LAW ON SALES

(2024 EDITION)

CONTRACT OF SALE

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.

CONTRACT OF SALE DISTINGUISHED

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
Sale
Consideration is price in money or its
equivalent
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
(done)
Barter
Consideration is another thing
Contract of Sale Contract to Sell
Ownership is transferred upon delivery Ownership is only transferred upon full
payment of price
Non-payment is a resolutory condition Full payment is a positive suspensive
condition; hence, non-payment would not
give rise to the obligation to transfer
ownership
Conditional Contract of Sale Contract to Sell
Sale is already perfected No perfected sale yet
A subsequent buyer is presumed to be a A subsequent buyer is presumed to be a
buyer in bad faith buyer in good faith.

Sale Contract for a Piece of Work

Goods are manufactured or procured in
the ordinary course of business
For the general market, whether on hand
or not
Governed by Stature of Frauds
Goods are manufactured for customers
upon his special order
For a specific customer
Not within Statute of Frauds

Sale Dacionenpago PERFECTION

No pre-existing debt Pre-existing debt
Creates an obligation Extinguishes the obligation (mode of
payment) Offer
Price is more freely agreed upon, fixed Price is the value of the thing given
by the parties The offer must be certain and the acceptanceabsolute. (Art. 1319, CC)
Buyer has to pay the price Payment is received by the debtor before
contract is perfected The person making the offer may fix the time, place, and manner of acceptance, all
of which must be complied with. (Art. 1321, CC)
Sale Agency to Sell
An offer becomes INEFFECTIVE upon the death, civil interdiction, insanity, or
Buyer receives the goods as owner Agent receives good as goods of the insolvency of either party before acceptance is conveyed. (Art. 1323, CC)
principal
Buyer pays the price Agent delivers the price which he got When the offerer has allowed the offeree a certain period to accept, the offer may
from his principal be withdrawn at any time before acceptance by communicating such
Buyer cannot return the object sold as a Agent cannot return the goods withdrawal,except when the option is founded upon a consideration, as something
general rule paid or promised. (Art. 1324, CC)
Seller warrants thing sold Agent makes no warranty
Not unilaterally revocable Essentially revocable Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer. (Art. 1325, CC)
Sale Lease
Ownership transferred by delivery No transfer of ownership
Permanent temporary Option contracts
Seller must be owner at the time of Lessor need not be owner
delivery Option- An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price. (Art. 1479(2), CC)

Contract to Sell Separate Consideration- A consideration for an optional contract is just as

important as the consideration for any other kind of contract. If there was no
Article 1478, CC: The parties may stipulate that ownership in the thing consideration for the contract of option, then it cannot be enforced any more than
shall not pass to the purchaser until he has fully paid the price any other contract where no consideration exists.

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.
Article 1462, CC:The goods which form the subject of a contract of sale
may be either existing goods, owned or possessed by the seller, or goods to
be manufactured, raised, or acquired by the seller after the perfection of
the contract of sale, in this Title called “future goods.”
There may be a contact of sale of goods, whose acquisition by the seller
depends upon a contingency which may or may not happen.
Article 1465, CC: Things subject to a resolutory condition may be the
object of the contract of sale.
The option is not the contract of sale itself. The optionee has the right, but not the
obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted
before a breach of the option, a bilateral promise to sell and to buyensues and both
parties are then reciprocally bound to comply with their respective undertakings.
The offeror is still free and has the right to withdraw the offer:
1. If the period is not itself founded upon orsupported by a consideration
andwithdrawn before its acceptance,
2. If an acceptance has been made, before the offeror's coming to know of
such fact, by communicating that withdrawal to theofferee.
Breach of contract- It will be a breach of contract when the offer was withdrawn during
the agreed period if the period has separate consideration since the contract of “option
is deemed perfected.”
Right of first refusal- While the object might be made determinate, the exercise of the
right, however, would be dependent not only on the grantor's eventual intention to enter
into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up.
Mutual promise to buy and sell- The obligation is not to enter into a sale, but rather to
negotiate in good faith for the possibility of entering into a sale. When the promissor has
in fact negotiated in good faith, but the parties’ minds could not meet on the price and
the terms of payment, then promissor has complied with his obligation.

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ESSENTIAL REQUISITES INADEQUACY OF PRICE

1. Consent of contracting parties- Consent refers to seller’s consent to

transfer ownership of, and deliver, a determinate thing, and to buyer’s GR: Does NOT affect a contract of sale’s validity. (Art. 1470, CC)
consent to pay the price certain.
Being a consensual contract, the contract of sale is perfected at the XPNs:
moment there is a “meeting of the minds” upon the thing which is the a. In Voluntary sales
object of the contract and upon the price. (Art. 1475, CC) a. Where low price indicates a vice ofconsent,
sale may be annulled.
2. Object certain which is the subject matter of the contract- The things b. Where price is so low to be shocking to the
must be licit and the vendor must have a right to transfer the ownership conscience (fraud, mistake, undueinfluence),
thereof at the time it is delivered (Art. 1459). then sale may be set aside
c. Where price is simulated such as when the real
Requisites of a Valid Subject Matter(Arts. 1459-1465, CC) intention was a donation or some
a. Must be licit othercontract.
b. Existing, Future, Contingent d. Where the parties did not intend to bebound at
Sale of Things Having Potential Existence all, sale is void.
Emptio Rei Speratei Emptio Rei Spei
Mere Hope Vain Hope b. In Involuntary sales
Sale of a thing Sale of a Sale of a VAIN a. A judicial or execution sale is one made bya
expected or future MERE HOPE HOPE or court with respect to the property of a debtor
thing or expectancy expectancy for the satisfaction of his indebtedness.
VALID GR: VALID GR: VOID b. Rescissible contracts of sale - Inadequacy of
Example: Sale of the Example: Sale Example: Sale price is a ground for rescission of conventional
grain a field may of a valid of a fake lottery sale under Art. 1381 (a) and (b), CC.
grow in a given time lottery ticket ticket
When NO price agreed
Deals with a future Deals with a thing that currently
a. Sale is INEFFICACIOUS (Art. 1474, CC)
thing that is currently exists- the hope or expectancy
b. But if the thing or part thereof has been delivered and
not in existence
appropriated by the buyer,he must pay a reasonable price
Subject to the Not subject to any condition; The
therefore
condition that the contract comes into existence
What is a reasonable price is a question of fact dependent on
thing will exist immediately
the circumstances of each particular case. (Art. 1474, CC)
Future thing is c. Generally, the reasonable price is the market price at the time
certain as to itself, and place fixed by the contract or by law for delivery of
but uncertain as to goods.
quantity and quality
In case of doubt, the presumption is in favor of emptio rei False Price vs. Simulated Price
speratei since it is more in keeping with the commutative
character of the contract. False Price Simulated Price
Price stated in the contract is not Price stated in the contract is not
c. Determinate or Determinable the true price. Parties intended to intended to be paid. Parties never
Determinate- When it is particularly designated or be bound. intended to be bound.
physically segregated from all others of the same class. (Art.
Effect: Binds the parties to their Effect: VOID for lack of cause/
1460, CC)
real agreement when it does not consideration, but can be shown
Determinable- When it is capable of being made
prejudice 3rd persons and is not as a donation or some other
determinate at the time the contract was entered intowithout
intended for anu purpose contrary contract. Parties may recover
the necessity of a new or further agreement between the
to law, morals, public policy, etc. from each other what they may
parties. (Art. 1460, CC)
have given under the contract.

