SALES

ATTY. RUTH HAZEL A. GALANG

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Nature, Form and Requisites

Civil Code of the Philippines

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Contract of Sales
Article 1458, CC: By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.

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Characteristics of a Contract of Sales

(1) Consensual, because it is perfected by mere consent without any
further act;
(2) Bilateral, because both the contracting parties are bound to fulfill
correlative obligations towards each other — the seller, to deliver and
transfer ownership of the thing sold and the buyer, to pay the price;
(3) Onerous, because the thing sold is conveyed in consideration of the
price and vice versa (see Gaite vs. Fonacier, 2 SCRA 820 [1961].);
(4) Commutative, because the thing sold is considered the equivalent of
the price paid and vice versa. (see Ibid.) However, the contract may be
aleatory as in the case of the sale of a hope (e.g., sweepstakes ticket);

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(5) Nominate, because it is given a special name or designation in the Civil

Code, namely, “sale”; and
(6) Principal, because it does not depend for its existence and validity
upon another contract.

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Contract to Sell
Article 1478, CC: The parties may stipulate that ownership in the thing
shall not pass to the purchaser until he has fully paid the price

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Conditional Contract of Sale

Article 1461, CC: Things having a potential existence may be the object of
the contract of sale.
The efficacy of the sale of a mere hope or expectancy is deemed subject to
the condition that the thing will come into existence.
The sale of a vain hope or expectancy is void.

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Contract of Sale Contract to Sell

Ownership is transferred upon Ownership is only transferred upon

delivery full payment of price

Non-payment is a resolutory Full payment is a positive

condition suspensive condition; hence non-
payment would not give rise to the
obligation to transfer ownership

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Conditional Contract of Sale Contract to Sell

Sale is perfected No perfected sale yet

already
A subsequent buyer is presumed to A subsequent buyer is presumed to
be a buyer in bad faith be a buyer in good faith

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Essential Requisites of Sale

(1) Consent or meeting of the minds. — This refers to the con- sent on the
part of the seller to transfer and deliver and on the part of the buyer to
pay. (see Art. 1475.) The parties must have legal capacity to give consent
and to obligate themselves. (Arts. 1489, 1490, 1491.)
Exc:
1. Expropriation (see Art. 1488.)
2. Ordinary execution sale (see Rules of Court, Rule 39, Sec. 15.),
3. Judicial foreclosure sale (Ibid., Rule 68.), and
4. Extra-judicial foreclosure sale. (Act No. 3135, as amended.)

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Special Case
If the sale involves the conjugal property of spouses, consent must be
given by both.

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Essential Requisites of Sale

(2) Object or subject matter.—This refers to the determinate thing which
is the object of the contract. (Art. 1460.)
The things must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered [Art. 1459].

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Requisites of a Valid Subject Matter [Arts. 1459-1465, CC]

a. Must be licit
• Within the commerce of man
• When right is not intransmissible [Art. 1347, CC]
• It does not contemplate a future inheritance, unless expressly
authorized by law

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Example of illicit things per se (of its nature) and per accidens (due to
provisions of law
- Sale of animals if the use or service for which they are acquired has been
stated in the contract, and they are found to be unfit therefor [Art. 1575,
CC]
- Sale of animals suffering from contagious diseases [Art. 1575, CC]
- Sale of future inheritance is void [Art. 1347, CC]
-Sale of land in violation of Constitutional prohibition against the transfer
of lands to aliens. [Art. XII of Constitution]

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b. Existing, Future, Contingent

• Existing goods owned or possessed by the seller;
• Goods to be manufactured, raised, OR acquired by the seller – “Future
Goods” [Art. 1462, CC]
• Things having potential existence may be the object of a contract of sale
[Art. 1461, CC]. A sale may be made of a thing which, though not yet
actually in existence is reasonably certain to come into existence as the
natural increment or usual incident of something in existence already
belonging to the seller, and the title will vest in the buyer the moment the
thing comes into existence. [Sibal v. Valdez, G.R. No. L-26278 (1927)]

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c. Determinate or Determinable Determinate

When it is particularly designated or physically segregated from all others
of the same class. [Art. 1460, CC]

Determinable
When it is capable of being made determinate at the time the contract
was entered into without the necessity of a new or further agreement
between the parties. [Art. 1460, CC]
Failure to state the exact location of the land does not make the subject
matter indeterminate, so long as it can be located. [Camacho v. CA, G.R.
No. 127520 (2007)]

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3. Cause of the obligation which is established

This refers to the “price certain in money or its equivalent” [Art. 1458]. It
does not include goods or merchandise although they have their own
value in money.
However, the words “its equivalent” have been interpreted to mean that
payment need not be in money, so that there can be a sale where the
thing given as token of payment has “been assessed and evaluated and
[its] price equivalent in terms of money [has] been determined.” [De Leon]

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a. Requisites of a valid price

1. Certain or ascertainable at the time of perfection
2. In money or its equivalent
• If price is partly in money and partly in another thing: determine
manifest intention of the parties to see whether it was barter or sale. [Art.
1468, CC]
• If intention does not clearly appear, it shall be considered a barter if the
value of the thing exceed the amount of money or its equivalent. [Art.
1468, CC]

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3. Real
• When buyer has an intention to pay and the seller has an expectation to
receive the price
• If simulated: Sale is VOID; BUT act may be shown to have been a
donation or some other act or contract. [Art. 1471, CC]
• If Price is false – when the real consideration is not the price stated in
the contract:
o Sale is void
o UNLESS proved to be founded on another true and lawful price [Art.
1353, CC]

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b. How price is determined/when certain

1. Fixed by agreement of the parties and cannot be left to the discretion of
one of the parties – BUT if such is accepted by the other, sale is perfected.
[Art. 1473, CC]
2. Determination is left to the judgment of a specified person.

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• If 3rd person disregards specific instructions/data/procedure, thereby

fixing an arbitrary price
• The price is made in reference to another thing, or when the price fixed
is the price of the commodity on a definite day, or in a particular exchange
or market, or when the amount fixed is above or below the price on such
day, exchange or market. [Art. 1472, CC]

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• If 3rd person disregards specific instructions/data/procedure, thereby

fixing an arbitrary price
• The price is made in reference to another thing, or when the price fixed
is the price of the commodity on a definite day, or in a particular exchange
or market, or when the amount fixed is above or below the price on such
day, exchange or market. [Art. 1472, CC]

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General Rule: When the price is not certain, the contract is without effect
and no obligation arises from it.
Exception: When the thing is already delivered, the buyer must pay a
reasonable price therefor. This exception only arises when the means
contemplated by the parties for fixing the price have become ineffectual.

