mistake is an essential element while in accion in
rem verso, it is not necessary that there should
be mistake in the payment (I Tolentino, Civil Code
of the Phil., 1992, p. 76).
Q: “C”, a Filipino resident of the US sent to
his father “D” in Manila $500.00 through
“X” Bank which had a branch in Manila. Due
to mistake of the employees of the Bank,
“D” was paid $5,000.00. Upon delivery of
the mistake, the Bank demanded from “D”
the return of the $4,500.00. “D” refused
and the Bank sued him. Is the Bank entitled
to recover from “D”? (Bar 1980)
A: Yes. The Bank is entitled to recover the
$4,500.00 from D. This is an example of a quasi-
contract of solution indebiti which arises
whenever a person unduly delivers a thing
through the mistake to another who has no right
to demand it (Jurado, Civil Law Reviewer, 2009, p.
1151).
V. SALES
Sales Defined
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 therefore a price certain in
money or its equivalent (Art. 1458, NCC).
 The contract of sale is not a mode for
acquisition or transmission of ownership; it
only creates title (San Lorenzo Development
Corp. vs. CA, G. R. No. 124242, Jan. 21, 2005)
Characteristics of a Contract of Sale
a. Nominate – it has been given a particular
name by law (Art. 1458, NCC).
b. Principal – it can stand on its own, and does
not depend on another contract for its
validity.
c. Bilateral – it creates reciprocal obligations –
the seller obligates himself to transfer the
ownership of and deliver a determinate thing,
and the buyer obligates himself to pay
therefore a price certain in money or its
equivalent. Reciprocal obligations are those
which arise from the same cause and in
which party is a debtor and a creditor of each
other, such that the obligation of one is
dependent upon the obligation of the other.
(Carrascoso, Jr. vs. CA, G.R. No. 123672,
December 17, 2005)
d. Consensual – It is perfected by mere
consent of the parties. The essence of
consent is the agreement of the parties on
the terms of the contract, the acceptance by
one and the offer made by the other (Vda.
De Ape vs. CA, G.R. No. 133638, April 15,
2005; Torcuator vs. Bernabe, G.R. No.
134219, June 8, 2005).
 The essence of consent is the agreement
of the parties on the terms of the
contract, the acceptance by one of the
offer made by the other. It is the
concurrence of the minds of the parties
on the object and the cause, which
constitutes the contract. The area of
agreement must extend to all points that
the parties deem material or there is no
consent at all (Leonardo vs. Court of
Appeals, G.R. No. 125485, June 15, 2006).
e. Onerous and Commutative – A contract of
sale is normally commutative and onerous:
not only does each one of the parties assume
a correlative obligation (the seller to deliver
and transfer ownership of the thing sold and
the buyer to pay the price), but each party
anticipates performance by the other from
the very start (Gaite vs. Fonacier, G.R. No. L-
11827, July 31, 1961).
In a sale the obligation of one party can be
lawfully subordinated to an uncertain event,
so that the other understands that he
assumes the risk of receiving nothing for
what he gives [as in the case of a sale of
hopes or expectations, emptio spei, which
makes the contract ALEATORY and not
commutative (Art. 2010, NCC). But this XPN
is not the usual course of business; hence,
the contingent character of the obligation
must clearly appear. (Gaite vs. Fonacier,
supra.)
A. NATURE AND FORM
Being a consensual contract, the contract of sale
is perfected at the moment there is a meeting of
minds upon the thing which is the object of the
contract and upon the price (Art. 1475, NCC).
227

The form of a contract refers to the manner in
which it is executed or manifested.
GR: Contract of sale may be entered into in any
form provided all the essential requisites for its
validity are present (Art. 1356, NCC). It may be
in writing; it may be oral; it may be partly in
writing and partly oral. It may even be inferred
from the conduct of the parties (Art. 1483, NCC).
XPNs:
a. Where form is required in order that a
contract may be enforceable.
Under the Statute of Frauds, the following
contracts must be in writing; otherwise, they shall
be unenforceable by action:
1) Sale of personal property at a price not less
than P500.00;
2) Sale of real property or an interest therein
regardless of the price involved; and
3) Sale of property not to be performed within a
year from the date thereof regardless of the
nature of the property and the price involved
(Art. 1403[2], a, d, e], NCC).
b. Where the “applicable statute” requires that
the contract of sale be in a certain form for
its validity (Art. 1356, NCC);
1) Sale of large cattle (Art. 1581, NCC).
2) Sale of a piece of land or interest therein
through agent is required to be in writing,
otherwise the sale thereof by the agent
would be void (Art. 1874, NCC).
3) Sale of land by non-Muslim hill tribe
cultural minorities of the Philippines is void
if not approved by National Commission of
Indigenous Peoples (R.A. No. 8371).
c. Where form is required only for the
convenience of the parties (De Leon,
Comments and Cases on Sales and Lease, 2005,
p. 115).
STATUTE OF FRAUDS: Note that if a particular
form is required under the statute of frauds and
the same is not followed, the sale is valid, but it
is unenforceable even as to the parties to the
contract of sale.
228
Kinds of Contact of Sales as to Presence or
Absence of Conditions (1997, 2001 Bar)
a. Absolute Sale - where the sale is not
subject to any condition whatsoever and
where title passes to the buyer upon delivery
of the thing sold.
b. Conditional Sale - where the sale
contemplates a contingency, and in general,
where the contract is subject to certain
conditions.
If the condition is imposed on an obligation
of a party (e.g., ejection by the vendor of
squatters within a certain period before
delivery of property) not upon the perfection
of the contract itself, which is not complied
with, the other party may either refuse to
proceed or waive said condition (De Leon,
Comments and Cases on Sales and Lease, 2005,
p. 16).
1. ESSENTIAL REQUISITES– ART. 1505,
NCC
a. Consent or meeting of the minds to
transfer ownership in exchange for the
price
 Being a consensual contract, the
contract of sale is perfected at the
moment there is a “meeting of the
minds” upon the thing which is the
object of the contract and upon the
price (Art. 1475, NCC).
 There may be a sale against the will
of the owner in case of expropriation
and the three different kinds of sale
under the law – ordinary execution
sale, judicial foreclosure sale, and
extra-judicial foreclosure sale (Paras,
Civil Code of the Philippines Annotated,
2008, p. 12).
Requisites:
a. Capacity,
b. Offer and acceptance, and
c. No vitiation of consent
b. Determinate or determinable subject
matter – which refers to the determinate thing
which is the object of the contract.
(See further discussion under Subject Matter) Container vs. PNB, G.R. No. 166862, December 20,
2006)
c. Price certain in money or its equivalent.
Earnest Money
It is not enough for the parties to agree on the
price of the property, but they must also agree Earnest money, called “arras,” is something of
on the manner of payment of the price of the value to show that the buyer was really in
property to give rise to a binding and earnest, and given to the seller to bind the
enforceable contract of sale or contract to sell. bargain. (See 14 Words and Phrases, p. 23). It is
This is because the agreement as to the manner part of the purchase price, hence, is a proof of
of payment goes into the price, such that a the perfection of the contract (Art. 1482, NCC).
disagreement on the manner of payment is
tantamount to a failure to agree on the price Earnest Money distinguished from Option
(Boston Bank of the Phil. vs. CA, G.R. No. 158149, Money
February 9, 2006, Mernelego vs. Banco Filipino
Savings and Mortgage Bank, G.R. No. 161524, Earnest Money Option Money
January 27, 2006). As to Money Given
Forms part of Money given as a
 In expropriation and foreclosure proceedings, purchase price distinct consideration
there can be a valid sale but not by the for an option contract
meeting of the minds since the other party is As to Perfection
compelled to enter into a contract. Given only where Applies to a
there is already a sale sale not yet perfected
NOTE: The absence of any essential elements Obligation of the buyer
negates the existence of a perfected contract of Buyer is bound to pay Buyer is not required
sale (Dizon vs. CA, G.R.122544, June 28, 1999) even the balance to buy but may
when earnest money or down payment has been even forfeit it
paid (Manila Metal Container Corp. vs. PNB, G.R. No. depending on the
166862, December 20, 2006) terms of the option

2. PERFECTION 3. CONTRACT OF SALE V. CONTRACT TO

SELL
GR: Being a consensual contract, the contract of
sale is perfected at the moment there is a Contract of Sale Contract to Sell
meeting of minds upon the thing which is the As to transfer of ownership
object of the contract and upon the price. (Art. Ownership is Ownership is
1475, NCC) transferred to the transferred upon full
buyer upon delivery payment of the
XPN: When the sale is subject to a Suspensive of the object to him. purchase price.
Condition (People’s Homesite vs. CA, G.R. No. L-
61623, December 26, 1984).
Note: Vendor has lost Note: Prior to full
and cannot recover payment, ownership
Requirements:
ownership until and is retained by the
unless the contract is seller.
1. When parties are face to face – when there
resolved or rescinded
is absolute acceptance of an offer.
