LAW ON SALES

DEFINITION:

Art. 1458. 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 therefor a price certain in money
or its equivalent.

Characteristics of a Contract of Sale:

1. Purpose: is to transfer of ownership;

2. Perfection is by mere consent, since one of the parties “obligates” himself, as such, he
already bound himself, a contract is already perfected Even before delivery of the thing;
3. Subject Matter: determinate thing
4. Cause: the contract of sale is onerous, since the other party has the obligation to pay;
5. Bilateral Contract: since both parties have their respective obligations;
6. Nominate Contract: not only because there’s a specific designation of the contract, but more
so because there are specific rules are provided by law to govern the rights and obligations
of the parties, after stipulations;
7. Commutative: classic commutative in the sense that there is equivalence in the prestation
of the parties. Ordinarily, price reflects the value of the property, since the seller would not
normally accept a price below the value of the property and the buyer would not normally pay
an amount more than the value of the property.

Aleatory: there is also a sale of hope where there is no equivalence in the value of prestations. Since
the obligation of the other party is not certain to arise. E.g., lotto. (Art. 1461)

DISTINGUISHED FROM OTHER TRANSACTIONS:

1. Contract for a piece of work

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of his business manufactures or procures for the general market, whether the same is on
hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general market, it is a contract for a piece of
work. (n)

The Massachussetts Rule: if the thing to be delivered by the obligor is manufactured in the ordinary
course of business, and being offered to the general market, even if not at hand at the time the order
is made, it is a contract of sale; but, if the thing is to be manufactured only because of the order of
the buyer; not offered to the general market – contract for a piece of work.

SIMILARITIES:

1. There is transfer of ownership

2. Buyer/Customer pays the price.

DISTINCTION: is as to the subject matter: in a contract of sale, the subject is a thing and its delivery,
in a contract for a piece of work, the subject is service.

Importance of Distinction: sale is covered by the statute of frauds. On the other hand, contracts for
a piece of work is covered only if to be performed after more than one year.
E.g., customized shoes. If for more than 1 year – covered by statute of frauds. If for 6 months –
depends on type of contract.

2. Dacion en pago

SIMILARITY: upon delivery, ownership passes. Although, dacion en pago, there is always transfer of
ownership.

DISTINCTION:

a. sale is a contract and a source of obligation; dation in payment is a special form of payment and a
mode of extinguishment of an obligation.

b. In sale, there is no requirement of a pre-existing obligation, in dation in payment, as a special form

of payment, there is a need for a preexisting obligation.

3. Barter

Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing,
the transaction shall be characterized by the manifest intention of the parties. If such intention does
not clearly appear, it shall be considered a barter if the value of the thing given as a part of the
consideration exceeds the amount of the money or its equivalent; otherwise, it is a sale.

ILLUSTRATION: In an agreement where A obliged himself to give to B a watch worth P800,000, and B
obliged himself to give to A, his car and cash P350,000. What contract was entered into?

ANSWER: It depends upon the intention of the parties. If the intention is not clear, it will depend on
the value of the car. If the value of the car is greater than cash, it will be treated as barter. If the value
of the car is less than P350,000 it will be treated as a sale.

4. Contract of agency to sell

Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale
and of the contract of agency to sell, the essential clauses of the whole instrument shall be
considered. (n)

ELEMENTS OF A CONTRACT OF SALE:

1. Natural- those which are deemed part of the contract even if not stipulated or even if the parties
are unaware. Deemed part of the contract by law,

E.g., warranties.

2. Accidental- present only because the parties so stipulated. E.g, obligation to pay interest. E.g., in
a contract of sale of a parcel of land, obligation of the seller to cause the registration of the land in
the name of the buyer.

3. Essential – required for validity.

ESSENTIAL ELEMENTS OF A CONTRACT OF SALE:

1. Consent of the contracting parties, i.e., the buyer and the seller.

Incapacity: consent may have been given, but the one giving it is incapacitated.

• Absolute Incapacity – the party cannot give consent to any and all contract, which may result
in the contract being voidable or void.
Minors and those without capacity to act: may enter into a valid contract of sale of
“necessaries” as provided under Art. 1489. Necessaries are those which are indispensable
for sustenance, dwelling, clothing and medical attendance.
• Relative Incapacity – the party is prohibited from entering some specific transactions with
some persons and sometimes over specific things.
Examples of Relative Incapacity:

a. Husband and wife cannot sell property to each other, except:

1. When a separation of property was agreed upon in the marriage settlements; or

2. When there has been a judicial separation or property

b. The following persons cannot acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another.

1. The guardian, the property of the person or persons who may be under his guardianship;
2. Agents, the property whose administration or sale may have been entrusted to them, unless
the consent of the principal has been given;
3. Executors and administrators, the property of the estate under administration;
4. Public officers and employees, the property of the State or of any subdivision thereof, or of
any government-owned or controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges and government experts who,
in any manner whatsoever, take part in the sale;
5. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights
in litigation or levied upon an execution before the court within whose jurisdiction or territory,
they exercise their respective functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the property and rights which may be
the object of any litigation in which they may take part by virtue of their profession.
6. Any others specially disqualified by law

c. Aliens are prohibited by the Constitution from acquiring lands in the Philippines, except by
succession or in case of a former natural born Filipino Citizen who has lost his citizenship.

• Vitiated consent: by force, intimidation, violence, mistake or fraud – the contract is voidable.
• Consent by a party given by another without authority: the contract is unenforceable as to
the supposed principal.

2. Cause -as to each contracting party is the prestation or promise to be performed by the other party.
For the buyer, it is the delivery of the object, while for the seller, it is the payment of the price.

Rules as to PRICE:

A. It must be certain.
1. With reference to another thing certain, or
2. The determination thereof be left to the judgment of a special person or persons.
i. Should such person or persons be unable or unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently agree upon the price.
ii. If the third person or persons acted in bad faith or by mistake, the courts may fix
the price.
ii. Where such third person or persons are prevented from fixing the price or terms by fault of
the seller or the buyer, the party not in fault may have such remedies against the party in fault
as are allowed the seller or the buyer, as the case may be

B. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in
the consent, or that the parties really intended a donation or some other act or contract.

C. The price of securities, grain, liquids, and other things shall also be considered certain, when the
price fixed is that which the thing sold would have.”

1. On a definite day, or

2. In a particular exchange or market, or

 3. When an amount is fixed above or below the price on such day, or in such exchange or market,
provided said amount be certain

D. The fixing of the price can never be left to the discretion of one of the contracting parties. However,
if the price fixed by one of the parties is accepted by the other, the sale is perfected.

• Where the price cannot be determined in accordance with the preceding rules, or in any
other manner, the contract is inefficacious.
• However, if the thing or any part thereof has been delivered to and appropriated by the buyer
he must pay a reasonable price therefor. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case

PERFECTION OF A CONTRACT OF SALE

Consensual Contract: sale, being a consensual contract, is perfected by mere consent as to the
object of the contract and upon the price.

