

pg. 11
o The owner or developer shall be 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. (Sec.19, PD 957)

B. OBLIGATIONS OF THE BUYER

1. Accept delivery of the thing sold (Art. 1585)

2. Pay the price of the thing sold (Art.1582)

1. Acceptance

o Modes of accepting goods: (AIR)

1. Buyer intimates to the seller that he has accepted (verbal/written) the goods.

2. Goods delivered to the buyer and he does any act in relation to them which is inconsistent with the
ownership of the seller.

3. After the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he
has rejected them. (Art.1585)

o Rights of the buyer (UNLESS otherwise agreed):

1. Not bound to accept delivery of goods by installments (Art. 1583) – consider if goods is separable; ex:
if not, when part is damage, you can sue damage for whole part; if separable, only part that is damaged

2. Reasonable opportunity to examine the goods upon delivery to ascertain WON they are in conformity
with the contract before accepting the same

 BUT when the seller delivers the goods to a carrier upon the terms that the same shall not be delivered
to the buyer until he has paid the price, the buyer has no right to examine the goods before payment
unless there is an agreement or usage of trade permitting such examination. (Art.1584)

3. Acceptance of the goods shall not discharge the seller from liability for breach of any promise or
warranty

 BUT the buyer must give the seller notice of the breach of promise or warranty within a reasonable time
after the buyer knows or ought to know of such breach, otherwise the seller shall not be liable therefor.
(Art.1586)

o The buyer must notify the seller of the breach of warranty at any time BEFORE the latter has filed the
suit for the collection of the unpaid price since the purpose of the rule requiring notice is to prevent the
buyer from interposing belated claims for damages as an offset to a suit begun by the seller for the
purchase price (de Guzman v. Triangle Ace Corp., 2001)

4. Reject delivery of a wrong quantity of goods or of goods of a different description not included in the
contract which are mixed with the goods sold. (Art.1522)

5. If he refuses to accept the goods, having the right to do so, he is not bound to return them to the seller;
it being sufficient that he notifies the seller of his refusal to accept.

 If he voluntarily constitutes himself a depositary of the goods, he shall be liable as such. (Art.1587)

o Effect of refusal to accept goods without just cause: title to the goods passes to the buyer from the
moment they are placed at his disposal, except if ownership has been reserved by the seller (Art.1588) –

pg. 12
2. Payment (Art. 1582)

No stipulation: vendee is bound to pay at time of delivery

(Art. 1589 – liable for interest on the price)

o 3 cases where the buyer is liable for interest for the period between delivery and payment: (STD)

1. It is stipulated; no stipulated rate - legal

2. Thing sold produces fruits or income; bilaterality

3. Buyer is in default (interest accrues from the time of judicial or extrajudicial demand for the payment of
the price)

o Rights of the buyer:

1. Suspend payment (Art. 1590) applies to contract of sale when not consummated

 When:

a) he is disturbed in the possession or ownership of the thing acquired or has reasonable grounds to fear
such disturbance, right to suspend but not to recover

b) by a vindicatory action or a foreclosure of mortgage

 Until when: until the seller has caused the disturbance or danger to cease

 Exceptions: when vendee cannot suspend

b) When the seller gives security for the return of the price in a proper case

c) When it has been stipulated that, notwithstanding any such contingency, the buyer shall be bound to
pay  A mere act of trespass shall not authorize the suspension of the payment. (Art.1590)

2. In the sale of immovable property, to pay even after the expiration of the period agreed upon,

 as long as no demand for rescission of the contract has been made upon him either judicially or by a
notarial act,

Immovable property

 even though it may have been stipulated that rescission shall of right take place upon failure to pay the
price at the time agreed upon. (Art.1592) – must have judicial or notarial act

VII. REMEDIES IN CASE OF BREACH

A. GENERAL REMEDIES (Art.1191)

1. Specific performance

2. Rescission

3. Damages

o The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental breach as would defeat the very object of the parties in making
the agreement (Song Fo & Co. v. Hawaiian-Philippine Co., 1925)

pg. 13
 o In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. (Art.1169 last par.)

o Prescriptive periods: - 10 years if based on written contract - 6 years if based on oral contract

B. PARTICULAR REMEDIES OF THE BUYER

1. Breach of Obligation to Preserve Loss (Arts.1538 & 1189)

Without fault of seller - No breach (obligation extinguished)

Through fault of seller OR through fortuitous event if seller liable even for fortuitous events – Damages

o A thing is lost when it:

