REGULATORY FRAMEWORK IN BUSINESS TRANSACTIONS

TOPIC 3: LAW ON SALES

SALES (ARTICLE 1458 – 1623, Civil Code)

ARTICLE 1458: One of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing,
and the other obligates himself to pay.

ELEMENTS OF CONTRACT OF SALE

1. Essential elements/requisites - without it, contract cannot exist (Consent, Object, Cause)
2. Natural elements - already exist in a contract even do not stipulate it (warranty against eviction, warranty against hidden
defects and encumbrances)
3. Accidental elements - parties stipulated (terms, place and time of payment and other conditions agreed upon)

CHARACTERISTICS OF CONTRACT OF SALE

1. Perfection/Consensual – perfected by mere consent
2. Bilateral – both parties are bound by reciprocal obligations
3. Commutative – there is equivalent prestation of the parties
4. Principal – does not depend upon another contract
5. Onerous – parties give valuable consideration in order to acquire rights
6. Nominate – has a special law given it by law
7. Aleatory – sale of hope, no equivalence in the value of the prestations

FORMS OF A CONTRACT OF SALE

GENERAL RULE: A contract of sale may be made in writing, word of mouth, partly writing or partly word of mouth, must be
inferred from the conduct of the parties

1. The law requires a document or other special form, the contracting parties may compel each other to observe the form.
(Art. 1357)
2. Under the Statute of Frauds – MUST BE IN WRITING TO BE ENFORCEABLE
 Sale of real property or any interest therein (regardless of the price)
 Sale of goods, chattel mortgage or things in action (500 or more)
3. Sale of piece of land through an AGENT – MUST BE IN WRITING
 Agent authority to sell is not in writing – VOID
 Agent authority to sell is in a public/private instrument
o Orally – ENFORCEABLE
o In public/private instrument - VALID

Note: In order that the sale may be recorded in the Register of Deeds, both authority of the AGENT and the SALE must be in
PRIVATE INSTRUMENT.

A CONTRACT OF SALE MAY BE ABSOLUTE OR CONDITIONAL:

1. In absolute sale, no condition is imposed and ownership transfers upon delivery
2. A conditional sale contemplates a contingency

DISTINGUISHED FROM OTHER TRANSACTIONS

Sale Donation Sale Barter

 Onerous  Gratuitous/Onerous  Cause or  Party in money and partly in another thing
 Consensual  Formal Contract consideration is  Value of the thing given as a part of the
 Law on Sales  Law on Donation money consideration exceeds the amount of the money
or its equivalent

Payment by Cession or Cession de

Sale
 No pre-existing credits
 Creates obligations
 Seller – Cause is the price
 Buyer – Delivery of the object
 Greater freedom in fixing the price
 Ownership is transferred to the buyer
Dacion en Pago
 Pre-existing credits
 Extinguishes obligations
 Seller – Cause is the extinguishment
of the obligation
 Buyer – Delivery of the object
 Less freedom in fixing the price
Bienes
 Pre-existing credits
 Extinguishes obligations
 Debtor – Cause is the extinguishment
of the obligation
 Creditor – Assignment of the things to
be sold
 Less freedom in fixing the price
 Creditors DO NOT become the
owners of the properties

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 Sale Agency to Sell
 Property passes to the vendee upon the delivery of  Title to the goods is not transferred to the agent, the risk of loss
the thing sold remains with the principal
 The buyer is required to pay the price  Agent is required to turn over to the principal the price of goods

Sale Piece of Work

 Manufactured in the ordinary course of business  Manufactured specially for the customer and upon special order

Sale Contract of Agency to Sell

 Property passes to the vendee upon the delivery of
the thing sold
 Vendor has lost and cannot recover ownership
unless the contracts is rescind or resolved.
 Non-payment of the price is a negative resolutory
 The risk of loss is on the buyer.
 Only one contract between seller and buyer
 Not pass to the vendee until full payment of the purchase price
 Ownership is retained by the seller
 Non-payment of the price is a positive resolutory
 The risk of loss is on the seller
 Two contracts: (a.) Contract to Sell and (b.) Deed of Absolute
Sale (executed after full payment of the purchase price)

ESSENTIAL ELEMENTS OF CONTRACT OF SALE

Vendor / Seller – has the right to transfer the ownership of the thing at the time it is delivered
Vendee / Buyer – legally capacitated to enter into contract

 Incapacity – cannot give consent

CONSENT
1. Absolute Incapacity – cannot give consent to any and all contract
2. Relative Incapacity – prohibited from entering some specific transactions

Minors and those without Capacity to Act – valid contract of sale of necessaries
 The subject matter which may be things or rights

Service cannot be the object of contract of sale.