Transfer of ownership: however, happens only after delivery, either actual or constructive, as a
general rule. Except if the parties agreed that ownership will not pass until full payment of the price.

Sale by Auction: is perfected when the auctioneer announces its perfection by the fall of the
hammer, or in other customary manner.

Before perfection:

1. Any bidder may retract his bid; and

2. the auctioneer may withdraw the goods from the sale unless the auction has been announced to
be without reserve.

Object of a sale by auction: Where goods are put up for sale by auction in lots, each lot is the subject
of a separate contract of sale

1. General Rule: The seller has no right to bid

2. Requisites for the seller to have the right to bid.

a. The right to bid was expressly reserved;

b. Notice was given to the bidders; AND

c. It is not prohibited by law or stipulation.

** Any sale made contradicting the above may be treated as fraudulent by the buyer

Option Agreement and Contract: A promise to buy and sell a determinate thing for a price certain
is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon
the promissor if the promise is supported by a consideration distinct from the price, known as option
money.

Rules Applicable:

1. A period agreed upon under an Option Agreement by the offerer and the offeree is not binding
upon the offeror unless it is supported by a consideration distinct from the price, which we
call the option money.

2. Accordingly, the offerer may withdraw his ofer at any time, even before the expiration of the period
agreed upon, without being liable for damages
3. If there is such a separate consideration, the agreement as to the period is covered by an Option
CONTRACT. In which case, the offerer cannot withdraw the offer without being liable for damages for
breach of the option contract.

4. In either case, if there is acceptance by the offeree which was already communicated, withdrawal
cannot be validly made since there is already a perfected contract of sale and there is no “offer” to
withdraw anymore, subject to the Statute of Frauds as to enforceability.

ILLUSTRATION: S offered to sell his land to B for P1M which B accepted and was given 30 days within
which to pay the price. Is there an option agreement/contract?

ILLUSTRATION: S offered to sell his land to B for P1M and gave the latter (B) 30 days to decide
whether or not to accept the offer. Is there an option agreement/contract?

ILLUSTRATION: S offered to sell his land to B for P1M and gave the latter (B) 30 days to decide
whether or not to accept the offer. B gave P5,000 to ensure the 30-day period to decide. Is there an
option agreement/contract?

EARNEST MONEY – forms part of the purchase price and is proof of perfection of a contract of sale.

Option Money is a separate consideration to give the offeree a definite period within which to decide
whether or not to accept an offer, there is no perfected contract of sale yet and does not form part of
the purchase price.

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

SALE OF GOODS BY DESCRIPTION AND SAMPLE: if the contract be by sample as well as

description, it is not sufficient that the bulk of goods correspond with the sample if they do not also
correspond with the description.

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

FORM: no specific form is required for the perfection of a contract of sale

However, the same is still subject to the Statute of Frauds for its enforceability, particularly the
following provisions:

1. Those not to be performed within 1 year;

2. Sale of personal property the price not less than (or at least) P500

3. Sale of real property

As such, the above contracts of sale must be in writing or memorandum, in order to be enforceable

INSTALLMENT SALES

RECTO LAW

APPLICATION: The Recto Law applies to a contract of sale of personal property the price of which is
payable in installments.

The law, however, does not apply to sales “on credit”, only sales in “installment.”

It likewise applies 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.

ALTERNATIVE REMEDIES OF THE SELLER:

1. Exact fulfillment of the obligation, should the vendee fail to pay;

2. Cancel the sale, should the vendee’s failure to pay cover two or more installments;

3. 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.

The remedies are alternative. As such, if the seller/vendor invoked one, he can no longer invoke any
of the two remaining remedies. Any agreement to the contrary shall be void.

ILLUSTRATION: S sold to B a motorcycle for a price of P100,000, secured by a chattel mortgage on

the motorcycle. B is required to pay a downpayment ofP50.000 and the balance is payable on or
before December 31, 2020. I1 B fails to pay on due date and S foreclosed the mortgage on the
motorcycle, but resulted in a deficiency balance of P10,000, can S still collect the deficiency?

ILLUSTRATION: S sold to B a motorcycle for a price of P100.000, secured by a chattel mortgage on

the motorcycle, payable in 10 equal monthly installments. B failed to pay the first installment, can S
foreclose the mortgage or cancel the sale?

*FORFEITURE OF INSTALLMENTS IN CASE OF CANCELLATION: The 2nd option of cancelling the

sale would entail mutual restitution by the parties.

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

Exception: the retention of ALL the purchase price would be unconscionable

*FORECLOSURE OF THE CHATTEL MORTGAGE: The 3’d option entails that the foreclosed mortgage
is the mortgage on the personal property itself, and in case of deficiency of the foreclosure sale
proceeds, the seller is NOT entitled to recover such, since recovery of the deficiency falls under
option 1.

However, if what is foreclosed is another security or a mortgage on different property, the prohibition
to collect the deficiency would not apply, since foreclosure of a mortgage of a different thing precisely
falls under option 1 also.

ILLUSTRATION: B bought a truck from S worth P2,000,000 payable P100,000 installment, secured by
a chattel mortgage on the truck itself. As additional security, B’s brother, X, executed a real estate
mortgage over his own land in favor of S. B defaulted in the first two installments leaving an unpaid
balance of P2,000,000.

1. If S would foreclose the chattel mortgage on the truck, would there be a remedy to collect
deficiency if it was sold for less than the unpaid amount?

2. If S forecloses the real estate mortgage, would there be a remedy to collect deficiency if it was sold
for less than the unpaid amount

MACEDA LAW

APPLICATION: the Maceda Law, or the Realty Installment Buyer Act (RA No. 6552), applies to a
contract of sale of residential realty on installments, where the buyer is given protection in case of
failure to pay installments.

Similar to the Recto Law, the Maceda Law does not apply to sales “on credit”, only ones in installment
RIGHTS OF THE BUYER UNDER THE MACEDA LAW

1. If installments already paid are less than two years equivalent.

a. Grace Period – pay without interest within 60 days. Note, however, that this right can only be
applied once every 5 years

b. The buyer may sell or assign his interest;

c. Pay the entire balance.

2. After two years’ worth of installment, the buyer will have the following additional rights:

a. In addition to the 60 day grace period, the buyer shall have additional 1 month grace period for
every year of installment payments after the first 2 years installments;

b. If the seller will exercise his right to rescind the contract, he is required to first give the Cash
Surrender Value to the buyer.