As to numbers of contracts
2. When thru correspondence/telegram –
There is only one There are two
when the offeror receives or had knowledge of
contract executed contracts:
the acceptance.
between the seller 1.The contract to sell.
and the buyer. (Preparatory to sale)
NOTE: Qualified acceptance is a mere counter-
2. The deed of
offeror which needs to be absolutely accepted to
absolute sale. (The
give rise to perfected contract of sale (Manila Metal
principal contract is

229
 executed after full  In a conditional contract of sale, however,
payment of the upon the fulfillment of the suspensive
purchase price.) condition, the sale becomes absolute and this
As to payment as a condition will definitely affect the seller’s title thereto.
Non-payment of the Full payment of the In fact, if there had been a previous delivery
price is a resolutory price is a positive of the subject property, the seller’s ownership
condition. Vendor suspensive or title to the property is automatically
loses ownership over condition. transferred to the buyer such that, the seller
the property and will no longer have any title to transfer to any
cannot recover it until Note: Failure to fully third person. Applying Article 1544 of the Civil
and unless the pay the price is not a Code, a second buyer of the property who
contract is resolved or breach but an event may have had actual or constructive
rescinded. that prevents the knowledge of such defect in the seller’s title,
obligation of the or at least was charged with the obligation to
vendor to convey title discover such defect, cannot be a registrant
from becoming in good faith. Second buyer cannot defeat the
effective (Uy & Sons, first buyer’s title. In case a title is issued to
Inc. v Valbueco Inc., the second buyer, the first buyer may seek
G.R. No.o. 179594, reconveyance of the property subject of the
September 11, 2013). sale (Ibid.).
The non-payment of
the purchase price B. CAPACITY TO BUY OR SELL
renders the contract
to sell without force GR: All persons, whether natural or juridical, who
and effect (Tumibay can bind themselves, have legal capacity to buy
v. Lopez, GR No. and sell (Art. 1489, par. 1, NCC).
171692, June 3,
2013). XPN:
As to remedies available
1. Specific 1. Resolution Those incapacitated to enter into contracts
Performance 2. Damages
2. Rescission 1. Absolute incapacity - cannot bind themselves
3. Damages in any case
(De Leon, Comments and Cases on Sales and Lease,
2005, p. 22) 2. Relative incapacity - exists only with
reference to certain persons or a certain class
Importance of Distinctions Between of property
Contract to Sell and Conditional Contract of
Sale: 3. Specific incapacity/Special disqualifications

In a contract to sell, there being no previous sale Absolute Incapacity (Arts. 1327, 1397,
of the property, a third person buying such 1399, NCC):
property despite the fulfillment of the suspensive
condition such as the full payment of the 1. Persons who cannot give consent to a
purchase price, cannot be deemed a buyer in bad contract:
faith and the prospective buyer cannot seek the a. Minors
relief of reconveyance of the property. There is b. Insane persons
no double sale in such cases. Title to the property c. Deaf-mutes who do not know how to write
will transfer to the buyer after registration
because there is no defect in the owner-seller’s 2. Civil Interdictees
title per se, but the latter may be sued for a. Judicially-declared Incompetents
damages by the intending buyer (United Muslim b. Prodigals
and Christian Urban Poor Association, Inc. vs. Bryc-V c. Imbeciles
Development Corp., G.R. No. 179653, July 31, 2009). d. Absence & presumption of death

230
 e. Persons not of unsound mind but by
reason of age, disease, weak mind, and
other similar causes, cannot take care of
themselves and manage their property
without outside aid
 Contracts entered into during intervals by
insane or demented persons are generally
valid (Art. 1328, NCC); whereas, those
entered into in a state of drunkenness, or
during hypnotic spell, are merely voidable
(Art.1328, NCC). Contracts entered into by
such legally incapacitated persons are not
void, but merely voidable, subject to
annulment or ratification (Art. 1393, NCC).
 Capacitated person CANNOT file an action for
annulment using incapacity of the
incapacitated party as the basis.
He is disqualified from alleging the incapacity of
the person whom he contracts (Art. 1397, NCC).
Obligation to make restitution in a defective
contract, where such defect consists in the
incapacity of a party.
GR: The incapacitated person is not obliged to
make any restitution.
XPN: Insofar as he has been benefited by the
thing or price received by him (Art. 1399, NCC).
Sale to a Minor
Rule: The contract is voidable. But where
necessaries are sold and delivered to a minor or
other person without capacity to act, the
incapacitated person must pay a reasonable price
therefor (Art. 1489 [2], NCC).
Necessaries cover everything indispensable for
sustenance, dwelling, clothing, medical
attendance, education, and transportation (Art.
194, FC).
Relative Incapacity:
a. Married Persons
GR: Sale between husband and wife is void (Art.
1490, NCC; Camia De Reyes vs. Reyes de Ilano, G.R.
No. L-42092, October 28, 1936).
The prohibition applies –
a. To sales in legal redemption, compromise
and renunciations (Art. 1492, NCC); and
b. To common-law spouses (Calimlim-Canullas vs.
Fortun, G.R. No. L-57499, June 22, 1984).
Rationale: The reason behind the prohibition is
to protect third persons who may have contracted
with a spouse, believing in the existence of
certain properties, and who could easily be
defrauded by removing such property by transfer
to the other spouse (Perez vs. Perez-Senerpida, G.R.
No. 233365, March 24, 2021).
XPNs:
a. Separation of property in marriage settlement,
OR
b. Judicial separation of property. (Art. 1490,
NCC)
Who may question validity of sale:
a. The heirs of the spouses who have been
prejudiced, prior creditors and the State
when it comes to the payment of the proper
taxes due on the transactions (Medina vs. CIR,
G.R. No. L-15113, January 28, 1961).
b. However, the spouses, since they are parties
to an illegal act, cannot avail themselves of the
illegality of the sale on the ground of in pari
delicto and creditors who became such only
after the prohibited sale (Medina vs. CIR, supra).
Between Common Law Spouses
In Calimlim-Canullas vs. Fortun, the Court
decided that sale between common law spouses
is null and void because Art. 1490 prohibits
sales between spouses to prevent the exercise of
undue influence by one spouse over the other, as
well as to protect the institution of marriage. The
prohibition applies to a couple living as husband
and wife without the benefit of marriage,
otherwise, the condition of those incurred guilt
would turn out to be better than those in legal
union (Calimlim-Canullas vs. Fortun, et. al., G.R. No.
L-57499, June 22, 1984).
But when the registered property has been
conveyed subsequently to a third-party buyer in
good faith and for value, then reconveyance is no
longer available to common-law spouse-seller,
since under the Torrens system every buyer has
231
a right to rely upon the title of his immediate
seller (Cruz vs. CA, G.R. No. 120122, Nov. 6, 1997).
b. Alienage (Art. 39, NCC)
GR: Aliens, whether individuals or corporations,
have been disqualified from acquiring lands of the
public domain (Matthews vs. Taylor, G.R. No.
164584, June 22, 2009).
XPNs:
1. Acquisition is through hereditary succession
(Section 7, Article XII, 1987 Constitution)
2. A natural-born citizen of the Philippines who
has lost his Philippine citizenship (Section 8,
Article XII, 1987 Constitution)
3. Americans who may have acquired tile to
private lands during the effectiveness of the
Parity Agreement (Section 11, Article XVII,
1973 Constitution).
c. Trusteeship
Special Disqualifications (Arts. 1491-1492,
NCC)
1. Agents
GR: An agent or administrator cannot acquire by
purchase, even at public or judicial auction, either
in person or thru the mediation of another, the
property whose administration or sale may have
been entrusted to them.
XPN: Principal gives consent.
2. Guardian
GR: Sale of property belonging to the ward in
favor of the guardian is void (Art. 149[1], NCC;
Philippine Trust Co. vs. Roldan, G.R. No. L-8477,
May 31, 1956). But after the inhibition has
ceased, a new contract may be executed which
will be valid from the time of the execution of the
new contract (Rubias vs. Batiller, G.R. No. L-35702,
May 29, 1973).
Rationale: Guardianship is a trust of the highest
order, and the trustee cannot be allowed to have
any inducement or neglect his ward’s interest (Phil
Trust Co vs. Roldan, G.R. No. L-8477, May 31, 1956).
232
3. Executors and Administrators
GR: The sale in favor of the executor or
administrator of property under his
administration is void (Art. 1491[3], NCC).
Qualifications:
(a) Prohibition applies to sale of specific property
under administration. But after the inhibition
has ceased (or after the termination of the
administration), a new contract may be
executed which will be valid from the time of
the execution of the new contract (Rubias vs.
Batiller, G.R. No. L-35702, May 29, 1973).
(b) Prohibition does not apply to acquisition of
hereditary rights because these hereditary
rights are not part of the property under his
administration (Naval vs. Enriquez, G.R. No.
1318, April 12, 1904).
4. Public Officers and Employees
Public officers and employees cannot acquire the
property of the State or of any political
subdivision, or any GOCC, or institution, the
administration of which has been entrusted to
them; including judges and government experts,
who, in any manner whatsoever takes part in the
sale. (Art. 1491[4], NCC) Such contract is void.