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c. Inadequacy of price
The stipulation in a contract of sale which states that the consideration is
“PhP1 and other valuable considerations” does not make the contract
void. Gross inadequacy of price does not affect the contract of sale except
that it may indicate a defect in consent. [Bagnas v. CA, G.R. No. L-38498
(1989)]

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General Rule: Does not affect a contract of sale’s validity. [Art. 1470, CC]
Exceptions:
a. In Voluntary sales
• Where low price indicates a vice of consent, sale may be annulled.
• Where price is so low to be shocking to the conscience (fraud, mistake,
undue influence), then sale may be set aside
• Where price is simulated such as when the real intention was a donation
or some other contract.
• Where the parties did not intend to be bound at all, sale is void.

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b. In Involuntary sales
• A judicial or execution sale is one made by a court with respect to the
property of a debtor for the satisfaction of his indebtedness.
• Rescissible contracts of sale - Inadequacy of price is a ground for
rescission of conventional sale under Art. 1381 (a) and (b), CC.

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d. When no price agreed

1. Sale is inefficacious [Art. 1474, CC]
2. But if the thing or part thereof has been delivered and appropriated by
the buyer, he must pay a reasonable price therefore
• What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.
[Art. 1474, CC]
• The reasonableness of a price may be determined on the basis of a
company’s balance sheet showing the book value or fair market value of
its shares. [Philippine Free Press v. CA, G.R. No. 132864 (2005)]

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e. False price vs. simulated price
False Price
Price stated in the contract is not
the true price. Parties intended to be
bound.
Effect: Binds the parties to their real
agreement when it does not
prejudice 3rd persons and is not
intended for any purpose contrary to
law, morals, public policy, etc.
SALES
Simulated Price
Price stated in the contract is not
intended to be paid. Parties never
intended to be bound.
Effect: Void for lack of
cause/consideration, but can be
shown as a donation or some other
contract. Parties may recover from
each other what they may have
given under the contract.
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f. Earnest money vs. option money

Earnest Money – paid in advance of the purchase price agreed upon by
the parties in a contract of sale, given by the buyer to the seller, to bind
the latter to the bargain

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e. Earnest Money vs. Option Money

Option Money Earnest Money

Separate and distinct consideration Part of purchase price [Art. 1482,

from the purchase price CC]
Given when sale is not yet perfected Given only when there is already a
sale
When given, the would-be-buyer is When given, the buyer is bound to
not required to buy, but may even pay the balance
forfeit it depending on the terms of
the option
Grantee of option is still undecided Buyer manifests his earnest desire
whether or not to buy or sell the to buy the property
property [Baviera]
[Limson v. CA, G.R. No. 135929 (2001)]

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Natural and accidental elements.

The above are the essential elements of a contract of sale or those
without which no sale can validly exist. They are to be distinguished from:
(1) Natural elements or those which are deemed to exist in certain
contracts, in the absence of any contrary stipulations, like warranty
against eviction (Art. 1548.) or hidden defects (Art. 1561.); and
(2) Accidental elements or those which may be present or ab- sent
depending on the stipulations of the parties, like conditions, interest,
penalty, time or place of payment, etc.

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Contract of Sale Distinguished
1. Donation
Sale
Onerous
Perfected by mere consent
The property sold is replaced by the
equivalent monetary consideration;
there is no diminution of the seller’s
estate
Grantee of option is still undecided
whether or not to buy or sell the
property [Baviera]
SALES
Donation
Gratuitous
Requires consent and must comply
with the formalities required by law
for its validity. [Art. 745, CC]
Requires that there be a diminution
of the estate of one party (donor)
and the enrichment of the other
party’s estate (donee)
Buyer manifests his earnest desire
to buy the property
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When the price of the contract of sale is simulated, the sale may be void
but the act may be shown to have been in reality a donation or some
other contract. [Art. 1471, CC]
The donee must accept the donation personally, or through an authorized
person with a special power for the purpose, or with a general and
sufficient power; otherwise, the donation shall be void. [Art. 745, CC]

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2. Barter

Sale Barter

Consideration is price or its Consideration is another thing

equivalent

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Rules to determine whether contract is sale or barter:

a. Manifest intention of the parties: Even if the acquisition of a thing is
paid for by another object of greater value than the money component, it
may still be a sale and not a barter, when such was the intention of the
parties
b. When intention does not appear and consideration consists partly in
money and partly in another thing

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BARTER = where the value of the thing given as part of the consideration
exceeds the amount of money given or its equivalent
SALE = where the value of the thing given as part of the consideration
equals or is less than the amount of money given

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3. Contract for a Piece of Work
Sale
Goods are manufactured or
procured in the ordinary course of
business
For the general market, whether on
hand or not
Governed by Statute of Frauds
SALES
Contract for a Piece of Work
Goods are manufactured for
customer upon his special order
For a specific customer
Not within Statute of Frauds
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When each product or system executed is always UNIQUE and could not
mass-produce the product because of its very nature, such is a contract
for a piece of work. [Commissioner v. Engineering Equipment and Supply
Co., G.R. No. L-27044 (1975)]

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4. Dacion En Pago
Sale
No pre-existing debt
Creates an obligation
Price is more freely agreed upon,
fixed by the parties
Buyer has to pay the price
SALES
Dacion en pago
Pre-exisiting debt
Extinguishes the obligation (mode of
payment)
Price is the value of the thing given
Payment is received by the debtor
before contract is perfected
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5. Agency to Sell
Sale
Buyer receives the goods as owner
Buyer pays the price
Buyer cannot return the object sold
as a general rule
Not unilaterally revocable
SALES
Agency to sell
Agent receives good as goods of
the principal
Agent delivers the price which he
got from his principal
Agent makes no warranty
Essentially revocable
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6. Lease
Sale Lease

Ownership transferred by delivery No transfer of ownership

Permanent Temporary

Seller must be owner at time of Lessor need not be owner

delivery

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In the lease of things, one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain, and for a period which
may be definite or indefinite. However, no lease for more than ninety-nine
years shall be valid. [Art. 1643, CC]

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Rights and Obligations of Vendor

and Vendee
Civil Code of the Philippines

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Obligations of the Vendor

a. Obligations of the Vendor in General
1. To transfer ownership of the thing [Art. 1495, CC]
2. To deliver the thing, with its accessions and accessories, if any [Arts.
1164, 1166, CC]
3. To warrant against eviction and against hidden defects [Arts. 1545-
1581, CC]
4. To take care of the thing, pending delivery, with proper diligence [Art.
1163, CC]
5. To pay for the expenses of the deed of sale [Art. 1487, CC]

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(1) To Transfer Ownership of the Thing and To Deliver the Thing, with its
Accessions and Accessories
i. When Seller is Not the Owner
General Rule: Ownership is not acquired by the buyer. One cannot give
what one does not have. [Art. 1505, CC]
Exceptions:
a. Seller has a right to transfer ownership.
Seller need not be the owner of the thing at the time of perfection of the
contract. It is sufficient that the seller has a right to transfer ownership
thereof at the time it is delivered. [Art. 1459, CC]