Earnest money vs option money

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.”
Requisites of a valid price
a. Certain or ascertainable at the time of perfection
b. In money or its equivalent
i. If price is partly in money and partlyin another
thing: determine manifest intention of the
parties to see whether it was barter or sale.
(Art. 1468, CC)
ii. 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)
c. Real
i. When buyer has an intention to payand the
seller has an expectation toreceive the price
ii. If simulated: Sale is VOID; BUT actmay be
shown to have been a donation or some other
act or contract. (Art. 1471, CC)
iii. If Price is false – when the real consideration is
not the price stated in the contract:Sale is
voidUNLESS proved to be founded on another
true and lawful price (Art. 1353, CC)
How price is determined/when certain
a. 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)
b. Determination is left to the judgment of a specified person.
Option Money Earnest Money
Separate and distinct consideration Part of purchase price (Art.
from the purchase price 1482, 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
not required to buy, but may even bound to pay the balance
forfeit it depending on the terms of
the option
Grantee of option is still undecided Buyer manifests his earnest
whether or not to buy or sell the desire to buy the property
property
Q: Alice agreed to sell a parcel of land with an area of 500 square meters registered in her name
and covered by TCT No. 12345 in favor of Bernadette for the amount of ₱900,000.00. Their
agreement dated October 15, 2015 reads as follows: I, Bernadette, agree to buy the lot owned by
Alice covered by TCT No. 12345 for the amount of ₱900,000.00 subject to the following
schedule of payment: Upon signing of agreement – ₱100,000.00 November 15, 2015 –
₱200,000.00 December 15, 2015 - ₱200,000.00 January 15, 2016 - ₱200,000.00 February 15,
2016 - ₱200,000.00 Title to the property shall be transferred upon full payment of ₱900,000.00
on or before February 15, 2016. After making the initial payment of ₱100,000.00 on October
15, 2015, and the second instalment of ₱200,000.00 on November 15, 2015, Bernadette
defaulted despite repeated demands from Alice. In December 2016, Bernadette offered to pay
her balance but Alice refused and told her that the land was no longer for sale. Due to the
refusal, Bernadette caused the annotation of her adverse claim upon TCT No. 12345 on
December 19, 2016. Later on, Bernadette discovered that Alice had sold the property to Chona
on February 5, 2016, and that TCT No. 12345 had been cancelled and another one issued (TCT
No. 67891) in favor of Chona as the new owner. Bernadette sued Alice and Chona for specific
performance, annulment of sale and cancellation of TCT No. 67891. Bernadette insisted that she
had entered into a contract of sale with Alice; and that because Alice had engaged in double
sale, TCT No. 67891 should be cancelled and another title be issued in Bernadette's favor.
(a) Did Alice and Bernadette enter into a contract of sale of the lot covered by TCT No. 12345?
Explain your answer. (2017 Bar)
A: No, Alice and Bernadette did not enter into a contract of sale over the lot covered by TCT
No. 12345. In a contract of sale, the ownership passes to the vendee upon delivery of the thing
sold. Here, the title passes only upon full payment of the purchase price, which is a hallmark of
a contract to sell, and not of a contract of sale. Hence, Alice and Bernadette did not enter into a
contract of sale.

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CAPACITY OF PARTIES

GR: Any person who has capacity to act may enter into a contract of sale.
Effects of incapacity
As a general rule, all persons, whether natural or juridical, who can bind themselves have also
legal capacity to buy and sell. 1. Absolute incapacity
If both parties are incapacitated: UNENFORCEABLE (Art. 1403 (3), CC)
Capacity of Parties If only 1 party is incapacitated: VOIDABLE.

1. Absolute incapacity XPN: Where necessaries are sold and delivered to a minor or to a person without
capacity to act, he must pay a reasonable price therefor.(Art. 1489, par. 2,
a. Minors (Art. 1327, CC) CC)The resulting sale therefore described in the foregoing article is valid and
b. Insane or Demented(Art. 1327, CC) binding.
c. Deaf-mutes who do not know how to write(Art. 1327, CC)
d. Civil Interdiction(Art. 38, CC) 2. Relative incapacity
e. Judicially-declared Incompetents(Art. 39, CC) Sale between spouses is VOID.
i. Prodigal Rationale:
ii. Imbeciles a. To protect 3rd persons who may have contracted with the spouse
iii. Absence & presumption of death b. To avoid undue advantage of the dominant spouse over the
iv. Persons not of unsound mind but byreason of age, weaker spouse.
disease, weak mind, and other similar causes, c. To avoid circumvention of the prohibition against donations
cannot take care of themselves and manage their between spouses.
property without outside aid (Easy prey for deceit
and exploitation) Such prohibition shall likewise apply to common law spouses.