(Maharlika Broadcasting Corp. vs. Tagle, G.R. No. L-
65594, July 9, 1986)
5. Lawyers
Cannot acquire or purchase property or rights in
litigation in which they take part by virtue of their
profession.
Rationale: Lawyers may have undue influence
over clients; greed may get the better of the
sentiments of loyalty and disinterestedness
(Valencia vs. Cabanting, A.C. No. 1302, 1391, 1543,
April 26, 1991).
Prohibition is definite and permanent and cannot
be cured by ratification (Rubias vs. Batiller, G.R. No.
L-35702, May 29, 1973).
XPNs: An assignment to a lawyer by his client of
an interest in the property does not violate Art.
1491, where:
a. A judgment has been rendered and has
become final; and
b. In case of contingency fee arrangements:
the interest of the lawyer may be annotated
as an adverse claim on the property awarded
to his client (Director of Lands vs. Ababa, G.R.
No. L-26096, February 27, 1979).
6. 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 which jurisdiction or territory they
exercise their respective functions.
Rationale: To prevent fraud and to surround
their profession with prestige.
Prohibition applies only on sales or assignment
during the pendency of litigation involving the
property (Macariola vs. Asuncion, A.M. No. 133-J, May
31, 1982).
Applicability of Prohibition
a. Even if the sale is at a public or judicial
auction, either in person or through the
mediation of another (Art. 1491, NCC).
b. To sales in legal redemption compromises
and renunciations (Art. 1492, NCC).
c. Only during the period of litigation. Hence, in
a case where the judge acquired the property
after the decision had long become final,
there is said to be no violation (Macariola vs.
Asuncion, A.M. No. 133-J, May 31, 1982).
When prohibition does not apply:
a. It does not apply to the sale of a parcel of
land acquired by a client to satisfy a
judgment in his favor to his attorney, as long
as the property was not the subject of the
litigation (Daroy vs. Abecia, A.C. No. 3046,
October 26, 1998).
b. It does not apply to a contingent fee based
on the value of the property involved in
litigation because the transfer or assignment
of the property in litigation takes effect only
after the finality of a favorable judgment.
(Recto vs. Harden, G.R. No. L-6897, November 29,
1956; Vda. De Laig vs. CA, G.R. No. L-26882; April
5, 1978; Director of Lands vs. Ababa, G.R. No. L-
26096, February 27, 1979)
C. EFFECTS OF THE CONTRACT WHEN THE
THING SOLD HAS BEEN 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
(Art. 1189, NCC).
a. If occurs prior to perfection, the seller bears
the loss, being the owner of the thing (res
perit domino).
b. If loss occurs at the time of perfection:
● If subject matter has been “entirely” lost,
contract shall be without any effect (Art.
1493, NCC).
● If the subject matter has been lost in part
only, the buyer may choose between:
withdrawing from the contract; or
demanding the remaining part, paying its
price in proportion to the total sum
agreed upon (Id).
c. If loss occurs after perfection but before
delivery (Villanueva, Law on Sales, 2009, p.
348):
● If lost without fault of the vendor,
obligation is extinguished.
● If lost through the fault of the vendor, he
is obliged to pay damages.
● If the thing deteriorates without fault of
the vendor, impairment is borne by
vendee.
● If it deteriorates through fault of the
vendor, vendee may choose between
rescission of obligation and its fulfillment,
with indemnity for damages in either
case.
● If loss without seller’s fault: Two views:
First view: Seller is released from his obligation to
deliver but buyer’s obligation to pay subsists
(Paras, Vol. V, 1990 ed., p. 58; Padilla, Civil Code,
1972, Ed., p. 840-841). Hence, the buyer bears the
risk of loss.
Second view: Counter-prestation is also
extinguished (IV Tolentino, Civil Code, 1991 ed.,
337). Hence, risk of loss is borne by the seller and
buyer need not pay the price.
233
 View of Tolentino is more just and equitable
and in conformity with the principle of res
perit domino. At any rate, the Supreme Court
had the occasion to hold that after perfection
but before delivery, the risk of loss is borne
by the seller under the rule of res perit
domino (Union Motors vs. CA, G.R. No. 117187,
July 20, 2001; Chrysler Philippines vs. CA, G.R. No.
L-55684, December 19, 1984).
d. If loss and deterioration occur after delivery:
GR: When ownership over goods has been
transferred to the buyer, goods are buyer’s risk
(Art. 1504, NCC).
XPNs:
(a) When delivery is made to buyer in pursuance
of contract and ownership is retained by
seller merely to secure performance of
buyer’s obligations, goods are still at buyer’s
risk from time of such delivery (Art. 1504,
NCC).
(b) Where actual delivery is delayed thru fault of
either buyer or seller, goods are at risk of
party in fault (Art. 1504, NCC).
Loss in case of specific goods
In the case of sale of specific goods, and without
the knowledge of the seller, the goods have
perished in part or wholly or in a material part so
deteriorated in quality as to be substantially
changed in character, the buyer may at his
option: treat sale as avoided; or treat sale 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 (Art. 1494, NCC).
D. OBLIGATIONS OF THE VENDOR
General Obligations of the Vendor:
1. Transfer the ownership
2. Deliver the thing sold (Arts. 1458 and 1495)
3. Deliver the fruits and accessories (Arts. 1164,
1166, and 1537);
4. Make Warranties (Arts. 1545 - 1581) - can be
waived or modified; warranty is not an
essential element of the contract of sale;
5. Take care of the thing, pending delivery, with
diligence of a good father of a family unless
234
law or parties stipulate another standard (Art.
1163);
6. Pay for the expenses for the execution and
registration of the sale, unless there is
stipulation to the contrary
7. Accord the buyer the right to examine the
goods (Art. 1584);
8. Enter into contract with the carrier on behalf
of the buyer as may be reasonable under the
circumstances (Art. 1523);
9. Notify the buyer regarding necessity to insure
goods if it is usual to insure them
OBLIGATION OF THE SELLER TO TRANSFER
OWNERSHIP
Not required at the time of the perfection of the
contract, but required only at the time of
delivery (Art. 1459, NCC). Hence, a perfected
contract of sale cannot be challenged on the
ground of the seller’s non-ownership of the thing
sold at the time of the perfection of the contract
of sale (Quijada vs. CA, G.R. No. 126444, December
4, 1998; Cavite Development Bank vs. Sps. Lim G.R.
No. 131679, February 1, 2000).
Place of Delivery
The following are the rules shall be observed in
determining the place of delivery of goods sold:
1. Where there is an agreement, express or
implied, the place of delivery is that agreed
upon;
2. In the absence an agreement, the place is
that determined by usage of trade;
3. Where there is no agreement and there is
also no prevalent usage, the place of delivery
is the seller’s place of business;
4. In any other case, the place of delivery is the
seller’s residence; and
5. In case of specific goods, which to the
knowledge of the parties at the time the
contract was made were in some other place,
that place is the place of delivery, in the
absence of any agreement or usage of trade
to the contrary (Art. 1521, NCC).
 Where the goods at the time of sale are
in the possession of a third person, the
seller has not fulfilled his obligation to
deliver to the buyer unless and until such
third person acknowledges to the buyer
that he holds the goods on the buyer’s
behalf (Art. 1521, NCC).
When Thing is Deemed Delivered
The thing sold shall be understood as delivered,
when it is placed in the control and possession of
the vendee (Art. 1497, NCC).
Delivery – 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 (Equatorial Realty Dev. vs. Mayfair Theatre,
G.R. No. 106063, November 21, 1996).
Types of Delivery:
Delivery may be effected in any of the following
ways or modes:
1. by actual or real delivery (Art. 1497, NCC)
2. by constructive or legal delivery (Arts.
1498-1501, NCC); or
3. by delivery in any other manner signifying an
agreement that the possession is transferred
to the vendee. (De Leon, Comments and Cases
on Sales and Lease, 2005, p. 166).
Actual Delivery
Thing sold is placed under the control and
possession of the vendee (Art. 1497, NCC) or his
agent (Alliance Tobacco Corp., Inc. vs. Phil. Virginia
Tobacco Administration, G.R. No. L-66944, November
13, 1989).
Constructive Delivery; Concepts; Types
Constructive delivery is a general term
comprehending all those acts which, although not
conferring physical possession of the thing, have
been held by construction of law equivalent to
acts of real delivery (Banawa vs. Mirano, G.R. No. L-
24750, May 16, 1980).
Constructive delivery may be effected in any of
the following ways or modes:
1. by the execution of a public instrument
(Art. 1498, par. 1., NCC);
2. by symbolical tradition or traditio
symbolica (ibid., par. 2);
3. by traditio longa manu (Art. 1499, NCC);
4. by traditio brevi manu (Ibid.);
5. by traditio constitutum possessorium
(Art. 1500, NCC); or
6. by quasi-delivery or quasi-traditio (Art.
1501, NCC).
1. Execution of Public Instruments
When the sale of movable or immovables is made
through a public instrument, the execution
thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from
the deed the contrary does not appear or cannot
clearly be inferred (Art. 1498, NCC).