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b. Estoppel: Owner is, by his conduct, precluded from denying the seller’s
authority to sell. [Art. 1434, CC]
c. Registered land bought in good faith
General 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

d. Order of courts; Statutory Sale - In execution sale, the buyer merely

steps into the shoes of the judgment debtor [Sec. 33, Rule 39, ROC]
e. When goods are purchased in Merchant’s store, Fair, or Market [Art.
1505, CC]

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ii. Sale by Person having a Voidable Title

a. True owner may recover the thing when the ff. requisites concur:
• Subject matter is movable
• Owner has either lost the thing or has been unlawfully deprived. [Art.
559, CC
b. Reimbursement is necessary before owner can recover when:
● Buyer acted in good faith
● Acquired at a public auction [Art. 559, CC]

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c. Recovery no longer possible when:

● Buyer in good faith
● Acquired it at a merchant’s store, fair or market. [Art. 1506, CC]

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iii. Manner of Transfer [Arts. 1477, 1496-150, CC]

General Rule: Ownership of the thing sold shall be transferred to the
vendee upon actual or constructive delivery thereof [Art. 1477, CC]

Exceptions:
a. Contrary stipulation
b. Contract to sell
c. Contract of insurance
d. Sale on acceptance/Trial
e. When seller is not the owner or has voidable title

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Obligation to transfer ownership and to deliver is implied in every contract

of sale [Arts. 1458- 1459, CC]
Transfer of ownership requires delivery [Art. 1495, CC]
Intention to transfer ownership
• All forms of delivery shall be coupled with intention of delivering the
thing sold.
• Seller must be the owner or authorized by owner of the thing sold
When right to transfer ownership must exist: At the time of delivery and
not at the time of perfection of contract of sale.

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iv. Concept of Delivery

Requisites
a. Identity – between what must be delivered and what is actually
delivered
b. Integrity – in a condition suitable for enjoyment
c. Intentional

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What to Deliver
a. Thing sold [Art. 1495, CC]
b. Fruits [Art. 1164 & 1537, CC] – belong to the vendee from day of
perfection.
c. Accessions and accessories [Art. 1166 & 1537, CC] – in the same
condition they were in on day of perfection
● Improvements by seller at his expense grants him a usufructuary
right [Art. 1138, 1189, CC]
● No indemnification
● But he may remove it to the extent that there is no damage [Art. 1538,
CC]
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Where to Deliver
a. A hierarchy is followed:
1. Stipulation
2. Usage of trade
3. Seller’s place of business (office)
4. Seller’s residence
b. In case of specific goods, which the parties knew to be at some other
place when the contract was perfected, that place is the place of delivery
c. If goods at the time of sale are possessed by a third person, then there
is no delivery until he acknowledges to the buyer that he holds the goods
for the buyer.
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v. When Delivery Does Not Transfer Title

Sale on Approval or Trial
● Title remains with the seller notwithstanding delivery of the goods.
● Buyer becomes the owner when he:
a. Signifies his approval or acceptance to the seller
b. Does any other act adopting the transaction (i.e. sale to a third person)
c. Retains the goods without giving notice of rejection after the time fixed
has expired; if no time has been fixed, after the expiration of a reasonable
time [Art. 1502, CC]

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Sale or Return
● Buyer becomes owner of the property on delivery, BUT has the option to
revest ownership in the seller instead of paying the price by returning the
goods within the time fixed in the contract, or, if no time is fixed, within a
reasonable time. Otherwise, the sale becomes absolute.
● Loss or destruction of the property prior to return falls upon the buyer
and makes him responsible for the purchase price.

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Express Reservation
If it was stipulated that shall not pass to the purchaser until he has fully
paid the price, then ownership remains with seller even when delivery is
made [Art. 1478, CC].

Implied Reservation
The following are instances when there is an implied reservation of
ownership:
a. Goods are shipped, but by the bill of lading goods are deliverable to the
seller or his agent, or to the order of the seller or his agent
b. Bill of lading is retained by the seller or his agent.

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Sale by Person Having a Voidable Title

a. True owner may recover the thing when the ff. requisites concur:
● Subject matter is movable
● Owner has either lost the thing or has been unlawfully deprived. [Art.
559, CC]
b. Reimbursement is necessary before owner can recover when:
● Buyer acted in good faith
● Acquired at a public auction [Art. 559, CC]
c. Recovery no longer possible when:
● Buyer in good faith
● Acquired it at a merchant’s store, fair or market. [Art. 1506, CC]
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vi. Kinds of Delivery

Actual Delivery
Deemed made when the thing sold is placed in the control and possession
of the vendee [Art. 1497, CC]
Not always essential to passing of title [Art. 147, CC]
Parties may agree when and on what conditions the ownership shall pass
to the buyer [e.g.: Art 1478 where ownership will only pass after full
payment of the price]

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Constructive Delivery
a. Execution of public instrument [par. 1, Art. 1498, CC]
General Rule: produces the same legal effects of actual delivery.
Exceptions:
1. The parties intended otherwise.
2. At the time of execution, the subject matter was not subject to the
control of the seller, which control must subsist for a reasonable length of
time after execution. [Pasagui v. Villablanca, G.R. No. L-21998
(1975)]

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b. Symbolic Delivery
Delivery of keys of the place or depositary where the movable is stored or
kept. [Art. 1498, CC]
Unless otherwise agreed, when symbolic delivery has been made, the
seller is not obliged to remove tenants to place the buyer in actual
possession of the property as he has already complied with his obligation
to transfer ownership of and deliver the thing sold. [Power Commercial
and Industrial Corp. v. CA, G.R. No. 119745 (1997); Sabio v. The
International Corporate Bank, Inc., G.R. No. 132709 (2001)]

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c. Traditio Longa Manu (Long Hand)

Delivery of movable property by mere consent or agreement, if the thing
sold cannot be transferred to the possession of the buyer at the time of
sale. [Art. 1499, CC]
Example: Seller points to the property without actually transferring
physical possession thereof.

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d. Traditio Brevi Manu (Short Hand)

Delivery of movable property by mere consent or agreement, if the buyer
already had it in his possession for any other reason. [Art. 1499, CC]
Happens when the already has possession of the thing sold before the sale
by virtue of another title (as lessee, borrower, depositary, etc.)

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e. Traditio Constitutum Possessorium

Seller continues to be in possession of the property sold not as owner but
in some other capacity, like as tenant or lessee.
At the time of perfection, the seller held possession of the subject matter
in the concept of owner, and pursuant to the contract, the seller continues
to hold physical possession thereof as lessee or other form of possession
other than the concept of owner.

