Obligations of the

vendee
 Objectives
At the end of the lecture, the student should be able
to:
1. Discuss the obligations of the vendee
2. Enumerate the modes of extinguishment of sale
3. Differentiate conventional from legal redemption
4. Understand the provisions on assignment of credit
and incorporeal rights

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Obligations of
the vendee
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Obligations of the vendee
1.) To accept delivery;

2.) To pay the price of the thing; and

3.) To bear the expenses for the execution and

registration and putting the goods in a deliverable
state, if such is the stipulation.

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When buyer deemed to have
accepted theto the
● When he intimates goods
seller that he is accepting them
● When he does any act in relation to the goods which is
inconsistent with the ownership of the seller (ex.: consuming the
goods, giving the goods to others)
● When he retains the goods after the lapse of a reasonable time
without intimating to the seller that he has rejected them.

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Delivery of goods in installments
As a general rule, the buyer is not bound to accept delivery of the
goods in installments, unless otherwise agreed (Art 1583).

This is consistent with the rule that payment or performance must

be complete (Art 1233)

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Where there is a contract of sale of goods to be delivered by stated installments,
which are to be separately paid for, and the seller makes defective deliveries in
respect of one or more instalments, or the buyer neglects or refuses without just
cause to take delivery of or pay for one more instalments, it depends in each case
on the terms of the contract and the circumstances of the case:

● whether the breach of contract is so material as to justify the

injured party in refusing to proceed further and suing for
damages for breach of the entire contract, or
● whether the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole contract as
broken.

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RIGHT OF THE BUYER TO
EXAMINE THE GOODS BEFORE
ACCEPTING THEM
The buyer has the right to examine the goods before accepting
them EXCEPT:
● When there is an agreement to that effect
● When there is a stipulation that the goods shall not be delivered
to the buyer until he has paid the price such as when the goods
are marked with the words “collect on delivery” – unless there is
an agreement or usage of trade permitting such examination.

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Effect of acceptance of goods on
seller’s liability for breach of
warranty
The seller is not discharged from such liability in damages or other
remedy for breach of warranty by acceptance of the goods
EXCEPT:
● If there is an agreement, whether express or implied.
● If the buyer fails to give notice to the seller of any breach of
warranty within a reasonable time after the buyer knows or
ought to know of such breach.

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Effect when buyer refuses to accept
delivery
If refusal to accept delivery is justified (ex.: incomplete goods)
● Buyer has no duty to return goods to the seller unless otherwise
agreed.
● Title to the goods does not pass on to the buyer
● He shall not be obliged to pay the price
● If he constitutes himself as depositary of the goods, he shall be liable as
such.

Obligation of the buyer

It is sufficient that the buyer notifies the seller that he refuses to accept
the goods so that the seller can take action on them.

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Effect when buyer refuses to accept
delivery
If refusal to accept delivery is not justified
● Title to the goods passes to the buyer the moment
the goods are placed at his disposal EXCEPT
○ When there is a stipulation to the contrary

○ When the seller has reserved the ownership of goods as a

security for payment of the price.

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Obligation to pay the price of the
thing
Time and place of payment of the price
● At the time and place stipulated
● Time and place of delivery of the thing, in the
absence of stipulation

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Obligation to pay the price of the
thing
When interest will be paid on the price
The buyer shall pay interest for the period between the
delivery of the thing and the payment f the price, in the
following cases:
1. If there is a stipulation (at 6% if no rate indicated)
2. If the thing sold produces fruits or income
3. If he is in default, from the time of judicial or extrajudicial
demand for the payment of the price

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Obligation to pay the price of the
thing
Suspension of payment of the price by the vendee
Grounds
● Disturbance in the vendee’s possession or ownership of
the thing purchased (ex.: complaint for eviction)
● Reasonable grounds to fear such disturbance, by a
vindicatory action or foreclosure of mortgage

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Obligation to pay the price of the
thing
Duration of suspension of payment
● Until the vendor has caused the disturbance or
danger to cease.