Rules on the object of the contract of sale

 Requisites
a. Must be licit or within the commerce of men
b. VENDOR must have the rights to transfer the ownership
c. Must be determinate
d. Either be existing goods or things having potential existence
OBJECT
 Emptio Rei Speratae – sale of future things; must come into existence
 Emptio Spei – sale of present time; produce effects even if the thing hoped does not come into
existence
 Vain Hope – VOID
e. May be segregated or an undivided share or interest
f. Things subject to resolutory condition
g. Sale of fungible goods (interchangeable goods)
 The mass is more than the quantity sold – parties became co-owners
 The mass is less than the quantity sold – the buyer becomes the owner of the whole mass,
the seller is bound to make the deficiency from goods of the same kind and quality
 Price is the sum stipulated as the equivalent of things
 The prestation or promise to be performed by the other part
 The delivery of the object and the payment of the price

Rules on price
 Must be certain
 Reference to another thing
CAUSE  Determination left to judgment of a special person/s
o Unable or unwilling to fix it, hence, no contract of sale
o Acted in bad faith or by mistake, courts may fix the price
o Prevented from fixing the price, the party not in fault may have such remedies
 Failure to pay the consideration vs lack of consideration
 Gross inadequacy of price does not affect the contract of sale
 Simulated price is VOID, but the act may be shown to have been in reality a DONATION
 The price is fixed by one of the parties is accepted by the other, the sale is perfected.

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As to money given
As to perfection
Obligation of the buyer upon
payment of consideration
As to recovery
As to transfer of ownership
Effect of Non-payment
OPTION MONEY
Distinct consideration for an option contract
Applies to resale not yet perfected
Prospective buyer is not required to buy
If buyer does not decide to buy, it cannot
be recovered
Ownership is reserved to the seller and is
not to pass until full payment
Specific performance
EARNEST MONEY
Forms part of the purchase price
Given only when there is already a sale
The buyer is bound to pay the balance
If sale did not materialize, it must be
returned
Title passes to the buyer upon delivery
of the thing sold.
Specific performance and rescission

STAGES OF FORMATION OF CONTRACT OF SALE

1. Negotiation – communication of the offer to buy/sell to the other party.

2. Perfection – contract of sale is perfected
3. Consummation – contract of sale takes place by the delivery of the thing

PERFECTION OF A CONTRACT OF SALE

Consensual Contract  Perfected by mere consent

Transfer of  GENERAL RULE: happens only after the delivery, either actual or constructive
Ownership  EXCEPT: the parties agreed that ownership will not pass until full payment of the price
 Each lot is subject of a separate contract of sale
 Auction is perfected
 Rights of parties before perfection
o Any bidder may retract his bid
o Withdrawal of goods is equivalent to a rejection of the offer
 Rights of parties after perfection – the bidder CANNOT retract his bid
 Right of seller to bid
Sale by Auction  GENERAL RULE: Has no right to bid.
 REQUISITIES
o Must have been reserved expressly
o Notice must be given that the sale is subject to a right to bid; AND
o Must not be prohibited by law or stipulated

“By bidders” or “Puffers” refer to the persons employed by the SELLER to bid in his behalf, the
purpose is to raise the price, but the said persons ARE NOT in themselves bound by their bids.

SALE OF GOODS BY DESCRIPTION OR SAMPLE: the contract may be rescinded if the bulk of the goods delivered do
not correspond with the description or the sample.

SALE OF GOODS BY DESCRIPTION AND SAMPLE: if the contract be by sample as well as description, it is not sufficient
that the bulk of goods correspond with the sample if they do not also correspond with the description.

The buyer shall have a reasonable opportunity of comparing the bulk with the description or the sample.