GR: Contracts entered into by a minor and other incapacitated persons are But if already sold to a third person who relied on the title of his immediate
VOIDABLE. seller, reconveyance to the seller spouse is no longer available.
XPN: Where necessaries are sold and delivered to him (without parent or
guardian), he must pay a reasonable price therefor. Sale contracted by aliens is VOID
a. Such contract is VALID
b. But the minor has the right to recover any excess above a 3. Specific incapacity
reasonable value paid by him. GR: Contracts expressly prohibited by law are VOID and CANNOT BE
RATIFIED. Neither can the right to set-up the defense of illegality be waived.
(Art. 1409 (7), CC)

2. Relative incapacity Those entered into by public officers/employees, justices and judges, and
lawyers in violation of Art. 1491 are inexistent and VOID from the beginning. It
a. Husband and wife(Art. 1490, CC) is NOT subject to RATIFICATION.
GR: Cannot sell property to each other
XPN:Separation of property in marriage settlement, ORJudicial XPNs: Sales entered into by guardians, administrators, and agents (specific
separation of property. incapacities) in violation of Art. 1491 may beRATIFIED by means of and in the
b. Alienage (Art. 39, CC) form of a new contract when the cause of nullity has ceased to exist. Ratification
GR: Aliens are disqualified from purchasing or acquiring real is valid only from date of execution of the new contract and does not retroact.
property.
XPN: If acquisition is through hereditary succession
c. Trusteeship(Art. 39, CC)

3. Special Disqualifications
Such is grounded on public considerations which disallow the transactions
entered into by them (directly or indirectly) in view of the fiduciary relationship
involved or the peculiar control exercised by these individuals over the
properties or rights covered.
a. Agents – Cannot purchase or acquireproperty whose
administration or sale was entrusted to them, except if principal
gives consent
b. Guardian – Cannot purchase property of person under his
guardianship
c. Executors and administrators –Cannot acquire or purchase
property of estate under their administration.
The prohibition on executors and administrators does not apply if
the principal consents to the sale.
d. Public officers and employees - Cannot acquire or purchase
property of State/anyof its subdivisions, GOCC or administration,
the administration of whichwas entrusted to them. Prohibition
includes judges and government experts who, in any manner, take
part in the sale.
e. Lawyers - Cannot acquire or purchase property or rights in
litigation in which they take part by virtue of their profession.
For the prohibition to operate, the sale or assignment must take
place during the pendency of the litigation involving the property.
f. Justices, Judges, prosecuting attorneys, clerks and other
officers and employees connected with the administration of
justice - Cannot acquire or purchase property or rights in
litigation or levied upon on execution before the court within
whose jurisdiction or territory they exercise their respective
functions.
g. Others specially disqualified by law
i. Unpaid sellers with goods in transit from buying
the goods
ii. Officer conducting the execution sale of deputies
iii. Aliens who are disqualified to purchase private
agricultural lands
Q: Bert offers to buy Simeon’s property under the following terms and conditions: P1 million
purchase price, 10% option money, the balance payable in cash upon the clearance of the
property of all illegal occupants. The option money is promptly paid, and Simeon clears the
property of illegal occupants in no time at all. However, when Bert tenders payment of the
balance and ask Simeon for the deed for absolute sale, Simeon suddenly has a change of heart,
claiming that the deal is disadvantageous to him as he has found out that the property can fetch
three time the agreed purchase price. Bert seeks specific performance but Simeon contends that
he has merely given Bert an option to buy and nothing more, and offers to return the option
money which Bert refuses to accept. A. Will Bert’s action for specific performance prosper?
Explain. B. May Simeon justify his refusal to proceed with the sale by the fact that the deal is
financially disadvantageous to him? Explain. (1993, 2002Bar) A:
A. Bert’s action for specific performance will prosper because there was a binding agreement of
sale, not just an option contract. The sale was perfected upon acceptance by Simeon of 10% of
the agreed price. This amount is in really earnest money which, under Art. 1482, “shall be
considered as part of the price and as proof of the perfection of the contract”. (Topacio v. CA,
G.R. No. 102606, July 3, 1992; Villongco Realty v. Bormaheco, G.R. No. L26872, July
25,1975) B. Simeon cannot justify his refusal to proceed with the sale by the fact that the deal is
financially disadvantageous to him. Having made a bad bargain is not a legal ground for pulling
out a binding contract of sale, in the absence of some actionable wrong by the other party (Vales
v. Villa, G.R. No. 10028, December 16, 1916) and no such wrong has been committed by Bert.
Q: Spouses Biong and Linda wanted to sell their house. They found a prospective buyer, Ray.
Linda negotiated with Ray for the sale of the property. They agreed on a fair price of P2
Million. Ray sent Linda a letter confirming his intention to buy the property. Later, another
couple, Bernie and Elena, offered a similar house at a lower price of P1.5 Million. But Ray
insisted on buying the house of Biong and Linda for sentimental reasons. Ray prepared a deed
of sale to be signed by the couple and a manager's check for P2 Million. After receiving the P2
Million, Biong signed the deed of sale. However, Linda was not able to sign it because she was
abroad. On her return, she refused to sign the document saying she changed her mind. Linda
filed suit for nullification of the deed of sale and for moral and exemplary damages against Ray.
1) Will the suit proper? 2) Does Ray have any cause of action against Biong and Linda? Can he
also recover damages from the spouses? Explain.(2006 Bar)
A:
1) The suit will prosper. The sale was void because Linda did not give her written consent
to the sale. In Jade-Manalo v. Camaisa, 374 SCRA 498 (2002), the Supreme Court has
ruled that the sale of conjugal property is void if both spouses have not given their written
consent to it and even if the spouse who did not sign the Deed of Sale participated in the
negotiation of the contract. In Abalos v. Macatangay, 439 SCRA 649 (2004), the Supreme
Court even held that for the sale to be valid, the signatures of the spouses to signify their
written consent must be on the same document. In this case, Linda, although she was the
one who negotiated the sale, did not give her written consent to the sale. Hence, the sale is
void. However, Linda will nto be entitled to damages because Ray is not in any way in
bad faith.
2) Yes, Ray has a cause of action against Linda and Biong for the return of the 2 million
pesos he paid for the property. He may recover damages from the spouses, if it can be
proven that they were in bad faith in backing out from the contract, as this is an act
contrary to morals and good customs under Articles 19 and 21 of the Civil Code.