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Obligation to pay the price of the
thing
When right to suspend payment not available
● If the vendor gives security for the return of the price
● If it has been stipulated that the vendee shall pay the
price notwithstanding the existence of the aforementioned
disturbance or danger
● If the disturbance is a mere act of trespass.

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Rescission by vendor
IMMOVABLES
● When vendor is entitled to sue for immediate rescission
the vendor may immediately sue for rescission of the sale
if there are reasonable grounds to fear:
1. The loss of the immovable property sold, AND
2. Its price

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illustration
S sold his lot to B for P50,000. While the lot had been
delivered to B, B was to pay the price after 2 months, if
the lot was in danger of being eroded because B was
cutting all the trees planted thereon and B was
squandering his money in gambling, S may sue for
immediate rescission of the sale.

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Rescission by vendor
If one or both grounds do not exist the vendor may choose
between:
● Fulfillment of the contract, with damages
● Rescission of the contract, with damages

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Rescission by vendor
PACTUM COMMISSORIUM
This is an agreement between the vendor and the vendee in the sale of an
immovable that rescission of the contract shall of right take place if the vendee
fails to pay the price at the time agreed upon.
VOID: The vendee may pay even after the expiration of the period as long as no
demand for rescission has been made upon him either judicially or by notarial
act. After the demand, the court may not grant him a new term. Installment sales
are covered by Maceda Law.

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Rescission by the vendor
MOVABLES
Grounds:
● The vendee does not appear to receive the thing
● The vendee does not pay the price, unless a longer period is stipulated
for its payment

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 Actions for
breach of
contract of sale 22
Actions by the seller
1. Maintain an action for the price if the goods if the buyer
wrongfully neglects or refuses to pay
2. Maintain an action for damages if the buyer wrongfully
neglects or refuses to accept and pay for the goods
3. Rescind the contract if the buyer has repudiated the sale, or
manifested his inability to perform his obligation, or has
committed a breach of contract where the goods have not
been delivered to the buyer.

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Actions by the buyer
1. Bring an action for specific performance, if the seller has broken the contract
to deliver specific or ascertained goods
2. In case of breach of warranty by the seller, the buyer may, at his election:
• Accept or keep the goods and set up against the seller, the breach of warranty
by the way of recoupment or diminution or extinction of the price.
• Accept or keep the goods and maintain an action against the seller for
damages for breach of warranty
• Refuse to accept the goods, and maintain an action against the seller for
damages for breach of warranty
• Rescind the sale and refuse to receive the goods or if the goods have already
been received, return them or offer to return them to the seller and recover
the price or any part thereof which has been paid.

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Extinguishment
of sale
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How sales are extinguished
Common - By the same causes as all other obligations
● Payment or performance
● Loss of the thing due
● Condonation
● Novation
● Rescission
● Annulment
● Fulfillment of a resolutory condition

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How sales are extinguished
Special - By the various causes of extinguishment such as:
● Cancellation of sale of personal property payable in installments
● Resale of goods by the unpaid seller
● Rescission of the sale by the unpaid seller
● Rescission by the buyer in case of partial eviction
● Rescission by the buyer in case of breach of warranty against hidden defects
● Rescission by the buyer of sale of animals with redhibitory defects

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How sales are extinguished
Extra-special:
By redemption, whether legal or conventional.

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CONVENTI
ONAL
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Conventional redemption
Conventional redemption takes place when the vendor reserved the right to
repurchase the thing sold, with the obligation:
● To return to the vendee
○ The price of the sale
○ The expenses of the contract, and any other legitimate payments made
by reason of the sale, and
○ The necessary and useful expenses made on the thing sold

● To comply with other stipulations which may have been agreed upon

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Conventional redemption
Characteristics:
 Contractual
 Accidental
 Potestative (sole will of the redemptioner)
 Resolutory
 Real right (binding third persons if annotated or registered)
 Reserved right (at the time of the sale)

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Conventional redemption
Liability with respect to fruits existing at the time of redemption
● If there were visible or growing fruits at the time of sale
there will be no reimbursement for or prorating of the fruits at the time of
redemption if no indemnity was paid by the purchaser at the time the sale was executed.

