LAW ON SALES Part 6 (1545 – 1581)

Conditions and Warranties

Condition v. Warranty
Effect of non-fulfillment of condition
Remedies
1. Refuse to proceed with the contract
2. Waive the condition
Can the non-fulfillment of condition be treated as a breach of warranty?

When implied warranty NOT applicable

1. “As is and where is” sale
2. Sale of second hand article
3. Sale by virtue of authority in fact or law
(sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by authority in fact or law)

Essential elements of implied warranty AGAINST EVICTION (1548)

1. The vendee is deprived in whole or in part of the thing purchased;
2. He is deprived based by virtue of a final judgment (1552)
3. The judgment is on a right prior to the sale or an act imputable to the vendor;
4. The vendor was summoned in the suit for eviction at the instance of the vendee; and
5. There is no waiver on the part of the vendee

1549 – Vendee has no duty to appeal from judgment

The vendee need not appeal from the decision in order that the vendor may become liable for eviction

1551 – deprivation of non-payment of taxes

If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is
liable for eviction

1552 – liability of judgment debtor (v. 1570 – judgment debtor not liable for hidden defect)
The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment

1555 – vendee can demand VICED

When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the
vendee shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the
sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for
the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.
1556 – partial eviction (rescind or enforce warranty)
Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole,
that he would not have bought it without said part, he may demand the rescission of the contract; but with the
obligation to return the thing without other encumbrances that those which it had when he acquired it.

1558 – formal summons to vendor essential

The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the
instance of the vendee

1559 – vendor to be made a co-defendant

The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor
be made a co-defendant

1550 – effect of prescription (10 years GF/30 years BF)

a. If completed before the sale
b. If completed after the sale (seller not liable)

1553 – stipulation waiving warranty (seller)

• If seller acted in BF – liable

1554 – kinds of waiver of eviction (buyer)

a. Waiver consciente (pay the value at the time of eviction)
b. Waiver intencionada (seller is not liable)

1560 – right of vendee where immovable sold encumbered with non-apparent burden
a. Within one year to be computed from the execution of the deed, rescission or sue for damages
b. One year having elapsed, action for damages counted from discovery of the burden

When remedies NOT available

1. If burden is apparent
2. If non-apparent burden or servitude is registered
3. If the vendee had knowledge of the encumbrance

Implied Warranty
a. Merchantability – goods are reasonably fit for the general purpose for which they were sold
b. Fitness – goods are suitable for the special purpose of the buyer

Implied Warranty Against Hidden Defect (redhibitory)

When is defect important?
1. It renders the thing sold unfit for the use for which it is intended
2. If it diminishes its fitness for such use to such extent that the vendee would not have acquired it had he been
aware thereof

When is defect hidden?

1. If it was not known/not visible
2. If the vendee is an expert
Alternative Remedies of the buyer in case of hidden defect –
1. Accion Redhibitoria/Withdrawing from the contract
2. Accion Quanti Minoris/Proportionate reduction of the price
Period to file – 6 months from the delivery of the thing sold (1571)

Effect of loss of thing sold on account of hidden defects (1568)

a. Vendor was aware –
b. Vendor was not aware –
Effect of loss of defective thing sold (1569)
- Price which he paid, less the value which the thing had when it was lost (if seller in BF – damages)

Sale of Animals
1572 – sale of two or more animals together
1574 – sale of animals at fairs or at public auctions or as condemned
There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as
condemned.

1575 – sale of animals suffering from contagious diseases and unfit animals
The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the
contract, and they are found to be unfit therefor.

1576 – redhibitory defect of animals (if expert)

If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that
expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages.

1577 – period to file – 40 days

The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of
their delivery to the vendee.
This action can only be exercised with respect to faults and defects which are determined by law or by local customs.

1578 – if animal dies within 3 days, LIABLE

If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the
death existed at the time of the contract.

1579 – liability of buyer in case of sale animal rescinded

If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee
being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect.

1580 – alternative remedies (withdrawal or reduction)

In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he
must make use thereof within the same period which has been fixed for the exercise of the redhibitory action.
 LAW ON SALES Part 7 (1582 – 1599)
Obligations of the Buyer
1. Accept the delivery
2. Pay the price

Obligations of the Vendee

GR – Buyer is not bound to accept delivery by installments (1583)
E – Stipulation
When is there a breach?