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f. Quasi-traditio
Mode of delivery of incorporeal things or rights.
Delivery is effected:
● By execution of public instrument
● When such is not applicable, by placing the titles of ownership in the
possession of the buyer
● By allowing the buyer to use his rights as new owner with the consent of
the seller

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g. Delivery to a Common Carrier

General Rule: Delivery to the courier or carrier is tantamount to delivery
to buyer, whether carrier is named by buyer or not. The buyer assumes
the risk of loss.
Exceptions
1. Seller reserved title through the form of the bill of lading, with intent to
remain the owner, not merely for the purpose of securing payment, OR
2. Contrary intention appears in the contract (i.e. seller is required to
deliver goods to buyer at the point of destination)
3. Delivery by the seller is in breach of the contract
4. F.O.B. (Free on Board or Freight on Board) - When seller bears the
expenses of transportation up to the F.O.B. point.
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5. C.I.F. (Cost, Insurance, Freight) - Price quoted includes the costs of the
goods, insurance, and freight charges on the goods up to the point of
destination.
6. F.A.S. (Free Alongside) – Seller bears the expenses of transportation
until he delivers the goods alongside a vessel at a named port.

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vii. Double Sales [Art. 1544, CC]

General Rule: Prior tempore, prior jure (“First in time, priority in right”)
applies.
Requisites:
a. 2 or more valid sales;
b. Same subject matter;
c. 2 or more buyers with conflicting interests over the rightful ownership
of the thing sold;
d. Same seller. [Cheng v. Genato, G.R. No. 129760 (1998)

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Rules on Double Sale

There is no double sale when:
a. Not all the elements of a sale are present
b. The principle of prior tempore, prior jure (he who is first in time is
preferred in right) should apply
c. The two different contracts of sale are made by two different persons,
one of them not being the owner of the property sold.
d. The land sold is not yet registered under the Torrens system
e. The first sale occurred when land was not yet registered, and the
second sale was done when the land was already registered – prior
tempore, prior jure should apply

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Rules on Preference
Personal property
- First possessor in good faith
Real property
- First registrant in good faith: must register the document otherwise, he
does not have preference
- First possessor in good faith
- Person with oldest title in good faith

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Caveat emptor: One who purchases real property which is in actual

possession of others should make some inquiry concerning the rights of
those in posses

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Rules Governing Sale of Movables, Immovables and Unregistered Lands

a. Sale of Movable: Ownership shall be transferred to the person who may
have first taken possession in good faith.
b. Sale of Immovables: Registered Land – Ownership belongs to the person
who:
● In good faith first recorded the sale in the Registry of Property; or
● If there is no inscription of sale on the
title, ownership passes to the person who in good faith was first in
possession; or
● In the absence thereof, to the person who presents the oldest title,
provided there is good faith.

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Rules Governing Sale of Movables, Immovables and Unregistered Lands

a. Sale of Movable: Ownership shall be transferred to the person who may
have first taken possession in good faith.
b. Sale of Immovables: Registered Land – Ownership belongs to the person
who:
● In good faith first recorded the sale in the Registry of Property; or
● If there is no inscription of sale on the
title, ownership passes to the person who in good faith was first in
possession; or
● In the absence thereof, to the person who presents the oldest title,
provided there is good faith.

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Possession refers to any of the modes of possession in Arts. 1497-1501, CC

Oldest Title as to any public document showing acquisition of the land in
good faith. To constitute “title,” the transmission of ownership must
appear in a public document [Art. 1358 (1), CC]

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c. Second Sale Made by Virtue of Execution and Attachment – Art. 1544

does NOT apply in cases where the first sale of an unregistered immovable
occurred prior to an execution sale and the second sale occurred by virtue
of an execution sale. This is because a buyer of unregistered land at an
execution sale only steps into the shoes of the judgment debtor (the
person who sold the property prior to the execution sale). The second
buyer merely acquires the latter’s interest in the property sold as of the
time the property was levied upon. [Carumba v. CA, G.R. No. L-27587
(1970)]

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d. Sale of Immovables: Unregistered Land

Instrument or deeds establishing, transmitting, acknowledging, modifying
or extinguishing rights with respect to lands not registered under the Land
Registration Act or the Spanish Mortgage Law, are required to be
registered in the Registry of Property to prejudice 3rd persons, although
such registration is understood to be “without prejudice to a third party
with a better right”. [PD 1528 Sec 113]

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Obligations of the Vendee

Inspection and acceptance
The buyer is deemed to have accepted the goods when:
1. He intimates to the seller that he has accepted them
2. The goods have been delivered to him and he does any act in relation to
them which is inconsistent with the ownership of the seller
3. After the lapse of a reasonable time, he retains the goods without
intimating to the seller that he has rejected them. [Art. 1585, CC]

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 SALES

General rule: Exercise of acts of ownership over the goods is a

manifestation of acceptance, such as making use of them as owner,
making alterations in the goods, or subjecting it to the process of
manufacture.
Exception: Buyer’s right to make a test of goods, but only if necessary, to
enable him to determine whether to accept or reject the goods.

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Modes of acceptance
1. Express acceptance - Buyer intimates to the seller that the has accepted
them
2. Implied acceptance
a. When the vendee, after delivery of goods, does any act inconsistent
with the vendor’s ownership or
makes an alteration in them in a manner proper only for an owner; or
b. When the buyer, after the lapse of a reasonable time, retains the goods
without intimating his rejection.

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Vendee’s refusal
If vendee has the right to refuse and rightfully refused upon delivery,
He has no obligation to return them UNLESS otherwise agreed BUT he has
to take reasonable care of the goods
He is not a depositary thereof UNLESS he voluntarily agrees to be one

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i. Inspection/buyer’s right to examine [Art. 1584]

General rule: The buyer is not deemed to have accepted the goods
delivered which he has not previously examined unless and until he has
had a reasonable opportunity to examine them for the purpose of
ascertaining whether they are in conformity with the contract.
Exception: If there is a stipulation to the contrary [par. 1, Art. 1584, CC]

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 SALES

General rule: The seller is bound, when he tenders delivery to the buyer,
on request, to afford the buyer a reasonable opportunity to examine the
goods for the purpose of ascertaining whether they are in conformity with
the contract.
Exception: Unless otherwise agreed upon [par. 2, Art. 1584, CC]

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 SALES

Exception to the right to examine: C.O.D. Sales

Where goods are delivered to a carrier by the seller, in accordance with an
order from or agreement with the buyer, upon the terms that the goods
shall not be delivered by the carrier to the buyer until he has paid the
price, whether such terms are indicated by marking the goods with the
words "collect on delivery," or otherwise, the buyer is not entitled to
examine the goods before the payment of the price, in the absence of:
a. agreement; or
b. usage of trade
c. permitting such examination. [par. 3, Art. 1584, CC]

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ii. Delivery of goods in installment

General rule: The vendee is not bound to accept delivery of goods in
installment
Exception: Unless otherwise agreed upon [par. 1, Art. 1583, CC]
Where separate price has been fixed for each installment [par. 2, Art.
1583, CC] Where there is a contract of sale of goods
1. T o be delivered by stated installments,
2. To be separately paid for, and
3. The seller makes defective deliveries in respect of one or more
installments, or the buyer neglects or refuses without just cause to take
delivery of or pay for one or more installments.