Sale of thing not subject to control of
vendor:
Delivery by the execution of a public instrument
is equivalent to actual delivery only where the
thing is subject to the control of the vendor and
there is no impediment that may prevent the
passing of the property from the hands of the
vendor into those of the vendee. The thing sold
must be placed in his control in order that it can
be said that delivery has been effected (Addison
vs. Felix Tioco, G.R. No. L-12342, August 3, 1918).
Execution of Special Power of Attorney to
Agent; Not a Delivery
A special power of attorney authorizing the
agents to execute a deed of sale over the
property can by no means be interpreted as
delivery or conveyance of ownership over said
property (Torcuator vs. Bernabe, G.R. No. 134219,
June 8, 2005).
2. Symbolical Tradition or Traditio
Symbolica
As to movable property, its delivery may also be
made by the delivery of the keys of the place or
depository where it is stored or kept (Art. 1498,
NCC).
3. Traditio Longa Manu
This mode of delivery takes place by the mere
consent or agreement of the contracting parties
as when the vendor merely points to the thing
sold which shall thereafter be at the control and
disposal of the vendee (De Leon, Obligations and
Contracts, 2005, p. 181).
4. Traditio Brevi Manu
This mode of legal delivery happens when the
vendee has already the possession of the thing
sold by virtue of another title as when the lessor
235
sells the thing leased to the lessee. Instead of
turning over the thing to the vendor so that the
latter may, in turn, deliver it, all these are
considered done by action of law (De Leon,
Obligations and Contracts, 2005, p. 181).
5. Constitutum Possessorium
This mode of constructive delivery takes effect
when at the time of the perfection of the sale, the
seller held possession of the subject matter in the
concept of owner, and pursuant to the contract,
the seller continues to hold physical possession
thereof no longer in the concept of an owner, but
as a lessee or any other form of possession other
than in the concept of owner and pursuant to
sale, he would now hold possession in the
concept of an owner (Villanueva, Law on Sales,
2009, p. 230).
6. Quasi-traditio
Used to indicate the transfer of rights or
incorporeal things through the exercise of the
rights by the grantee with the acquiescence of the
grantor. (Rabuya, Civil Review I, 2021 Ed., p. 746)
Delivery of Incorporeal Thing
Delivery of incorporeal thing is effected:
1. by the execution of a public instrument (Art.
1498, NCC); or
2. when that mode of delivery is not applicable,
by the placing of the titles of ownership in the
possession of the vendee (Art. 1501, NCC);
or
3. by allowing the vendee to use his rights as
new owner with the consent of the vendor
(Art. 1501, NCC).
Double Sale
There is double sale when same property is sold
by the same vendor to different vendees (Art.
1544, NCC)
Requisites of Double Sales
1. The two (or more) sales transactions must
constitute valid sales;
2. The two (or more) sales transactions must
pertain to exactly the same subject matter;
3. The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
236
4. The two (or more) buyers at odds over the
rightful ownership of the subject matter must
each have bought from the very same
seller (Cheng vs. Genato, G.R. No. 129760,
December 29, 1998).
Rules in Case of Double Sales
The conflicting rights of said vendees in case of
double sales shall be resolved in accordance with
the following rules:
1. When subject matter is movable - the
ownership shall be acquired by the vendee
who first takes possession in good faith
(Art. 1544, NCC; Villa Rey Transit, Inc. vs. Ferrer,
G.R. No. L-23893, October 29, 1968).
2. When subject matter is immovable
a. Registration in good faith: The
vendee who first registers the sale in
good faith in the Registry of Property has
a preferred right over another who has
not registered his title even if the latter is
in actual possession of the immovable
property.
b. Possession in good faith: In the
absence of registration, the vendee who
first takes possession in good faith; and
c. Oldest title in good faith: In the
absence of both registration and
possession, the vendee who presents the
oldest title in good faith. (Art. 1544, NCC)
 Art. 1544 does not apply to land
application under the Torrens
System.
Concept of Purchaser in Good Faith
He is deemed a possessor in good faith who is
not aware that there exists in his title or mode of
acquisition any flaw which invalidates it (Art. 526,
NCC).
When a piece of land is in the actual possession
of persons other than the seller, the buyer must
be wary and should investigate the rights of those
in possession. Without making such inquiry, one
cannot claim that he is a buyer in good faith
(Rosaroso vs. Doria, G.R. No. 194846 June 19, 2013).
Effect if seller is not the owner at the time
of delivery:
If the seller is not the owner, the sale is null and
void (nemo dat quod non habet). The seller is
liable for damages for breach of his obligation to
transmit ownership to the buyer (Rabuya, Pre-bar
Reviewer in Civil Law, 2021 Ed., p. 446-447).
Sale by a Person Having a Voidable Title
GR: In a sale by the non-owner, the buyer
acquires no better title to the goods than the
seller had (he merely steps into the shoes of the
seller).
XPNs: (True Owner Cannot Recover):
1. Owner is estopped or precluded by his
conduct (Art. 1505, NCC);
2. Sale made by the registered or apparent
owner in accordance with registration laws
(Art. 1505, NCC);
3. Sales sanctioned by judicial or statutory
authority (Art. 1505, NCC);
4. Purchases in a merchants store, fairs or
markets; the thing must be on display to
make it part of the goods for sale to bar
recovery by the true owner (Art. 1505, NCC);
5. When a person who is not the owner sells and
delivers a thing, and subsequently acquires
title thereto (Art. 1434, NCC);
6. When the seller has a voidable title which has
not been avoided at the time of the sale (Art.
1506, NCC)
7. Sale by co-owner of whole property or a
definite portion thereof;
8. Special rights of unpaid seller (Arts. 1526-
1533, NCC).
 When a non-owner who sells and delivers
a thing subsequently acquires title
thereto, the title passes by operation of
law to the buyer (Art. 1434, NCC).
E. OBLIGATIONS OF THE VENDEE
General Obligations of Vendee:
1. Payment of price;
2. Accepting the delivery of thing sold; and
3. Bear the expenses for the execution and
registration of the sale and putting the goods
in a deliverable state, if such is the stipulation
(Art. 1488, NCC).
OBLIGATION TO PAY PRICE:
1. As to time and place: Must pay at the time
and place stipulated in the contract. If no
stipulation, at the time and place of the delivery
of the thing sold (Art. 1582, NCC).
1. Liability for interest: For the period
between delivery and payment of price, in the
following cases-
a. If stipulated
b. If thing sold and delivered produced
fruits and income; or
c. If buyer is in default, from time of judicial
or extrajudicial demand for payment of
price (Art. 1589, NCC).
OBLIGATION TO ACCEPT DELIVERY:
1. Time and place: The vendee is bound to
accept delivery at the time and place
stipulated in the contract. If not stipulated, at
time and place of the delivery of thing sold
(Art. 1582, NCC).
2. Rule in delivery of goods by installment.
Buyer cannot be compelled to accept delivery
of goods by installment, unless otherwise
agreed upon (Art. 1583, NCC).
Rule on right of buyer to examine
GR: If not previously examined by buyer and no
stipulation to contrary, delivery is not deemed
accepted unless buyer has reasonable
opportunity to examine the delivered goods (Art.
1584 [1], NCC). Buyer has, upon request and
unless there is contrary agreement, the right to
examine the goods when seller tenders delivery
of the same (Art. 1584 [2], NCC).
XPN:
C.O.D – When the terms indicate that goods shall
not be delivered by the carrier to the buyer until
he has paid the price. The buyer is not entitled to
examine the goods before the payment of the
price (Art. 1584, NCC).
Delivery by installments
The buyer of goods is not bound to accept
delivery thereof by installments, unless otherwise
is agreed upon (Art. 1583, NCC).
237
Seller’s Warranty
In the absence of express or implied agreement
of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability
in damages or other legal remedy for breach of
any promise or warranty in the contract of sale
(Art. 1586, NCC).
Refusal to Accept
Unless otherwise agreed, where goods are
delivered to the buyer, and he refuses to accept
them, having the right to do so, he is not bound
to return them to the seller, but it is sufficient if
he notifies the seller that he refuses to accept
them (Art. 1587, NCC). However, when the
buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the
moment they are placed at his disposal (Art.
1588, NCC).
Circumstances indicating acceptance of
goods:
1. Express acceptance
- When buyer intimates to the seller that he
has accepted them;
2. Implied acceptance
- When goods have been delivered to buyer
and he does any act in relation to them
which is inconsistent with the ownership of
the seller; or
- When, after the lapse of a reasonable time,
buyer retains the goods without intimating
to seller that he has rejected them (Art.
1585, NCC).
Effect of acceptance on seller’s breach:
1. Seller remains liable for damages or other
legal remedy for breach of any promise or
warranty in the contract of sale, in the
absence of agreement to the contrary.
2. But the buyer must give notice to the seller
of such breach within a reasonable time after
the buyer knows, or ought to know of such
breach; otherwise, the seller is not liable (Art.
1586, NCC).