Cash Surrender Value:

*Minimum of 50% of all payments (including downpayment) plus

* 5% after five years (55% after 6 years of payment), and

*5% for every additional year thereafter upto a maximum of 90% (or 14 years of instalment)

ILLUSTRATION: Pricilla purchased a residential condominium unit in Makati City from the Citiland
Corporation for a price of P10 Milion, payable P3 Million down and the balance with interest thereon
at 14% per annum payable in sixty (60) equal monthly installments of P198,333.-33. They executed a
Deed of Conditional Sale in which it is stipulated that should the vendee fail to pay three (3)
successive installments, the sale shall be deemed automatically rescinded without the necessity of
judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way
of rental for the use and occupancy of the unit and as liquidated damages. For 46 months, Pricilla
paid the monthly installments religiously, but on the 47 th and 48th months, she failed to pay. On the
49th month, she tried to pay the installments due but the vendor refused to receive the payments
tendered by her. The following month, the vendor sent her a notice that it was rescinding the Deed of
Conditional Sale pursuant to the stipulation for automatic rescission, and demanded that she vacate
the premises.

Was the contract of sale validly rescinded?

VOID STIPULATIONS: The following are void stipulations:

1. Stipulation as to interest or damages or penalty during the grace period

2. Forfeiture clause

3. Automatic cancellation or rescission upon default of the buyer

RESCISSION REQUIREMENTS: the rescission will take effect only after 30 days from complying with
both:

1. Notice to be given to the buyer as to the intention to rescind

2. Payment of the cash surrender value

ILLUSTRATION: Pricilla purchased a residential condominium unit in Makati City from the
Citiland Corporation for a price of P10 Million, payable P3 Million down and the balance with
interest thereon at 149 per annum payable in sixty (60) equal monthly installments of
P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that should the
vendee fail, to pay three (3) successive installments, the sale shall be deemed automatically
rescinded without the necessity of judicial action and all payments made by the vendee shall be
forfeited in favor of the vendor by way of rental for the use and occupancy of the unit and as
 liquidated damages. For 46 months, Pricilla paid the monthly installments religiously, but on the
47th and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due
but the vendor refused to receive the payments tendered by her. The following month, the vendor
sent her a notice that it was rescinding the Deed of Conditional Sale pursuant to the stipulation
for automatic rescission, and demanded that she vacate the premises.

CONDOMINIUMS

PD No 957 or the THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE covers
the sale of condominium units, among others.

Rules affecting installment purchases of Condominiums:

1. Non-forfeiture of payments: No installment payment made by a buyer in a subdivision

or condominium project for the lot or unit he contracted to buy shall be forfeited in favor
of the owner or developer when the buyer, after due notice to the owner or developer,
desists from further payment due to the 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 with the same.

Such buyer may, at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with
Interest thereon at the legal rate. (Section 23, PD 957)

2. Failure to pay installments: The rights of the buyer in the event of this failure to pay the
installments due for reasons other than the failure of the owner or developer to develop
the project shall be governed by RA 6552 (Maceda Law)

OBLIGATIONS OF THE VENDOR

• To take care of the thing after the contract has been perfected, prior to delivery
Risk of Loss:
a. General Rule: the thing perishes with the owner, following the principle of res perit
domino.

b. Exceptions:
1. Stipulation
2. Security title – Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the
goods has been retained by the seller merely to secure performance by the
buyer of his obligations under the contract, the goods are at the buyer’s risk
from the time of such delivery;
3. Delay in the delivery -whoever causes the delay shall bear the risk of loss.

c. If the thing is lost in part only, the buyer may choose between:
1. Withdrawing from the contract; and
2. Demanding the remaining part, paying its price in proportion to the total sum
agreed upon.

d. Where the parties purport a sale of specific goods, and the goods without the
knowledge of the seller have perished in part or have wholly or in a material part so
 deteriorated in quality as to be substantially changed in character, the buyer may at his
option treat the sale:
1. As avoided; or
2. As valid in all 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.

Note: the risk of loss is where it is important why there are distinctions in the following.
•Contract of Sale vs. Contract of Agency to Sell
•Sale or Return vs. Sale on Approval/Trial/Satisfaction

Loss, Deterioration or Improvement pending delivery of the goods: the rules under
Art. 1189 applies, accordingly:
a. The thing is lost (when it perishes, goes out of commerce, or disappears in such a way
that its existence is unknown or it cannot be recovered)
1. Without fault of the seller – obligation is extinguished;
2. With fault of the seller -jhe is liable for damages.

b. The thing deteriorates

1. Without fault of the seller – the impairment is borne by the buyer;
2. With fault of the seller- the debtor has two options:
a. To exact fulfillment and ask for damages
b. Rescission with damages

c. There is improvement

1. By nature or time – the improvement will inure to the benefit of the buyer

2. At the expense of the seller – he shall have no other right than that granted to .

the usufructuary, e.g., he may remove the improvement if it will not cause

damage to the thing.

• Obligation to pay taxes and incidents of the sale, unless otherwise agreed upon;
• To warrant the thing (see Warranties);
• To transfer ownership.
Seller need not be the owner for validity of the contract: the seller need not be the owner
and the sale is still valid if he sold the thing in a capacity authorizing him to do so such as a
liquidator, executor, administrator, sheriff, or a notary (in case of pledge).

This is different from a pledge or mortgage which requires the pledger or mortgagor to be the
absolute owner of the thing.

SELLER IS NOT THE OWNER:

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

Exceptions:

a. Authority from the owner - like an agent

b. Valid Sale by Statutory or Judicial Authority – such as sales made by guardians,

executors, administrators, sheriffs, etc.

c. In cases of estoppel:

1. As to the owner: estoppel in pais – by his conduct or representation, he led the buyer to
believe that the seller had authority to sell.
 2. As to the seller: estoppel by deed – if after the sale, he acquired ownership, such
ownership automatically passes to the buyer. THERE MUST BE DELIVERY.

d. Sale of an Apparent Owner: the sale of an apparent owner will give the buyer a better right
provided the following shall concur:

1. There is apparent ownership

Examples:

• An old lady asked a lawyer to register her land in her name. However, the lawyer
instead registered it in his name.
• A group of businessmen agreed to register the lot in the name of the one who will
manage the business.

2. Buyer in good faith and for value – the buyer had no knowledge of any defect in the seller’s
title at the time of full payment (not only at the time of sale).

3. There must be a law from which apparent ownership may be had, such as.
a. PD 1529 which provides that those dealing with registered land need not inquire
beyond the title, also known as the mirror principle, unless the buyer is required under
the law to exercise the highest degree of diligence, e.g., banks and public utility
companies.
b. Factor’s Act (agency)- so far as third persons are concerned, they only have to rely on
the power of attorney as written, they need not inquire into limitations imposed by the
principal to the agent not written
c. 1518 – for goods covered by negotiable instruments.

e.Purchase from a Merchant Store, Market or Fair in good faith and for value: the purpose of this
exception is to facilitate commercial transactions so as not to degrade the trust in sales made
through such stores.

Right of buyer to reimbursement: One who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same. If the possessor of a movable lost
or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid therefor

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

Delivery

Is the mode by which ownership is transferred. It is accomplished by placing the thing in the
control and possession of the vendee.