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b. Obligation to pay the price

Article 1582, CC: The vendee is bound to accept delivery and to pay the
price of the thing sold at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must
be made at the time and place of the delivery of the thing sold.

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i. Obligation to pay interest

The buyer shall owe interest on the price from the time the thing is
delivered up to the time of payment if there is stipulation requiring
interests, or even if there is none, if the thing delivered produces fruits or
income, or if the buyer incurs in default from the time of judicial or
extrajudicial demand for payment [Baviera].
The three instances when the vendee shall pay interest for the period
between delivery and payment of the price:
1. If there was a stipulation;
2. If the thing sold and delivered produces fruits or income;
3. If the vendee is in default, from the time of judicial or extrajudicial
demand for payment [Art. 1589, CC].
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ii. Right of vendee to suspend payment of price

The vendee has the right to suspend in two instances:
1. If he is disturbed in the possession or ownership of the thing bought; or
2. If he has reasonable grounds to fear such disturbance, by a vindicatory
action or a foreclosure of mortgage [Art. 1590, CC]
Except
1. If the vendor gives security for the return of the price in a proper case
2. If it has been stipulated
3. If the vendor caused disturbance or danger to cease
4. If the disturbance is a mere act of trespass 5. If the vendee has already
fully paid the price [De Leon]

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c. Obligation to Bear the Expenses for the Execution and Registration of

the Sale and Putting the Goods in a Deliverable State, if so Stipulated
Art.1521, par. 5: Unless otherwise agreed, the expenses of and incidental
to putting the goods into a deliverable state must be borne by the seller.

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 2

Warranties
Civil Code of the Philippines

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 SALES

Warranties - A statement or representation made by the seller

contemporaneously and 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 ensure that certain facts are or shall be as he then
represents.

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 SALES

Condition vs Warranty

Condition Warranty

Pertains to and affects the existence Goes into the performance of an

of the obligation obligation and may, in itself, be an
obligation
Non-happening does not amount to Non-fulfillment constitutes breach of
breach of contract contract
Must be stipulated Stipulation or operation of law

May attach either to the seller’s duty Always relates to the subject matter
to deliver thing or some other or the seller’s obligations as to the
circumstance subject matter

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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, CC]

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Express vs Implied

Express Implied

Nature is contractual Constituted by law

Stipulated by parties, thereby Only seller is bound, whether or not

binding both the seller and buyer intended or known by the parties.
Must be stipulated Stipulation or operation of law

May attach either to the seller’s duty Always relates to the subject matter
to deliver thing or some other or the seller’s obligations as to the
circumstance subject matter

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a. Express Warranties
For there to be express warranty, the following requisites must concur:
a. An affirmation of fact or any promise relating to the thing sold;
b. The natural tendency of such affirmation or promise is to induce the
buyer to buy;
c. The buyer buys the thing relying thereon. [Art. 1546, CC]
d. Made before the sale, not upon delivery or any other point
An express warranty can be made by and also be binding on the seller
even in the sale of a second hand article. [Moles v. IAC, G.R. No. 73913
(1989)]

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Express vs Implied

Express Implied

Nature is contractual Constituted by law

Stipulated by parties, thereby Only seller is bound, whether or not

binding both the seller and buyer intended or known by the parties.
Must be stipulated Stipulation or operation of law

May attach either to the seller’s duty Always relates to the subject matter
to deliver thing or some other or the seller’s obligations as to the
circumstance subject matter

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Express warranty vs Dealer’s or Trader’s Talk
Express Warranty
What is specifically represented as
true in said document cannot be
considered as mere dealer's talk.
[Moles v. IAC, supra]
95
Dealer’s or Trader’s Talk
Affirmation of the value of the thing
or statement of only the seller’s
opinion is not a warranty unless:
● The seller made it as an expert;
● It was relied upon by the buyer.
[Art.1546, CC]
● Ordinarily, what does not appear
on the face of the written instrument
[Moles v. IAC, supra]
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Express warranty vs False Representation
Express Warranty
Concealment of facts does not
necessarily amount to false
representation
96
Dealer’s or Trader’s Talk
When concealment of facts comes
with an active misstatement of fact
or a partial statement of fact, such
that withholding of that unsaid
portion makes that which is stated
absolutely false.
However, a buyer who fails to
inspect the condition of property
despite ample opportunity to do so
when there is no opposition on the
part of seller to inspect cannot later
on allege false representation.
[Philippine Manufacturing Co. v. Go
Jocco, G.R. No. L-24256 (1926)]
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b. Implied Warranties [Art. 1547, CC]

An implied warranty is derived by law, by implication, or inference from
the nature of the transaction or relativation, or circumstances of the
parties, irrespective of any intention of the seller to create it. [De Leon]
Implied Warranty of Title
a. Implied Warranty against Encumbrance/Non-Apparent Servitudes
b. Implied Warranty against Hidden Defects [Art. 1547, CC]
• Implied Warranty as to Merchantable Quality and Fitness of Goods
• Implied Warranty against Redhibitory Defect in the Sale of Animals [Art.
1572, CC]
• Quality and Fitness of Goods in Sale by Sample or Description
c. Other Warranties
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IMPLIED WARRANTY OF TITLE

Implied warranty arises by operation of law and need not be stipulated in
the contract of sale.
Warranty of Seller’s Right to Sell: Seller warrants his right to sell at the
time the ownership is to pass.
Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person
professing to sell by virtue of authority in fact or law. [Art. 1547, CC]

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 SALES

Warranty against Eviction: Seller warrants that buyer, from the time
ownership passes, shall have and enjoy legal and peaceful possession of
the thing. Its requisites are:
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 co- defendant in the suit for eviction at
the instance of the buyer. [Power Commercial and Industrial Corp. v. CA,
G.R. No. 119745 (1997)]

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 SALES

IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT

SERVITUDES
Requisites for breach:
a. Thing sold is an immovable
b. Burden or servitude encumbering the thing sold is:
1. Non-apparent to the naked eye
2. Not mentioned in the agreement
3. Of such nature that it must be presumed that the buyer would not
have bought it had he been aware of it
4. 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, CC]
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 SALES

IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT

SERVITUDES
Requisites for breach:
a. Thing sold is an immovable
b. Burden or servitude encumbering the thing sold is:
1. Non-apparent to the naked eye
2. Not mentioned in the agreement
3. Of such nature that it must be presumed that the buyer would not
have bought it had he been aware of it
4. 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, CC]
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IMPLIED WARRANTY AGAINST HIDDEN DEFECTS

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, 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 if he is not
aware thereof, if there is no stipulation to the
contrary [Art.1566
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The buyer must also give notice of such redhibitory defect within a
reasonable time.
The use contemplated must be that which is stipulated, and in the
absence of stipulation, that which is adopted to the nature of the thing,
and to the business of the buyer.