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OBLIGATIONS OF VENDOR
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)
Q: D sold a second-hand car to E for P150,000.00. The agreement between D and E was
that half of the purchase price, or P75,000.00 shall be paid in five equal monthly
instalments of P15,000.00 each. That car was delivered to E, and E paid the amount of
P75,000.00 to D. Less than one month thereafter, the car was stolen from E’s garage
with no fault on E’s part and was never recovered. Is E legally bound to pay the said
unpaid balance of P75,000.00? Explain your answer. (1990 Bar)
A: Yes, E is legally bound to pay the balance of P75,000.00. The ownership of the car
sold was acquired by E from the moment it was delivered to him. Having acquired
ownership. E bears the risk of the loss under the doctrine of res perit domino. (Articles
1496, 1497, Civil Code)
Q: Pablo sold his car to Alfonso who issued a postdated check in full payment therefore.
Before the maturity of the check, Alfonso sold the car to Gregorio who later sold it to
Gabriel. When presented for payment, the check issued by Alfonso was dishonored by
the drawee bank for the reason that he, Alfonso, had already closed his account even
before he issued his check. Pablo sued to recover the car from Gabriel alleging that he
(Pablo) had been unlawfully deprived of it by reason of Alfonso’s
deception.Willthesuitprosper? (1991 Bar)
A: No. The suit will not prosper because Pablo was not unlawfully deprived of the car
although he was unlawfully deprived of the price. The perfection of the sale and the
delivery of the car was enough to allow Alfonso to have a right of ownership over the
car, which can be lawfully transferred to Gregorio. Art. 559 applies only to a person who
is in possession in good faith of the property, and not to the owner thereof. Alfonso, in
the problem, was the owner, and, hence, Gabriel acquired the title to the car. Non-
payment of the price in a contract of sale does not render ineffective the obligation to
deliver. The obligation to deliver a thing is different from teh obligation to pay its price.
[EDCA Publishing Co. v. Santos (1990)]
Q: A granted B the exclusive right to sell his brand of Maong pants in Isabela, the price
for his merchandise payable within 60 days from delivery, and promising B a
commission of 20% on all sales. After the delivery of the merchandise to B but
beforehecouldsellany of them, B’s store in Isabela was completely burned without his
fault, together will all of A’s pants. Must B pay A for his lost pants? Why? (1999 Bar)
A: The contract between A and B is a sale not an agency to sell because the price is
payable by B upon 60 days from delivery even if B is unable to resell it. If B were an
agent, he is not bound to pay the price if he is unable to resell it. As a buyer, ownership
passed to B upon delivery and, under Art. 1504 of the Civil Code, the thing perishes for
the owner. Hence, B must still pay the price.
Q: On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995,
he sold the same land to Jose. Who has a better right if: a) The first sale is registered
ahead of the second sale, with knowledge of the latter. Why? b) The second sale is
registered ahead of the first sale, with knowledge of the latter? Why?(2001 Bar)
A:
a) The first buyer has the better right if his sale was first to be registered, even though
the first buyer knew of the second sale. The fact that he knew of the second sale at the
time of his registration does not make him as acting in bad faith because the sale to him
was ahead in time, hence, has a priority in right. What creates bad faith in the case of
double sale of land is knowledge of aprevious sale.
b) The first buyer is still to be preferred, where the second sale is registered ahead of the
first sale but with knowledge of the latter. This is because the second buyer, who at the
time he registered his sale knew that the property had already been sold to someone else,
acted in bad faith (Article 1544).
Q: JV, owner of a parcel of land, sold it to PP. But the deed of sale was not registered.
One year later, JV sold the parcel again to RR, who succeeded to register the deed and to
obtain a transfer certificate of title over the property in his own name. Who has a better
right over the parcel of land, RR or PP? Why? Explain the legal basis for your answer.
(2001, 2004Bar)
A: It depends on whether or not RR is an innocent purchaser for value. Under the
Torrens System, a deed or instrument operated only as a contract between the parties and
as evidence of authority to the Register of Deeds to make the registration. It is the
registration of the deed or the instrument that is the operative act that conveys oraffects
the land (Sec. 51, P.D.No. 1529). In cases of double sale of titled land, it is a wellsettled
rule that the buyer who first registers the sale in good faith acquires a better right to the
land(Art. 1544). Persons dealing with property covered by Torrens title are not required
to go beyond what appearsonitsface (Orquiola v. CA 386, G.R. No. 141463, August 6,
2002; Spouses Domingo v. Races, G.R. No. 147468, April 9, 2003). Thus, absent any
showing that RR knew about, or ought to have known the prior sale of the land to PP or
that he acted in bad faith, and being first to register the sale, RR acquired a good and a
clean title to the property as against PP.
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Q: Juliet offered to sell her house and lot, together with all the furniture and appliances
therein to Dehlma. Before agreeing to purchase the property, Dehlma went to the
Register of Deeds to verify Juliet's title. She discovered that while the property was
registered in Juliet's name under the Land Registration Act, as amended by the Property
Registration Decree, it property, Dehlma told Juliet to redeem the property from Elaine,
and gave her an advance payment to be used for purposes of releasing the mortgage on
the property. When the mortgage was released, Juliet executed a Deed of Absolute Sale
over the property which was duly registered with the Registry of Deeds, and a new TCT
was issued in Dehlma's name. Dehlma immediately took possession over the house and
lot and the movables therein. Thereafter, Dehlma went to the Assessor's Office to get a
new tax declaration under her name. She was surprised to find out that the property was
already declared for tax purposes in the name of XYZ Bank which had foreclosed the
mortgage on the property before it was sold to her. XYZ Bank was also the purchaser in
the foreclosure sale of the property. At that time, the property was still unregistered but
XYZ Bank registered the Sheriff's Deed of Conveyance in the day book of the Register
of Deeds under Act. 3344 and obtained a tax declaration in its name. a) Was Dehlma a
purchaser in goodfaith? b) Who as between Dehlma and XYZ Bank has a better right to
the house and lot? (2008 Bar)
A:
a) Yes, Dehlma is a purchaser in good faith. She learned about the XYZ tax declaration
and foreclosure sale only after the sale to her was registered. She relied on the certificate
of title of her predecessor-ininterest. Under the Torrens system, a buyer of registered
lands is not required by law to inquire further than what the Torrens certificated
indicates on its face. If a person proceeds to buy it relying on the title, that person is
considered a buyer in good faith. The “priority in time” rule could not be invoked by
XYZ Bank because the foreclosure sale of the land in favor of the bank was recorded
under Act No. 3344, the law governing transactions affecting unregistered land, and
thus, does not bind the land.
b) Between Dehlma and the bank, the former has a better right to the house and lot.
Q: In December 1985, Salvador and the Star Semiconductor Company (SSC) executed a
Deed of Conditional Sale wherein the former agreed to sell his 2,000 square meter lot in
Cainta, Rizal, to the latter for the price of P1,000,000.00, payable P100,000.00 down,
and the balance 60 days after the squatters in the property have been removed. If the
squatters are not removed within six months, the P100,000.00 down payment shall be
returned by the vendor to the vendee. Salvador filed ejectment suits against the squatters,
but in spite of the decisions in his favor, the squatters still would not leave. In August,
1986, Salvador offered to return the P100,000.00 down payment to the vendee, on the
ground that he is unable to remove the squatters on the property. SSC refused to accept
the money and demands that Salvador executed a deed of absolute sale of the property in
its favor at which time it will pay the balance of the price. Incidentally, the value of the
land had doubled by that time. Salvador consigned the P100,000.00 in court, and filed an
action for rescission of the deed of conditional sale, plus damages. Will the action
prosper? Explain. (1996 Bar)
A: No, the action will not prosper. The action for rescission may be brought only by the
