pledge, and mortgage. (it can stand on ● Interest i.

Valide, rescissible,
Regulatory Framework and Legal Issues in Business its own) ● Penalty voidable, enforceable, or
Transcribed by: Kaye Cuenca ● Time of place of payment void.
DFSDFSFS COMPONENTS OF CONTRACT OF SALE
(PPSC or pipisee) STAGES IN A CONTRACT OF SALE (PPP) SALE DISTINGUISHED FROM OTHER
LAW ON SALES ● PURPOSE: of the delivery is to transfer 1. PREPARATION. When negotiation is on CONTRACTS
Nature and Form of the Contract ownership progress SALE CONTRACT TO
● PERFECTION: as a rule, is by mere 2. PERFECTION. Meeting of minds, birth SELL
ARTICLE 1458. By the contract of sale, one of consent; of a contract
the contracting parties obligates himself to Transfer Title passes to the Where it is
● SUBJECT MATTER: is determinate 3. PERFORMANCE. When the object is of title buyer upon stipulated that
transfer the ownership of and to deliver a thing; delivered. delivery of the ownership in the
determinate thing, and the other to pay ● CAUSE: is onerous, since the cause or
thing sold thing shall not pass
to the purchaser
therefore a price certain in money or its consideration of the parties is the KINDS OF CONTRACT OF SALE until he has fully
equivalent. prestation or promise of the other. 1. As to presence of absence of paid the price,
ownership is
conditions - a sale may be either: reserved in the
CONCEPT OF CONTRACT OF SALE ESSENTIAL ELEMENTS OF CONTRACT OF a. ABSOLUTE SALE - where the seller and is not
The contract of sale is an agreement whereby SALE (COC) sale is not subject to any pass until the full
one of the parties (the seller or vendor) payment of the
● CONSENT or meeting of the minds - condition whatsoever and where purchase price.
obligates himself to deliver something to the the consent on the part of the seller to title passes to the buyer upon
other (the buyer or purchaser or vendee) who, Risk of The risk of loss or The risk is borne
transfer and deliver and on the part of delivery of the thing sold. loss damage to the by the seller based
on his part, binds himself to pay therefore a the buyer to pay. The parties must have b. CONDITIONAL SALE - where good upon on the same
sum of money or its equivalent (the price). legal capacity to give consent and to the sale contemplates a delivery is on principle that the
thebuyer (res perit thing perishes with
obligate themselves. contingency. domino, the thing the owner
CHARACTERISTICS OF A CONTRACT OF ● OBJECT or subject matter - the GENERAL: where the contract is perishes with the
SALE (CBOCNP cebu-cnp) determinate thing which is the object of subject to certain conditions,
owner)
● CONSENSUAL. Because it is perfected the contract The thing must be usually, in the case of the vendee, Payment Non-payment of Full payment is a
by mere consent without any further act; determinate or at least capable of being the full payment of the agreed of price the price is a positive suspensive
● BILATERAL. Because both the negative condition
made determinate. purchase price, and in the case of resolutory
contracting parties are bound to fulfill ● CAUSE or consideration - the “price the vendor, the fulfillment of condition
correlative obligations towards each certain is money or its equivalent” certain warranties.
other; SALE AGENCY TO
2. Other kinds SELL
● ONEROUS. Because the thing sold is NATURAL ELEMENTS OF A CONTRACT OF a. As to the nature of the subject
conveyed in consideration of the price Ownerhs Passes to the Retained by the
SALE matter ip buyer principal
and vice versa; Those which are deemed to exist in certain i. Real (immovable) or
● COMMUTATIVE. Because the thing sold contracts, in the absence of any contrary personal (movable) Payment The buyer pays The buyer pays the
is considered the equivalent of the price the seller agent and the latter
stipulations: ii. Tangible (corporeal) or transmits the
paid and vice versa. However, the ● Warranty against eviction intangible money to the
contract may be aleatory as in the case ● Warranty against hidden defects iii. Licit (lawful) or illicit
principal
of the sale of hope, (sweepstakes ticket) b. As to manner of payment of the Delivery The goods are The agent delivers
● NOMINATE. Because it is given a ACCIDENTAL ELEMENTS OF A CONTRACT price of goods delivered by the the goods to the
special name of designation in the Civil seller to the buyer buyer
OF SALE i. Cash or installment or
Code, namely, “Sale” Those which may be present or absent straight term
● PRINCIPAL. Because it does not depending on the stipulations of the parties ii. Wholesale or retail SALE BARTER
depend for its existence and validity like: c. As to its validity or defect Consider Money Another thing
upon another contract, unlike guaranty, ● Conditions ation
 If the monetary If the value of the good customs, public order, or contract by reason of the contract is the hope itself.