Obligations of the Vendee

GR – Buyer has right to examine the goods
E – not allowed if:
1. Stipulation
2. COD

Obligations of the Vendee

Modes of Manifesting Acceptance
1. Express/Intimates – oral/writing
2. Implied
a. Does an act inconsistent with the seller’s ownership (selling it/alteration)
b. After the lapse of time, retains the goods without intimating his rejection
Acceptance not a bar to action for damages (1586)

Effect of justified refusal to accept the goods on the part of the buyer (1587)
Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to
do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them.
If he voluntarily constitutes himself a depositary thereof, he shall be liable as such.

Effect of buyer’s wrongful refusal to accept (1588)

If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is
without just cause, the title thereto passes to him from the moment they are placed at his disposal.

Obligation of the Vendee

Instances when buyer is liable to pay interest
1. Stipulation
2. Should the thing sold and delivered produce fruits or income
3. Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price

Buyer’s Suspension of Payment (1590)

Instances when allowed
1. If he is disturbed in the possession or ownership of the thing bought
2. If he has well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or
foreclosure of mortgage

Instances when NOT allowed

1. Vendor gives security for the payment of the price
2. If there is a stipulation
3. If the vendor has caused the disturbance or danger to cease
 4. If the disturbance is a mere act of trespass

Anticipatory Breach

Stipulation for Automatic Rescission

Notarial Rescission (1592)

In the sale of immovable property, there is a stipulation of automatic rescission
Effect: NOT Automatic
Required: demand for rescission of the contract has been made either judicially or by a notarial act.

Action for Breach of Contract of Sale of Goods

Actions Available (1594)
1. Action by seller for the payment of the price (1595) 3 instances
2. Action by seller for damages for non-acceptance of the goods (1596)
3. Action by seller for rescission of the contract (1597)
Technical rescission RMC (no stipulation for rescission) 1597 v. 1593
4. Action by the buyer for specific performance (1598)
5. Action by the buyer for rescission or damages (1599)

Remedies of the Buyer for the Breach of Warranty by Seller

1. Accept the goods and recoupment
2. Accept the goods and sue for damages
3. Refuse to accept the goods and maintain an action for damages
4. Rescind the contract and recover the price

When rescission by the buyer not allowed

a. Acceptance knowing the breach without protest
b. Buyer fails to notify the seller within reasonable time
c. Failure to return the goods in the same condition

LAW ON SALES Part 8 (1600 – 1623)

Extinguishment of Sale (1600 – 1623)
Causes of extinguishment of sale
1. Common – PaLoReMeCoNo AnRes3Pres
2. Special – 1484, 1532, 1539, 1540, 1542, 1556, 1567, 1541
3. Extra-Special
a. Conventional redemption
b. Legal redemption

Conventional Redemption
Sale with Right to Repurchase
Sale with Right to Redeem
Pacto de Retro Sale
Retracto Conventional
Defined – seller reserves the right to redeem

Sale v. Mortgage (1378)

Absolute Sale (1604) v. Mortgage
Sale with Right to Repurchase (1603) v. Mortgage

Why? If contract is onerous (sale), interpreted in favor of greatest reciprocity of interest

Why equitable mortgage?

The contract shall be presumed to be an EQUITABLE MORTGAGE (1602)

I – Unusually Inadequate
P – seller remain in possession
E – extending the period of redemption
R – buyer retains a part of the price
T – seller binds himself to pay taxes
O – other cases
D - in case of Doubt (1603/1604)

Sale with right to repurchase

1605 – remedy of reformation
1606 – period to exercise of right of redemption
GR – period agreed upon
E – if no agreement – 4 years
Maximum period – 10 years

If court declares that it is not equitable mortgage but SRR – within 30 days from the time the final judgment was
rendered

1607 – necessity of judicial order for recording of consolidation of ownership

In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply
with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the
vendor has been duly heard.

1608 – right to redeem, a real right

Can buyer a retro sell the property acquired?
If yes, from whom should the seller a retro redeem?
The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the
Mortgage Law and the Land Registration Law with respect to third persons

1609 – vendee, subrogated to vendor’s rights

The vendee is subrogated to the vendor's rights and actions

1610 – right of vendor’s creditors to redeem

The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have
exhausted the property of the vendor

Conventional Redemption
1611 – Redemption in sale of part of undivided immovable (v. 1629 – legal redemption)
In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in
the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the
right of redemption

e.g. ABC are co-owners

Who can redeem? Up to what extent?

Can buyer sell or motgage the property bought?

