COURSE OUTLINE Grading System:

University of San Jose – Recoletos MID-TERM GRADE (MG) = 70 % FISMO + 30

% MIDTERM Exam
Magallanes Street, 6000 Cebu City
Where: FISMO = 10 % Assignments = 15 %
College of Commerce Seatworks + 15 % Groupworks + 60 % Quizzes

Department of Accountancy FINAL GRADE (FG) = 1/2 MG + 1/2 TFG

THE LAW ON SALES AND CREDIT Where: Tentative Final Grade (TFG) =70 % FISMO
TRANSACTIONS + 30 % FINAL Exam

Atty. Angelo Hizon Barrios  

   

  Passing Rates:

Course Objectives: 2.5 for BSA students

At the end of the summer class, students should be 2.8 for non-BSA students
able to know and understand:
 
The nature of sale as a contract, its form and
requisites, obligations of the vendor and vendee, Textbook:
warranties, actions for breach of contract, and its
extinguishment;  Domingo, Simplified Law on Sales and Credit
Transactions, Latest Edition
The allied laws of sales, particularly: the Recto
Law, the Maceda Law and PD 957; and de Leon and de Leon, Jr., The Law on Sales,
Agency and Credit Transactions, Latest Edition,
The law governing pledge, mortgages, and Rex Bookstore.
antichresis.
 
 
Other References:
Learning Activities:
Suarez, Carlos B., Pointers in Business Law, Latest
To ensure higher knowledge retention, recall and Edition, GIC Enterprise & Co., Inc.
application, various effective learning activities will
be conducted, such as lecture/discussion, case let Paras, Edgardo L., Civil Code of the Philippines,
analysis, pre-tests and post-tests, internet research, Book V (Special Contracts), Latest Edition, Rex
drafting of legal forms and the like. Bookstore.

   

   

 
Topics Outline:                   a.     Husband and wife (1490)

 PART ONE. SALES                   b.     Persons in trust relation (1491)

 Chapter 1: NATURE AND FORM OF                   c.     In auctions (1476)

CONTRACT
          C.     Rule when an incompetent buys  (1489)
 
 
Art. 1458
Object
I.        Nature and Characteristics
 
          A.     Definition of sale (1458)
Arts. 1459-1465
          B.      Characteristics of a contract of sale
I.        Object 
          C.     Sale distinguished from
          A.     Qualities – The object must be 
a.   Agency to sell (1466)
                  a.     Existing, future or contingent
b.   Lease of Service (1467) (1462)

c.   Barter (1468, 1638)                           1)     Potential existence (1461)

d.   Dation in payment (1245)                           2)     Things under resolutory

condition (1465)
          D.     Absolute Sale vs. Conditional contract
of sale vs. Contract to sell                           3)     Sale of mere hope or
expectancy (1461)
 
                  b.     Lawful (1459)
II.       Elements
                  c.     Determinate or determinable (1460)
Essential
                          1)     Undivided interest as object
Consent (1463)

                            2)     Undivided share in a mass

(1464)
CAPACITY TO BUY OR SELL
                  d.     Transferability of ownership 
 
                          1)     When it must exist
Arts. 1489-1492
                          2)     Subsequent acquisition of title
I.        Parties and their consent (1434)

          A.     Capacity in general (1489)                           3)     Acquisition of title upon a

contingency (1462)
          B.      Special disqualifications to buy
 Cause                   a.     Effect of seller’s opinion (1546) 

Arts. 1469-1474  

I.        Price 1.) WARRANTY IN CASE OF EVICTION

          A.     Requisites  Arts. 1548-1559

                  a.     Real (1471) I.        Requisites of warranty:

                  b.     In money or equivalent (1458)           A.     Eviction of the buyer (1548)

                  c.     Certain or ascertainable                    a.     Requisites of eviction 

                          1)     How           B.      No express waiver (1554)

determined                                  
          C.     Seller duly summoned (1558)
                                   i)       By a third person (1469)
II.       Effect of warranty (1555)
                                   ii)      By the courts (1469)
          A.     If the seller is in good faith
By reference (1472)
          B.      If the seller is in bad faith 
By one of the parties (1473)         
          C.     Effect of loss of an important part
                          2)     Effect of indeterminability (1556) 
(1474)
          D.     Obligation of the vendee
                          3)     Effect of inadequacy of price
(1470) III.      Waiver of warranty