INSTALLMENT SALES

“Article 1484 or the Installment Sales of Personal Property” To guard against seller misuse in
cases that a buyer is unable to make additional payments on a property.

ALTERNATIVE REMEDIES OF THE SELLER

1. Exact fulfillment – fail to pay
2. Vendee’s fail to pay (two or more installments)
a. Cancel the sale – mutual restitution but seller is allowed to retain a reasonable
amount or all of it if there is forfeiture clause
RECTO LAW
b. Foreclose the chattel mortgage – foreclosed the mortgage on the personal property
itself

GENERAL RULE: The seller is allowed to retain a reasonable amount of the purchase price
already paid as compensation for the use of the thing (rent), or ALL of the amount paid only if
there is a forfeiture clause which entitles him to the purchase price already paid at the time of
cancellation.
EXCEPTION: the retention of ALL the purchase price would be unconscionable.

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 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT
PAYMENTS
(Republic Act. No. 6552)
 Transaction Covered – residential realty installments
 Rights of the buyer
 Less than 2 years of installments
o Grace period – pay without interest within 60 days, can applied once every 5 years
o The buyer may sell or assign his interest.
o Pay the entire balance.
 After least 2 years of installments (additional rights)
o In addition to 60 day grace period, the buyer have additional 1 month grace period for every
year of installment payments
o Seller will exercise his right to rescind the contract, required to give Cash Surrender Value
to the buyer.

Cash surrender value equivalent

 Minimum of 50% of all payment (including downpayment) +
 5% after 5 years;
 An additional 5% every year but not exceed 90%.
MACEDA LAW
VOID STIPULATIONS:
 Stipulation as to interest or damages or penalty during the grace period
 Forfeiture clause
 Automatic cancellation or rescission upon default of the buyer

RESCISSION REQUIREMENTS: The actual rescission will take effect only 30 days from complying
with both:
 Notice to be given as to the buyer intention to rescind
 Payment of the cash surrender value

 Additional rights
 Buyer’s right
o To sell his rights to another
o To assign his right to another
o To reinstate the contract by updating the contract
 Pay in advance any installment
 Ask for any annotation of the full payment

MACEDA LAW IS NOT APPLICABLE TO A LOAN TRANSACTION.

Regulating the sale of subdivision lots and condominiums, providing penalties for violations
thereof. (PD. No. 957)
 Subdivision Lot – whether residential, commercial, industrial
CONDOMINIUM  Condominium Unit – intended for any type of independent use or ownership, including one or more
ACT spaces
“The Subdivision
and
Rules affecting installment purchases of Condominium
Condominiums
Buyers Protective
 Non-forfeiture of payments – Buyers in a subdivision or condominium project cannot have their
Decree” installment payments forfeited if they choose to stop making payments due to the owner or
developer's failure to develop the project according to the approved plans and within the specified
time limit.
 Failure to pay installments – governed by RA 6552

OBLIGATIONS OF THE VENDOR

1. To take care of the thing after the contract has been perfected, prior to delivery.

Loss of the thing pending delivery:

 Object is entirely lost – contract shall be without any effect
 Thing lost in part only, the buyer may choose between:
o Withdrawing from the contract;
o Demanding the remaining part

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  The goods without the knowledge of the seller have perished in part or have wholly or in a material part so
deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale:
o As avoided
o As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the
buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible.

Risk of Loss: GENERAL RULE: the thing perishes with the owner, following the principle of res perit domino.

Exceptions:
a. Stipulation
b. Security title – Where delivery of the goods has been made to the buyer or to a bailee for the buyer
c. Delay in the delivery – whoever causes the delay shall bear the risk of loss

Sale of Return Sale on Approval

 Ownership of the goods passes to the  Ownership of the goods passes to the buyer
buyer upon delivery upon his acceptance
 The risk of loss is on the buyer  The risk of loss is on the seller
 The buyer may return the goods even if he  The buyer has no right to return the goods if
is satisfied of its quality he satisfied of its quality.

