ART. 1586 2.
If he has a well-grounded fear that his
possession or ownership would be disturbed by
Effect of acceptance on vendor’s liability for breach of vindicatory action/mortgage foreclosure.
warranty
NOTES:
General Rule: Seller is not discharged from liability for If there has been partial payment, vendee
breach of warranty by the acceptance of the goods may only suspend that w/c is yet to be paid.
He cannot recover what has been already paid.
Exception:
In no.2, it is not necessary that an action be
(1) If there is an agreement, express or implied; instituted against the vendee. If an action is
(2) If buyer fails to give notice to seller of breach of instituted, the remedy is not automatically 1548.
warranty within a reasonable time after buyer knows of In 1548, the vendee must be deprived of
such breach. possession, in whole or in part. Nag-institute pa
lang naman ng action, relax. It appears that his
ART. 1588
“remedy” is filing a 3rd party complaint against
Effects if buyer wrongfully refuses to accept delivery the vendor.
If the disturbance is caused by a non-apparent
a) Title passes to the buyer, unless there is servitude, remedy is 1560.
stipulation and seller reserved the ownership If the thing sold is in the possession of the
b) Obliged to pay the price vendee and the price is already in the hands of
c) Therefore, risks shall be borne by him.
the vendor, the sale is a consummated contract
ART. 1589 and Article 1590 is no longer applicable.
The vendee has no cause of action for rescission
General Rule: Interest rate will accrue from date of before final judgement, otherwise the vendor
delivery until payment. might become a victim of machinations (The act
by which some plot or conspiracy is set on foot)
Exceptions: When date from w/c interest rate is to run between the vendee and the third person
is stipulated & Vendee is guilty of default
When buyer may NOT suspend payment
When Vendee is liable for interest
1. Vendor gives SECURITY for the return of the
Buyer shall pay interest for the period between delivery price
and payment of price in the following cases: 2. If it has been STIPULATED that vendee must
make payment notwithstanding any contingency
a) If there is stipulation 3. Vendor has caused the disturbance or danger to
If there is no rate stipulated, legal rate CEASE
(12%). 4. Disturbance is a mere act of TRESPASS
May be in oral or in writing ( applicable 5. Vendee has FULLY paid the price
only to Contracts of loan)
b) Thing sold produces fruits or income (2 ART. 1591
conditions)
Thing has been delivered; When Vendor may Rescind the Sale
It must produce fruits/income
c) If he is in default, from the time judicial or Sale of immovable - seller must have a reasonable
extrajudicial demand for payment of price. ground to fear the:
1. Loss of the immovable property; AND
ART. 1590 2. Loss of the price.
When buyer may suspend payment If there is no ground to fear the loss of the immovable
or the price, 1191 applies, why? B/c vendee is yet to
1. If he is disturbed in the possession or ownership comply w/ his obligation giving the vendor the option to
of the thing bought; or choose b/w:
1. Fulfillment with damages;
2. Rescission with damages (+ Damages in either)
ART. 1592 ART. 1594
Mandates the necessity of demand before BREACH OF CONTRACT OF SALE OF GOODS
rescission.
Rescission of real property is not automatic. Actions by the Seller
Demand is needed before rescission may take
place. Demand is for the rescission and not for 1. Action for payment of price
the payment of the price. a. Ownership has passed to buyer and he
wrongfully neglects or refuses to pay
QUESTION: Teka kala ko ba 1191, pwede mamili b/w the price;
fulfillment or rescission? b. Price is payable on a certain day and
buyer did not pay, even if there is no
A: Failure to comply w/ obligation is not the contract’s transfer of title; or
rescission. It merely gives the right for the vendor to c. If the goods can’t be readily be resold
choose b/w the 2 remedies aforestated. As a matter of for a reasonable price and buyer
fact, even if there is a stipulation allowing for automatic wrongfully refuses to accept them
rescission, demand is still necessary before rescission before ownership has passed.
could take place. The demand must be judicial or 2. Action for damages
notarized else, it’s useless. 3. Action for rescission
a. When buyer repudiated the contract of
Also, 1191 tells us that when there is just cause, sale;
instead of decreeing rescission, the court may extend b. When buyer manifested his inability to
the period for payment. However, 1592 specifically perform his obligation; and
provides that the court may no longer grant a new term c. When buyer has committed a breach in
when a judicial/notarized demand has been made. the contract.