1. perishes;

2. goes out of commerce; or

3. disappears in such a way that its existence is unknown or it cannot be recovered

Deterioration (Arts.1538 & 1189)

Without fault of seller - No breach (impairment borne by buyer)

Through the fault of seller - 1. Rescission + damages OR 2. SP + damages

2. Breach of Obligation to Deliver

Goods (Art.1522)

Less –

1. Reject OR

2. Accept and pay - at contract rate: if he accepts knowing that the seller is not going to perform in full; or -
fair value: if he used the goods delivered before knowing that the seller is not going to perform in full

More -

1. Reject the excess or the whole if indivisible OR

2. Accept the whole and pay at contract rate

o In the sale of an undivided share of a specific mass of fungible goods, if the mass contains less than the
number, weight, or measure bought, the buyer becomes the owner of the whole mass and the seller is
bound to make good the deficiency from goods of the same kind and quality, UNLESS a contrary intent
appears. (Art.1464)

Fungible goods – please add note

Real estate (Arts.1539-1543)

per unit of measure

less (in area or quality)

1. proportional reduction of price OR

pg. 14
2. rescission, if - lack in area or inferior quality at least 1/10 of area stated or price; OR - the buyer would
not have bought had he known of smaller area or inferior quality prescriptive pd: 6 mos. from delivery

More 1. Reject the excess OR 2. Accept the whole and pay at contract rate.

Lump sum/ sale of 2 or more immovables for a single price (Art. 1542) -the boundary itself

Everything w/in boundaries, even if less or more than stated area - No remedy

o Where both the area and the boundaries of the immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated area. (Rudolf Lietz, Inc. v. CA, 2005)

NOT everything w/in boundaries –

1. proportional reduction in price OR

2. Rescission prescriptive pd: 6 mos. from delivery

3. Breach of Warranty Express implied warranty – 6 months; express – 4 years

o Prescriptive period:

1. Period specified in the express warranty; OR

2. If no period specified, 4 years, following the general rule on rescission of contract (Engineering &
Machinery Corp. v. CA, 1996)

o Remedies in case of sale of goods:

1. Accept goods + demand diminution or extinction of price

2. Accept goods + action for damages

3. Refuse to accept goods + action for damages

4. Rescind (refuse to accept OR return or offer to return) + recover price paid

(Art. 1599)

Recoupment vs Counterclaim

 Rescission NOT available IF buyer: - knew of the breach of warranty when he accepted the goods
without protest; - fails to notify seller of the election to rescind w/in a reasonable time;

- fails to return or to offer to return the goods to the seller in substantially as good condition as they were
in when delivered, unless the deterioration is due to the breach of warranty

 Measure of damages in case of breach of warranty of quality (in the absence of special circumstances
showing proximate damage of a greater amt): difference between the value of goods at the time of
delivery and the value they would have had if they had answered to the warranty.

 Effects of rescission:

1. Buyer no longer liable for price and entitled to return of any part thereof paid, concurrently with or
immediately after an offer to return the goods.

pg. 15
2. If seller refuses to accept offer to return goods, buyer deemed bailee for the seller and has right of lien
to secure payment of any part of price paid.

Implied Warranty Against Eviction (Arts.1555&1556) prescribes in 10 years

ART. 1555 – WHAT SELLER MUST GIVE IN CASE OF EVICTION

Total Eviction - Enforce liability for eviction (demand VICED from seller)

o Value of thing sold at the time of eviction

o Income or fruits, IF he has been ordered to deliver them to the party who won the eviction suit

o Costs of

- eviction suit and

- in a proper case, suit against seller for the warranty o Expenses of the contract, IF the buyer has paid
them

o Damages and interests, and ornamental expenses, IF the sale was made in BF

Partial eviction

1. Enforce liability for eviction (VICED) OR

2. Rescind, IF he would not have bought the thing sold without the part lost (but he must return the thing
without other encumbrances than those which it had when he acquired it)

2 KINDS OF WAIVER AGAINST EVICTION A. consciente ; B. Intencionada

o RULES: (Arts.1549-1554)

Art. 1548 – definition of eviction

1. Buyer need not appeal from the decision to hold seller liable for eviction.

2. When adverse possession commenced before sale but prescriptive pd. completed after transfer- seller
not liable

3. If property sold for nonpayment of taxes due and not made known to the buyer before sale- seller
liable 4. Judgment debtor also responsible for eviction in judicial sales, unless it is otherwise decreed in
the judgment