aggrieved party to the contract. Since it was Salvador who failed to comply with his
conditional obligation, he is not the aggrieved party who may file the action for
rescission buy the Star Semiconductor Company. The company, however, is not opting
to rescind the contract but has chosen to waive Salvador’s compliance with the condition
which it can do under Art. 1545, NCC.
Q: Danny and Elsa were married in 2002. In 2012, Elsa left the conjugal home and her
two minor children with Danny to live with her paramour. In 2015, Danny sold without
Elsa's consent a parcel of land registered in his name that he had purchased prior to the
marriage. Danny used the proceeds of the sale to pay for his children's tuition fees. Is the
sale valid, void or voidable? Explain your answer. (3%) (2017 BAR)
A: The sale of the parcel of land is void. There is no indication in the facts that Danny
and Elsa executed a marriage settlement prior to their marriage. As the marriage was
celebrated during the effectivity of the Family Code, absent a marriage settlement, the
property regime between the spouses is the Absolute Community of Property. Under the
Absolute Community of Property regime, the parcel of land belongs to the community
property as the property he had brought into the marriage even if said property were
registered in the name of Danny. Therefore, the sale of the property is void, because it
was executed without the authority of the court or the written consent of the other
spouse.
OBLIGATIONS OF VENDEE
1. Inspection and acceptance- The buyer is deemed to have accepted the goods when:
1. He intimates to the seller that he hasaccepted them
2. The goods have been delivered to him andhe 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)
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
Inspection/buyer’s right to examine(Art. 1584)
GR: 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.
XPN: If there is a stipulation to the contrary (par. 1, Art. 1584, CC)
GR: 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.
XPN: Unless otherwise agreed upon (par. 2, Art. 1584, CC)
XPN 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," orotherwise, the buyer is not entitled
to examine the goods before the payment of the price, in the absence of:
1. agreement; or
2. usage of trade
3. permitting such examination. (par. 3, Art. 1584, CC)
Delivery of goods in installment
GR: The vendee is not bound toaccept delivery of goods in installment
XPN: 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. To be delivered by stated installments,
2. To be separately paid for, and
3. The seller makes defective deliveries inrespect 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.
It depends in each case on the terms of the contract and the circumstances
of the case:
1. Whether the breach of contract is somaterial as to justify the
injured party in refusing to proceed further and suing for damages
for breach of the entire contract, or
2. Whether the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole contract as
broken.
2. 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.
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 (1) if there is stipulation
requiring interests, or even if there is none, (2) if the thing delivered produces
fruits or income, or (3) if the buyer incurs in default from the time of judicial or
extrajudicial demand for payment(Art. 1589, CC).
Right of vendee to suspend payment of price-
1. If he is disturbed in the possession orownership of the thing
bought; or
2. If he has reasonable grounds to fear such disturbance, by a
vindicatory action or aforeclosure of mortgage (Art. 1590, CC)
XPN:
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 dangerto cease
4. If the disturbance is a mere act of trespass
5. If the vendee has already fully paid theprice
5
Q: LT applied with BPI to purchase a house and lot in Quezon City, one of its acquired
assets. The amount offered was P1,000,000.00 payable, as follows: P200,000.00 down
payment, the balance of P800,000.00 payable within 90 days from June 1, 1985. BPI
accepted the offer, whereupon LT drew a check for P200,000.00 in favor of BPI which
the latter thereafter deposited in its account. On September 5, 1985, LT wrote BPI
requesting extension until October 10, 1985, within which to pay the balance, to which
BPI agreed. On October 5, 1985, due to the expected delay in the remittance of the
needed amount by his financier from the United States, LT wrote BPI requesting a last
extension until October 30, 1985, within which to pay the balance. BPI denied LT’s
request because another had offered to buy the same property for P1,500,000.00,
cancelled its agreement with LT and offered to return to him the amount of P200,000.00
that LT had paid to it. On October 20, 1985, upon receipt of the amount of P800,000.00
from his US financier, LT offered to pay the amount by tendering a cashier’s check
therefor, but which BPI refused to accept. LT then filed a complaint against BPI in the
RTC for specific performance and deposited in court the amount of P800,000.00. Is BPI
legally correct in cancelling its contract with LT? (1993 Bar)
A: BPI is not correct in cancelling the contract with LT. In Lina Topacio v. Court of
Appeals and BPI Investment (G.R. No. 102606, July 3, 1993, 211 SCRA 291), the
Supreme Court held that the earnest mone is part of the purchase price and is proof of
the perfection of the contract. Secondly, notarial or judicial rescission under Art. 1592
and 1991 of the Civil Code is necessary (Taguba v. De Leon, 132 SCRA 722).
Q: Priscilla purchased a condominium unit in Makati City from the Citiland Corporation
for a price of P10 Million, payable P3 Million down and the balance with interest
thereon at 14% per annum payable in sixty (60) equal monthly installments of
P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that
should the vendee fail to pay three (3) successive installments, the sale shall be deemed
automatically rescinded without the necessity of judicial action and all payments made
by the vendee shall be forfeited in favor of the vendor by way of rental for the use and
occupancy of the unit and as liquidated damages. For 46 months, Priscilla paid the
monthly installments religiously, but on the 47th and 48th months, she failed to pay. On
the 49th month, she tried to pay the installments due but the vendor refused to receive
the payments tendered by her. The following month, the vendor sent her a notice that it
was rescinding the Deed of Conditional Sale pursuant to the stipulation for automatic
rescission, and demanded that she vacate the premises. She replied that the contract
cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of
the Civil Code. a) Is Article 1592 applicable? b) Can the vendor rescind the contract?
(2000, 2014 Bar)
A:
a) Article 1592 of the Civil Code does not apply to a conditional sale. In Valarao v. CA,
304 SCRA 155, the Supreme Court held that Article 1592 applies only to a contract of
sale and not to a Deed of Conditional Sale where the seller has reserved title to the
property until full payment of the purchase price. The law applicable is the Maceda Law.
b) No, the vendor cannot rescind the contract under the circumstances. Under the
Maceda Law, which is the law applicable, the seller on installment may not rescind the
contract till after the lapse of the mandatory grace period of 30 days for every one year
of installment payments, and only after 30 days from notice of cancellation or demand
for rescission by a notarial act. In this case, the refusal of the seller to accept payment
from the buyer on the 49th month was not justified because the buyer was entitled to 60
days grace period and the payment was tendered within that period. Moreover, the notice
of rescission served by the seller on the buyer was not effective because the notice was
not by a notarial act. Besides, the seller may still pay within 30 days from such notarial
notice before rescission may be effected. All these requirements for a valid rescission
were not complied with by the seller. Hence, the rescission is invalid.
Q: X sold a parcel of land to Y on 01 January 2002, payment and delivery to be made on
01 February 2002. It was stipulated that if payment were not to be made by Y on 01
February 2002, the sale between the parties would automatically be rescinded. Y failed
to pay on 01 February 2002, but offered to pay three days later, which payment X
refused to accept, claiming that their contract of sale had already been rescinded. Is X’s
contention correct? Why? (2003 Bar)
A: No, X is not correct. In the sale of immovable property, even though it may have
been stipulated, as in this case, that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act (Art.1592). Since no demand for
rescission was made on Y, either judicially or by a notarial act, X cannot refuse to accept
the payment offered by Y three (3) days after the expiration of theperiod.
 BREACH OF CONTRACT
2024 BAR MATTER