● If there were no fruits at the time of sale

the fruits at the time of redemption will be prorated between the redemptioner and
the vendee, giving the vendee the part corresponding to the time he possessed the land in
the last year, counted from the anniversary of the date of sale

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Conventional redemption
Condition of the property at the time of redemption
● The vendor shall receive the property free from all charges constituted by the
vendee
● He shall respect the leases which the vendee may have executed in good
faith, and in accordance with the custom of the place where the land is
situated.

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Conventional redemption
Right of vendee to subrogation

In sale with right to repurchase, the vendee is subrogated to the vendor’s

rights and actions. Ownership is immediately transferred to the vendee.

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Conventional redemption
Period of redemption
● When no period is fixed
Within four(4) years from the date of contract

● When a period is fixed by the parties

 If period does not exceed 10 years, the stipulated period
 If period exceeds 10 years, redemption shall be within 10 years, excess
being null and void.

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Conventional redemption
Period of redemption
● Where the period agreed upon is indefinite (at any time), period shall be
within 10 years

● In case of a civil action between the parties, the vendor may still exercise the
right to repurchase within 30 days from the time the final judgment was
rendered in a civil action on the basis that the contract was a true sale with a
right to repurchase

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Conventional redemption
Failure to exercise right of repurchase
● Personal property - Ownership is consolidated to the vendee.
● Real Property – ownership is consolidated to the vendee and recorded in the
Registry of Property after issuance of a judicial order, the vendor has been
duly heard.

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Conventional redemption
Against whom right to repurchase available
● 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.

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Conventional redemption
Against whom right to repurchase available
● Every possessor whose right is derived from the vendee a retro (original
vendee), 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.

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illustration
S sold his lot to B with a right to repurchase the said lot within 5
years.

● S may repurchase the lot from B, the original vendee, within the
five year period

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illustration
S sold his lot to B with a right to repurchase the said lot within 5 years.
Assume that B dies before S could repurchase the lot. B is survived by his sons, X,Y,
and Z. S may exercise his right to repurchase against X, Y, and Z only to the extent of
1/3 undivided interest of each one on the lot.
● If the lot has been divided, S may exercise his right to repurchase against X, Y, and
Z only to the extent of the part that had been given to each one of them in the
partition.
● If X inherited the whole lot (Y and Z having given other properties from the
estate), then S may exercise the right to repurchase against X alone.

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illustration
S sold his lot to B with a right to repurchase the said lot within 5 years.
Assume that B sold the property to C, S may exercise his right to repurchase against C
provided the sale with right to repurchase was registered or C was aware that the sale
was with a right to repurchase when he purchased the property from B.

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Who may avail of the right to repurchase

● The vendor a retro

● Creditors of the vendor

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Who may avail of the right to repurchase
The vendor a retro
● In a sale with a right to repurchase, the vendee of a part of an undivided
immovable who acquires the whole thereof, may compel the vendor to
redeem the whole property, if the latter wishes to make use of the right of
redemption.

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Who may avail of the right to repurchase
The vendor a retro
● If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right
for more than his respective share.

● The same rule shall apply if the person who sold an immovable alone has
left several heirs, in which case each of the latter may only redeem the part
which he may have acquired.

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Who may avail of the right to repurchase
The vendor a retro
● In the case of the preceding article, the vendee may demand of all the
vendors or co-heirs that they come to an agreement upon the purchase of the
whole thing sold; and should they fail to do so, the vendee cannot be
compelled to consent to a partial redemption.

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Who may avail of the right to repurchase
The vendor a retro
● Each one of the co-owners of an undivided immovable who may have sold
his share separately, may independently exercise the right of repurchase as
regards his own share, and the vendee cannot compel him to redeem the
whole property.