  Must be express

Natural Elements a.     Effect if made with knowledge of risk (1554)

         b.     Effect if made without knowledge of risk

(1554)
CONDITIONS AND WARRANTIES
B.       Effect if seller is in bad (1553)
 Arts. 1545-1547   
 
I.        Conditions (see 1179 et seq.)1

          A.     Effect of non-fulfillment of condition

(1545)

II.       Warranties:  Kinds

          A.     Express (1546)

          B.      Implied (1547, 1562)

2.) WARRANTY AGAINST HIDDEN DEFECT           B.      When redhibitory vice is presumed
OF OR ENCUMBRANCES UPON THE THING (1578)
SOLD
          C.     Effects of warranty 
Arts. 1561-1571
                  a.     Options of the vendee 
I.        Warranty against hidden defects 
 
          A.     Requisites
Art. 1560
                  a.  Not visible (1561)
I.        Warranty against hidden encumbrance (1560)
                  b.  Serious (1561)
          A.     Requisites 
                  c.   Not known to buyer
                  a.     Must be important
                  d.  Existed prior to the sale
                  b.     Is not recorded
                  e.   Notified to seller 
                  c.     Is claimed in due time (1586)
                  f.    Action must be within 6 months or
40 days            B.      Effects:  Buyer’s action 

                  g.  No stipulation against warranty has                   a.     Rescission or damages (1560, par.

been agreed  3)

          B.      Vice need not be known to vendor b.      Damages only (1560, par. 4)

(1566)
 
          C.     Effects of warranty 
3.) WARRANTY OF FITNESS OR
                  a.     Options of vendee (1567) MERCHANTABILITY (1562- 1565)

                  b.     Rule if the thing is lost (1568)  Accidental Elements

                          1.     If the vendor is aware  

                          2.     If the vendor is not aware  Chapter 2: OBLIGATIONS OF THE VENDOR

                  c.     Rule if the thing is lost by fortuitous Arts. 1495-1506

event (1569) 
I.        General Obligations
 
          A.     To preserve the thing (1163)
Arts. 1572-1581
          B.      To deliver the thing sold (1537)
I.        Warranty against hidden vices of animals
                  a.     Form of delivery 
          A.     When no warranty exists (1574)
                          1)     Physical or real (1497)
                          2)     Constructive Arts. 1536-1543

                                   i)       Real property I.        Completeness of delivery

                                   ii)      Personal property           A.     Real estate

                                   iii)     Incorporeal property                    a.     Where it is sold per unit or number

                          3)     Constitutum possessorium                    b.     Where it is sold for a lump sum or a

single price (1542)
          C.     Transfer of ownership to the buyer
                  c.     Prescription of action
                  a.     General rule - delivery
          B.      Movables 
                  b.     When delivery does not transfer
title                   a.     If there is deficiency in quantity or
quality 
                          1)     Delivery on approval, trial or
satisfaction (1502)                   b.     If there is an excess 

                          2)     Express reservation of title           C.     What delivery includes (1537, par. 2)

                          3)     Implied reservation of title II.       Sales to two different persons (1544) –

DOUBLE SALE
                                   i)       Goods deliverable to the
order of shipper (1503)           A.     Rules as to immovables

                          4)     When seller is not the owner           B.      Rules as to movables

(1505)
          C.     What good faith of buyer consists of 
 
 
 
 
TIME AND PLACE OF DELIVERY
Chapter 3: OBLIGATIONS OF THE VENDEE
Arts. 1521-1524
Arts. 1582-1593
I.       Time and Place of Delivery
I.        To accept delivery 
         A.      Time (1521)
          A.     Rule if there was no previous
         B.       Place (1521, 1523) examination (1584)