1618 – right of vendor a retro to recover the thing sold free from charges
The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but
he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the
place where the land is situated.

Redemption in joint sale by co-owners/co heirs of undivided immovable (1612/1613)

Redemption in SEPARATE sales by co-owners/co heirs of undivided immovable (1614)

Redemption against heirs of vendee (1615)

Liabilities
Rights of the parties as to the fruits of the land (1617)
1. If there were fruits at the time of the sale and the buyer paid for them –
2. If no indemnity was paid by the buyer for the fruits at the time of the sale –
3. If the property had no fruits at the time of sale and some exists at the time of redemption –

Legal Redemption
- Is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one
who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is
transmitted by onerous title.
Not allowed in the case of donation/succession

Right of legal redemption of co-owner

Right of legal redemption of adjacent owners of RURAL lands (1621)

If two or more adjoining owners desire to exercise the right to redeem at the same time, who shall be preferred?
GR – Smaller Area
E – should both lands have the same area, ONE WHO FIRST REQUESTED

When right to redeem NOT available

1. Stranger has no rural lands
2. Buyer is an adjacent owner
3. Land is not adjacent
4. Land exceeds one hectare
5. Separated by brooks, ravine, roads, drains or apparent servitudes

Right of pre-emption and legal redemption of adjacent owners of URBAN lands (1622)

Pre-emption – before the sale

Redemption – after the sale
Requisites
1. Urban land
 2. Must be an adjacent owner
3. Land is small
4. Bought merely for speculation

Preference
Rule – whose intended use of the land appears BEST JUSTIFIED

Period for the exercise of redemption

1623
- Within 30 days from notice in WRITING by the prospective vendor or by the vendor
- Affidavit of the vendor that he has given written notice to possible redemptioners

The right of redemption of co-workers excludes that of adjoining owners

LAW ON SALES Part 9 (1624 – 1641)

Assignment of Credits and other Incorporeal Rights
Assignment of Credit – is a contract by which one person (assignor/creditor) transfers to another his rights and actions
against a third person (debtor) in consideration of a price certain in money or its equivalent.

1625 – binding effect of assignment to TPs

If personal property – public document
If real property – registered
An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public
instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.

1626 – consent of debtor not required

The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation.

1627 – extent of assignment of credit

- All accessory rights (guaranty, mortgage, pledge, etc.)
The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference.

Warranties of the assignor of credit (1628)

1. Person of the debtor
2. Existence of the credit
3. Legality of the credit

GR – No Warranty – Solvency of the Debtor

E – there is a warranty on the solvency if –
a. Stipulation
b. Insolvency was known to the creditor
c. Insolvency was already of public knowledge

If there is a warranty of the solvency of the debtor due to stipulation

GR – apply the term/period agreed upon
E – if no period was agreed upon
a. For ONE year from the assignment of the credit when the period for payment of the credit has expired.
 b. For ONE year after its maturity, when such period for payment has NOT yet expired.

1630 – sale of successional rights

(future inheritance v. right to inherit) warranty of heirship
1631 – sale of whole of certain rights, rents, or products
GR – Warranty on the legitimacy of the whole in general, NO warranty on each of the various parts
E – eviction from the whole or part of the greater area
1632 – liability of the vendor of inheritance for fruits received
1633 – liability of vendee for debts of and charges on, estate

Legal redemption in sale of credit or other right in litigation (1634)

Exception to Exception (1635)

1. To a co-heir or co-owner of the right assigned
2. To a creditor in payment of his credit
3. To the possessor of tenement or piece of land which is subject to the right in litigation assigned

General Provisions
1636 – definition of terms
1. Document of title to the 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.
2. Goods - includes all chattels personal but not things in action or money of legal tender in the Philippines. The
term includes growing fruits or crops.
3. Order - relating to documents of title means an order by indorsement on the documents.
4. Quality of goods - includes their state or condition
5. Specific goods - means goods identified and agreed upon at the time a contract of sale is made.
6. Antecedent or pre-existing claims - whether for money or not, constitutes "value" where goods or documents of
title are taken either in satisfaction thereof or as security therefor.
7. Insolvent - A person is insolvent within the meaning of this Title who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts as they become due, whether insolvency proceedings have
been commenced or not.
8. Goods are in a deliverable state - Goods are in a "deliverable state" within the meaning of this Title when they
are in such a state that the buyer would, under the contract, be bound to take delivery of them.
1637 – sale of immovable subject to registration law