When Art. 1592 does not apply Actions by the Buyer
1. Sale on installment of real estate – 6552 applies 1. Bring an action for specific performance, if the
2. Contracts to sell/conditional sale of real estate – seller has broken the contract to deliver specific or
since payment is the suspensive condition that ascertained goods.
will give rise to vendor’s obligation to convey 2. In case of breach of warranty by seller:
title, nonpayment will not justify rescission, it a) Accept the goods and ask to reduce or
merely suspends vendor’s obligation extinguish the price
b) Accept goods and maintain an action for
ART. 1593 damages
c) Refuse to accept the goods and maintain an
When Vendor may Rescind the Sale action for damages
d) Rescind the contract by the return of goods and
recover of price
Sale of Movables - rescission of the sale of movable
shall take place at the option of the vendor, if at the ART. 1595
time fixed for the delivery of the thing, the vendee:
1. Does not accept delivery When Seller’s right for action for damages available
2. Does not pay the price, unless a longer period of
payment is stipulated 1. Ownership of goods has passed to buyer +
buyer wrongfully refuses to pay
NOTE: Similar to the requirement of demand in 1592, 2. Price is payable on certain day + buyer
the vendor should take some affirmative action wrongfully neglects/refuses to pay
indicating intention to rescind. 3. Goods cannot readily be resold for a reasonable
price + buyer wrongfully refuses the accept +
1596, 4th par does not apply
NOTES: ART. 1598
In 2 & 3, it is immaterial when title is yet to pass
Defense available to buyer in 2: Seller has Applies only where the goods to be delivered are
manifested inability to perform or intention not specific or ascertained.
to perform at all Damages (that mentioned in this article) do not
substitute performance, therefore, seller cannot
ART. 1596 retain goods. They are imposed to insure
performance.
When the seller has a right of action for damages
ART. 1599
1. If the buyer w/o lawful cause neglects or refuses
to accept & pay for the goods he agreed to buy Remedies of buyer when seller breaches
2. In Executory contract, where ownership in the promise/warranty
goods yet to pass, & seller cannot maintain an
action to recover price 1. ACCEPT goods + REDUCE/EXTINGUISH PRICE
3. Goods are not yet identified at the time of the 2. ACCEPT goods + maintain an action for
contract or subsequently DAMAGES
3. REFUSE goods + maintain an action for
Measure of damages DAMAGES
4. RESCIND contract (wherein he will be allowed to
General formula: Loss = X – Y recover whatever he has paid as rescission
Where: brings the parties to where they were before.
X = contract price or the remaining if partly paid; Reset button kumbaga)
Y = market price at time goods ought to have been NOTE:
accepted or time of refusal Remedies alternative. Once alternative is GRANTED
(read: not elected), no other remedy can be exercised.
Formula 2 (buyer repudiates the contract or notifies EXCEPT: 1191, buyer chooses fulfillment, fulfillment not
seller to proceed no further) possible, he may then choose to rescind.
Loss = (X-Y) + Z + A
Where: Rescission not allowed when
Z = labor performed & expenses incurred for materials
before receipt of such notice; 1. Buyer accepts the goods + He knows the breach
A = profit seller would have realized if the sale had been of warranty + no protest
fully performed. 2. Buyer does not notify seller w/in reasonable
NOTE: time of choice to rescind
If there are ‘special circumstances’ (such as BF), 3. Fails to return or offer to return the goods in
additional damages substantially as good condition as they were
If no available market, seller entitled to full HOWEVER if the deterioration of the goods was
amount of damage caused by the very breach itself, then rescission
is allowed
ART. 1597 NOTE:
1586 = acceptance of the buyer will not discharge seller
Rights and Obligation in Rescission : SELLER from liability due to breach of warranties
1. When the buyer repudiated the contract of sale; Rights and Obligation in Rescission : BUYER
2. When buyer manifested his inability to perform
his obligation 1. Obliged to return the goods, and cease to be
3. When buyer committed a breach of the contract. liable for the price;
NOTE: 2. If paid the price or any part thereof, he may
Seller required to give notice of rescission. Need recover it;
not be formal. Bringing of action can be 3. Right to hold the goods as bailee if the seller
considered as notice. Read 1385, CC for refuse the return of goods;
limitations on right of seller to rescind. 4. Right to have a lien of the goods for any portion
Breach must be substantial to justify rescission of price paid, as if he were an unpaid seller.
Seller cannot unilaterally & extrajudicially rescind
EXCEPT 1597 or express stipulation.