II.       Rule in case of delivery to carrier (1523)           B.      Effect of unjust refusal to accept (1588)

III.      Expenses for delivery (1521)           C.     Duty of the buyer for justifiable refusal
to accept (1587)
 

 
II.       Payment of price and interest            C.     Right of resale (1533)

          A.     Time and place (1582)                   a.     Requisites for the exercise of the

right 
          B.      Suspension of payment after delivery
(1590)                   b.     Notice of resale to the buyer

                  a.     Grounds                            1)     General rule

                  b.     When there is no right to suspend                            2)     Exception

          C.     Payment of interest on the price (1589):                   c.     Manner of resale

When
          D.     Right to rescind the sale (1526, No. 4)
                  a.     Before default
                  a.     Requisites
                  b.     After default 
                  b.     Notice of intention to rescind 
 
                  c.     Effect of rescission 
 
III.      Effect of sale or other disposition of the
RIGHTS OF THE UNPAID SELLER goods 

Arts. 1525-1535 General rule (1523, par. 1)

I.        Definition of unpaid seller (1525)           B.      Exception (1535, pars. 1 & 2)         

          A.     What the term “seller” includes (1525)  

II.       Rights of an unpaid seller (1526) 

          A.     Lien on the goods (1526, par. 1) Arts. 1594-1599

                  a.     When the lien exists (1527, 1528) I.        Action for the price (1595)

                  b.     When the lien is lost (1529)           A.     Grounds 

          B.      Right of stoppage in transitu (1526, No. II.       Seller’s action for damages for non-
2) acceptance (1596)

                  a.     Requisites for the exercise of the           A.     Grounds 

right (1526, 1530)
          B.      Measure of damages 
                          1)     When good are no longer in
transit (1531) III.      Seller’s action for total rescission (1597)

                  b.     Effect of partial delivery (1531, par.           A.     Requisites

4)
IV.      Buyer’s action for seller’s specific
                  c.     How right is exercised (1532) performance (1598)
V.      Buyer’s action for breach of warranty (1599)                   a.     Of execution and registration
(1487)  
          A.     Buyer’s options 
                  b.     Of putting the goods in a
          B.      Nature of options – alternative  deliverable state (1521)

          C.     When buyer cannot rescind   

          D.     Effects of election to rescind (1599, par. II.       Rules in special sales

4)
          A.     Sales at auction (1476)
                  a.     As to liability for the price
          B.      Sales by sample and/or description
                  b.     Recovery of the price (1481)

                  c.     As Refusal of seller to accept the           C.     Sales of personalty payable by

return installments (1484) – RECTO LAW (ACT NO.
4122)
          E.      Loss in case of breach of warranty of
quality (1599, par. 5)                            a.     Alternative remedies in case of non-
payment
a.      Measure of liability
                  b.     Forfeiture of installments (1486)
 
          D.     Leases of personalty with option to buy
  (1485)

Chapter 4: Rules and Allied Laws applicable to           E.      Expropriation (1488)

different types of sales
          F.      Realty Instalment Buyers Act –
Arts. 1475-1488 MACEDA LAW (RA NO. 6552)

I.        Rules in ordinary sales           G.     The Subdivision and Condominium

Buyers’ Protective Decree (PD 957)
          A.     Form
 
                  a.     General rule (1483)
DOCUMENTS OF TITLE TO GOODS
                  b.     When Statute of Frauds apply 
Arts. 1507-1520 
          B.      Perfection
I.        Definition of document of title (1636, No. 1)
                  a.     General rule (1475)
II.       Kinds of document of title
                          1)     Sale by description and/or
sample (1481)           A.     Negotiable 

                  b.     Place of perfection                   a.     Definition of negotiable document

of title (1507)
          C.     Expenses
                          1)     Effect of absence of words of IV.     Levy or garnishment of goods covered by a
negotiability (1510) document of title

                  b.     Negotiation           A.     When covered by a negotiable

document
                          1)     Definition of negotiation
                  a.     General rule (1519)
                          2)     Ways of negotiation
                          1)     Exceptions (1519)
                                   i)       By delivery (1508,
par.1)                                  b.     Rights of the bailee (1519)