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 SALES

IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF

GOODS
Merchantable Quality
a. Where the goods are brought by description from a seller who deals in
goods of that description [Art. 1562, CC]
b. 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, CC]
Warranty of merchantability is warranty that goods are reasonably fit for
the general purpose for which the same are sold.

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“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 relied on the seller’s skill or
judgment [Art.1562(1), CC]

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IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF

ANIMALS [Art. 1572, CC]
Redhibitory defect – a hidden defect of animals of such nature that expert
knowledge is not sufficient to discover it, even in a case where a
professional inspection has been made
No warranty in case of [Art. 1574, CC]
a. Animals sold at fairs or public auctions b. Livestock sold as condemned
The following sales are void [Art. 1575, CC]
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

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c. Effects of Warranties
a. Natural tendency is to induce buyer to purchase the subject matter
b. Buyer purchases subject matter relying thereon
c. Seller liable for damages in case of breach

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d. Effects of Waivers
Only applicable to waiver of warranty against eviction; parties may
increase or decrease warranty against eviction but the effect depends on
good/bad faith of the seller:
a. Seller in bad faith and there is warranty against eviction – null and void
b. Buyer without knowledge of a particular risk and made general
renunciation of warranty – not waiver but merely limits liability of seller in
case of eviction (pay value of subject matter at the time of eviction)
c. Buyer with knowledge of risk of eviction assumed its consequences and
made a waiver – vendor not liable
d. Waiver to a specific case of eviction – wipes out warranty as to that
specific risk but not as to eviction caused by other reasons
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e. Buyer’s Options in Case of Breach of Warranty

Remedies of buyer for breach of warranty, both implied and express:
• Accept goods + demand diminution/extinction of price
• Accept goods + damages
• Refuse to accept goods + damages
• Rescind (Refuse to accept or return or offer to return) + recover price
paid [Art. 1599, CC]

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EXPRESS WARRANTY
Prescriptive period: Period specified in express warranty OR 4 years, if no
period is specified (following the general rule on rescission of contracts)
Remedies
Rescission not available when buyer:
a. Knew of breach of warranty when he accepted the goods without
protest
b. Fails to notify the seller about election to rescind within a reasonable
period of time
c. Fails to return or offer to return the goods to the seller in substantially a
good condition as they were when delivered, unless deterioration was due
to breach of warranty
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Measure of damages: Difference between 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
a. Buyer no longer liable for price: Entitled to the return of any part of
price paid, concurrently with or immediately after an offer to return the
goods
b. If seller refuses to accept offer to return goods: buyer deemed as bailee
for seller and has right of lien to secure payment of part of price paid

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If there is waiver of warranty:

a. Seller acted in bad faith: Waiver is void, seller liable for eviction
b. Buyer made waiver without knowledge of risks of eviction: Seller liable
only for the value of the thing sold at time of eviction
c. Buyer made waiver with knowledge of risks: Seller not liable; buyer
assumed the consequences

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IMPLIED WARRANTY AGAINST ENCUMBRANCES [Art. 1560, CC]

Rescission: Within 1 year from execution of deed of sale OR
Damages: Within 1 year from execution of deed of sale or discovery of the
burden or servitude
IMPLIED WARRANTY AGAINST HIDDEN DEFECTS [Arts. 1567-1571, CC]
If thing is not lost:
• Withdraw from contract (accion redhibitoria) + damages
• Demand a proportionate reduction of the price (accion quanti minoris) +
damages

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IMPLIED WARRANTY AGAINST REDHIBITORY DEFECTS OF ANIMALS

Remedies
• Withdraw from contract + damages
• Demand a proportionate reduction of the
price + damages If sale is rescinded:
a. Buyer must return animal in the condition in which it was sold and
delivered
b. Buyer shall be liable for injury due to his negligence.
Prescriptive period: 40 days from delivery

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f. Warranty in Sale of Consumer Goods

If implied warranty accompanies express warranty, both will be of equal
duration. [Sec. 68, RA 7394]

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Express warranty vs Implied warranty

Express Warranty Implied Warranty

a. Demand repair within 30 days; a. Retain the goods and

extendible for causes beyond the
control of the warrantor
b. Demand refund of price minus
amount directly attributable to the
use of the consumer prior to the
discovery of the non-conformity
recover
damages OR
b. Reject the goods, cancel
contract and recover from seller so
much of the purchase price as has
been paid + damages

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 2

Remedies
Civil Code of the Philippines

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Breach of Contract
The following remedies arise from the bilateral nature of the contract of
sale:
a. Specific performance
b. Rescission
c. Damages

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General rule: 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., G.R. No. 23769 (1925)]
Prescriptive periods
• 10 years if based on written contract
• 6 years if based on oral contract

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Remedies of the Seller

Remedies

Movables Damages, Rescission, Price through

Movables on installment
Immovables
Immovables on installment
Specific Performance.
Special Remedies: Possessory lien,
Stoppage in transitu, Resale, Rescission
Exact fulfillment, Cancellation of the Sale,
Foreclosure of Chattel Mortgage
Price through Specific Performance,
Rescission (for anticipatory breach and for
non-payment)
Contract of Sale: Rescission through Article
1592, CC Contract to Sell: Rescission
through Maceda Law (RA 6552)

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1. Sale of Goods
ACTION FOR PRICE [Art. 1595, CC]
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 to pay such price, whether or not ownership has passed
c. When the goods cannot readily be resold for a reasonable price, and the
buyer wrongfully refuses to accept the goods, whether or not ownership
has passed

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If ownership has not yet passed to the buyer, the seller cannot maintain
an action for the price, unless it involves (1) or (3).
Title to goods passes from the moment the goods are placed at the
buyer’s disposal when refusal to accept is without just cause. [de Leon
citing Art. 1588, CC]

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ACTION FOR DAMAGES [Art. 1596, CC]

When ownership has not yet passed and the buyer, without lawful cause,
neglects or refuses to ACCEPT and PAY for the goods
General rule: Measure of damages is the ESTIMATED LOSS directly and
naturally resulting in the ordinary course of events from the buyer’s
breach.
Exceptions:
a. Where there is available market for goods: Difference between the
contract price and the market price. The market price is fixed at the time
the goods ought to have been accepted, or if no time was fixed, at the
time of refusal to accept.

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Note: When there are special circumstances showing proximate damages

of a greater amount than the difference between the contract price and
market price, seller is entitled to such higher amount of damages when
such damages may be reasonably attributed to the non-performance of
the obligation. [de Leon; par. 3, Art. 1596 read with par. 2, Art. 2201, CC]

b. Where labor or expense of material amount is necessary on the part of

the seller to perform the contract: Cost of labor performed or expenses
made before receiving notice of buyer’s repudiation, and unrealized profit.