consideration is thing given as part public policy: and should SALE OF THINGS HAVING POTENTIAL absence of an essential
more than or of the c. Not be impossible. The thing EXISTENCE element
equal to the value consideration
of the thing given exceeds the must be within the commerce of Object with potential existence are objects of
as part of the monetary men sale, which though not yet actually in existence, SALE OF AN UNDIVIDED SHARE OF A
consideration consideration
2. All rights which are not intransmissible or are reasonably certain to come into existence SPECIFIC MASS
personal may also be the object of sale. as the natural increment or usual incident of
something in existence already belongs to the FUNGIBLE GOODS. It means goods of which
SALE LEASE OF
THINGS REQUISITES OF THE OBJECT IN A seller shall pass title to the buyer the moment any unit is, from its nature or by mercantile
CONTRACT OF SALE the thing comes into existence. usage, treated as the equivalent of any other
The seller One of the parties unit, such as grain, oil, wine, gasoline, etc.
transfers binds himself to
1. The thing must be licit and the vendor
ownership of the give to another the must have a right to transfer the Examples:
thing sold enjoyment or use ownership thereof at the time it is ● Goodwill of trade or business Effect of sale. The owner of a mass of goods
of a thing for a
price certain and delivered. (Art. 1459) ● Sale of wine that a vineyard is expected may sell only an undivided share thereof,
for a period which to produce provided the mass is specific or capable of
may be definite or Nemo dat quod non habet ● Milk the cow may yield during the being made determinate.
indefinite
coming year
SALE DACION EN 2. The object must be determinate. A thing ● Next catch of a fisherman’s net. a. By such sale, the buyer becomes a
PAGO (dation in
is determinate of at the time the contract co-owner with the seller of the whole
payment)
is entered into, the thing is capable of SALE OF THING EXPECTED vs SALE OF mass in the proportion in which the
There is no There is being made determinate or ascertained HOPE ITSELF definite share bought bears to the mass.
pre-existing credit pre-existing credit
without the necessity of a new or further b. Rules when quantity sold is different
Obligation is Obligation is agreement between the parties. (Art. EMPTIO REI SPERATAE (sale of thin from the quantity of the mass:
created extinguished ● If the mass of fungible goods
1460) expected) - is the sale of thing not yet in
The cause or The cause is the existence subject to the condition that the thing contains less than what was sold,
consideration is extinguishment of RULES AS TO SUBJECT MATTER will exist and on failure of the condition, the the buyer becomes the owner of
the price the debtor’s
obligation 3. Goods may be existing or future goods. contract becomes ineffective and hence, the the whole mass and the seller
buyer has no obligation to pay the price. shall supply whatever is lacking
SALE CONTRACT FOR from goods of the same kinds and
Future goods are those still to be
A PIECE OF
WORK ● Manufactured or printed EMPTIO SPEI is the sale of the hope or quality
● Raised, or future agricultural expectancy that the thing will come into ● If the quantity of the mass is more
A contract for the The goods are to
delivery at a be manufactured products existence, where it is agreed that the buyer will than the quantity sold, the parties
certain price of an specially for the ● Acquired by the seller after pay the price even if the thing does not shall become co-owners of the
article which the customer and upon perfection of contract, or eventually exists. A sale of a “hopeless case” mass.
vendor in the his special order
ordinary course of after-acquired property
business ● Things whose acquisition ERS ES
PRICE OF CERTAIN IN MONEY
manufactures or It must be certain or capable of being
procured for the
depends upon a contingency that
may or may not happen (Art. Sale of future thing Sale of a present thing ascertained in money or its equivalent; and
general market
1462) The future thing is certain It is not certain that the money is to be understood as currency, and its
OBJECT IN A CONTRACT OF SALE 4. An undivided interest in a thing may be as to itself but uncertain thing itself will exist equivalent means promissory notes, checks
as to its quantity and
1. The thing, aside from being sold by the sole owner which results in a quality
and other mercantile instruments generally
a. Determinate, the law requires co-ownership. (Art.1463) accepted as representing money.