238
Other Obligations of the Buyer
1. Duty of buyer to take care of goods without
obligation to return (Art. 1587, NCC);
2. To be liable for a depositary if he voluntarily
constitutes himself as such (Art. 1587, NCC);
and
3. Pay interest for the period between the
delivery of the thing and the payment of the
price in the following circumstances:
a. Should it have been so stipulated;
b. Should the thing sold and delivered
produce fruits or income;
c. Should he be in default, from the time of
judicial or extrajudicial demand for the
payment of the price (Art. 1589, NCC).
F. BREACH OF CONTRACT
1. REMEDIES
a. Remedies of the Seller
1. Action for payment of the price (Art.
1595);
2. Action for damages for non-acceptance
of the goods (Art. 1596);
3. Action for rescission (Art. 1597).
b. Remedies of the Buyer
1. Action for specific performance (Art.
1598);
2. Action for rescission or damages for
breach of warranty (Art. 1599).
c. Remedies of the Seller for Breach of
Contract in Case of Movables
1. Ordinary Remedies
Movables in General – Action to rescind the
sale (Art. 1593)
Sale of Goods:
1. Action for specific performance - when
ownership has been transferred to the
buyer (Art. 1595, NCC).
2. Treat the goods as the buyer’s and may
maintain an action for the price - When the
ownership in the goods has not passed, if
they cannot readily be resold for a
reasonable price, the seller may offer to
 deliver the goods to the buyer, and, if the
buyer refuses to receive them, may notify
the buyer that the goods are thereafter
held by the seller as bailee for the buyer
(Art. 1595, NCC).
When buyer wrongfully neglects / refuses
to accept goods:
The seller may maintain an action against him for
damages for non-acceptance in accordance with
the following:
a. The seller of the goods who has not been
paid or to whom the price has not been
tendered.
b. The seller of the goods, in case a bill of
exchange or other negotiable instrument has
been received as conditional payment, AND
the condition on which it was received has
been broken by reason of the dishonor of the
instrument, insolvency of the buyer or
otherwise (Villanueva, Law on Sales, 2009, p.
363).
3. Special Right of resale;
Remedies of Unpaid Seller:
1. Possessory lien over the goods;
● Right of lien is not affected by any sale, or
other disposition of the goods which the
buyer may have made, unless the seller
assented thereto. If a negotiable document
of title has been issued for goods, no
seller’s lien shall defeat the right of any
purchaser for value and in good faith to
whom such document has been
negotiated, whether such negotiation be
prior or subsequent to the notification to
the carrier, or other bailee who issued such
document, of the seller’s claim to a lien
(Art. 1535, NCC).
● It is exercisable only in the following
instances:
4. Special Right to rescind the sale;
a. Where the goods have been sold
without any stipulation as to credit;
b. Where the goods have been sold on
credit, but the term of credit has
expired;
c. Where the buyer becomes insolvent
(Art. 1527, NCC).
2. Right of stoppage in transit after he has
parted with the possession of the goods and
the buyer becomes insolvent;
● The unpaid seller may resume possession
of the goods at any time while they are in
transit, and he will then become entitled to
the same rights in regard to the goods as
he would have had if he had never parted
with the possession (Villanueva, Law on
Sales, 2009, p. 371).
● If a negotiable document of title has been
issued for goods, no seller’s right to
stoppage in transitu shall defeat the right
of any purchaser for value and in good
faith to whom such document has been
negotiated, whether such negotiation be
prior or subsequent to the notification to
the carrier, or other bailee who issued such
document, of the seller’s claim to a lien
(Art. 1535, NCC).
● Unpaid seller may exercise special right of
resell under the following circumstances:
a. The goods are of perishable nature;
b. Where the seller has been expressly
reserved in case the buyer should
make default; or
c. Where the buyer has been in default
in the payment of the price for an
unreasonable time (Art. 1533, NCC).
● Unpaid seller, without need of first
rescinding the contract judicially, is entitled
to resell the same, and if he is obliged to
sell it for less than the contract price, the
buyer is liable for the difference (Katigbak
vs. Court of Appeals, G.R. No. L-16480, January
31, 1962).
● Notwithstanding that the ownership in the
goods may have passed to the buyer, the
unpaid seller has a special right to
extrajudicially rescind the sale.
239
 ● Unpaid seller may exercise special right to
rescind the sale under the following
circumstances:
a. The seller has expressly reserved the
right to do so in case the buyer should
make default; or
b. The buyer has been in default in the
payment of the price for an
unreasonable time.
5. Action for the price;
Effect of Failure to Pay:
Failure of the vendee to pay the price after the
execution of the contract does not make the sale
null and void for lack of consideration but results
at most in default on the part of the vendee, for
which the vendor may exercise his legal remedies
(Balatbat vs. CA, G.R. No. 109410, August 28, 1996).
Failure to pay the consideration results in a right
to demand the fulfillment or cancellation of the
obligation under an existing valid contract
(Buenaventura vs. CA, G.R. No. 126376, November 20,
2003)
When Vendee Liable to Pay Interest:
1. If it has been so stipulated;
2. If the thing sold and delivered produce fruits
or income; or
3. If the buyer be in default, from the time of
judicial or extrajudicial demand for the
payment of price (Art. 1589, NCC).
6. Action for damages
2. SALE OF PERSONAL/MOVABLES
PROPERTY THRU INSTALLMENT (AS
AMENDED BY RECTO LAW, ACT NO. 4122)
Remedies of Vendor: In a contract of sale of
personal property the price of which is payable in
installments, the vendor may exercise any of the
following remedies:
a. Exact fulfillment of the obligation, should the
vendee fail to pay at least one installment;
b. Cancel the sale, should the vendee’s failure
to pay cover two or more installments;
c. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee’s failure to pay cover two or more
installments (Art. 1484, NCC).
240
Foregoing remedies are alternative and not
cumulative. If the creditor chooses one remedy,
he cannot avail himself of the other two (Delta
Motors Sales Corp. vs. Niu Kim Duan, G.R. No. 61043,
September 2, 1992; Elisco Tool Manufacturing Corp.
vs. CA, G.R. No. 109966, May 31, 1999).
What constitute “sale on installment”
1. The price must be payable in several
installments (Levy Hermanos, Inc. vs. Gervacio,
G.R. No. L-46306, October 27, 1939).
2. The Recto law does not apply to a sale where
there is an initial payment and the balance is
payable in the future. This is not a sale on
installment (Id.).
A. Specific Performance
GR: The GR is that when the seller has chosen
specific performance, he can no longer seek for
rescission nor foreclosure of the chattel mortgage
constituted on the thing sold. The seller is
deemed to have chosen specific performance,
thereby foreclosing resort to the other two
remedies, when he files an action in court for
recovery.
XPN: Even if the seller had chosen specific
performance, but if the same becomes
impossible, the seller may still choose rescission
(Art. 1191, NCC).
 In Chieng vs. Sps. Santos (G.R. No. 169647,
Aug. 31, 2007), involving a real estate
mortgage obligation, the Supreme Court held
that the filing of the criminal cases for
violation of B.P. Blg. 22 where the civil action
for recovery of the amount of the checks is
impliedly instituted (Sec. 1[b] of Rule 111 of
the 2000 Rules on Criminal Procedure), the
remedy of collection suit is deemed to have
been availed, thus barring the complainant
from subsequently resorting to an action for
foreclosure.
B. Rescission/Cancellation of Sale
When remedy is deemed chosen:
The rule is that the seller is deemed to have
chosen the remedy of rescission, and can no
longer avail of the other two remedies, when he
has clearly indicated to end the contract, such as:
(1) when he sends a notice of rescission; or (2)
takes possession of the subject matter of the
sale; or (3) when he files an action for rescission.
Forfeiture of installment or rentals paid:
GR: As a rule, rescission obliges the parties to
make mutual restitution (Art. 1385, NCC). Hence,
the payments must be returned.
XPN: A stipulation that the installments or rents
paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
unconscionable under the circumstances (Art.
1486, NCC).
Effects of rescission:
It abrogates the contract from the very
beginning, subject to the provisions of Article
1486 allowing the vendor to retain installments
payments if there is such stipulation and the
same is not unconscionable under the
circumstances.
 As a consequence, the seller is barred from
exacting payment from the buyer the balance
of the price (Nonato vs. IAC, G.R. No. L-67181,
November 22, 1985; Delta Motor Sales Corp. vs.
Niu Kim Duan, supra.). The same is not
consistent with the remedy of rescission.
C. Foreclosure of Chattel Mortgage:
When remedy is deemed chosen:
GR: Where the mortgagee elects a remedy of
foreclosure, the law requires the actual
foreclosure of the mortgaged chattel. Thus, in
Manila Motor Co. vs. Fernandez (G.R. No. L-8377,
August 28, 1956), the Court held that it is the actual
sale of the mortgaged chattel in accordance with
Sec. 14 of Act No. 1508 that would bar the
creditor (who chooses to foreclose) from
recovering any unpaid balance (Pacific Commercial
Co. vs. De la Rama, G.R. No. 47771, June 17, 1941).