MODES OF DELIVERY: THINGS

A. Actual Delivery: The actual and physical transfer of the thing to the buyer.

B. Constructive Delivery

i. Traditio Longa Manu: literally, long-hand delivery, or by pointing to the thing sold
accomplished by mere consent of the seller, ownership transfers to the buyer, because at the
time of sale, the seller cannot transfer possession to the buyer, e.g., the thing is leased by
another.
 ii. Consitutum Posessorium: at the time of sale, the seller is in possession and remains in
possession in another concept other than an owner, like that of a lessee, depositary or
borrower. E.g., sale lease-back.

ii. Brevi Manu: or short hand delivery. When the buyer is in possession of the thing, in a
concept other than that of an owner, at the time of sale, and remains in possession after sale,
now as owner. E.g., a lessee who buys the thing leased.

iv. Symbolic Delivery: where the seller merely gives the key to a warehouse where the goods
are located or in a sale of car, the delivery of the keys is symbolic delivery.

v. Execution of the Required Formality: by execution of a public instrument. This mode of

delivery is available to both sale of rights and sale of things;

C. Delivery to a common carrier: when the parties so agreed that the seller will deliver to the
common carrier for ultimate delivery to the buyer. In this case, there is already delivery upon receipt
of the common carrier.

EXCEPT:

a. Ownership is reserved by the seller – such as if it is deliverable to the seller or his agent.

b. The seller reserved possession – goods are deliverable to the buyer, but possession of the
bill of lading is with the seller.

c. A Bill of Exchange is drawn by the seller against the buyer and the latter dishonors the same

MODE OF DELIVERY: As to rights:

• By execution of an instrument.
• Quasi Traditio:
i. When the title of ownership is placed in the possession of the vendee (e.g., certificates of
stock for sale of shares of stock);
i.By the use of the vendee of his rights with the vendor’s consent. (e.g., the vendee of shares
where the same has not been transferred in his
name yet, with the consent of the owner, through a proxy, he may exercise his rights as a
stockholder)

TIME OF DELIVERY:

a. Stipulation of the parties;

b. If no stipulation, within a reasonable time.

PLACE OF DELIVERY:

a. Stipulation of the parties;

b. If no stipulation, by usage of trade;
c. If no stipulation nor usage of trade, the seller’s place of business;
d. If none, the seller’s residence.
e. However, in case of a contract of sale of specific goods, which to the knowledge of the
parties when the contract or the sale was made were in
some other place, then that place is the place of delivery

SELLER IS NOT BOUND TO DELIVER:

a. If it is a pure obligation and the buyer does not pay; or

b. If there is a period agreed upon, the obligation to deliver shall be demandable at that time. Except,
if the buyer loses the right to make use of the period under Art. 1198

QUANTITY TO BE DELIVERED:
*DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF PERSONAL
PROPERTY:

1. Delivery is less than quantity agreed upon, the buyer may:

a. Reject the delivery; or

b. Accept or retain the goods delivered and pay:

1. The full contract price if he knew that the seller is not going to perform the contract in full;
or

2. Pay the fair value of the goods delivered if without such knowledge.

ILLUSTRATION: B purchased from S 1.000 sacks of rice at a price of P1.000/sack. At the time of
delivery, S delivered only 900 sacks. The sacks of rice has a fair market value of P900/sack. What are
the remedies of B?

2. Delivery is greater than quantity agreed upon, the buyer may:

a. Accept the goods in the quantity agreed upon and reject the rest; or

b. Accept the whole of the goods delivered and pay for them at the contract rate.

ILLUSTRATION: B purchased from S 1,000 sacks of rice at a price of P1,000/sack. At the time of
delivery, S delivered only 900 sacks. The sacks of rice has a fair market value of P900/sack. The seller
delivered 1,100 sacks of rice. What are the remedies of B?

3.Delivery of goods mixed with goods of different description not included in the contract, the
buyer may accept the goods which are in accordance with the contract and reject the rest.

4.In no. 2 and 3, if the subject matter is indivisible, the buyer may reject the whole of the goods.

ILLUSTRATION: B purchased a specific cow from B with a weight of 80kgs., at the time of delivery,
the cow’s weight was 100kgs. In this case, the buyer will have the additional option to reject the entire
delivery. The same will be true if the weight of the cow was 70kgs only, since the subject matter is
indivisible.

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

A.ATA RATE OF A CERTAIN PRICE FOR A UNIT OF MEASURE OR NUMBER:

1. Delivery is LESS than that agreed upon, the buyer may:

a. Ask for specific performance and demand delivery of the shortage;

b. Ask for the proportionate reduction of the price (accion quanti minoris)

c. Rescission, in case:

1. The area lacking is at least 1/10 of that agreed upon; or

2. The buyer would not have entered into the contract, had he known of its smaller area.

• The same rules apply if any part of the immovable is not of the QUALITY specified in the contract
(except that rescission is an available remedy in the event that the inferior value is MORE THAN 1/10
of the price agreed upon) even if the area delivered be that agreed upon.

ILLUSTRATION: S and B entered into a contract of sale for 1.000 sqm of land at the rate of
P1,000/sqm. If it turns out that the actual area of the land is only 950 sqm. What are the remedies of
B?
2. If the delivery is in excess of the area agreed upon, the buyer may.

a. Accept the area agreed upon and reject the rest; or

b. Accept the whole and pay at the contract rate.

ILLUSTRATION: S and B entered into a contract of sale for 1,000 sqm of land at the rate of
P1,000/sqm. If it turns out that the actual area of the land is only 1,100 sqm. What are the remedies
of B?

**The above rules likewise applies to judicial sales.

B. SALE OF REAL ESTATE FOR A LUMP SUM PRICE: whatever is the actual area of the land, the
buyer is still required to pay the price agreed upon and the seller is bound to deliver the entire
area.

If the actual area is bigger than the agreed upon area, and the seller should not deliver the
whole actual area, the buyer may.

a. Reduce the price to be paid, in proportion to what is lacking in the area or number; or

b. Rescind the contract for failure of the vendor to deliver what has been stipulated.

ILLUSTRATION: S and B entered into a contract of sale concerning the corner lot of 5 th and
27th streets in a particular city. They agreed to a price of P1,000,000 for an estimated area of
the land of 1,000sqm, more or less. This is a lump sum sale. And the entire P1M is the price
for the land, regardless of the agreed area.

1. If it turns out that the actual area is 900 sqm. Only, what are the obligations of S
and B?

2. If it turns out that the actual area is 1,100sqm., what are the obligations of S and
B?

3. If the seller only delivered 1,000sqm, where the actual area is 1,100 sqm., what are
the remedies of B?

RIGHTS OF AN UNPAID SELLER

Unpaid Seller: the seller of the goods is deemed to be an unpaid seller when:

1. The whole of the price has not been paid or tendered;

2. 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,
the insolvency of the buyer, or otherwise

Rights of an Unpaid Seller: notwithstanding that the ownership of the goods may have passed to
the buyer, the unpaid seller of goods has the following rights:

1. Possessory lien – right to retain the goods or right to withhold delivery of the goods.

Grounds:

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.