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Who may avail of the right to repurchase
● Creditors of the vendor
The creditors of the vendor cannot make use of the right of redemption against
the vendee, until after they have exhausted the property of the vendor.

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illustration
● S sold his lot to B reserving his right to repurchase
the same within 5 years. S himself may repurchase
the lot from B.

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illustration
● A, B and C are co-owners of a lot. The lot is situated on a hillside
and of a shape that subdividing it among the owners would
render the lot unproductive, hence, essentially indivisible. A sells
his 1/3 undivided interest to X with right to repurchase the same
within 5 years. Shortly thereafter, B and C also sell their
undivided interests to X without a right to repurchase. When A
exercises his right to repurchase, X may compel him to redeem
not only his share but also those of B and C, the whole property.

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illustration
● A, B and C are co-owners of a lot. They sell the lot to X with right
to repurchase in the same contract. In this case, each one may
repurchase only to the extent of his 1/3 undivided interest. X,
however, may demand that A,B, and C come to an agreement to
redeem the whole property, and if they fail to do so, X cannot be
compelled to consent to a partial redemption.
● The same rules applies if S was the original seller who sold the
lot with right to repurchase and he dies with A,B, and C as heirs.

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illustration
● A, B, and C are co-owners of a lot. A sells his undivided interest
of 1/3 on the lot with right to repurchase to X. Sometime later, B
also sells his 1/3 undivided interest to X with right to repurchase.
Thereafter, C also sells his 1/3 undivided interest to X with right
to repurchase. A , B and C may each exercise his right to
repurchase only with respect to his share and no one of them
can be compelled by X to redeem the whole property

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 LEGAL
REDEMPTI
53
Conventional vs LEGAL
REDEMPTION
Conventional Legal
Right is reserved upon Statutory privilege
perfection of the sale
Seller a retro exercises Repurchase is exercised
the repurchase by a third person, not a
party to the sale
Contract of sale is New contract substitutes
extinguished when the original contract of
redemption is exercised sale
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LEGAL REDEMPTION
is 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 transferred by
onerous title.

Statutory privilege based on public policy, for the

convenience of the redemptioner and to avoid co-ownership.

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Instances of legal redemption
LEGAL REDEMPTION BY CO-OWNER
A co-owner of a thing may exercise the right of redemption in case
the shares of all the other co-owners or of any of them, are sold to
a third person, (Such is the rule in order to reduce the number of
co-owners since co-ownership is not favored upon.

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Instances of legal redemption
LEGAL REDEMPTION BY CO-OWNER
If two or more co-owners desire to exercise the right of
redemption, they may only do so in proportion to the share they
may respectively have in the thing owned in common.

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Instances of legal redemption
A, B, and C are co-owners of a lot, a sells his 1/3 undivided interest
in the property to X. B or C may redeem the share of A from X. if
both of them desire to redeem the share of A, each can redeem
only 1/6 of the property *they halve the share of A.

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Instances of legal redemption
LEGAL REDEMPTION BY ADJOINING OWNER OF A RURAL LAND
The owners of adjoining lands shall also have the right of
redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own
any rural land.
This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other apparent
servitudes for the benefit of other estates.

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Instances of legal redemption
LEGAL REDEMPTION BY ADJOINING OWNER OF A RURAL LAND
If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption.

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Instances of legal redemption
LEGAL REDEMPTION BY ADJOINING OWNER OF AN URBAN LAND
Whenever a piece 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, having been bought
merely for speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a reasonable price.

Right to purchase before any

other
*brought to the prospective seller

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Instances of legal redemption
LEGAL REDEMPTION BY ADJOINING OWNER OF AN URBAN LAND
If the re-sale has been perfected, the owner of the adjoining
land shall have a right of redemption, also at a reasonable price.

When two or more owners of adjoining lands wish to exercise the

Brought to the buyer
right of pre-emption or redemption, the owner whose intended use
of the land in question appears best justified shall be preferred.