The ownership passes to the buyer:

a. Signifies his approval
b. Retains the goods without giving notice of rejection

2. Obligation to pay taxes and incidents of the sale, unless otherwise, agreed upon;
3. To warrant the thing
4. To transfer ownership

SELLER IS NOT THE OWNER:

General Rule: the buyer acquires no better title to the goods than the seller had

Exceptions: In all of these exceptions, the buyer acquires GOOD TITLE to the object even if the seller is not the owner.
a. Seller is authorized by the owner - such as an agent.
b. Seller had statutory or judicial authority to sell - such as a guardian, executor, administrator, or court sheriff.
c. In cases of estoppel:
o As to the owner: estoppel in pais - by his conduct or representation, he led the buyer to believe that the seller
had authority to sell.
o As to the seller: estoppel by deed - if after the sale, the seller acquired ownership, such ownership automatically
passes to the buyer as to the thing already delivered
d. Sale of an Apparent Owner: REQUISITES:
i. There is apparent ownership
ii. Buyer in good faith and for value - the buyer had no knowledge of any defect in the seller's title at the time of
full payment (not only at the time of sale).
iii. There must be a law from which apparent ownership may be had, such as:
a. PD 1529 which provides that those dealing with registered land need not inquire beyond the title,
also known as the mirror principle, unless the buyer is required under the law to exercise the
highest degree of diligence, e.g., banks and public utility companies.
b.
e. Purchase from a Merchant Store, Market or Fair in good faith and for value

5. To deliver the determine thing or specific thing including the fruits from the moment the obligation to deliver arises
and the accessions and accessories thereof

MODES OF DELIVERY: THINGS

Kinds of Delivery or Tradition
1. Actual Delivery Actual and physical transfer
2. Constructive or Legal Delivery
By legal formalities sale is made through a public instrument
Symbolic delivery (traditio simbolica) applies to movable thing e.g., keys
Traditio Longa Manu usually pointing to the thing sold; delivery of the long hand
at the time and after the sale, the buyer is in and remains in possession;
Brevi Manu
delivery of the short hand

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Constitutum Possessorium
Execution of the Required Formality
3. Delivery of Common Carrier
at the time and after the sale, the seller is in and remains in possession;
delivery by agreement of possessors
Execution of public instrument
The parties agreed that the seller will deliver to the common carrier for ultimate
delivery to the buyer. EXCEPT:
a. Ownership is reserved by the seller
b. Seller reserved possession
c. Bill of exchange

Document of the title to goods – any document used in the ordinary course of business
1. Bill of lading – written acknowledgement of the receipt of the goods to the carrier
2. Dock warrant – given by dock owner to the owner of goods imported
3. Warehouse receipt or order – written acknowledgement by warehouseman of the receipt of the goods

Warranties of a person transferring or negotiating a document of title

1. The document is genuine
2. Has a legal right to negotiate or transfer it
3. Has knowledge of no fact which would impair the validity or worth of the document
4. Has a right to transfer the title of the goods

MODE OF DELIVERY: RIGHTS

a. By execution of an instrument
b. Quasi Traditio
a. The title of ownership is placed in the possession of the vendee
b. The use of the vendee of his rights with the vendor’s consent

TIME AND PLACE OF DELIVERY OF THING SOLD

a. Place of delivery
a. Place stipulated
b. Place fixed by usage or trade
c. In the absence of both, the seller’s place of business or residence
b. Time of delivery of goods
a. Time stipulated
b. Delivery must be made within a reasonable time
c. Goods in the possession of third person – seller fails to deliver the goods unless third persons acknowledges to the
buyer to hold the buyer’s goods on his behalf
d. Demand or tender of delivery – made by reasonable hour
e. Expenses of delivery – seller bears the expenses unless otherwise stipulated

SELLER IS NOT BOUND TO DELIVER

a. It is a pure obligation and the buyer does not pay
b. If there is a period agreed upon, the obligation to deliver shall be demandable at once

QUANTITY TO BE DELIVERED:

DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF PERSONAL PROPERTY
1. Less than quantity agreed upon
a. Reject the goods
b. Accept the goods
i. Full contract price if he knew that the seller is not going to perform the contract in full
ii. Fair value of the goods delivered if without such knowledge

2. Greater than quantity agreed upon

a. Accept the goods agreed and reject the rest
b. Accept the whole of goods and pay for them at the contract rate
c. Reject the whole of goods if they are indivisible
3. Mixed
a. Accept the goods agreed upon and reject the rest
b. Reject the whole goods if the sale is indivisible