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent
or bailee for the buyer.

Partial Lien: Where an unpaid seller has made part delivery of the goods, he may exercise his right
of lien on the remainder, unless such part

Delivery has been made under such circumstances as to show an intent to waive the lien or right of
retention.

Loss of possessor lien: happens:

• When the seller delivers the goods to a carrier or other bailee for the purpose of transmission
to the buyer without reserving the ownership in the goods or the right of possession thereof;
• When the buyer or his agent lawfully obtains a possession of the goods
• By waiver

*The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that
he has obtained judgment or decree for the price of the goods

Sale of the thing by the buyer to third persons:

a. As a rule, the seller does not lose his right to possessory lien or right of stoppage in transitu.

b. Exceptions:

1. If the seller assented to the transfer;

2. If the goods are covered by a negotiable document of title and it is sold to a purchaser for
value in good faith to whom such document as been negotiated.

2. Stoppage in transitu – right to stop the goods while in transit.

Requisites:

a. The seller already parted with the possession of the goods;

b. The goods are already in transit;

c. The buyer is insolvent.

Goods are in transit:

1. From the time when they are delivered to a carrier by land, water, or air, or other bailee for the
purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes delivery
of them from such carrier or other bailee;
2. lf the goods are rejected by the buyer, and the carrier or other bailee continues in possession
of them, even if the seller has refused to receive them back.

Goods are no longer in transit:

a. If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the
appointed destination;

b. If, after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his agent; and it is immaterial that further destination
for the goods may have been indicated by the buyer;

c. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that
behalf

If part delivery of the goods has been made to the buyer, or his agent in that behalf the remainder of
the goods may be stopped in transitu, unless such part delivery has been under such circumstances
as to show an agreement with the buyer to give up possession of the whole bf the goods.
Right of stoppage in transitu is exercised:

a. By taking actual possession of the goods; or

b. By giving notice of his claim to the carrier or other bailee who is in possession of the goods, as a
consequence of which.

1. The carrier or bailee then must redeliver the goods to, or according to the directions of, the
seller.
2. The expenses of such delivery must be borne by the seller.
3. If, however, a negotiable document of title representing the goods has been issued by the
carrier or other bailee, he shall not be obliged to deliver or justified in not delivering the goods
to the seller unless such document is first surrendered for cancellation.

3. Resale

Grounds:

1. The goods are perishable in nature

2. The seller expressly reserves the right of resale in case the buyer should make
default, or
3. Where the buyer has been in default in the payment of the price for an
unreasonable time

To exercise such right: the unpaid seller must have a right of lien or stoppage in transitu

In case the resale resulted in proceeds less than or more than the price in the original
sale:

A. If the resale price is LESS than the price in the original sale, the seller can recover
from the original buyer the difference as damages occasioned by the breach of
contract of sale;

B. If the resale price is MORE than the price in the original sale, the seller is entitled
to the profit made in such resale.

Good Title: the buyer in the resale acquires a good title as against the original buyer.

Notice: except in case of resale made because the goods are perishable, notice shall be
given to the original buyer about.:

a. The intention to resell – which is relevant to prove that the buyer has been in default
for an unreasonable length of time.

b. The date, time and place of resale – to be considered doing the resale in good faith
and entitle the seller to any deficiency.

Note, however, that failure to give notice does not affect the validity of the resale.

Participation: the seller is prohibited from being the buyer in the resale, either directly or
indirectly, whether the resale be public or private.

4. Rescission

Grounds:

a. When the right to rescind is expressly reserved by the seller;

b. When the buyer has been in default in the payment of the price for an unreasonable time,

To exercise such right: the unpaid seller must have a right of lien or stoppage in transitu
Recovery of damages: the seller is not liable to the buyer upon the contract of sale, but may recover
from the buyer damages for any loss occasioned by the breach of contract.

Notice: is not necessary for the validity of rescission. But the same shall be relevant in determining
whether the buyer has been in default for an unreasonable length of time.

Mutually Exclusive Rights: the right of possessory lien and stoppage in transitu are mutually
exclusive in the sense that both rights cannot exist together at the same time. This is because the
right of possessory lien presupposes that the seller retains possession, while in stoppage in transitu,
the seller should have parted with the possession already.

Note, however, that for the right of resale and right to rescind, it is necessary that the seller has either
possessory lien or the right of stoppage in transitu.

Insolvency of the buyer: is a requisite only for the right of stoppage in transitu, but not in all other
rights. It is, however, a ground to exercise possessory lien, but still, not a requisite.

RULES ON DOUBLE SALE

MOVABLE PROPERTY: if the same movable is sold by the vendor to two or more vendees, the one
who has a better right over the thing shall be the first one to take possession in good faith.

ILLUSTRATION: S sold his car to B1 on June 1, 2020. Later on, he sold the same car to B2, who had
no knowledge of the first sale, on June 15, 2020, where B2 immediately took possession. Who has a
better right between B1 and B2?

ANSWER: B2. Without regard to whoever was the first buyer, the one who has a better right in case
of double sale of movable property shall be the possessor in good faith. In this case, B2 was in good
faith since he was not aware of the existence of the first sale, therefore, being the first possessor in
good faith, he will have a better right than B1.

IMMOVABLE PROPERTY: if the same immovable property is sold by the vendor to two or more
vendees, the one who has a better right over the thing shall be.

1. The one to first register in good faith; if none,

2. The one to first take possession in good faith; if none stil

3. The one with the oldest title.

“Good faith” pertains to the time of registration or possession not the time of perfection of sale:
as such, if at the time of the second sale, the buyer had no knowledge of the prior sale, but learns of
it prior to registration or possession (if there is no registrant), he will NOT be considered a
registrant/possessor in good faith.

ILLUSTRATION: On June 30, 2020, Jesus sold a specific parcel of registered land to Jaime. On July
15, 2020, he sold the same land to Jose.

1. If Jose registers the second sale first, without knowledge of the existence of the first sale, he
shall have a better right over Jaime, since he is the first registrant in good faith.
2. If at the time of sale to Jose, he did not know of the existence of the sale to Jaime, but learns
of it before registering. Jose will NOT be considered the first REGISTRANT IN GOOD FAITH
since he already had knowledge of the first sale at the time of registration.
3. If no on registered their sale, and Jose first took possession without knowledge of the
existence of the first sale, he shall have a better right over Jaime, since he will be considered
the first possessor in good faith.
4. If there was was no registrant nor any possessor in good faith, Jaime will have a better right
having the older title.
ILLUSTRATION: On June 30. 2020, Jesus sold a specific parcel of registered land to Jaime. On July
15, 2020, he sold the same land to Jose . On July 17, 2020, Jaime knew that Jesus sold again the same
parcel of land to Jose. Jaime then immediately went to the Register of Deeds to have his sale
registered. Who has a better right?