5. Things subject to a resolutory condition The sale is subject to the Produces effect even
that the subject matter must be condition that the thing though the thing does not
b. Elicit or lawful, that is, it should may be the object of the contract of sale. should exist, so that if it come into existence The price is certain when:
not be contrary to law, morals, (Art.1465) does not, there will be no because the object of the 1. It is stipulated
 2. It is with reference to another thing
which is certain
3. It is fixed by a third person
4. It is fixed by the court or
5. It can be determined on a definite day or
in a particular exchange or market.
RULES ON PRICE
1. Generally, price must not be inferior to
the value of the thing.
If the consideration of the contract
consists partly in money, and partly in
another thing, the transaction shall be
characterized by the manifest intention
of the parties.
If such intention does not clearly appear,
it shall be considered a barter if the
value of the thing exceeds the amount of
the money or its equivalent; otherwise, it
is a sale. (Art. 1468)
2. Adequacy of price is not necessary for
the validity for the contract of sale. Gross
inadequacy of price does not affect a
contract of sale, except as it may
indicate a defect in the consent, or that
the parties really intended a donation or
some other act or contract. (Art. 1470)
3. If the price is simulated, the sale is void,
but the act may be shown to have been
in reality a donation, or some other act
or contract. (Art. 1471)
4. The fixing of the price can never be left
to the discretion of one of the contracting
parties. However, if the price fixed by
one of the parties is accepted by the
other, the sale is perfected. (Art. 1473)
5. The price must be real, not fictitious.
Where the price cannot be determined,
the contract is inefficacious. However, if
the thing or any part thereof has been
delivered to and appropriated by the
buyer he must pay a reasonable price
thereof.
WHEN A CONTRACT OF SALE IS
PERFECTED
Sale if perfected at the moment there is a
meeting of minds coupons the thing which is
the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance subject to the law
governing the form of contracts.
REQUIREMENTS FOR PERFECTION
1. When the parties are face to face, the
offer must be accepted without
qualification
2. When the contract is through
correspondence, there is perfection
when the offeror receives the
acceptance or has knowledge of the
acceptance of the offeree.
3. When a sale is subject to a suspensive
condition, the perfection is from the
moment the condition is fulfilled.
FORMS OF A CONTRACT OF SALE
1. Subject to the provisions of of the
Statute of Frauds and of any other
applicable statue, a contract of sale may
be in any of the following forms:
a. In writing or
b. By word of mouth, or
c. Partly in writing and partly by
word of mouth, or
d. May be inferred from the conduct
of the parties (Art. 1483)
2. Under the statute of frauds, the sale
involving the following must be in writing
to be enforceable:
a. Sale of real property or of any
interest therein (regardless of the
price);
b. Sale of goods, chattels or things
in action the price of which is
Php500 or more. (Art.1403)
Things in action include credit,
shares of stock and other
incorporeal properties.
3. Sale of a piece of land through an agent
The authority of the agent to sell a piece
of land must be in writing; otherwise, the
sale is void. (Art. 1874)
a. If the authority of the agent to sell
a piece of land is not in writing -
the sale is void whatever may
have been the form it was entered
into, i.e oral, private instrument or
public instrument.
b. If the authority of the agent is in a
private instrument and the sale
was:
i. Entered into orally - the
sale is enforceable. (Art.
1403)
ii. In a private instrument -
valid
iii. In a public instrument -
valid.
SALE BY AUCTION
Owner’s terms and conditions for the sale of
property under auction are binding on all
bidders, whether or not they knew of them.