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DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF REAL ESTATE

A. At a Rate of a Certain Price for a Unit of Measure or Number

1. Less than that stated in the contract, buyer may ask for:
a. Ask for a specific performance and demand of delivery of the shortage
b. Ask for the proportionate reduction of the price
c. Rescind the sale if lack in area is at least 1/10; or the buyer would not have entered into the contract
2. More than that stated in the contract, buyer may:
a. Accept the area stated and reject the rest
b. Accept the whole and pay for them at the contract rate
3. Area is same but a part of the immovable is not of the quality specified
a. Proportionate reduction of the price if the inferior value of the thing does not exceed 1/10 of the price agreed upon
b. Rescind the sale if the inferior value of the thing exceeds 1/10 of the price agreed upon.

SALE OF REAL ESTATE FOR A LUMP SUM PRICE

 Agreed price regardless of the actual agreed are

If the actual are is bigger and the seller only delivered the agreed area:
a. Reduce the price to be paid, in proportion to what is lacking
b. Rescind the contract

RIGHTS OF UNPAID SELLER

Possesory Lien
 Right to retain the goods or right to withhold delivery of goods

Grounds:
a. Where the goods have been sold without stipulation as to credit
b. Where the goods have been sold on credit, but the credit term has expired
c. Where the buyer is insolvent

Stoppage to Transit
 Right of the unpaid seller to resume possession of the goods at any time while in transit

Requisites:
a. Seller parted with the possession of the goods,
b. The goods are already in transit
c. Buyer becomes insolvent

How exercised
i. By obtaining actual possession of the goods
ii. By giving notice of his claim to the carrier

Effects of exercise of rights of stoppage to transit

i. Goods are no longer in transit
ii. Contract of carriage ceases
iii. Carrier must redeliver the goods to

When goods are in transit

i. From the time they are delivered to the carrier or other bailee
ii. Goods are rejected by the buyer, the carrier continues in possession of them

Goods no longer in transit

i. Buyer obtains delivery of goods
ii. Carrier acknowledges to the buyer or his agent

Resale

Grounds
 Goods are perishable in nature
 Seller expressly reserved the right to sell
 Buyer has been in default
Requisites
a. Buyer has defaulted the payment price.
b. Seller has the right of lein
c. Title of goods passed to the buyer
d. Resell of goods in a public or private sale.

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Rescission

Grounds
a. Seller has expressly reserved the right to rescind the sale
b. Buyer has been in default in the payment

RULES ON DOUBLE SALE

Double Sale exist when the following requisites are present:

1. Two or more transactions constitute valid sales
2. Sales pertain to exactly the same object or subject matter
3. Object must be bought from the same immediate seller
4. Two or more buyers; represents conflicting interest

Rules of Preference in case of Double Sale

1. Movable Party
a. Ownership shall be transferred to the person who first took possession of the property in good faith.
b. Either be actual or constructive

2. Immovable Party
a. Ownership shall belong to the person who in good faith first registered the sale in Registry of Property first registrant
in good faith
b. If there was no registration, ownership shall belong to the person who first took possession thereof in good faith
first possessor in good faith
c. In the absence of both registration and possession, ownership shall belong to the person who presents the oldest
title in good faith.

CONDITIONS AND WARRANTIES

Conditions
 Conditions which is not fulfilled, other party may choose to:
1. Refuse to proceed with the contract
2. Waive the performance of the condition
3. Treat the non-performance as a breach of warranty and ask for damages

Warranties
Kinds:
1. Express – affirmation of fact or promise by the seller relating to the thing whose natural tendency is to induce the buyer
to purchase the same

2. Implied
a. Warranty against eviction – warranty on the part of the seller that has the right to sell the thing at the time when
ownership is to pass.

Eviction – the deprivation of the vendee of the whole or a part of the thing sold by virtue of a final judgment

Requisites:
a. Purchasers has been deprived of the whole or part of the thing sold.
b. Eviction is the final judgment. (Article 1549)
c. Deprivation is based on a right prior to the sale or an act imputable to the vendor. (Article 1548)
d. The vendor must have been notified of the suit for eviction at the instance of the vendee. (Article 1558)
Seller’s liable for breach of warranty against eviction
a. Sale of the property for non-payment of taxes – vendor is liable for EVICTION.
b. Judicial sales – debtor is liable for EVICTION.