DOCUMENTS OF TITLE
In General
Documents of Title to Goods – Includes bills of lading, dock warrants, “quedans” or
warehouse receipts or orders for the delivery of goods
1. This is proof of possession or control of the goods
2. This also authorizes the possessor of the document to transfer or
receive, either by indorsement or delivery, the goods represented by the
document,
Bill of Lading – A document issued by the common carrier acknowledging receipt
ofgoods described therein for transportation to a designated place and delivery to a
named consignee
1. It is a symbol of possession and control of the goods if it is negotiable in
form
2. This authorizes the consignee to transfer the goods to another
3. If properly negotiated, this shall operate as a transfer of possession of the
goods in transit as effectively as a physical delivery thereof
Kinds of Documents of Title
1. Negotiable – the goods described therein are deliverable to bearer or to the
order of the consignee
2. Non-Negotiable – deliverable only to a specified person
Negotiable Documents Of Title
How Negotiated-A negotiable bill of lading may be negotiated bydelivery of the
document to another if by the terms thereof, the goods are deliverable to bearer
When the bill of lading was endorsed in blankby the person to whose order the goods
were deliverable.
If by its terms the goods are deliverable to the order of a specified person, it can only
be negotiated by indorsement of such person.
The following remedies arise from the bilateral nature of the contract of sale:
1. Specific performance
2. Rescission
3. Damages
GR: 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.
Prescriptive periods
1. 10 years if based on written contract
2. 6 years if based on oral contract
Q: Peter and Paul entered into a Contract to Sell whereby Peter, the lot owner, agreed to
sell to Paul his lot on November 6, 2016 for the price of P1,000,000.00 to be paid at the
residence of Peter in Makati City at 1 :00 p.m. If the full price is paid in cash at the
specified time and place, then Peter will execute a Deed of Absolute Sale and deliver the
title to Paul. On November 6, 2016, Paul did not show up and was not heard of from that
date on. In view of the nonperformance by Paul of his obligation, Peter sent a letter to
Paul that he is expressly and extra-judicially declaring the Contract to Sell rescinded and
of no legal and binding effect. Peter further stated that failure on the part of Paul to
contest the rescission within thirty (30) days from receipt of said letter shall mean that
the latter agreed to the rescission. Paul did not reply to this letter for five (5) years. Thus,
Peter decided to sell his lot to Henry in 2021. After hearing that Henry bought the lot,
Paul now questions the sale of the lot to Henry and files a complaint for nullification of
the sale. 1. Is the exercise by Peter of his power to rescind extra-judicially the Contract
to Sell the proper and legal way of rescinding said contract? Explain. 2. In case Paul
made a down payment pursuant to a stipulation in the Contract to Sell, what is the legal
remedy of Peter? (2016Bar)
A:
1. Yes, Peter validly rescinded the contract to sell his lot to Paul for the latter’s
failure to comply with the prestation to pay P1,000,000 on November 6, 2016 at
1:00pm at the residence of Peter so that Peter will execute the Deed of Absolute
Sale. The recission is actually the resolution of the reciprocal obligation.