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RESCISSION BY GIVING THE BUYER NOTICE OF THE ELECTION TO RESCIND

[Art. 1597, CC]
When the goods have not yet been delivered to the buyer, and the buyer
repudiated the contract of sale, or manifested his inability to perform his
obligations, or has committed a breach of the contract of sale.
Under this rule, rescission would bar an action on the contract because it
means cancellation of the contractual obligations between the parties.
[Baviera]

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The unpaid seller’s right to rescind for non- performance is not absolute.
Not allowed to rescind when:
a. There are 3rd persons possessing the
objects of the contract to whom no bad faith is imputable [de Leon; Ocejo
Perez & Co. v. International Bank, G.R. No. L-10658 (1918)]
b. Breach is on slight or casual [de Leon; Song Fo & Co. v. Hawaiian-Phil.
Co., supra]

The seller cannot unilaterally and extrajudicially rescind a contract absent

express stipulation to do so, except as provided in Art. 1597. [De Leon]

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2. Special Remedies of the Unpaid Seller [Arts. 1525-1535, CC]

a. Possessory lien;
b. Stoppage in transitu;
c. Special right of resale; and
d. Special right to rescind

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POSSESSORY LIEN OVER THE GOODS

Right to retain possession of goods until payment or tender of the whole
price, or unless he agrees to sell on credit [Arts. 1526-1529, 1503, 1535,
CC]
When lien available
a. The seller is unpaid
b. The unpaid seller has possession over the thing
c. Ownership of the thing has passed to the buyer
d. Any of the following: [Art 1527, CC]
• Goods are sold without stipulation as to credit
• Goods are sold on credit, but term of credit has expired
• Buyer becomes insolvent
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The seller may exercise his right of lien notwithstanding that he is in

possession of the goods as agent or bailee for the buyer [par. 2, Art. 1527,
CC]

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When unpaid seller loses his lien [Art. 1529, CC]

a. Seller delivers goods to carrier or other
bailee for transmission to the buyer without reserving ownership or right
of possession (i.e. under a straight or non-negotiable bill of lading)
b. Buyer or his agent lawfully obtains possession of goods
c. Seller waives the lien
● But it is not lost with respect to the remainder of the goods when only
partial delivery is made (unless such is symbolic delivery of the whole)
● It is not lost by the mere fact that seller obtained a judgment for the
price

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When Lien May Be Revived After Delivery

a. If the buyer refuses to receive the goods after the same are delivered to
the carrier or other bailee on his behalf, though the seller has parted with
both ownership and possession. Here, the seller may reclaim the goods
and revest the lien. [par. 1 (2). Art 1531, CC]
b. If the buyer returns the goods in wrongful repudiation of the sale, and
the seller, in accepting the goods from the buyer, says he does not assent
to the rescission.

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RIGHT OF STOPPAGE IN TRANSITU

An extension of the lien for the price; entitles unpaid seller to resume
possession of the goods while they are in transit before the goods come in
possession of the vendee. [Arts. 1530- 1532, 1535, 1636(2) CC]

Requisites for the exercise of stoppage in transitu

a. The seller is unpaid
b. The buyer is insolvent
c. The goods are in transit
d. The seller either takes actual possession,or gives notice of claim to the
carrier or other person possessing the goods

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e. The seller must surrender the negotiable instrument or title, if any,

issued by the carrier/bailee
f. The seller must bear the expenses of the delivery of the goods after
exercise of such right.

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When Goods Are In Transit [par. 1, Art 1531, CC]

a. From the time of delivery to the carrier or
other bailee by the seller, for the purpose of transmission to the buyer,
until the buyer or his agent takes such delivery from the carrier.
b. Even when goods have reached their ultimate destination, if buyer
rejects them and carrier retains possession
To terminate transit by delivery to a middleman, delivery must be to keep,
not to transport.
In case of misdelivery, the goods are still considered in transit, hence, the
seller may still exercise his right pursuant to Article 1523.

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When Goods are No Longer in Transit [par. 2, Art. 1531, CC]

a. Buyer obtained delivery of the goods before they have reached their
appointed destination
b. Goods have arrived at the appointed destination, and the carrier/bailee
acknowledges to hold the goods on behalf of the buyer
c. Goods have arrived at the appointed destination, but carrier wrongfully
refuses to deliver to buyer/his agent

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How Right is Exercised [Art. 1532, CC]

a. By obtaining actual possession of the goods
b. By giving notice of his claim to the carrier/other bailee who has
possession of the goods
• Carrier must redeliver goods to seller, or according to his instructions
• Carrier not obliged to redeliver until the negotiable document of title, if
any, has been surrendered for cancellation

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Effect When Buyer Has Sold the Goods [Art. 1535, CC]
General Rule: Seller’s right to stoppage in transitu is not affected even if
buyer has sold or disposed of the goods unless the seller has given his
assent thereto.
Exceptions:
a. When seller has given consent thereto
b. When a negotiable document of title has been issued for the goods to a
purchaser for value in good faith

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SPECIAL RIGHT OF RESALE

Available to unpaid seller who has a right of lien or who has stopped the
goods in transitu [Art. 1533, CC].
When available
When the unpaid seller has either a right of lien or has stopped the goods
in transitu and under any of the following conditions:
a. The goods are perishable in nature
b. The right to resell is expressly reserved in case the buyer should default
c. The buyer delays in paying the price for an unreasonable time
The right to resell the goods is not mandatory, but permissive.

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Effects of Resale:
a. Seller is no longer liable to the original buyer upon the contract of sale
or for any profit made by the resale
b. Buyer at resale acquires good title as against the original owner
c. In case resale is at a loss, seller is entitled to recover the difference from
the original buyer
d. Seller may recover damages from original buyer for breach of contract

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SPECIAL RIGHT TO RESCIND

Return of the title over the undelivered goods to the seller, and right to
recover damages for breach of contract [Art. 1534, CC]
When available
When the unpaid seller has either a right of lien or has stopped the goods
in transitu and under any of the following conditions:
a. Seller expressly reserved his right to
rescind in case buyer defaults
b. Buyer has been in default in payment for an
unreasonable time

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3. Recto Law: Sale of Movables on Installment – Arts. 1484-1486, CC

WHEN APPLICABLE
Sale of movables in installment
The rule is intended to apply to sales of movables, the price of which is
payable in 2 or more installments, but not to straight-term sales where
the price is payable in full, after making a down payment because the law
aims to protect improvident buyers who may be tempted to buy beyond
their means. [Levy Hermanos v. Gervacio, G.R. No. l-46306 (1939)]

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ALTERNATIVE AND EXCLUSIVE REMEDIES

Note: The exercise of one remedy bars the exercise of the others.
a. Specific Performance
General Rule: When the seller has chosen specific performance, he can no
longer seek for rescission or foreclosure of the chattel mortgage
Exception: If specific performance has become impossible, the seller may
still choose rescission [Art. 1191, CC]

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b. Cancellation of sale if vendee fails to pay 2 or more installments

When the seller cancels the sale by repossessing the property sold, he is
barred from exacting payment for its price.
It can only be carried out when he who demands rescission can return
whatever he may be obliged to restore. [Art. 1385, CC]

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c. Foreclosure of Chattel Mortgage if vendee fails to pay 2 or more

installments
If seller chooses this remedy, he shall have no further action to recover
any unpaid balance, and any stipulation to the contrary shall be void. The
purpose of the law is to remedy the abuses committed in foreclosure of
chattel mortgages. It prevents mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing the
suit against the mortgagor for a deficiency judgment. The almost
invariable result of this procedure was that the mortgagor found himself
minus the property and still owing practically the full amount of his
original indebtedness. [Bachrach Motor Co., Inc. v. Millan, G.R. No. L-
42256 (1935)]

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4. Sale of Immovables
RESCISSION FOR ANTICIPATORY BREACH [ART. 1591, CC]
Note: This is applicable to both cash sales and sales in installments.