An auction sale is perfected by the fall of the
hammer or in other customary manner and it
does not matter that another was allowed to
match the bid of the highest bidder.
RULES IN CASE OF SALE BY AUCTION
1. Sale by auction in lots - each lot is the
subject of a separate contract of sale.
2. When sale by auction is perfected -
when the auctioneer announces its
perfection
a. By the fall of the hammer or
b. In any other manner.
TRANSFER OF OWNERSHIP OF THE THING
SOLD
Ownership of the thing sold is transferred (not
by perfection of the contract but) by the delivery
of the thing sold.
Payment of the purchase price is not essential
to the transfer of ownership unless otherwise
stipulated.
DELIVERY OF THE THING SOLD
The thing is considered to be delivered when it
is placed in the hands and possession of the
vendee.
KINDS OF DELIVERY
1. Actual or real delivery
2. Constructive delivery
3. In any other manner as stipulated
EARNEST MONEY (Art. 1482)
Earnest Money given by the buyer shall be
considered as part of the price and as proof of
the perfection of the contract. It constitutes as
advance payment to be deducted from the total
price. Also known as “arras” or something of
value to show that the buyer was really in
earnest and given to the seller to bind the
bargain.
OPTION MONEY. Is the consideration paid for
the purpose of holding one to his promise to
buy or sell a determinate thing for a certain
period of time, which consideration is separate
and distinct from the purchase price.
EM OP
Part of the purchase price Separate and distinct
 from the purchase price
paid upon the perfection Paid for a sale that is yet
of a contract of sale to be perfected.
Regulatory Framework and Legal Issues in Business
Transcribed by: Kaye Cuenca
DFSDFSFS
LAW ON SALES
Chapter 2: Capacity to Buy or Sell
Who may enter into a contract of sale?
GENERAL RULE: All persons, whether
natural or juridical, who can bin themselves
have also the legal capacity to buy and sell.
KINDS OF INCAPACITY
● Absolute Inpacaity. In the case of
persons who cannot bind themselves
● Relative Incapacity. Where it exists
only with reference to certain persons or
a certain class of property.
SALE BY MINORS
General Rule: The contract entered into by a
minor is voidable. (Art. 1327)
However, where necessaries are sold and
delivered to him (without the intervention of the
parent or guardian), he must pay a reasonable
price therefore. (Art. 1489, par. 2.) The contract
is, therefore, valid but the minor has the right to
recover any excess above a reasonable value
paid by him.
SALES BY AND BETWEEN SPOUSES
General Rule: The husband and the wife are
prohibited by Art. 1490 from selling property to
each other. A sale between husband and wife
in violation of this provision is inexistent and
void from the beginning because such contract
is expressly prohibited by law.
Exception:
1. When a separation of property was
agreed upon in the marriage settlement;
or
2. When there has been a judicial
separation of property.
Spouses are also prohibited from making
donations to each other during the marriage
except for moderate gifts on the occasion of
any family rejoicing.
Under Art. 124 of family code, sale by husband
of a conjugal property without the wife’s
consent is void, not merely voidable, since the
resulting contract lacks one of the essential
elements of “full consent”
INCAPACITY BY REASON OF RELATION TO
PROPERTY
Person who, by reason of the relation of trust
with the persons under their charge or their
peculiar control over the property, are
prohibited from acquiring said property either
directly or indirectly and whether in private or
public sale:
a. Guardians
b. Agents
c. Executors and administrators
d. Public officers and employees
e. Judicial officers, employees and lawyers;
and
f. Others especially disqualified by law
1) The incapacity of the guardian is only
against buying the property he is required to
sell during the existence of the relationship.
2) The agent’s incapacity to buy his principal’s
property rests on the fact that the agent and the
principal form one juridical person.
3) The prohibition with respect to executors and
administrators refers only to properties under
the administration of the executor or
administrator at the time of the acquisition.
4) The prohibition with respect to public officials
and employees refers only to properties:
a. Belonging to the State, or of any
subdivision thereof, or of any GOCC or
institution
b. The administration of which has been
entrusted to the public officials or
employees.