ANSWER: Jaime still. Knowledge of the second sale does not make the first buyer , “NOT in good
faith” because by the act of registering (or by taking possession) he can be said to have done it in bad
faith for he is merely protecting his rights. Also because there is no defect in his title, being the one
with an older right.

BOTH SALES MUST BE VALID: In order for the Rules on Double Sale to apply, it presupposes that
both the sale are valid or at least voidable or rescissible, prior to annulment or rescission.

ILLUSTRATION: Rica filed a petition for annulment of his marriage with Richard. They were under the
regime of Absolute Community of Property. Richard hired Atty. Cruz who was paid through
conveyance of a parcel of land which he recently purchased with his lotto winnings. The transfer
documents were duly signed and Atty .Cruz took possession by fencing the entire parameter. Richard
then offered the same parcel of land to spouses Garcia. Immediately after the sale, the Sps. Garcia
commenced the construction on the land which was objected to by Atty. Cruz, who claims he has a
better right over the property. Is Atty. Cruz correct?

ANSWER: Atty. Cruz is not correct. The transaction with Atty. Cruz is a dation in payment. Second
contract is a sale. Double sale would have been applicable despite dation since it is governed by law
on sales. However, 1544 requires that both sales are valid.

The dation in payment to Atty. Cruz, being governed by the law on sales, is’void. Art. 1491 provides
that a lawyer cannot acquire by purchase a thing which is the subject matter of an action which he is
a litigating lawyer.

There was a case for annulment of marriage and the parcel of land, being acquired by proceeds of
lotto winnings, is one of the properties which would be considered in settlement of conjugal
properties.

As such, the first transaction being void, there is only one valid sale, i.e., the sale to the Sps. Garcia,
the rules on double sale do not apply.

CONDITIONS AND WARRANTIES

CONDITIONS: where the obligation of either party to a contract of sale is subject to any condition
which is not performed, such party may:

1. Refuse to proceed with the contract; or

2. Waive the performance of the condition; or

3. Treat the non-performance as a breach of warranty and ask for damages.

WARRANTIES: Any affirmation of fact or any promise by the seller relating to the thing is an express
warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the
same, and if the buyer purchase the thing relying thereon.

Opinion of the seller: is not understood to be a warranty unless the seller made such affirmation or
statement as an expert and it was relied upon by the buyer.

Express Warranty: is an affirmation of fact or promise by the seller relating to the thing which would
induce the buyer to buy the same. However, those

Relating to opinions of the seller are not considered warranties unless they are made by experts and
the buyer relies upon them.
Implied Warranties:

1. Warranty against eviction – that the seller has a right to sell the thing at the time when
ownership is to pass, and that the buyer shall from that time have and enjoy legal and
peaceful possession of the thing;

Eviction; requisites:

a. The vendee is deprived of the whole or of a part of the thing purchased;

b. By virtue of a final judgment

c. Such judgment is based on:

1. A right prior to the sale or

2. An act imputable to the vendor

Rules Applicable:

a. The warranty applies even if there is no agreement to such effect;

b. The vendee need not appeal from the decision in order that the vendor may become liable for
eviction.

c. When the adverse possession had been commenced before the sale but the prescriptive period is
completed after the transfer, the vendor shall not be liable for eviction.

a. If the property is sold for non-payment of taxes due and not made known to the vendee before the
sale, the vendor is liable for eviction.

e. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed
in the judgment.

t. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee
loses the thing acquired or a part thereof.9. The defendant vendee shall ask, within the time fixed in
the Rules of Court for answering the complaint, that the vendor be made a codefendant.

h. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the
suit for eviction at the instance of the vendee

Extent of Liability: First, it will depend whether the seller is in bad faith:

a. If the seller is in bad faith, he shall be liable for:

1. Value of the thing sold at the time of eviction;

2. Income or fruits, if he has been ordered to deliver them to the party who won the suit against
him;
3. Costs of the suit which caused the eviction, and, in a proper case, those of the suit bought
against the vendor for the warranty;
4. Expenses of the contract, if the vendee has paid them;
5. Damages and interests and ornamental expenses.

b. If the seller is in good faith, the liability of the vendor shall depend whether there is a waiver
executed by the buyer:

1. If there is no waiver, the seller is liable for VICE above except Damages.
2. If there is a waiver, the liability of the vendor shall depend whether the buyer is aware of the
risk of eviction:

a. Consciente – the buyer is not aware of the risk, or without knowledge of the defect in the
title of the seller: seller is still liable but only for the VALUE of the thing at the time of eviction;

b. Intencionada – the buyer was aware of the risk of eviction or of the defect in the title of the
seller, the seller is no longer liable for anything.
Partial Loss: should the vendee lose only a part of the thing sold but the same is of such importance,
in relation to the whole, that he would not have bought it without said part he may demand the
rescission of the contract, but with the obligation to return the thing without other encumbrances
that those which it had when he acquired it, instead of enforcing the vendor’s liability for eviction.

Two or more things sold: the same rules as to partial loss shall apply.

a. If they have been jointly sold for a lumpsum; or

b. Even if they were sold for a separate price for each of them if it should appear that the
vendee would not have purchased one without the oth

2. Warranty against hidden defects or of quality – the thing shall be free from any hidden faults or
defects.

Effect of Hidden Defects: it would render the thing unfit for its indended use; or diminish its fitness
for such use to such extent that, had the vendee been aware thereof, he would not have acquired it
or would have given a lower price for it.

Vendor not liable in case:

• The defects are patent or those which may be visible; or

• Even if not visible, the vendee who is an expert, by reason of his trade or profession, should
have known.

Warranty of Fitness of Goods: there is an implied warranty that the goods shall be reasonably fit for
such purpose;

a. The buyer, expressly or by implication, makes known to the seller the particular purpose
for which the goods are acquired, and

b. It appears that the buyer relies on the seller’s skill or judgment (whether he be the grower
or manufacurer or not),

In the case of contract of sale of a specified article under its patent or,pther trade name, there is no
warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary.

Warranty of Merchantable Quality: there is an implied warranty that the goods shall be of
merchantable quality

a. Where the goods are brought by description

b. From a seller who deals in goods of that description (whether he be the grower or
manufacturer or not).

In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from any defect rendering them unmerchantable which
would not be apparent on reasonable examination of the sample.

Other rules on warranty against hidden defects or of quality:

• The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof, unless there is contrary stipulation.
 • An implied warranty or condition as to the quality or fitness for a particular purpose may be
annexed by the usage of trade.

Remedies of the vendee:

a. Withdraw from the contract plus damages;

b. Accion quanti minoris or demand a proportionate reduction of the price plus damages.

Loss of the thing with hidden defect; liability of the seller:

a. If the cause was the defect itself: the seller shall be liable for.