And it is deemed that there has been foreclosure
of the mortgage when all the proceedings of the
foreclosure, including the sale of the property at
public auction, have been accomplished
(Macondray & Co., Inc. vs. Tan, G.R. No. 45105,
November 26, 1938).
XPN: Although no actual foreclosure as
contemplated under the law has taken place but
since the vehicle is already in the possession of
the creditor and it has persistently and
consistently avowed that it elects the remedy of
foreclosure, the creditor can be directed to
foreclosure the said vehicle without more (Magna
Financial Services Group, Inc. vs. Colarina, G.R.
No. 158635, December 9, 2005).
Effect of foreclosure of mortgage:
GR: In case of foreclosure, the creditor-
mortgagee shall have no further action against
the purchaser to recover “any unpaid balance of
the price.” Any agreement to the contrary shall
be void. This is known as the Recto Law (Art.
148[3], NCC). Notwithstanding the language of
the law, current jurisprudence upholds the full
barring effect in recovery to include damages,
interests and attorney’s fees (and not only the
balance of the purchase price).
XPN: However, where the mortgagor plainly
refuses to deliver the chattel subject of the
mortgage upon his failure to pay two or more
installments, or if he conceals the chattel to place
it beyond the reach of the mortgagee, the
creditor-mortgagee is allowed to recover the
expenses properly incurred in effecting seizure of
the chattel and reasonable attorney’s fees in
prosecuting the action for replevin (Filipinas
Investment & Finance Corp., vs. Ridad, G.R. No. L-
27645, November 28, 1969).
The seller can no longer proceed to foreclose on
the real estate mortgage because if the guarantor
should be compelled to pay the balance of the
purchase price, the guarantor will in turn be
entitled to recover what he has paid from the
debtor vendee; so ultimately, it will be the buyer
who will be made to bear the payment of the
balance of the price, despite the earlier
foreclosure of the chattel mortgage given by him
(Cruz v. Filipinas Investment & Finance Corp., G.R. No.
L-27645, November 28, 1969).
Applicability of Recto Law: The Recto law
applies also to contracts purporting to be leases
of personal property with option to buy, when the
lessor has deprived the lessee of the possession
or enjoyment of the thing (Art. 1485, NCC).
 This law covers contracts of sale of personal
property by installments (Act No. 4122). It is
also applied to contracts purporting to be
leases of personal property with option to
buy, when the lessor has deprived the lessee
241
 of the possession or enjoyment of the thing.
(PCI Leasing and Finance Inc. vs. Giraffe‐ X
Creative Imaging, Inc., G.R. No. 142618, July 12,
2007).
 In choosing, through replevin, to deprive the
lessee-buyer of possession of the leased
equipment, the lessor-seller waived its right
to bring an action to recover unpaid rentals
on the said leased items. The condition that
the lessor has deprived the lessee of
possession or enjoyment of the thing for the
purpose of applying Article 1485 was fulfilled
upon filing of the lessor-seller of the
complaint for a sum of money with prayer for
replevin to recover possession of the office
equipment. By virtue of writ of seizure issued
by the court, the lessor-seller has effectively
deprived lessee-buyer of their use, a situation
which, by force of Recto Law, in turn
precludes the former from maintaining an
action for recovery of “accrued rentals” or the
recovery of the balance of the purchase price
plus interest (PCI Leasing and Finance, Inc.
vs. Giraffe-X Creative Imaging, Inc., supra).
SALE OF IMMOVABLE PROPERTY THRU
INSTALLMENT (MACEDA LAW, R.A. 6552)
Applies to sale or financing of real estate on
installment payments, including residential
condominium apartments. The MACEDA law
applies to sale of real estate on installments,
whether the contract be one of contract to sell
(Villanueva, Sales, 2009 Ed., p. 432; Rillo vs. CA, G.R.
No. 125347, June 19, 1997).
Requisites:
1. Transactions or contracts involving the sale
OR financing of real estate on installment
payments, including residential condominium
apartments; and
2. Buyer defaults in payment of succeeding
installments.
Not Applicable:
1. Sale of industrial lots
2. Sale of commercial buildings
3. Sale of urban land covered by Urban Land
Reform and agricultural land under Agrarian
Reform Law
4. Sale of lands payable in straight terms
242
Rights of the Buyer
If Buyer Has Paid At Least 2 Years of
Installments:
1. The buyer must pay, without additional
interest, the unpaid installments due within
the total grace period earned by him. There
shall be one (1) month grace period for every
one (1) year of installment payments made.
This right shall be exercised by the buyer
ONLY once in every 5 years of the life of the
contract AND its extensions.
 Actual cancellation can only take place
after 30 days from receipt by the buyer of
the notice of cancellation OR demand for
rescission by a notarial act AND upon full
payment of the cash surrender value to
the buyer t of the cash surrender value to
the buyer (Olympia Housing vs. Panasiatic,
G.R. No. 140468 January 16, 2003).
 The seller shall refund to the buyer the
cash surrender value of the payments on
the property equivalent to 50% of the
total payments made. After five (5) years
of installments, there shall be an
additional 5% every year but not to
exceed 90% of the total payments made.
2. The buyer shall have the right to sell his
rights or assign the same to another person
OR to reinstate the contract by updating the
account during the grace period and before
actual cancellation of the contract.
3. The buyer shall have the right to pay in
advance any installment or the full unpaid
balance of the purchase price any time
without interest and to have such full
payment of the purchase price annotated in
the certificate of title covering the property.
If Buyer Has Paid Less Than Two Years Of
Installments:
1. Buyer is entitled to pay unpaid installments
within a grace period of NOT less than 60
days from the date the installments became
due. Within the grace period, buyer also has
the right to assign his rights.
2. After the grace period, seller may cancel the
contract AFTER 30 days from receipt of the
buyer of notice of cancellation or demand for
rescission by a notarial act.
3. Here, there is no cash surrender value.
Maceda Law, MANDATORY: Any stipulation of
the parties contrary to the foregoing rules shall
be null and void (Sec. 7, R.A. No. 6552).
Sale of Immovable Property In General
Anticipatory breach (No Actual Breach):
Seller may sue for rescission of sale of immovable
property even in the absence of actual breach by
buyer, if the following conditions are present:
1. Seller has already delivered the immovable
property but the buyer has not yet paid the
price; and
2. Seller has reasonable grounds to fear the loss
of the immovable property and its price (Art.
1591, NCC).
Where there was actual breach (buyer
failed to pay agreed price within agreed
period):
1. Buyer may still pay 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. After the
demand, the court may not grant the buyer a
new term (Art. 1592, NCC).
2. The foregoing rule applies even if the
contract provides for its automatic rescission
upon failure of the buyer to pay the price at
the time agreed upon (Art. 1592, NCC).
3. An offer to pay prior to the demand for
rescission is sufficient to defeat the seller’s
right under Article 1592 of the Civil Code (Art.
1592, NCC).
4. Under the provisions of Article 1592, the
demand for rescission must either be
judicial or by notarial act. A letter
informing the buyer of the automatic
rescission of an agreement does not amount
to a demand for rescission if it is not
notarized (Laforteza vs. Machuca, G.R. No.
137552, June 16, 2000);
5. The foregoing rules (or Article 1592) does not
apply in the following:
a. Cases covered by R.A. No. 6552 (or
Maceda Law)
b. Contracts to sell – Article 1592 of the
NCC, requiring demand by suit or by
notarial act in case the vendor of realty
wants to rescind does not apply to a
contract to sell but only to contract of
sale (Pangilinan vs. CA, G.R. No. 83588,
September 29, 1997);
c. Sale on installment of real estate where
parties have laid down the procedure to
be followed in the event vendee failed to
fulfill his obligation (Torralba vs. Delos
Angeles, G.R. No. L-27592, February 14,
1980).
Remedies of Buyer
Action for Specific Performance (Art. 1598,
NCC):
1. When a seller has broken a contract to
deliver specific or ascertained goods, the
buyer may ask for specific performance,
without giving seller the option to retain the
goods on payment of damages.
2. Judgment may be unconditional, or upon
such terms and conditions as to damages,
payment of the price and otherwise, as the
court may deem just (Art. 1598, NCC).
In case of breach of warranty by seller:
Buyer may, at his election –
1. Accept or keep goods and set up against the
seller, the breach of warranty by way of
recoupment in diminution or extinction of
price;
2. Accept or keep goods and maintain an action
against seller for damages for breach of
warranty;
3. Refuse to accept goods, and maintain an
action against seller for damages for breach
of warranty; or
4. Rescind contract of sale and refuse to receive
goods or if goods have already been
received, return them or offer to return them
to seller and recover the price or any part
thereof, which has been paid (Art. 1599,
NCC).
243
Remedy of Rescission by Buyer (Art. 1599,
NCC):
1. Not entitled to rescind:
a. If he knew of breach of warranty when
he accepted the goods without protest;
b. If he fails to notify the seller within a
reasonable time of the election to
rescind;
c. If he fails to return or offer to return the
goods to the seller in substantially as
good condition as they were in at the
time the ownership was transmitted to
the buyer.