Measure of damages: Difference between value of reserved the right to reacquire the thing sold, provided
goods at time of delivery and the value they would have that he:
had if they had answered to the warranty 1. Return to the vendee:
a. The price paid
ART. 1600 b. Expenses of the contract and other
legitimate payments made thereof
Sales are extinguished by: c. Necessary and useful expenses made on the
thing sold.
1. By the same causes as all obligations: COMMON 2. Comply with other stipulations
a) Payment/performance Note: Right to repurchase must be reserved at the time
b) Prescription of perfection of sale.
c) Loss of thing due
d) Annulment Nature of conventional redemption: (CAR4P2O)
e) Novation
f) Condonation/remission 1. Contractual – created by virtue of an express
g) Confusion or merger contract Accidental – nullity does not annul
h) Compensation contract
i) Rescission 2. Real right – binds 3rd persons
j) Resolutory Conditions 3. Resolutory condition – vendee’s right of
ownership is extinguished when exercised
2. By the various causes of extinguishment in title VI 4. Reserved @ moment of perfection – b/c if
(sales): SPECIAL agreed upon afterwards, it is not conventional
a) Cancellation of sale of personal property in redemption but rather a promise to sell
installments (art. 1484) 5. Reciprocal – vendor returns price, vendee
b) Resale of the goods by unpaid seller (art. 1532) returns object of sale
c) Rescission of the sale by unpaid seller (art. 6. Potestative – depends upon will of the vendor
1534) 7. Power or privilege – vendor may or may not
d) Rescission by the buyer in case of partial exercise
eviction (art. 1556) 8. Owner is necessarily the one who is entitled to
e) Rescission by buyer in case of breach of exercise
warranty against hidden defect (art. 1567) Right of Repurchase Option to Buy
f) Rescission by buyer in sale of animals with Reserved as a stipulation Given in another
redihibitory defects (art. 1580) in the contract instrument
Granted at moment of Granted after execution of
3. Conventional Redemption; or Legal redemption perfection absolute sale
Evidences pacto de retro Does not evidence pacto
ART. 1601 when extension is granted de retro when taken
together w/ the contract of
What is redemption? sale. Extension would not
fall under 1602 (3)
It is a mode of extinguishment wherein the seller has th
e right to redeem or repurchase the thing sold upon ret ART. 1602
urn of the price paid.
EQUITABLE MORTGAGE
What are the kinds of redemption?
One which lacks the proper formalities of a mortgage,
1. Legal but shows the intention of the parties to make the
2. Conventional property subject of the contract as security for a debt
Pacto de Retro Mortgage
Ownership is immediately Ownership is not
CONVENTIONAL REDEMPTION transferred transferred but prop is
merely made subject to a
Also called the right to redeem or repurchase, takes charge or lien as security
place when the vendor Seller loses all interest if Mortgagor does not lose
he does not repurchase interest in prop if he fails
to pay debt, merely valid only for the first 10 years. The time in excess of
subjects it to 10 years shall be null and VOID
foreclosure/execution 4. Civil Action between the parties: 30 days after final
No obligation on part of Mortgagee must foreclose judgement was made, provided that the contract was
buyer to foreclose a true sale with a right to repurchase.
No Right to redeem Right to redeem
A contract may be presumed to be an equitable
mortgage (applies only to absolute sale)
1. Unusually inadequate purchase price;
2. Vendor remains in possession as lessee or
otherwise;
3. Extension for period of right to repurchase;
4. Purchases retains for himself a part of the
purchase price;
5. Vendor binds himself to pay the taxes of the
thing sold;
6. When the real intention of the parties is to
secure the payment of an obligation.
NOTE:
In case of doubt, a contract purporting to be a
sale with right to repurchase (pacto de retro
sale) shall be construed as an equitable
mortgage. (General Rule ART. 1603)
Vendor may ask for reformation, or to correct
the instrument to express the true intent of the
parties.
ART. 1603 & 1604
Presumption not conclusive. Parol evidence admissible in
proving real intention of parties
ART. 1605
Reformation
Remedy granted by law by means of w/c a written
instrument is made or construed so as to express or
conform to the real intention of the parties when such
intention is not expressed in the instrument.
ART. 1606
Period of Redemption
1. No agreement/granting right – NO right of
redemption
2. Agreement merely grants right -
4 years from date of contract
3. Definite period of redemption agreed upon –
Should not exceed 10 years; but if it exceeded,