Requisites
a. There is delivery of immovable property
b. Vendee has not yet paid the price; and
c. Vendor has reasonable grounds to fear the loss of property and the loss
of price
If there is no such reasonable ground, Art. 1191 applies (specific
performance or rescission with damages).

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SPECIFIC PERFORMANCE + DAMAGES OR RESCISSION + DAMAGES [Art.

1191, CC]
Seller may choose between specific performance and rescission, with
damages in either case. Court has discretion, for a just cause, to give the
buyer more time to pay even if the seller chooses rescission.
If seller chose specific performance, and such becomes impossible, he may
still avail of rescission. If absolute sale, seller must make a demand for
rescission.
a. Judicially, OR
b. By a notarial act

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Demand necessary even if automatic rescission is stipulated

a. Effect of lack of demand: Buyer can still pay
b. b. Effect of demand: Court may not grant buyer a new term

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SECS. 23 AND 24, PD 957

Non-forfeiture of payments
No installment payment made by the buyer shall be forfeited in favor of
the owner or developer of the condominium or subdivision project, after
due notice, when the buyer desists from paying due to the failure of the
developer or owner to develop the project according to the approved
plans or within the time limit stated.
Buyer’s Remedy: At his option, he may reimburse the total amount paid
including amortization interest with interest thereon at the legal rate.
If the buyer fails to pay the installments for reasons other than the failure
of the owner or developer to develop the project, his rights shall be
governed by RA 6552.

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5. Maceda Law (RA 6552): Sale of Immovables on Installment

RA 6552 does NOT apply to:
a. Industrial lots
b. Commercial buildings
c. Sale to tenants under Agricultural Reform Code [RA 3844]
d. Sale of lands payable in straight terms [Sec. 3, RA 6552]

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Rights of the Buyer:

The law imposes additional requirements on the part of the seller for a
valid rescission.
a. If buyer has paid at least 2 years of installments then defaults:
• Buyer has right to a grace period of 1 month per year of installment
payment made BUT the buyer may only avail of the grace period once
every 5 years
• Buyer has right to the refund of Cash Surrender Value (CSV): 50% of total
amount paid + 5% for every year after the first 5 years of installments BUT
total CSV should not be greater than 90% of total amount paid
• After the lapse of the grace period, buyer is given a notice of
cancellation or demand for rescission by notarial act, effective 30 days
from the buyer’s receipt thereof AND only upon full payment of CSV
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b. If buyer has paid less than 2 years of installments:

• Grace period of at least 60 days
• After the lapse of the grace period, buyer is given a notice of
cancellation or demand for rescission by notarial act, effective 30 days
upon receipt thereof
c. During the grace period, the buyer shall also have the right:
• To sell or assign his rights, evidenced in a notarial instrument
• T o update his account
• To pay in advance any installment, or the full unpaid balance of the
price, without any interest, and to have such full payment of the purchase
price annotated in the certificate of title covering the property.

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Down payments, deposits, or options on the contract shall be included in

the total number of installments made.

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b. Remedies of the Buyer

General rule: Courts will refuse to decree specific performance with
respect to chattels because damages are a sufficient remedy.
Exception: Buyer is entitled to the specific thing which to him has special
value and which he cannot readily obtain in the market OR where
damages would not furnish a complete and adequate remedy. [Baviera]

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Remedies of the Buyer

Remedies

Movables Damages, Rescission, Price through

Breach of Warranty
Immovables
Immovables on installment
Specific Performance.
Return or Offer to Return (with recovery of
price or may become the seller’s bailee)
Acceptance, for recoupment or with
damages Refuse to Accept with Damages
Rescission, Suspension of Payment, PD
957 (Reimbursement of the total amount
paid/ compel the developer to complete
facilities)
Contract of Sale: Article 1592, CC
Contract to Sell: Maceda Law (RA 6552)

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1. Sales of movables
REMEDY FOR BREACH OF OBLIGATION TO PRESERVE
If thing is lost:

Without fault of seller Through fault of seller / through

fortuitous event (if seller is liable)
No breach. Obligation is extinguished. Damages.

A thing is lost when it:

a. Perishes;
b. Goes out of commerce of man; or
c. Disappears in such a way that its existence is unknown or it cannot be
recovered
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If thing deteriorates

Without fault of seller Through fault of seller

NO BREACH. Impairment shall be borne Rescission + damages OR

by buyer Specific performance + damages

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REMEDY FOR BREACH OF OBLIGATION TO DELIVER

Delivery of wrong quantity [Art. 1522, CC]

Goods are less than what was Goods are more than what was
contracted contracted
Reject the goods OR Reject the excess OR
Accept and pay: Reject the whole, if indivisible OR
a. At contract rate if Accept the whole and pay at contract rate
buyer knowing seller perform in full
b. At fair value if goods were used before
knowing that seller won’t be able to perform
in full
Buyer becomes the owner of the whole
mass and the seller is bound to make good
the deficiency [Art. 1464]

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2. Sale of Immovables [Art 1539 – 1543, CC]

IF AT THE RATE OF A CERTAIN PRICE PER UNIT OF MEASURE OR NUMBER

Less (in area or quality) than what was More (in area or quality) than what was
agreed upon: agreed upon:
Proportional reduction of price Reject the excess OR
OR Accept the whole and pay at contract rate
Rescission, if:
Lack in area is at least 1/10 of what is
stated, or inferior value of thing sold
exceeds 1/10 of price
Buyer would not have bought the property
has he been aware of the inferior quality or
smaller area

Note: This rule also applies to judicial sales [Art. 1541, CC].

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IF FOR A LUMP SUM

Everything is within boundaries, even if Not everything is within the boundaries

less or more than stated area
No remedy Proportional reduction in price OR
Where both the area and the boundaries of Rescission
the immovable are declared, the area
covered within the boundaries of the
immovable prevails over the stated area.
[Rudolf Lietz, Inc. v. CA, G.R. No. 122463
(2005)]

Prescriptive period: 6 months counted from date of delivery.

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 THANKS!

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ruthhazelgalang@gmail.com

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