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Instances of legal redemption
The right of legal pre-emption or redemption shall not be
exercised except within 30 days from the notice in writing by the
prospective vendor, or by the vendor, 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 vendor that he has
given written notice thereof to all possible redemptioners.

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Equitable mortgage
An equitable mortgage is one which although lacking in
some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as
security for a debt, and contains nothing impossible or
contrary to law.

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Equitable mortgage
Essential elements:
● The parties enter into what appears to be a contract of
sale
● Their intention is to secure an existing debt by way of
mortgage

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Equitable mortgage
Contracts presumed to be an equitable mortgage
A contract of sale with a right to repurchase and other contracts purporting to be an
absolute sale shall be presumed as equitable mortgage:
● When the price of a sale with a right to repurchase as unusually inadequate
● When the vendor remains in possession as lessee or otherwise
● When the period for the exercise of the right to repurchase is extended
● When the purchaser retains for himself a part of the purchase price
● When the vendor binds himself to pay the taxes on the thing sold
● When the intention of the parties is that the transaction shall secure the payment of a
debt or the performance of any other obligation

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Equitable mortgage
Contracts presumed to be an equitable mortgage
Fruits, money, or other benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the usury laws.

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Rule in case of doubt
A contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.

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Right to reformation
The apparent vendor may ask for the reformation of the instrument
in the contracts presumed to be an equitable mortgage.

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Assignment of credit
and other
incorporeal rights
70
Assignment of credit and other
incorporeal rights
Assignment of credits is a contract whereby a person (assignor)
transfers his credit, right or action against a third person to
another person (assignee) for a consideration which is certain in
money or its equivalent.

It is perfected at the moment there is a meeting of minds upon the

credit or right which is the object of the contract and upon the
price.

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Assignment of credit and other
incorporeal
FORM rights
OF ASSIGNMENT OF CREDIT
● Between parties – oral or written
● Third person
○ Personal property – public instrument
○ Real property – public instrument, recorded in the Registry of
Property

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Accessory rights
● The assignment of a credit includes all the accessory rights,
such as a guaranty, mortgage, pledge or preference.

This is based on the rule that the accessory follows the principal,
unless otherwise stipulated.

D obtained a loan from C amounting to P200,000. The loan is

secured by a mortgage of D’s lot. If C assigns his credit right to X,
the mortgage right is also considered assigned unless C and X
agree otherwise.
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Warranties of assignor
The legality and existence of the credit at the time of sale.\
However, there is no such warranty if the credit was sold as doubtful.

D owes C P10,000. The debt is evidenced by a promissory note. Thereafter,

C assigns his credit right to X. If X cannot collect later from D because the
note was issued for an illegal gambling debt, C will be liable to X because
he warranted that the credit was legal when he assigned it to X.

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Warranties of assignor
The legality and existence of the credit at the time of sale.\
However, there is no such warranty if the credit was sold as doubtful.

D owes C P10,000. The debt is evidenced by a promissory note. Thereafter,

C assigns his credit right to X. If X cannot collect later from D because it
turned out the debt has prescribed, C shall also be liable to X because he
warranted that the credit existed.

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Warranties of assignor
The legality and existence of the credit at the time of sale.\
However, there is no such warranty if the credit was sold as doubtful.

D owes C P10,000. The debt is evidenced by a promissory note. Thereafter,

C assigns his credit right to X. Assume that the credit right is in litigation.
Here, the credit is doubtful because whether D is liable or not to C
depends upon the outcome of the case. Accordingly, if X later on cannot
collect from D because the court adjudges him not liable to C, X cannot
hold C liable.

76
Warranties of assignor
As regards the debtor’s solvency, he does not warrant the same, EXCEPT:
● When there is a stipulation
● When the insolvency already existed prior to the sale and of public
knowledge

D obtained a loan of P50,000 from C. Thereafter, C assigned his credit right

to X. On due date, X demanded payment frim D but D could not pay
because he is insolvent. In this case, X cannot go after C except in the
cases stated above.