1. Price

2. Expenses of the contract

3. Interest (if in good faith)

4. Damages (if in bad faith)

b. If the cause of the loss is a fortuitous event or through the fault of the vendee, the seller shall be
liable to refund the price less the value at the time of loss, plus damages (if he was

1. Judicial sales: the above rules likewise apply to judicial sales, except the judgment detor
shall not be liable for damages.

Prescriptive period for the remedies: is 6 years from delivery.

Rules on hidden defects in animals:

*Redhibitory Defect is the hidden defect on animals that, even in case a professional inspection
has been made, should be of such nature that expert knowledge is not sufficient to discover it.

But if the veterinarian, through ignorance or bad faith shall fail to discover or disclose it, he shall
be liable for damages.

Sale of more than 1 animal: General Rule: The redhibitory defect of one shall only give rise to its
redhibition, and not of the others; Except: if the vendee would not have purchased the sound
animal or animals without the defective one, which is presumed when a team, yoke pair, or set is
bought, even if a separate price has been fixed for each one of the animals composing the same.

No warranty: There is no warranty against hidden defects of animals sold at fairs or at public
auctions, or of live stock sold as condemned.

Void sale of animals:

a. The sale of animals suffering from contagious diseases shall be void.

b. If the use or service for which they are acquired has been stated in the contract, and they are
found to be unfit therefor.

Remedies and Prescriptive Period: Remedies of the vendee in case of sale of animals with
redhibitory defects are similar to the remedies for breach of warranty against hidden defects;
but he must make use thereof within the same period which has been fixed for the exercise of the
redhibitory action or 40 days.

Other Rules:

a. If the animal should die within three days after its purchase, the vendor shall be liable if
the disease which cause the death existed at the time of the contract.
b. If the sale be rescinded, the animal shall be returned in the condition in which it was sold
and delivered, the vendee being answerable for any injury due to his negligence, and not
arising from the redhibitory fault or defect.
c. Sale of large cattle is governed by special laws.
 3. Warranty against non-apparent encumbrances: an encumbrance (or an easement or
servitude) is a burden imposed upon an immovable for the benefit of another immovable
belonging to a different owner. It is non-apparent, when there are no external indications of their
existence.

The warranty against non-apparent encumbrances arises when the same is:

a. Not mentioned in the agreement; or

b. Not recorded in the Registry of Property (now Registry of Deeds).

In which case, the buyer has the following remedies, within 1 year, counted from:

• Ask for the rescission of the contract – from execution of the deéd;
• Ask for damages – from discovery.

The implied warranties are not applicable to a sherit, auctioneer, mortgagee, pledgee or other person
professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has
a legal or equitable interest.

Not applicable to:

the implied warranties are not applicable to a sheriff, auctioneer, mortgage, pledgee or other person
profesing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has
a legal or equitable interest.

OBLIGATIONS OF THE VENDEE:

1. To pay the price

a. At the time and place stipulated; or if none was stipulated, the payment must be made at
the time and place of the delivery of the thing sold.

b. The vendee shall be liable for interest for the period between the delivery of the thing and
the payment of the price in the following cases:

1. Should it have been so stipulated;

2. Should the thing sold and delivered produce fruits or income;

3. Should he be in default, from the time of judicial or extrajudicial demand for the
payment of the price.

c. Suspension of payments: if the vendee is disturbed in the possession or ownership of the

thing acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease, unless:

1. The seller gives security for the return of the price in a proper case, or

2. It has been stipulated that, notwithstanding any such contingency, the vendee
shall be bound to make the payment.

A mere act of trespass shall not authorize the suspension of the payment of the price

d. However, if the fear of loss covers immovable property, the vendor may immediately sue
for rescission.
 e. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract may be had, the
vendee may pay, even 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 him a new term.

2. To accept delivery

a. The buyer is not bound to accept delivery by installments, unless otherwise agreed upon.

b. If it was agreed that delivery be done in installments and payments separately made, 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 or
more installments.

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
• Severable, giving rise to a claim for compensation but not to a right to treat the whole
contract as broken

c. Deemed Acceptance: the buyer is deemed to have accepted the deljvery if.

a. He intimates to the seller that he has accepted the thing;

b. He does any act which is inconsistent with the ownership of the seller;

c. After the lapse of a reasonable time, he retains the goods without intimating to the
seller that he has rejected them.

d. Buyer’s obligation to notify the seller of breach of promise or warranty: After delivery is
made, as a general rule, the seller is not discharged of liability for damages or of breach
of warranty except:

• There is an express or implied agreement to the contrary; or

• The buyer fails to give notice to the seller of the breach within a reasonable time
after the buyer knows, or ought to know of such breach.

e. Buyer as Depositary: Unless otherwise agreed, where goods are delivered to the buyer,
and he refuses to accept them, having the right so to do, 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. If he voluntarily
constitutes himself a depositary thereof, he shall be liable as such.

f. Right to Examine:

i. Delivered goods not previously examined: he is not deemed to have accepted

them unless and until he has had a reasonable opportunity of examining them for
the purpose of ascertaining whether they are in conformity with the contract if there
is no stipulation to the contrary.

ii. Unless otherwise agreed, the seller is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of ascertaining
whether they are in conformity with the contract

iii. Where goods are delivered to a carrier by the seller, upon the terms that the 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, in the
absence of agreement or usage of trade permitting such examination.
 g. Vendor’s Remedy of Rescission is an available remedy to the seller with respect to
movable property, if the vendee upon the expiration of the period fixed for the delivery of the
thing:

i. Should not have appeared to receive it, or,

ii. Having appeared, he should not have tendered the price at the same time, unless
a longer period has been stipulated for its payment.

EXTINGUISHMENT OF A CONTRACT OF SALE: sales are extinguished by the same causes as all
other obligations, and by conventional or legal redemption.

CONVENTIONAL REDEMPTION: otherwise known as “right of repurchase” shall take place when
the vendor reserves the right to repurchase the thing sold, with the obligation to return the price,
expenses related thereto and useful and necessary expenses, and other stipulations which may have
been agreed upon.

The sale, with a right of repurchase, is also known as pacto de retro sale.

Ownership: transfers to the vendee a retro upon delivery. However, this ownership is not absolute
but only conditional. This is because the seller a retro may be able to exercise the right to repurchase
and the ownership of the buyer will be terminated.

Amount to be paid at the time the right is exercised:

1. The purchase price;

2. The expenses of the contract, and any other legitimate payments made by reason of the sale; and

3. Useful and necessary expenses (e.g., fencing of the land)

Fruits: If at the time of the execution of the sale there should be on the land, visible or growing fruits,
there shall be no reimbursement for or prorating of those existing at the time of redemption, if no
indemnity was paid by the purchaser when the sale was executed.