2. If entitled to rescind and elected to do so
(Art. 1599, NCC):
a. He shall cease to be liable for the price
upon returning or offering to return the
goods.
b. If price or any part thereof has already
been paid, seller shall be liable to repay
so much thereof as has been paid,
concurrently with the return of the
goods, or immediately after an offer to
return of the goods, or immediately after
an offer to return the goods in exchange
for repayment of the price.
c. If the seller refuses to accept an offer of
buyer to return the goods, the buyer is
deemed to hold the goods as bailee for
seller, but subject to a lien to secure
payment of any portion of the price,
which he has been paid, and with
remedies for the enforcement of such
lien.
Right to Suspend Payment:
1. In sales not involving subdivision or
condominium projects:
a. Grounds for suspension of payment:
1) The vendee is disturbed in the possession
or ownership of the thing acquired; or
2) Vendee has reasonable grounds to fear
such disturbance, by a vindicatory action
or for a foreclosure of mortgage (Art.
1590 NCC).
 But a mere act of trespass does not
authorize the suspension of the
payment of the price (Art. 1590,
NCC).
244
b. Remedies of buyer: He may suspend
payment of the price until the vendor has
caused the disturbance or danger to cease.
But this remedy of suspension may not be
availed of if the seller gives security for the
return of the price or it has been stipulated
that, notwithstanding any such contingency,
the vendee shall be bound to make the
payment (Art. 1590, NCC).
2. In sales involving subdivision or
condominium projects:
a. Ground for suspension of payment: Failure of
the owner or developer to develop the
subdivision or condominium project
according to the approved plans and within
the time limit for complying the same (Sec.
23, PD 957).
b. Alternative remedies of the buyer:
1) The buyer may suspend payment and wait
for further development; or (2) he may
demand reimbursement of the total amount
paid (Sec. 23, P.D. No. 957).
2) In case of the first option, the
owner/developer may not forfeit the
installment payments made by the buyer
(Sec. 23, PD 957). He may not also be ousted
from the subdivision (Relucio vs. Brillante-
Garfin, G.R. No. 76518, July 13, 1990).
3) In case of the second option, the notice of
informing the developer of the intention not
to remit further payments on account of non-
development of the subdivision, and the
demand for refund, can be made at the same
time (Casa Filipina Realty Corp. vs. Office of the
Pres., G.R. No. 99346, February 7, 1995).
G. EXTINGUISHMENT
1. IN GENERAL
The same grounds by which obligations in
general are extinguished, also apply to the
extinguishment of the obligations arising from
contracts of sale. They include payment of the
price or performance, loss of the subject matter,
condonation or remission, confusion or merger of
the rights of creditor and debtor, compensation,
novation, annulment, rescission, fulfillment of a
resolutory condition, and prescription.
Payment or performance only extinguishes the
obligations to which they pertain to in a contract
of sale, but not necessarily the contract itself,
since the relationship between buyer and seller
remains after performance or payment, such as
the continuing enforceability of the warranties of
the seller. (Villanueva, Law on Sales, 2009 Ed., p.
515)
2. PACTO DE RETRO SALE
The essence is that title and ownership of the
property sold is immediately vested in the vendee
a retro, subject to the restrictive condition of
repurchase by the vendor a retro within the
period provided in Article 1606 of the New Civil
Code, to wit: the failure of the vendee a retro to
repurchase the property vests upon the latter by
operation of law the absolute title and ownership
over the property sold (Misterio vs. Cebu State
College of Science and Technology, G.R. No. 152199,
June 23, 2005).
Causes of Extinguishment: (Arts. 1600,
1231, NCC)
1. Same causes as all other obligations;
2. By various causes of extinguishment in Title
VI (Sales) such as:
a. Cancellation of sale of personal property
payable in installments (Art. 1484, NCC).
b. Resale of goods by the unpaid seller (Art.
1532, NCC).
c. Rescission of the sale by the unpaid
seller. (Art. 1534)
d. Rescission by the buyer in case of partial
eviction (Art. 1556).
e. Rescission by the buyer in case of breach
of warranty against hidden defects (Art.
1567).
f. Rescission by the buyer of sale of animals
with redhibitory defects (Art. 1580);
3. By redemption, whether conventional or legal.
a. Conventional Redemption
That which takes place when vendor reserves the
right to repurchase the thing sold with the
obligation to reimburse to the vendee the price of
the sale, the expenses of the contract, other
legitimate payments made by reason of the sale,
as well as necessary and useful expenses made
on the thing sold (Arts. 1601 and 1616, NCC).
 The GR in redemption is that it is not
sufficient that a person offering to redeem
manifests his desire to do so. The statement
of intention must be accompanied by an
actual and simultaneous tender of payment
for the full amount of the repurchase price
(BPI Family Savings Bank, Inc. vs. Veloso, G.R. No.
141974, August 9, 2004).
Period of Conventional Redemption:
1. When no period is fixed:
If the right of redemption was agreed upon
but there was no stipulation as to the period
within which the right shall be exercised, the
period of redemption shall be four years from
the date of the contract (Art. 1606, NCC).
2. When a period is fixed by the parties:
a. If the period does not exceed ten years-
such as when the right to repurchase
shall be exercised within five years, then
the period shall be five years from the
date of the contract.
If the period exceeds ten years, then the
period shall be ten years from the date of
the contract, the stipulation as to the
excess being null and void (Montiero vs.
Salgado, G.R. Nos. 7287, 7288, March 29,
1914).
b. When the period agreed upon is
indefinite, such as when the repurchase
may be made “at any time”, the
repurchase may be exercised within ten
years from the date of the contract.
c. In case there was a civil action between
the parties the vendor may still exercise
the right to repurchase within thirty days
from the time final judgment was
rendered in a civil action on that basis
that the contract was a true sale with a
right to repurchase (Art. 1606, NCC).
Effect of failure to exercise right of
repurchase
Ownership is consolidated in the vendee.
However, in case of real property, a judicial order,
after the vendee has been duly heard, is required
for the purpose of recording the consolidation in
the Registry of Property (Art. 1607, NCC).
245
Against whom right to repurchase available
a. The vendee a retro (original vendee)
If the vendee should leave several heirs, the
action for redemption cannot be brought
against each of them except for his own
share, whether the thing be undivided, or it
has been partitioned among them.
But if the inheritance has been divided, and
the thing sold has been awarded to one of
the heirs, the action for redemption may be
instituted against him for the whole (Art.
1615, NCC).
b. Every possessor whose right is derived from
the vendee a retro, even if no mention is
made in the second contract of the right to
repurchase, provided the right has been
recorded in the Register of Deeds, or even if
the right is not registered, but the possessor
has knowledge of the existence of the right.
(Art. 1608, Mortgage Law, Land Registration Law)
2. When the vendor remains in possession as
lessee or otherwise;
3. When the period for the exercise of the right
to repurchase is extended;
4. When the purchaser retains for himself a part
of the purchase price;
5. When the vendor binds himself to pay the
taxes on the thing sold;
6. When the real intention of the parties is that
the transaction shall secure they payment of
a debt or the transaction shall secure the
payment of a debt or the performance of any
other obligation (De Leon, Comments and Cases
on Sales and Lease, 2005, p. 389).
 The presumption of equitable mortgage
created in Article 1602 of the CC is not
conclusive – It may be rebutted by
competent and satisfactory proof of the
contrary (Santiago vs. Dizon, G.R. No.
172771, January 31, 2008).
Remedy: The apparent vendor may ask for the
reformation of the instrument (Art. 1605, NCC).

3. EQUITABLE MORTGAGE (Arts. 1602- Distinguished from Option to Buy

1604, NCC)
OPTION TO
RIGHT TO REDEEM
One which, although lacking in some formality, or PURCHASE
form, or words, or other requisites demanded by Not a separate contract Generally, it is
a statute, nevertheless reveals the intention of but merely part of a principal contract
the parties to charge real property as security for main contract of sale
a debt, and contains nothing impossible or Does not need its To be valid, it must
contrary to law (Dorado Vda. De Delfin vs. Dellota, separate consideration have a
G.R No. 143697, January 28, 2008; Deheza-Inamarga in order to be valid and consideration
vs. Alano, G.R. No. 171321, December 18, 2008). effective separate and
distinct from
Essential Elements: purchase price
Cannot exceed 10 years May be beyond 10
1. That the parties entered into a contract years
denominated as a contract of sale; and There must be a tender of May be exercised by
2. That their intention was to secure an existing payment of the amount notice of its exercise
debt by way of mortgage (Bacungan vs. CA, required by law, including to the offeror
G.R. No. 170282, December 18, 2008). consignment thereof if
tender of payment cannot
Contracts presumed to be an equitable be made effectively on the
buyer.
mortgage:
(De Leon, Comments and Cases on Sales and Lease,
2005, p. 382).