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Liability of the assignor when
warranties
Assignor arefaith
was in good violated
1. Price received
2. Expenses of the contract
3. Other legitimate payments by reason of the
assignment

78
Liability of the assignor when
warranties
Assignor arefaith
was in bad violated
1. Price received
2. Expenses of the contract
3. Other legitimate payments by reason of the
assignment
4. damages

79
Duration of assignor’s warranty of
the debtor’s solvency if assignor was
1.in The
good faith
period stipulated
2. If no period was stipulated

• If the assignment was made before maturity – 1 year from

maturity

• If the assignment was made after maturity – 1 year from the

time of assignment

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Sale of present inheritance
(Incorporeal rights)
Warranty of heirship - One who sells an inheritance without
enumerating the things of which it is composed, shall only be
answerable for his character as an heir.

A, B, and C are heirs of X, Pending the partition of the estate of X, A

sold his share in the inheritance to Y for P200,000. after partition, A
received only P180,000. in this case, A will not be liable to Y for the
difference because what he warranted was that he was an heir of
X.

81
Sale of present inheritance
Warranty of heirship - One who sells an inheritance without
enumerating the things of which it is composed, shall only be
answerable for his character as an heir.

If A sold his inheritance to Y and listed down that he would be

receiving a car, a house and lot, furniture, but later on he did not
receive the car in partition, then he shall be liable to Y for violation
of his warranty.

If A received nothing from X because he was not an heir in the first

place, he will be liable to Y for violation of his warranty. 82
Sale of present inheritance
Liabilities of vendor of inheritance sold

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.

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Sale of present inheritance
Liabilities of vendee of inheritance

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.

84
Vendor’s warranty for lump sum sale of
the whole of certain rights, rents or
products
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.

85
Vendor’s warranty for lump sum sale of
the whole of certain rights, rents or
products
S sold his receivables from more than 50 customers to B for P1M. B
was deprived of the amount P20,000 representing an alleged
receivable from D. Here, S shall not be liable because the warranty
of S is on the legitimacy of the while of the receivables. If B
however, is deprived of the whole amount of the receivables or
more than 50% thereof, S shall be liable to B.

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Sale of credit or other incorporeal right in
litigation
When right considered in litigation

The credit or other incorporeal right shall be considered in

litigation from the time the complaint concerning the same is
answered.

87
Sale of credit or other incorporeal right in
litigation
Right of legal redemption of debtor when credit or other
incorporeal right in litigation is sold

The debtor shall have the right to extinguish the same by

reimbursing the assignee the ff:
● Price paid by the assignee for the right purchased
● The judicial costs incurred by him
● Interest on the price from the day on which the same was paid

88
Sale of credit or other incorporeal right in
litigation
Period within which debtor may exercise the right

Within 30 days from the date the assignee demands payment

from him.

89
Sale of credit or other incorporeal right in
litigation
Period within which debtor may exercise the right

Within 30 days from the date the assignee demands payment

from him.

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Purpose of legal redemption
● To enable the debtor to pay less than the value of the credit
● To prevent speculation on the part of the assignee

D borrowed P50,000 from C, When D did not pay the debt upon demand by
C, C filed a complaint against him to collect the debt. D answered the
complaint. The credit right is considered in litigation. Suppose C sold the
credit right to X for P40,000. D may exercise his right of legal redemption
(within 30 days from demand by X) by paying X the amount of P40,000 plus
judicial costs incurred by X and the interest on the P40,000 from the day
that the same was paid by X to C.
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Exceptions to legal redemption by debtor
The debtor’s right of legal redemption shall not be available when
the assignment of the right in litigation is made:
a. To a co-heir or co-owner of the right assigned
b. To a creditor in payment of his credit
c. To the possessor of a piece of land which is subject to the right
in litigation assigned.

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