Vendor’s liability in case of eviction

a. If the seller is in bad faith, he shall be liable for: (VICED)
i. Value of the thing at the time of eviction
ii. Income or fruits, if the vendee has been ordered to deliver them to the party who won the suit against him.
iii. Cost of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor
for the warranty.
iv. Expenses of the contract, if the vendee has paid them.
v. Damages and interest, and ornamental expenses, if the sale was made in bad faith.

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 b. If the seller is in good faith, he shall be liable for:
i. Waiver Consciente – the buyer is not aware of the risk of eviction, and vendor shall pay only the value of the
thing sold at the time of eviction.
ii. Waiver Intencionada – the buyer is aware of the risk of eviction, and vendor shall not be liable.

Remedies of the Vendee in case of partial eviction

a. Rescission of the contract
b. Enforcement of the vendor’s liability for eviction

b. Warranty against hidden defects

Hidden Defects – it would render the thing unfit for its intended use

Requisites:
a. Defect must exist at the time of sale.
b. Defect must be hidden, not patent or visible.
c. Defect must render the thing unfit for the use
d. The action to enforce, must be made within the period provided by law.

Warranties included
a. Implied warranty of fitness for a particular purpose

Requisites:
i. Buyer makes known to the seller
ii. Buyer has relied upon the seller’s skills

b. Implied warranty of merchantable quality – goods are fit for general purpose of the thing
c. Implied warranty of merchantability – the seller is a dealer, goods shall be free from any defect

Responsibilities for hidden defects

General Rule: vendor shall be liable to the vendee for any hidden faults or defects
Exceptions: vendor shall not be liable if there is a stipulation

Remedies of vendee in case of breach

a. Accion Redhibitoria – Withdrawing from the contract or rescission
b. Accion Quana Minoris – Demanding a proportionate reduction in the price

Rules in case of loss of the thing with hidden defects

1. Cause of the loss is defect
a. Vendor was aware of the defect
i. To return the price
ii. To refund the expenses of the contract
iii. To pay damages
b. Vendor was not aware of the defect
i. To return the price
ii. To pay interest thereon
iii. To refund the expenses of the contract
2. Cause of loss through fortuitous events
a. Vendor was aware of the defect
i. To return the price paid less the value of the thing at the time of loss
ii. To pay damages
b. Vendor was not aware of the defect
i. To return the price paid less the value of the thing at the time of loss

Rules in sale of animals with defects or disease

1. Sale of animals with redhibitory defects
a. Redhibitory defects – defect that expert knowledge after a professional knowledge
b. Remedies
i. Rescission of the sale
ii. Ask for a proportionate reduction in its price
c. Redhibitory must be filed within 40 days from the date of delivery to the vendee
2. Sale of animals is VOID
a. Animals are suffering from contagious disease
b. Animals are found to be unfit for the use

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 3. Vendor’s liability in case the animal sold dies of disease – he shall be liable for the death of the animal sold
a. The disease existed at the same time
b. The disease is the cause of death of the animal
c. Animal dies within 3 days from the time of purchase
4. Sale without warranty against hidden defects – NO WARRANTY

c. Warranty against non-apparent encumbrances

Rules on easement or servitude

Easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable
belonging to a different owner.

Kinds:
a. Apparent easement – made known and continually kept in view by external signs that reveal its use and enjoyment.
b. Non-apparent easement – shows no external indication of existence

Requisites:
a. Easement must be non-apparent
b. Must not have been mentioned in the agreement.
c. Nature must be presumed.