A contract of sale with a right to repurchase and
other contracts purporting to be an absolute sale,
shall be presumed to be an equitable mortgage,
in any of the following cases:
1. When the price of a sale with a right to
repurchase is unusually inadequate;

246
Exercise of the Right to Redeem
Obligations of Vendor A Retro When He
Exercises Right to Repurchase (Art. 1616,
NCC):
1. Return to vendee price of sale;
2. Pay expenses of the contract and other
legitimate payments made by reason of sale;
and
3. Pay all necessary and useful expenses made
on the thing sold.
b. Legal Redemption
The right to be subrogated upon the same terms
and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or
dation in payment, or by any other transaction
whereby ownership is transmitted by onerous
title (Art. 1619, NCC). Thus, this right is not
available if the transfer of ownership is by
gratuitous title.
Instances of legal redemption under civil
code:
1. Redemption by other co-owners or any one
or some of them. If a co-owner sells his
undivided share to a third person. If two or
more co-owners desire to exercise the right,
they may only do so in proportion to the
share they may respectively have in the thing
owned in common (Art. 1620, NCC).
2. Redemption by other co-heirs, or by any one
of them. If a co-heir sells his hereditary right
to a stranger (Art. 1088, NCC).
3. Redemption by owner of adjoining land:
a. In case of rural – If the owner alienates
it to a third person, the area of which
does not exceed one hectare. If two or
more adjoining owners desire to exercise
the right at the same time, the owner of
the smaller area shall be preferred; and
should both lands have the same area,
the one who first requested the
redemption (Art. 1621, NCC).
b. In case of urban land – If owner of urban
land, which is so small and so situated
that a major portion thereof cannot be
used for any practical purpose within a
reasonable time and which said owner
had bought merely for speculation, resell
it to a third person. If resale has not yet
been perfected, an owner of adjoining
land shall have a right of pre-emption; in
other words, his right to buy the property
is preferred to that of third persons. If
two or more adjoining owners desire to
exercise the right of pre-emption or
redemption as the case may be, the
owner whose intended use of the land
appears best justified shall be preferred
(Art. 1622, NCC).
4. Redemption by a debtor: if a credit or other
incorporated right in litigation be sold by the
creditor to a third person (Art. 1634, NCC).
Period of Redemption/Pre-emption: The
right of legal redemption shall not be exercised
except within 30 days from the notice in writing
by the prospective seller, or seller, as the case
may be. The deed of sale shall not be recorded in
the Registry of Property unless accompanied by
an affidavit of the seller that he has given written
notice thereof to all possible redemptioners (Art.
1623, NCC).
Redemption v. Pre-emption:
Redemption Pre-emption
Effected after the sale Effected prior to sale
Directed against third Directed against the
persons who bought prospective vendor
the property who is about to resell
the property
May be exercised only
where there is
prospective resale of
a small piece of urban
land bought by the
prospective vendor
merely for speculation
H. ASSIGNMENT OF CREDITS
DEFINITION
An assignment of credit has been defined as the
process of transferring the right of the assignor
to the assignee who would then have the right to
proceed against the debtor. The assignment may
be done gratuitously or onerously, in which case,
the assignment has an effect similar to that of a
247
sale (Abelardo B. Licaros vs. Antonio P. Gatmaitan,
G.R. No. 142838, August 9, 2001).
Perfection
An assignment of creditors and other incorporeal
rights shall be perfected in accordance with the
provisions of Article 1475 (Art. 1624, NCC).
 Art. 1475. The contract of sale is perfected at
the moment there is a meeting of minds upon
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 provisions of the
law governing the form of contracts.
Effects:
1. An assignment of a credit, right or action shall
produce no effect as against a third person,
unless it appears in a public instrument, or the
instrument is recorded in the Registry of
Property in case the assignment involves real
property. (Art. 1625, NCC)
2. The debtor who, before having knowledge of
the assignment, pays his creditor shall be
released from the obligation (Art. 1626, NCC).
3. The assignment of a credit includes all the
accessory rights, such as a guaranty,
mortgage, pledge or preference. (Art. 1627,
NCC).
4. The vendor in good faith shall be responsible
for the existence and legality of the credit at
the time of the sale, unless it should have
been sold as doubtful; but not for the solvency
of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior
to the sale and of common knowledge. Even
in these cases he shall only be liable for the
price received and for the expenses specified
in No. 1 of Article 1616. The vendor in bad
faith shall always be answerable for the
payment of all expenses, and for damages
(Art. 1628, NCC).
5. In case the assignor in good faith should have
made himself responsible for the solvency of
the debtor, and the contracting parties should
not have agreed upon the duration of the
liability, it shall last for one year only, from the
time of the assignment if the period had
already expired.(Art. 1629, NCC). If the credit
should be payable within a term or period
which has not yet expired, the liability shall
cease one year after the maturity (Ibid)
248
6. One who sells an inheritance without
enumerating the things of which it is
composed, shall only be answerable for his
character as an heir (Art. 1630, NCC).
7. One who sells for a lump sum the whole of
certain rights, rents, or products, shall comply
by answering for the legitimacy of the whole
in general; but he shall not be obliged to
warrant each of the various parts of which it
may be composed, except in the case of
eviction from the whole or the part of greater
value (Art. 1631, NCC).
Obligation of the Vendor:
Should the vendor have profited by some of the
fruits or received anything from the inheritance
sold, he shall pay the vendee thereof, if the
contrary has not been stipulated (Art. 1632,
NCC).
Obligation of the Vendee:
Art. 1633. The vendee shall, on his part,
reimburse the vendor for all that the latter may
have paid for the debts of and charges on the
estate and satisfy the credits he may have against
the same, unless there is an agreement to the
contrary (Art. 1633, NCC).
Extinguishment:
When a credit or other incorporeal right in
litigation is sold, the debtor shall have a right to
extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs
incurred by him, and the interest on the price
from the day on which the same was paid.
A credit or other incorporeal right shall be
considered in litigation from the time the
complaint concerning the same is answered.
The debtor may exercise his right within thirty
days from the date the assignee demands
payment from him (Art. 1634, NCC).
XPNS - From the provisions of the preceding
article shall be excepted the assignments or sales
made:
1. To a co-heir or co-owner of the right
assigned;
2. To a creditor in payment of his credit;
3. To the possessor of a tenement or piece of
land which is subject to the right in litigation
assigned. (Art. 1635, NCC)
VI. LEASE
A. GENERAL PROVISIONS
Two Kinds of Contract of Lease
1. Contract of Lease (proper) – it is a lease of
things, or when the subject matter is a thing;
2. Contract for Piece of Work – it is a lease of
service, or when the subject matter is a
service. (Art. 1642, NCC)
Contract of Lease of Things
It is a contract involving the grant of temporary
use or enjoyment of a property to another in
consideration of the payment of a price certain in
money or its equivalent (called rent). (Art. 1643,
NCC)
"Rent" may be defined as the compensation
either in money, provisions, chattels, or labor,
received by the owner of the soil from the
occupant thereof. It is defined as the return or
compensation for the possession of some
corporeal inheritance and is a profit issuing out of
lands or tenements, in return for their use. It is
that which is to be paid for the use of land,
whether in money, labor or other thing agreed
upon. (Tolentino and Manio vs. Gonzales SyChiam,
G.R. No. 26085, August 12, 1927)
Subject-matter
It can either be real or personal property.
GR: As to personal property, consumable goods
cannot be the subject matter of a contract of
lease.
XPN: When they are merely to be exhibited or
when they are accessory to an industrial
establishment. (Art. 1645, NCC)
Characteristic of Lease of things:
1. Consensual Contract
2. Onerous (essentially onerous)
3. Bilateral
4. Nominate
5. Principal
6. Cumulative
A contract of lease is a consensual, bilateral,
onerous and commutative contract by which the
owner temporarily grants the use of his property
(Chua Tee Dee vs. Court of Appeals, G.R. No. 135721,
May 27, 2004) or rendering of some service to
another who undertakes to pay the rent.
Being a consensual contract, it is perfected at the
moment there is a meeting of the minds on the
thing and the cause and consideration, which are
to constitute the contract. (Bugatti vs. Court of
Appeals, G.R. No. 138113, October 17, 2000; citing
Vitug, Compendium of Civil Law and Jurisprudence,
1993 edition, 653-654)
GR: Without the agreement of both parties, no
contract of lease can be said to have been
created or established. Nobody can force an
owner to lease out his property if he is not willing.
(Pagurayan vs. Reyes, G. R. No. 15477, July 23, 2008)
XPN: In industrial accession where both the
landowner and the builder may not be compelled
to buy the land because the value of the building
or of trees, the builder can be required to pay
reasonable rent. (Art. 448, NCC)
Essential Requisites of Contract of Lease
1) Consent
As in all contracts, consent is an essential
requisite in a contract of lease.
But take note that the people who are prohibited
from entering in a contract of sale under Arts.
1490 and 1491 cannot also enter into a contract
of lease. (Art. 1646, NCC)
Disqualified under Art. 1490, NCC
The husband and the wife cannot sell property to
each other, except:
a) When a separation of property was agreed
upon in the marriage settlements; or
b) When there has been a judicial separation of
property under article 191.
249