5) The prohibition with respect to judges, and
lawyers etc., applies only to the sale or
assignment of property which is the subject of
litigation to the persons disqualified therein. For
the prohibition to operate, the sale or
assignment must take place during the
pendency of the litigation involving the property.
6) Other persons especially disqualified:
a. Aliens who are disqualified to purchase
private agricultural lands
b. An unpaid seller having a right of lien or
having stopped the goods in transit
c. The officer conducting the execution
sale or his deputies at an execution sale.
Regulatory Framework and Legal Issues in Business
Transcribed by: Kaye Cuenca
DFSDFSFS
LAW ON SALES
Chapter 3: Effects of the contract when the
thing sold has been lost
WHEN CAN A THING CONSIDERED LOST?
The thing is lost when it perishes or goes out
of commerce or disappears in such a way
that its existence is unknown or it cannot be
recovered.
EFFECTS OF LOSS OF THING AT THE TIME
OF SALE (ART. 1493)
1. Thing entirely lost - where the thing is
entirely lost at the time of perfection, the
contract is inexistent and void because
there is no object.
There being no contract, there is no
necessity to bring an action for
annulment.
2. Thing only partially lost - if the subject
matter is only partially lost, the vendee
may elect between withdrawing from the
contract (rescission) and demanding the
remaining part, paying its proportionate
price (specific performance)
LOSS AFTER PERFECTION BUT BEFORE
DELIVERY
Loss after perfection but before delivery - seller
bears the risk of loss (Art. 1504) i.e., the buyer
is not obligated to pay the price.
After perfection, the goods remain at the
seller’s risk until the ownership of the goods is
transferred to the buyer by actual or
constructive delivery. However, notwithstanding
that the ownership is not transferred to the
buyer, the goods are at the buyer’s risk:
a. If there is an agreement to that effect;
b. If the ownership of the goods is retained
by the seller merely to secure the
performance by the buyer of his
obligation under the contract;
c. When actual delivery has been delayed
through the fault of the buyer.
LOSS OF SPECIFIC GOODS (Art. 1494)
When parties purport a sale of specific goods,
and 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:
1. As avoided; or
2. As valid in all 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.
LOSS OF SPECIFIC GOODS
a. Sale divisible - the second option is
available only if the sale is divisible. (Art.
1494, par. 2.) a contract is divisible when
its consideration is made up of several
parts.
b. Sale indivisible - the buyer should be
made to pay only the proportionate price
of the remaining goods as provided for in
par.2 of Art. 1493
Regulatory Framework and Legal Issues in Business
Transcribed by: Kaye Cuenca
DFSDFSFS
LAW ON SALES
Chapter 4: Obligations of the Vendor
SECTION 1 - GENERAL PROVISION
a. To transfer ownership;
b. To deliver with fruits and accessories
c. To warrant against eviction and against
hidden defects;
d. To preserve the thing from perfection to
delivery;
e. To pay for the expenses of the deed of
sale.
OBLIGATION TO TRANSFER OWNERSHIP
AND DELIVER
The vendor should have “a right to transfer the
ownership thereof at the time it is delivered.
SECTION 2 - DELIVERY OF THE THING
SOLD
The thing sold shall be understood as delivered
when it is placed in the control and possession
of the vendee. (Art. 1497)
Delivery contemplates the absolute giving up
of the control and custody of the property on
the part of the vendor, and the assumption of
the same by the vendee.
Tradition is a derivative mode of acquiring
ownership by virtue of which one who has the
right and intention to alienate a corporeal thing,
transmits it by virtue of a just title to one who
accepts the same.
MODE OF DELIVERY
1. By actual or real delivery (Art. 1497)
2. By constructive or legal delivery (Art.
1498-1501); or
3. By delivery in any other manner
signifying an agreement that the
possession is transferred to the vendee.
(Art. 1496-1499)
WAYS OF EFFECTING CONSTRUCTIVE
DELIVERY
a. By the execution of a public instrument
b. By symbolical tradition or traditio
symbolica
c. By traditio longa manu
d. By traditio brevi manu
e. By traditio constitutum possessorium; or
by quasi-delivery or quasi-traditio
a. Legal Formalities - execution ogf
public instrument is deemed delivery.