Vendee’s Remedies
a. Within one year
i. Rescission
ii. Damages
b. After one year
i. Damages, within a period a period of one year

Vendor not liable for easement

a. Easement is apparent
b. Non-apparent easement is recorded in the Registry of Property
c. Vendee had knowledge at the time of the sale of existence

Persons not liable for breach of contract

a. Sheriff b. Auctioneer c. Mortgager d. Pledge
e. Other person professing to sell by virtue of authority in fact or law

Republic Act No. 7394 “Consumer Act” approved on April 13, 1992 and published in the Official Gazette on June 15,
1992
1. Person Liable
a. Manufacturer b. Distributor c. Retailer
2. Minimum standards for warranties
a. Consumer product within a reasonable time and without charge in case of defect
b. Permit to consumer to elect whether to ask for a refund
3. Duration of warranty
a. The period stipulated by the seller and consumer when the express warranty shall be enforceable.
b. Warranty shall endure not less than 60 days nor more than 1 year
4. Remedies for breach of contract
a. Express b. Implied
i. Repair the product. In whole or part i. Retain the goods and recover damages
ii. Refund the purchase price ii. Reject the goods, cancel the contract, and recover the seller purchase price

OBLIGATIONS OF THE VENDEE

 To accept the delivery of the thing sold.

Delivery of goods in installments – buyer is not bound to accept the goods in installments unless otherwise agreed
upon.

If the seller makes defective deliveries, the injured party may:

a. Refuse to proceed further contract
b. Claim compensation but not damages

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 Right of the buyer to examine goods before accepting goods
General Rule: Buyer has the right to examine the goods before accepting them
Exceptions:
a. When there is an agreement to the effect.
b. When there is a stipulation that the goods shall not be delivered to the buyer until he has paid the price.

Effect of acceptance of goods on seller’s liability for breach of contact

General Rule: Seller is not discharged from liability in damages
Exceptions: Seller is discharged from liability in the following cases:
a. If there is an agreement, whether express or implied.
b. If the buyer fails to give notice to the seller any breach of contract

Effect when buyer refuses to accept the delivery

a. If refusal to accept delivery is justified.
i. Buyer has no duty to return goods to the seller unless otherwise agreed
ii. Title to the goods does not pass to him
iii. He shall not obliges to pay the price
iv. Constitute himself as depository of the goods, he shall liable as such

Obligation of the buyer

It is sufficient that the buyer notifies the seller that he refuses to accept the goods.

b. If refusal to accept delivery is not justified.

i. Title of the goods passes to the buyer from the moment the goods are placed
ii. Obliged to pay the price

 To pay the price of the thing.

a. Time and place of payment of the price
i. At the time and place stipulated
ii. Time and place of delivery of the thing
b. Interest will be paid on the price
i. If there is a stipulation – is the rate was not indicate, the rate shall be 6%
ii. If the thing sold produces fruits or income
iii. If he is in default, from the time of judicial demand of payment of the price
c. Suspension of payment of price
i. Grounds
 Disturbance in the vendee’s possession or ownership
 Grounds to fear such disturbance, by vindicatory action
ii. Right to suspend payment not available
 Vendor gives security for the return of the price
 Vendee shall pay the price notwithstanding
 Disturbance is mere act of trespass
d. Rescission by vendor
i. Immovable
 Vendor is entitled to sue for immediate rescission
Grounds: The loss of the immovable sold, and its price. If one or both grounds do not exist, the vendor may
choose between: fulfillment of the contract with damages, and rescission of the contract and damages.
 Pactum Commissorium – NOT VALID

ii. Movable – shall take place in the interest of the vendor

 Does not appear to receive the thing
 Having appeared, does not pay the price

ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS

Actions by the seller Actions by the buyer
 Maintain an action for the price of the goods if  Bring an action specific performance
the buyer wrongfully neglects or refuses to pay.  In case of breach of warranty by the seller, the buyer may:
 Maintain an action for damages if the buyer  Accept or keep the goods and set up against the seller
wrongfully neglects or refuses to accept and pay  Accept or keep the goods and maintain an action against for
the goods. damages
 Rescind the contract if the buyer has repudiated  Refuse to accept the goods, and maintain an action against the
the sale or manifested his inability to perform his seller for damages
obligation.  Rescind the sale and refuse to receive the goods

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 EXTINGUISHMENT OF A CONTRACT OF SALE

Sales are extinguished by same clauses as all other obligation, and by redemption, whether conventional or legal