5. If there is waiver of warranty: -

a. if seller acted in BF- seller liable for eviction (waiver void)

b. if buyer made waiver without knowledge of the risks of eviction- seller liable only for the value of the
thing sold at the time of eviction

c. if buyer made waiver with knowledge of the risks of eviction and assumed its consequences- seller not
liable

- End – (Asumbra)

pg. 16
Implied Warranty Against Encumbrances (Art.1560)

1. Rescission- w/in 1 yr. from execution of deed of sale; OR

2. Damages- w/in 1 yr from execution of deed of sale or from discovery of burden or servitude

Implied Warranty Against Hidden Defects (Arts.1567-1571)

Thing not lost –

1. Withdraw from contract (accion redhibitoria) + damages; OR

2. Demand a proportionate reduction of the price (accion quanti minoris)+damages

Thing lost-

a. Due to hidden fault

o If seller aware of defect- may demand: - return of price - refund of expenses of contract – damages

o If seller not aware of defect- may demand price and expenses but not damages

b. Due to fortuitous event/ fault of the buyer

Demand:

o Price paid minus value of thing when it was lost

o Damages IF the seller acted in BF

o Prescriptive period: 6 mos. from delivery

Implied Warranty Against Redhibitory Defect of Animals

1. Withdraw from contract (accion redhibitoria) + damages; OR

2. Demand a proportionate reduction of the price (accion quanti minoris)+damages o If sale rescinded,
buyer must return animal in the condition in which it was sold and delivered (liable for injury due to his
negligence and not arising from the redhibitory fault or defect)

o Prescriptive period: 40 days from delivery

Warranty in Sale of Consumer Goods (Sec. 68 (e)(f), RA 7394) [pg 184]

Express warranty

1. Demand repair w/in 30 days (extendible for causes beyond the control of the warrantor; OR

2. Demand refund of price minus amount directly attributable to the use of the consumer prior to the
discovery of the nonconformity

Implied warranty

1. Retain the goods and recover damages; OR

2. Reject the goods, cancel contract and recover from the seller so much of the purchase price as has
been paid, including damages.

pg. 17
o Duration of warranty if implied warranty accompanies express warranty:

- If the implied warranty on merchantability accompanies an express warranty, both will be of equal
duration.

- Any other implied warranty shall endure not less than sixty (60) days nor more than one (1) year
following the sale of new consumer products.

C. PARTICULAR REMEDIES OF THE SELLER NON-ACCEPTANCE OF GOODS

1. Action for damages for nonacceptance, where the buyer wrongfully neglects or refuses to accept and
pay for the goods (Art.1596)

 Measure of damages: - estimated loss directly and naturally resulting in the ordinary course of events
from the buyer’s breach

- where there is an available market for the goods (in the absence of special circumstances): difference
between the contract price and the market price at the time the goods ought to have been accepted or if
no time fixed, at the time of refusal to accept

- labor performed and expenses made by the seller before receiving notice of the buyer’s repudiation or
countermand - profit the seller would have made if sale had been fully performed

2. Rescission by giving notice of election to rescind to the buyer (Arts.1597&1593)

NONPAYMENT In sale of movables:

1. Self-help remedies of unpaid seller of goods

2. Action for the price of goods

3. Alternative remedies under the Recto Law (Arts. 1484 & 1485)

Self-help remedies of an unpaid seller of goods (Arts.1525-1535)

o “unpaid seller” when:

1. the whole of the price has not been paid or tendered

2. a bill of exchange or other negotiable instrument received as conditional payment has been dishonored
 seller includes:

- seller’s agent to whom the BOE has been endorsed

- a consignor or agent who has himself paid, or is directly responsible for the price

- any other person who is in the position of a seller o Self-help remedies:

1. Lien- right to retain the goods while he is in possession of them

2. Stoppage in transitu- right to resume possession of the goods atany time while they are in transit as if
he never parted with the possession

3. Resale

4. Rescission –rescind transfer of title and resume ownership in the goods

Right of LIEN o Available when:

pg. 18
1. Goods sold w/o any stipulation as to credit;

2. Goods sold on credit, but the term of credit has expired; or

3. Buyer becomes insolvent

o Lost when:

1. Seller delivers goods to carrier or other bailee for transmission to the buyer w/o reserving ownership or
right to possession;

2. Buyer or his agent lawfully obtains possession of the goods

3. Seller waives it o NOT lost by reason only that the buyer has obtained judgment for the price of the
goods o In case of part delivery: may exercise right of lien as to remainder UNLESS part delivery made
with intent to waive the lien o NOT affected by any sale or other disposition of goods which the buyer may
have made UNLESS the seller has consented thereto

 BUT if negotiable doc of title has been issued, right of a holder in due course NOT defeated, whether
the negotiation be prior or subsequent to the notification of the carrier or other bailee of the seller’s claim
to a lien.