(Art. 1498, par 1)
b. Tradition Simbolica - delivery of the
keys of the place or depositgory where
movable property is stored or kept. (Art.
1498)
c. Traditio Longa manu - by themere
consent or agreement of the contracting
parties, if the thing sold cannot be
transferred to the possession of the
vendee at the time of the sale (Art. 1499)
d. Traditio brevi manu - if the buyer
already had the possession of the object
even before the purchase. (Art. 1499)
e. Traditio constitutum possessorium -
possession as owner changed to
possession as a lessee, for example
f. Quasi-tradition - delivery of rights,
credits, or incorporeal property, made
by:
● The execution of a public
instrument
● Placing of the titles of ownership
in the repossession of the vendee
or
● The use by the vendee of his
rights, with the vendor’s consent.
SPECIAL RULE ON COMPLETENESS OF
DELIVERY
1. In case of movables (Art. 1522 and
1537, 1480)
a. Sale on Approval, Trial or
Satisfaction (Art. 1502)
SALE OR RETURN. Goods are delivered to
the buyer but the buyer has an option to return
the goods instead of paying the price; the
ownership passes to the buyer but he may
revert the ownership in the seller by returning
or tendering the goods within the time fixed in
the contract or when no time is fixed, within a
reasonable time.
SALE ON APPROVAL. (also called “sale on
acceptance, “Sale on Trial” or “Sale on
Satisfaction), the delivery of the object does not
transfer ownership to the buyer since the
delivery was not for the purposes of transferring
ownership.
2. Sale by Description and/or Sample (Art.
1481)
Sale by description occurs where a seller sells
things as being of a particular kind, the buyer
not knowing whether the seller’s representation
are true or false, but relying on them as true.
There is a sale by sample
1. When a small quantity is exhibited by the
seller as a fair specimen of the bulk;
2. Which is not present and there is no
opportunity to inspect or examine the
same; and
3. The parties treated the samples as the
standard of quality and;
4. That they contracted with references to
the sample
5. With the understanding that that the
product to be delivered would
correspond with the sample.
2. Transfer of ownership where goods sold
delivered to carrier
Delivery to the carrier is deemed to be a
delivery to the buyer.
SECTION 3 - CONDITIONS AND
WARRANTIES
CONDITION. Means an uncertain event or
contingency on the happening of which the
obligation (or right) of the contract depends.
WARRANTY. Is a statement or representation
made by the seller goods, contemporaneously
and as a part of the contract of sale, having
reference to the character, quality, or title of the
goods, and by which he promises or
undertakes to ensure that certain facts are or
shall be as he then represents them.
EFFECT ON NON-FULFILLMENT OF
CONDITION
1. If the obligation of either party is subject
to any condition and such condition is
not fulfilled, such party may either:
a. Refuse to proceed with the
contract
b. Proceed with the contract, waving
the performance of the condition;
or
 c. Treat the non-performance as a
breach of warranty and ask for
damages
2. If the condition is in the nature of a
promise that it should happen, the
non-performance of such condition may
be treated by the other party as a breach
of warranty.
KINDS OF WARRANTY
Express warranty. Is any affirmation of fact or
any promise by the seller relating to the thing,
the natural tendency of which is induce the
buyer to purchase the thing and the buyer thus,
induced, does purchase the same.
Implied Warranty. Is that which the law derives
by implication or inference from the nature of
the transaction or the relative situation or
circumstances of the parties irrespective of any
intention of the seller to create it.
EFFECTS OF EXPRESS WARRANTY
A warranty being a part of the contract of sale,
it is immaterial whether the seller did not know
whether it was true or false. No intent is
necessary to make the seller liable for his
warranty.
EFFECTS OF EXPRESSION OF OPINION
A mere expression of opinion, no matter how
positively asserted, does not import a warranty
unless the seller is an expert and his opinion is
relied upon by the buyer.