                                           aa)   Forms of documents           B.      When covered by a non-negotiable

(1508, Nos. 1 & 2) document of title (1514)

                                           bb)   Right of the holder  

                                   ii)      By indorsement (1509,                           

par. 1)
Chapter 5: EXTINGUISHMENT OF THE
                                           aa)   Form of document  SALE

                                           bb)   Kinds of Arts. 1600

indorsements (1509)
I.        Causes of extinguishment
                          3)     Validity of negotiation (1518)
          A.     General causes (1231)
                          4)     Who may negotiate
(1512)                             B.      Special causes 

          B.      Non-negotiable a.   Redemption

III.      Rights acquired by transferee of document of  

title
EFFECTS OF THE CONTRACT WHEN THE
          A.     Under a negotiable document of title THING SOLD HAS BEEN LOST

                  a.     Which has been duly negotiated Arts. 1493-1494

(1513)      
I.        Distinction
                  b.     Which has been “transferred” (not
duly negotiated) (1514, 1515)           A.     Effect of loss of the thing sold

          B.      Under a non-negotiable document of                   a.     At the time of perfection

title 
                          1)     Total loss (1493)
                  a.     Rights of the transferee (1514)
                          2)     Partial loss (1494)
                  b.     Effect of indorsement (1511)
                          3)     Effect of
deterioration  (1494)  
                  b.     After perfection and before delivery                           b.     As to the instrument executed
(1605) 
                          1)     By the fault of one party
(1480, 1504) III.      Period of repurchase or redemption

                          2)     By fortuitous event (1480,           A.     When no period is agreed upon (1606,

1504, 1538) par. 1) 

            B.      When a period is agreed upon (1606,

par. 2)
 
          C.     When period may be extended (1606,
CONVENTIONAL REDEMPTION  par. 3)

Arts. 1601-1618 IV.      Who may redeem 

I.        Concept            A.     The vendor 

          A.     Defined (1601)                   a.     When vendors are co-owners 

          B.      Nature: It is                            1.     Right of each co-owner (1612,

par. 10)
                  a.     An accidental element 
                          2.     Right of the vendee (1613,
                  b.     An express condition 1611)

                  c.     A potestative resolutory condition                    b.     When a vendee sells his undivided

share (1614)
                  d.     A real right 
          B.      Heirs of the vendor (1612, par. 2)
II.       Equitable mortgage 
                  a.     Right of each heir
          A.     Equitable mortgage defined 
                  b.     Right of the vendee (1613) 
          B.      Transactions presumed to be equitable
mortgages:           C.     Creditors of the vendor (1610)

                  a.     Contracts of sale with right to V.      From whom/against whom redemption may

repurchase in the cases mentioned in 1602 be made

                  b.     Contracts of absolute sale in the           A.     The vendee

cases mentioned in 1602
          B.      Heir or heirs of the vendee
                  c.     Pacto de retro sale with doubtful
interpretation (1603)                   a.     Rule if there is more than one heir
(1615)
          C.     Effects when transaction is deemed an
equitable mortgage            C.     Every possessor whose right is derived
from the vendee (1608)
                          a.     As to fruits, money or other
benefits received (1602) VI.      Obligations of the vendor-a-retro
          A.     Obligations (1616)                           1.     Rural lands (1621)

                  a.     General rule                                    i)       Requisites 

                  b.     Exception (1608)                                    ii)      Who may exercise the

right 
VII.     Obligations of the vendee-a-retro (1618)
                          2.     Urban lands (1622)
VIII.    Rights of the vendee-a-retro (1611, 1609)
                                   i)       Requisites 
IX.      Rules on pro-rating of fruits (1617)
                  b.     Obligation of the redemptioner  
          A.     If there are visible fruits at the time or
execution III.      Procedure in redemption 

          B.      If there are no visible fruits at the time           A.     When to exercise the redemption 
of sale                               
          B.      Requisite for registration of sale 
 