Right of STOPPAGE IN TRANSITU

o Available when the buyer of the goods is or becomes insolvent o Goods are in transit:

1. From the time they are delivered to a carrier or other bailee for transmission to the buyer until buyer or
his agent takes delivery;

2. If buyer rejects the goods and the carrier or bailee continues in possession, even if the seller has
refused to receive them back

o Goods no longer in transit if:

1. Buyer or his agent obtains delivery of the goods before their arrival at the appointed destination;

2. After the arrival of the goods at the appointed destination, carrier or bailee acknowledges to the buyer
or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the
buyer or his agent (immaterial if buyer indicates further destination for the goods;

3. The carrier or baileewrongfully refuses to deliver the goods to the buyer or his agent

o Exercised by:

1. Obtaining actual possession of the goods; OR

2. Notifying carrier or bailee of his claim

 If carrier or bailee has issued a negotiable document of title, it must first be surrendered for cancellation
before the goods are redelivered to the seller o In case of part delivery: may exercise right of stoppage in
transitu as to remainder UNLESS circumstances of part delivery show an agreement with the buyer to
give up possession of the whole of the goods.

o NOT affected by any sale or other disposition of goods which the buyer may have made UNLESS the
seller has consented thereto

 BUT if negotiable doc of title has been issued, right of a holder in due course NOT defeated, whether
the negotiation be prior or subsequent to the notification of the carrier or other bailee of the seller’s claim
to a right of stoppage in transit

pg. 19
Right of RESALE

o Available to unpaid seller who:

1. has a right of lien; OR

2. has stopped the goods in transitu

o Available when:

1. Goods are of a perishable nature;

2. Seller expressly reserves the right of resale in case the buyer defaults; or

3. Buyer defaults in payment for an unreasonable time

o For the resale to be valid, the seller need NOT notify the original buyer of:

1. the intention to resell

2. the time and place of the resale o BUT giving or failure to give notice of intention to resell is relevant in
determining WON the buyer had been in default for an unreasonable time before the resale was made.

o The seller must exercise reasonable care and judgment in making a resale o The resale may be by
public or private sale.

o The seller CANNOT buy the goods, directly or indirectly. o Effects of resale:

1. The seller is NOT liable anymore to the original buyer: - upon the contract of sale; OR - for any profit
made by the resale

2. The seller may recover damages from the original buyer for any loss occasioned by the breach of the
contract of sale.

3. The buyer in the resale acquires a good title as against the original buyer.

Right to RESCIND

o Available to unpaid seller who:

1. has a right of lien; OR

2. has stopped the goods in transitu

o Available when:

1. Seller expressly reserved the right to rescind in case the buyer defaults; or

2. Buyer defaults in payment for an unreasonable time.

o Rescission made by manifesting an intention to rescind by:

1. notice to the buyer; OR

2. some other overt act which need not be communicated to the buyer

o BUT giving or failure to give notice of intention to rescind is relevant in determining WON the buyer had
been in default for an unreasonable time before the rescission. Action for the price of goods

o Available when:

1. Ownership has passed to buyer and buyer wrongfully neglects or refuses to pay;

pg. 20
2. Price payable on a certain day irrespective of delivery and buyer wrongfully neglects or refuses to pay;
or

3. Buyer notifies seller of his repudiation of the contract after the seller has completed the manufacture of
the goods or had procured the goods to be delivered, and the goods cannot readily be resold for a
reasonable price. (Art.1595) Under the Recto Law (Arts.1484 & 1485)

o Applies in cases of:

1. sale of movables in installment

2. lease of personal property - with option to buy - when the lessor has deprived the lessee of the
possession or enjoyment of the thing

 When the seller assigns his credit to another person, the assignee is likewise bound by the same law.
(Borbon II v. Servicewide Specialists, Inc., 1996)

 Stipulation that the installments or rents paid shall not be returned to the buyer or lessee VALID insofar
as the same may not be unconscionable (Art. 1486)

Continue pg 187

pg. 21