IMPLIED WARRANTIES IN SALE
The term implied warranty is reserved for cases
where the law attaches an obligation to the
seller which is not expressed in any words.
a. Implied warranty as to seller’s title
b. Implied warranty against hidden defects
or unknown encumbrance
c. Implied warranty as to fitness or
merchantability.
WHEN IMPLIED WARRANTY NOT
APPLICABLE
1. “As is and where is” sale.
2. Sale of second-hand articles. - there is
no implied warranty as to the condition,
adaption, fitness or suitability for the
purpose for which made, or the quality
of an article sold as and for a
second-hand article.
3. Sale by virtue of authority in fact or law -
no warranty if title is implied in a sale by
one not professing to be the owner.
SUBSECTION 1 - WARRANTY IN CASE OF
EVICTION
Eviction. May be defined as the juridical
process, whereby the vendee is deprived of the
whole or part of the thing purchased by virtue of
a final judgment based on a right prior to the
sale or an act imputable to the vendor.
ESSENTIAL ELEMENTS OF WARRANTY
AGAINST EVICTION
1. The vendee is deprived in whole or in
part of the thing purchased;
2. He is so deprived by virtue of a final
judgment (Art. 1557)
3. The judgement is based on a right prior
to the sale or an act imputable to the
vendor
4. The vendor was summoned in the suit
for eviction at the instance of the vendee
(Art. 1558)
5. There is no waiver on the part of the
vendee.
EFFECT OF PRESCRIPTION
By prescription, one acquires ownership and
other real rights through the lapse of time in the
manner and under the conditions prescribed by
law. In the same way, rights and actions are
lost by prescription. (Art. 1106)
1. Completed before sale - the vendee may
lose the thing purchased to a third
person who has acquired title thereto by
prescription.
2. Completed after sale - even if
prescription has started before the sale
but has reached the limit prescribed by
law after the sale, the vendor is not liable
for eviction. However, land registered
under the Torrens system, is not subject
to prescription.
KINDS OF WAIVER OF EVICTION
Any stipulation exempting the vendor from the
obligation to answer for eviction shall be void, if
he acted in bad faith.(Art. 1553)
1. Consciente, that is, the waiver is
voluntarily made by the vendee without
the knowledge and assumption of the
risks of eviction; and
2. Intencionada, that is the waiver is made
by the vendee with knowledge of the
risks of eviction and assumption of its
consequences.
EFFECT OF WAIVER BY VENDEE
1. If the waiver was only conscious, the
vendor shall pay only the value which
the thing sold had at the time of eviction.
This is a case of solutio indebiti.
2. In the secon dkind of waiver, the vendor
is exempted from the obligation to
answer for eviction, provided he did not
act in bad faith.
Rights and liabilities in case eviction occurs
(1) Return of value of thing. If at the
time of the eviction the value of the
property is really more or less than its
value at the time of the sale, by reason
of improvements or deterioration. it is but
just that the vendor should pay the
excess or not suffer the damage.
(2) Income or fruits of thing. - The
vendee is liable to the party who won the
suit against him for the income or fruits
received only if so decreed by the court.
(3) Costs of the suit. - The vendee is
also entitled to recover the expense of
litigation resulting in eviction, including
the costs of the action brought against
the vendor to enforce his warranty.
(4) Expenses of the contract. - In the
absence of any stipulation to the
contrary, the expenses in the execution
and registration of the sale are borne by
the vendor.
(5) Damages and interests. - The right
of the windee to demand "damages and
interests and ornamental expenses" is
qualified by the condition that the sale
was made in bad faith.
SUBSECTION 2. - Warranty Against Hidden
Defects of, or Encumbrances Upon, the
Thing Sold
● Redhibition - is the avoidance of a sale
on account of some vice or defect in the
thing sold, which renders its use
impossible, or so inconvenient and
imperfect that it must be supposed that
the buyer would not have purchased it
had he known of the vice.
● Redhibitory action- is an action
instituted to avoid a sale on account of
some vice or defect in the thing sold
which renders its use impossible, or so
inconvenient and imperfect that it must
be supposed that the buyer would not
have purchased it had he known of the
vice.
● Redhibitory vice or defect is a defect in
the article sold against which defect the
seller is bound to warrant.