Who May Negotiate It- Only the owner of the document or one to whom possession or
custody of the document has been entrusted by the owner, may negotiate it. (Art. 1512,
CC)
Rights Acquired by Negotiation- A document of title represents the right of the
consignee in the goods so that:
1. A person to whom a negotiable documentof title had been duly negotiated
acquiresnot merely the rights of his vendor but also whatever rights the
original consignee had over the goods.
2. The buyer of the document of title may acquire a better title than his
vendor, constituting an exception to Art. 1505, CC.
2. If Paul made a downpayment, Peter may still cancel the contract because in a
contract to sell, the seller does not yet agree to transfer ownership to the buyer. The
non-payment of the price in a contract to sell is not a breach for which the remedy
of rescission may be availed of, but rather it is considered as a failure to comply
with a positive suspensive condition which will prevent the obligation of the seller
to convey title from acquiring obligatory force. (Ursal v. Court of Appeals, GR No.
142411, October 14, 2005)

NOTE: The validity of the negotiation of a document of title to an innocent purchaser

for value is not affected by the fact that there was a breach of duty on the part of the
person to whom such document was entrusted by the owner, or by the fact that the
owner of the document was deprived of it by loss, theft, fraud, accident, mistake, duress
or conversion.

Implied Warranties- A person who transfers or negotiates a document of title for value:
1. Warrants not only the genuineness andvalidity of the document and his
right totransfer it
2. BUT ALSO assumed all the warrantiesof a vendor of goods.

Non-Negotiable Documents Of Title

How Transferred- Goods described in a non-negotiable document of title are
deliverable ONLY to a specified person:
1. Thus, the carrier will NOT deliver the goodsto any holder of the
document,
2. Or to whom such document of title may have been endorsed by the
consignee.

There must be evidence of the sale or donation of the goods:

1. The person must present to the carrier thedeed of sale or donation in his
favor.
2. Hence, delivery of such document to a purchaser or donee cannot operate
as a symbolic delivery of the goods described
3. Even if the deed of sale or donation is evidenced in a public instrument,
the execution of such instrument will not operate as a constructive delivery
of the goods described in the bill of lading where the goods are in
possession of a third person.

Rights Acquired by Transfer of Documents of Title

Transfer – the assignment of the rights of the consignee of a non-negotiable document
of title to another.
Also refers to a case where an “order” document of title was sold or assigned, without
indorsement.
The effect of a transfer of document of title is that the transferee does not acquire a
better title than his transferor.

6
WARRANTIES

Warranties - A statement or representation made by the seller contemporaneously 2. IMPLIED WARRANTIES

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 An implied warranty is derived by law, by implication, or inference from the nature of the
shall be as he then represents. transaction or relativation, or circumstances of the parties, irrespective of any intention of
the seller to create it.
Not every false representation voids the contract, only those matters substantially
affecting the buyer’s interest, not matters of opinion, judgment, probability, or
Implied Warranty of Title
expectation. When the buyer undertakes his own investigation, and the seller does
nothing to prevent it from being as full as the buyer chooses, the buyer cannot 1. Implied Warranty against Encumbrance/Non-Apparent Servitudes
afterwards allege misrepresentations. Requisites for breach:
a. Thing sold is an immovable
Economic Loss Doctrine: Where the defect makes the goods less valuable b. Burden or servitude encumbering the thingsold is:
Condition v. Warranty i. Non-apparent to the naked eye
Article 1545, CC: Where the obligation of either party to a contract of ii. Not mentioned in the agreement
sale is subject to any condition which is not performed, such party may iii. Of such nature that it must bepresumed that the
refuse to proceed with the contract or he may waive performance of the buyer would nothave bought it had he been aware
condition. If the other party (seller) has promised that the condition should of it
iv. Not recorded in the Registry of Property unless
happen or be performed, such first mentioned party (buyer) may also treat
there is an express warranty that the thing is free
the nonperformance of the condition as a breach of warranty. from all burdens and encumbrances (Art. 1560,
CC)
Where the ownership in the thing has not passed, the buyer may treat the
fulfillment by the seller of his obligation to deliver the same as described 2. Implied Warranty against Hidden Defects(Art. 1547, CC)
and as warranted expressly or by implication in the contract of sale as a
condition of the obligation of the buyer to perform his promise to accept Requisites for breach:
and pay for the thing.
The defect renders the thing sold unfit for the use for which it was intended
Condition Warranty 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
Pertains to and affects the existence of the Goes into the performance of an
price;
obligation obligation and may, in itself, be an
a. The defect is not patent or visible;
obligation b. The buyer is not an expert who, by reason of his trade or
Non-happening does not amount to breach Non-fulfillment constitutes breach of profession,should have known the defect
of contract contract c. The seller is aware of the hidden fault or defect, OR even if he is
Must be stipulated Stipulation or operation of law not aware thereof, if there is no stipulation to thecontrary
May attach either to the seller’s duty to Always relates to the subject matter or (Art.1566)
deliver thing or some other circumstances the seller’s obligations as to the subject
matter 3. Implied Warranty as to Merchantable Quality and Fitness of Goods
Merchantable Quality
a. Where the goods are brought by description from a seller who
Express Implied deals in goods of that description (Art. 1562, CC)
Nature is Contractual; Freely Represented Constituted by Law b. In a sale by sample, if the seller is a dealer in goods of that kind
Stipulated by parties, thereby binding Only seller is bound, whether or not and the defect is not apparent on reasonable examination of the
both the seller and buyer intended or known by the parties sample (Art. 1566, CC)