Conventional Redemption Legal Redemption

 Right to repurchase  Right to be subrogated upon the same terms and
 Ownership: transfers to the vendee-a-retro upon delivery conditions stipulated in the contract
 Amount to be paid at the time the right is exercise:  Period redemption
Purchase price, expenses of the contract, useful and  Pre-emption – within 30 days from written notice by
necessary expenses prospective vendor
 Period redemption  Redemption – within 30 days from written notice by
 No period is fixed vendor
o 4 years from the date of the contract  Recording of sale – the deed of sale shall not be
 Fixed by the parties recorded in the Registry of Property, unless
o Does not exceed ten years – 5 years from the date of the accompanied by an affidavit of the vendor
contract  Period to exercise legal right of redemption – 30 days
o Exceeds ten years – 10 years from the date of the contract from notice in writing by the prospective vendor
 The vendor may exercise his right to repurchase after 10
days

Equitable Mortgage – lacking in some formality

Contracts presumed to be an equitable mortgage

a. When the price of a sale with a right to repurchase is unusually inadequate
b. When the vendor remains in possession as lessee or otherwise
c. When the period for the exercise of the right to repurchase is extended
d. When the purchaser retains for himself a part of the purchase price
e. When the vendor binds himself to pay the taxes on the thing sold
f. When the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any
obligation

Multiple Parties
1. SALE OF UNDIVIDED IMMOVABLE – vendee eventually acquires the whole, may compel to vendor to redeem the whole
property
2. SEVERAL PERSONS JOINTLY AND IN THE SAME CONTRACT – sell an undivided immovable with a right to
repurchase:
a. SELLERS – can only redeem their share
b. BUYER – can compel of the entire property, cannot compelled to agree to a partial redemption
3. CO – OWNERS SOLD SEPARATELY – each can exercise his own right of redemption and cannot be compelled to
redeem the whole property

AMOUNT TO BE PAID MULTIPLY

SUBJECT MATTER
FOR REDEMPTION REDEMPTIONERS
Co – owners Real or personal Purchase price, unless
All pro-data
property grossly excessive
Adjacent rural land owners Smaller lot area
Rural land Purchase price
If same are, first
Adjacent urban land owners Urban land Purchase price One whose use is best justified

ASSIGNMENT OF CREDIT AND OTHER INCORPOREAL RIGHTS

A contract whereby a person (assignor) transfers his credit, right to certain against a third person to another person (assignee)
for a consideration which is certain in money or its equivalent.

Nature – constitute exchange or donation or dation in payment (dacion en pago)

Forms of assignment of credits

a. Between the parties
b. For binding effect against third person
a. Personal property – PUBLIC INSTRUMENT
b. Real property – PUBLIC INSTRUMENT recorded in the REGISTRY OF PROPERTY

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Effect of payment of debtor to creditor
a. Before knowledge of the assignment – debtor released from his obligation
b. After knowledge of the assignment – debtor is not released from his obligation

Accessory rights included in the assignment

a. Guaranty
b. Mortgage
c. Pledge
d. Preference

Warranties of assignee
a. Legality and existence of the credit at the time of sale
b. As regards to debtors insolvency
a. There is stipulation
b. The insolvency already existed prior to the sale and of public knowledge

Liability of the assignor when warranties are viotated

a. If he was in good faith
a. Price received
b. Expenses of the contract
c. Legitimate payments by reason of the assignment
b. If he was in bad faith
a. Price received
b. Expenses of the contract
c. Legitimate expenses by reason of the assignment
d. Damages

Duration of assignor’s warranty

a. Period stipulated
b. No period was stipulated
i. Assignment was made before maturity – 1 year from maturity
ii. Assignment was made after maturity – 1 year from the time of maturity

Sale of credit or other incorporeal right in litigation

a. Right shall be considered in litigation from the time the complaint concerning the same answer
b. Right of legal redemption
a. Price paid by the assignee for the right purchased
b. Judicial costs incurred by him
c. Interest on the price from the day on which the same was paid
c. Period – 30 days from the date the assignee demands payment from him
d. Purpose
a. To enable the debtor to pay less than the value of the credit
b. To prevent speculation on the part of the assignee
c. To put an end to the litigation
e. Exceptions to legal redemption by debtor
a. To a co-heir or co-owner of the right assigned
b. To a creditor in payment of his credit
c. To the possessor of a tenement or piece of land which is subject to the right in litigation assigned

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