Requisites for warranty agains hidden
defects
(1) The defect must be important or serious;
(2) It must be hidden;
(3) It must exist at the time of the sale;
(4) The vendee must give notice of the defect
to the vendor within a reasonable time (Art.
1586.);
(5) The action for rescission or reduction of the
price must be brought minio dh cAProps7 Perin
within no diays from the delive of the delivery in
case of animals (Art. 1577, par. 1.); and
(6) There must be no waiver of warranty on the
part of the vendee.
General Rule:
Vendor is not Liable in case:
(a) the defects are patent or those which
may be visible; or
(b) even is not visible, the vendee who is
an expert, by reason of his trade or
profession, should have known.
No warranty against hidden defects in:
● Sale of secondhand items or pre-owned
items
● Sale by junkshop operators
● Sale in auction
Implied warranties of quality
(1) Implied warranty of fitness. - There is no
implied warranty as to the quality or fitness for
any particular purpose of goods under a
contract of sale, except where:
(a) the buyer, expressly or by
implication, manifests to the seller the
particular purpose for which the goods
are required, and
(b) the buyer relies upon the seller's skill
or judgment.
A warranty of fitness is a warranty that the
goods are suitable for the special purpose of
the buyer which will not be satisfied by mere
fitness for general purposes.
(2) Implied warrant of merchantability. -
Where goods are bought by description, the
seller impliedly warrants that the goods are of
merchantable quality.
A warranty of merchantability is a warranty
that goods are reasonably fit for the general
purpose for which they are sold.
Responsibility of vendor fo hidden defects
(1) Effect of ignorance of vendor. -
The ignorance of the Vendor does not
relieve him from liability to the vendee
for any faults or defects in the thing sold.
(2) Exception - The parties, however,
may provide otherwise in their contract
(Art. 1581, par. 3.) provided the vendor
acted in good faith, that is he was
unaware of the existence of the hidden
fault or defect.
, imposed upon an immovable for the
(3) Where vendee, aware of the
defect. - If the vendee is aware of the
defect in the thing he buys or lack of title
in the vendor, he cannot later complain
thereof. He is deemed to have wilfully
and voluntarily assumed the risk
attendant to the sale.
Doctrines of "caveat venditor" and "caveat
emptor"
The doctrine of caveat emptor (let the buyer
beware) has a basic premise that there be no
misreprésentation by the seller. The seller's
liability for defects of the goods sold was then
confined to cases of express promise to
warrant the quality of such goods and to those
in which the seller had knowledge of
The doctrine of caveat venditor (let the seller
beware) was adopted in accordance with which
"the vendor is liable to the vendee for any
hidden faults or defects in the thing sold, even
though he was not aware thereof." The doctrine
is based on the principle that a sound price Prescription of actions in case of
warrants a sound article. implied/express warranty
Redhibitory Defects in animals 6 months from the date of delivery of the thing
sold for action for rescission of the contract or
Redhibitory defect - is the hidden defect in reduction of the purchase price
animals that, even in case a professional (Art. 1567)
inspection has been made, should be of such
nature that expert knowledge is not sufficient to 4 years with respect to an express warranty
discover it.
There is no warranty against hidden defects of
animals sold at fairs or at public auctions or of
livestock sold as condemned.
Warranty Against Non-Apparent
Encumbrances
Warranty against non-apparent
encumbrances - an encumbrance (or
an easement or servitude) is a burden
benefit of another immovable belonging
to a different owner. It is non-appraent,
When there are no external indications
of their existence.
The warranty against non-apparent
encumbrances arises when the same iS:
A. Not mentioned in the
agreement; or
B. Not recorded in the Registry of
Property (now Registry of deeds)
The buyer has the following remedies:
a. Ask for the rescission of the contract -
within 1 year from execution of the deed;
b. Ask for damages - within 1 year from
discovery.
The implied warranties are not applicable to a
sheriff, auctioneer, mortgagee, pledgee or other
person professing to sell by virtue of authority
in fact or law, for the sale of a thing in which a
third person has a legal or equitable interest.