Warranty of merchantability is warranty that goods are reasonably fit for

the general purpose for which the same are sold.
1. EXPRESS WARRANTIES
Warranty of fitness is warranty that goods are suitable for the special
purpose of the buyer which will not be satisfied by mere fitness for general
For there to be express warranty, the following requisites must concur: purposes.
1. 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 In a sale by sample, there is implied warranty that goods are free from defects
to buy; not apparent on reasonable examination of sample and which render goods
3. The buyer buys the thing relying thereon. (Art. 1546, CC) unmerchantable.
4. Made before the sale, not upon delivery or any other point
“Fitness for a particular purpose”: Where the buyer expressly or impliedly
Express Warranty v. Dealer’s/Trader’s Talk makes known to the seller the particular purpose for which the goods are
Article 1546, CC: Any affirmation of fact or any promise by the seller acquired AND it appears that the buyer relied on the seller’s skill or judgment
relating to the thing is an express warranty if the natural tendency of such (Art.1562(1), CC)
affirmation or promise is to induce the buyer to purchase the same, and if
4. Implied Warranty against Redhibitory Defect in the Sale of Animals(Art.
the buyer purchase the thing relying thereon. No affirmation of the value 1572, CC)
of the thing, nor any statement purporting to be a statement of the seller's
opinion only, shall be construed as a warranty, unless the seller made such Redhibitory defect – a hidden defect of animals of such nature that expert
affirmation or statement as an expert and it was relied upon by the buyer. knowledge is not sufficient to discover it, even in a case where a professional
inspection has been made
Article 1340, CC: The usual exaggerations in trade, when the other party
had anopportunity to know the facts, are not in themselves fraudulent. No warranty in case of(Art. 1574, CC)
a. Animals sold at fairs or public auctions
Article 1341, CC: A mere expression of an opinion does not signify fraud, b. Livestock sold as condemned
unless made by an expert and the other party has relied on the former's
special knowledge. The following sales are void(Art. 1575, CC)
a. Sale of animals suffering from contagiousdiseases
b. Sale of animals unfit for the purpose forwhich they are acquired
Express Warranty v. False Representation
as stated in the contract
Article 1342, CC:Misrepresentation by a third person does not vitiate
consent, unless such misrepresentation has created substantial mistake and 5. Quality and Fitness of Goods in Sale by Sample or Description
the same is mutual.
6. Other Warranties

Express Warranty False Representation Implied warranty arises by operation of law and need not be stipulated in
Concealment of When concealment of facts comes with an the contract of sale.
facts does not active misstatement of fact or a partial
necessarily amount statement of fact, such that withholding of that Warranty of Seller’s Right to Sell: Seller warrants his right to sell at the
time the
to false unsaid portion makes that which is stated
ownership is to pass.
representation. absolutely false.
Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person
However, a buyer who fails to inspect the professing to sell by virtue of authority in fact or law. (Art. 1547, CC)
condition of property despite ample
opportunity to do so when there is no Warranty against Eviction: Seller warrants that buyer, from the time
opposition on the part of seller to inspect ownership passes, shall have and enjoy legal and peaceful possession of the
cannot later on allege false representation. thing. Its requisites are:

1. Buyer is deprived of the whole or a part of the thing sold;

2. Eviction is by final judgment;
Final judgment based on a right prior to thesale or an act
imputable to the vendor;
3. Seller is summoned and made co-defendant in the suit for eviction
at the instance of the buyer

7
3. EFFECTS OF WARRANTIES 4. EFFECTS OF WAIVERS
a. Natural tendency is to induce buyer to purchase the subject matter
b. Buyer purchases subject matter relying thereon Only applicable to waiver of warranty against eviction; parties may increase or decrease
c. Seller liable for damages in case of breach 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
Buyer’s Options in Case of Breach of Warranty eviction (pay value of subject matter at the time of eviction)
Remedies of buyer for breach of warranty, both implied and express: c. Buyer with knowledge of risk of eviction assumed its consequences and made
a. Accept goods + demanddiminution/extinction of price a waiver – vendor NOT LIABLE
b. Accept goods + damages d. Waiver to a specific case of eviction – WIPES OUT WARRANTY as to that
c. Refuse to accept goods + damages specific risk but not as to eviction caused by other reasons
d. Rescind (Refuse to accept or return or offer to return) + recover price paid (Art.
1599, CC)

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 heaccepted the goods without protest
b. Fails to notify the seller about election torescind 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
ofwarranty

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

IMPLIED WARRANTY AGAINST EVICTION

Total Eviction Partial Eviction

Enforce liability for eviction Enforce liability (demand VICED)
OR
Demand from seller: (VICED)
a. Value of thing sold at time of Rescind within 6 months from delivery
eviction a. If he would not have bought
b. Income or fruits, if he has been the thing sold without the
ordered to deliver them to the part lost;
party who won the eviction suit b. BUT he must return the
c. Costs of eviction suit and in a thing without other
proper case, suit against seller encumbrances than those
for warranty which it had when he
d. Expenses of the contract, if acquired it
buyer has paid them
e. Damages and interests, and
ornamental expenses, IF sale
was made in bad faith

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:
a. Withdraw from contract (accionredhibitoria) + damages
b. Demand a proportionate reduction of theprice (accionquantiminoris) + damages

If the thing is LOST

Due to hidden fault Due to fortuitous event or fault of buyer
If seller aware of defect, buyer may demand: Demand:
a. Return of price a. Price paid minus value of
b. Refund of expenses thing when it was lost
c. Damages b. Damages, if seller acted in bad
faith
If seller not aware of defect:
Buyer may demand price and expenses BUT
NOT damages