Should there have been no fruits at the time of the sale and some exist at the time of redemption,
they shall be prorated between the redemptioner and the vendee, giving the latter the part
corresponding to the time he possessed the land in the last year, counted from the anniversary of the
date of the sale

Equitable Mortgag: a sale with a right of repurchase (or even a contact of absolute sale) is presumed
to be an equitable mortgage in the following cases:

1. When the price of a sale with right to repurchase is unusually inadequate;

2. When the vendor remains in possession as lessee or otherwise;

3. When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

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. In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, 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. The remedy
would be to ask for the reformation of the instrument purporting to be a contract of sale with right of
repurchase or a contract of absolute sale.
In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an
equitable mortgage.

Period to exercise right of repurchase:

1. That which was agreed upon which cannot exceed 10 years;

2. If no agreement as to the period, it shall be four years from the date of the contract.

The vendor may still exercise the right to repurchase within thirty days from the time final judgment
was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.

ILLUSTRATION: On Jan. 1, 2020, S sold to B with a right of repurchase a car, giving S 5 years to
exercise such right or until Jan. 1, 2025. On Jan. 1,2024, S sued for reformation of instrument,
claiming that the transaction is really one of an equitable mortgage. The court rendered its decision
on Jan.1, 2026 which he received on the same day. Can S still redeem the car?

ANSWER: Yes. He will have until Jan. 31, 2026, or 30 days from the time final judgment was rendered
in a civil action on the basis that the contract was a true sale with right to repurchase.

No Redemption/Repurchase was made:

1. In case of real property, the consolidation of ownership in the vendee by virtue of the failure
of the vendor to pay the required amounts shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard.
2. In case of personal property, the consolidation of ownership is by operation of law.

By consolidation of ownership, it means that the ownership of the vendee becomes absolute and the
resolutory condition is removed.

Other rules on conventional redemption:

1. In case of real property, the consolidation of ownership in the vendee by virtue of the failure
of the vendor to pay the required amounts shall not be recorded in the Registry of Property
without a judicial order, after the vendor has been duly heard.
2. The vendor may bring his action against every possessor whose right is derived from the
vendee, even if in the second contract no mention should have been made of the right to
repurchase, without prejudice to the provisions of the Mortgage Law and the Land
Registration Law with respect to third persons.
3. The vendee is subrogated to the vendor’s rights and actions.
4. 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.

Vendor’s Right of Repurchase: (2-4 above)

Multiple Parties

5. SALE OF UNDIVIDED IMMOVABLE – vendee eventually acquires the whole; may compel the
vendor to redeem the whole property.

E.g. A and B are co-owners of a land. A sold his share to X with a right to repurchase. B eventually
sold his share to X too. X can compel A to redeem the entire lot.

6. SEVERAL PERSONS JOINTLY AND IN THE SAME CONTRACT: sell an undivided immovable
with a right of repurchase:

a. SELLERS – can only redeem their share

b. BUYER- can compel redemption of the entire property; cannot be compelled to agree to a
partial redemption

E.g., A and B, co-owners, sold their respective shares in the same Deed of Sale to X with a
right of repurchase. In this case, A can only redeem his share, but X cannot be compelled to
 a partial redemption; he can require B to also redeem. If B does not want to, A cannot validly
exercise his right of redemption for his share alone.

7. Same rule applies to CO-HEIRS (A sold his land to B with a right of repurchase; A1 and A2 are
the heirs of A. If A dies, same rule above applies toA1 and A2 as if they are A and B in the above
illustration.)

If VENDEE has multiple heirs – the action for redemption should be to each for his own share.

8. CO-OWNERS SOLD SEPARATELY- each can exercise his own right of redemption and cannot
be compelled to redeem the whole property

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

transmitted by onerous title.

The Right of Legal Redemption is available to:

1. The right of redemption of the co-owners excludes that of adjoining owners. If there are
co-owners:
Period to exercise: 30 days from NOTICE in writing by the prospective vendor, or by the
vendor. 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.
Multiple persons exercising the right of redemption/pre-emption: the one whose
intended use is best justified shall be preferred.
a. Pre-emption is the right exercised by the adjoining land owner if the sale is NOT YET
perfected;
b. Redemption is the right exercised if the sale is already perfected.
When redemption, when pre-emption:
a. The subject is urban land;
b. The area of the land 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;
c. The one exercising the right of redemption or pre-emption is an adjoining land
owner.

Redemption and Pre-emption of Urban Land; Requisites:

a. The owner of the adjoining land of smaller area shall be preferred; and
b. Should both lands have the same area, the one who first requested redemption.

In case two or more adjoining owners desire to exercise the right of redemption at the same
time: Multiple redemptioners:
a. The subject is rural land;
b. The land does not exceed one hectare;
c. The redemptioner is an owner of a land adjoining the subject rural land;
d. The adjacent lands is not separated by brooks, drains, ravines, roads and other
apparent servitudes for the benefit of other estates
e. The grantee does not own any rural land;

Rural Land; Requisites:

- have the right of redemption in case of transfers of land

2. Owners of adjoining lands – have the right of redemption in case of transfers of land

Rural Land; Requisites:

 • The subject is rural land;
• The land does not exceed one hectare;
• The redemptioner is an owner of a land adjoining the subject rural land;
• The adjacent lands is not separated by brooks, drains, ravines, roads and other apparent
servitudes for the benefit of other estates
• The grantee does not own any rural land;

3. Co-owners – 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.

Subject property: may be movable or immovable property.

Amount to be paid for redemption: is the purchase price, unless the price of alienation is
grossly excessive, in which case, the redemptioner shall pay only a reasonable one.

Two or more redemptioners: should 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

• Acceptance: the buyer is deemed to have accepted the delivery if:

i. He intimates to the seller that he has accepted the thing;
ii. He does any act which is inconsistent with the ownership of the seller;
iii. After the lapse of a reasonable time, he retains the goods without intimating to
the seller that he has rejected them.

• Buyer’s obligation to notify the seller of breach of promise or warranty: After delivery is
made, as a general rule, the seller is not discharged of liability for damages or of breach of
warranty, EXCEPT:
i. There is an express or impled agreement to the contrary; or
ii. The buyer fails to give notice to the seller of the breach within a reasonable time
after the buyer knows, or ought to know of such breach.

• Buyer as depositary: Unless otherwise agreed, where goods are delivered to the buyer, and
he refuses to accept them, having the right so to do,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. If he voluntarily
constitutes himself a depositary thereof, he shall be liable as such.

• Right to Examine:
i. Delivered goods not previously examined: he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of examining them for
the purpose of ascertaining whether they are in conformity with the contract if there
is no stipulation to the contrary.
ii. Unless otherwise agreed, the seller is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose of ascertaining
whether they are in conformity with the contract
iii. Where goods are delivered to a carrier by the seller, upon the terms that the 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, in the
absence of agreement or usage of trade permitting such examination.
• Rescission is an available remedy to the seller with respect to movable property, if the vendee
upon the expiration of the period fixed for the delivery of the thing
i. Should not have appeared to receive it, or,
ii. Having appeared, he should not have tendered the price at the same time, unless
a longer period has been stipulated for its payment.