IV.      Other cases of legal redemption 
LEGAL REDEMPTION

Arts. 1619-1323
PART TWO.  CREDIT TRANSACTIONS:
I.        Concept PLEDGE, MORTGAGE AND ANTICHRESIS

          A.     Defined (1619) Chapter 1: PROVISIONS COMMON TO

PLEDGE AND MORTGAGE 
          B.      Kinds of alienation (1619)
Arts. 2085-2092
          C.     Legal redemption distinguished from
pre-emption  I.        Common characteristics (2085)

II.       Instances of legal redemption            A.     Constituted to secure fulfillment of a

principal obligation (2085)
          A.     Redemption by co-owners 
          B.      Can be constituted only by the absolute
                  a.     Purpose  owner 

                  b.     Requisites            C.     Pledgor or mortgagor must have free

disposal of the property (2085[3])
                  c.     Who may exercise redemption 
          D.     Things pledged or mortgaged may be
                  d.     Obligation of the redemptioner  alienated at the instance of creditor (2087)

                  e.     Legal redemption by co-heirs            E.      Pledge and mortgage are indivisible

(2089)
          B.      Redemption by adjoining owners 
          F.      Promise to constitute a pledge or
                  a.     Instances  mortgage gives rise to personal action only (2092)
Chapter 2: PLEDGE Foreclosure may be

Arts. 2093-2096 i)       Judicial

I.        Concept ii)      Extra-judicial 

II.       Elements Rule if two or more things are pledged (2119)

          A.     Parties:  capacity f.       To collect credits pledged (2118)

          B.      Object  Obligations of the Pledgee 

          C.     Consideration a.     Preservation

          D.     Form          1.     Must not use the thing pledged (2104)

III.      Classes         2.     Responsibility for acts of his employee

(2100)
          A.     Voluntary 
        3.     Cannot deposit the thing pledged with
          B.      Legal another person (2100)

          4.     Duty to advise pledgor of any danger to

the thing (2107, par.2)
Arts. 2097-2130
        5.     Rule in case of danger of loss due to
I.        Effects as to the Pledgee pledgee’s negligence or fault (2106)

          A.     Rights of the Pledgee           6.     Rule in case of fear of impairment of the

thing pledged (2108)
                  a.     To the retention of the thing in his
possession (2098) b.     Restitution

                  b.     To the reimbursement of the         1.     Presumption (2110)

expenses for preservation (2099)
II.       Effects as to the Pledgor
                  c.     To compensate fruits, income, etc.
(2102)           A.     Rights of the pledgor

                  d.     To institute actions of recovery and                   a.     Remains the owner (2103)

defense (2103)
                  b.     Right to demand deposit of the
                  e.     To cause the sale of the security thing (cf. 2106, 2104)

                          1.     Grounds:                   c.     Right to substitute another thing

02107)
                                   i)       Precautionary (2198, cf.
2107))                   d.     Right to bid and to preference at the
foreclosure sale (2113)
                                   ii)      Foreclosure (2108)
                  e.     Right to the return of the thing           D.     Form
(2098)
                  a.     Between the parties
          B.      Obligations of the Pledgor
                  b.     As to third persons (2125)
                  a.     To notify the pledgee of flaws of
the thing III.      Classes

III.      Extinguishment of the pledge           A.     Voluntary

          A.     By extinction of the principal obligation           B.      Legal (2125)

B.       By destruction or loss of the thing pledged           C.     Equitable mortgage 

          C.     By return of the pledge IV.      Effects

          D.     By renunciation by the pledgee or           A.     A to the property mortgaged 

abandonment of the pledge in writing 
                  a.     Real right is created (2126)
          E.      By redemption of the party having any
right in the thing pledged                   b.     Extension of accessions and
accessories 
          F.      By other causes 
                  c.     pactum de non alienando (2130)
 
          B.      Effects as to the Mortgagee
Arts. 2121-2122
V.      Kinds of foreclosure 
I.        Legal Pledges (Right of Retention)
          A.     Judicial
          A.     Governed by the rules on conventional
pledge           B.      Extrajudicial 

          B.      Cases of retention  

  Chapter 4: ANTICHRESIS 

Chapter 3: MORTGAGE (REAL) Arts. 2132-2139

Arts. 2124-2131 I.        Concept (2132)

I.        Concept II.        Elements

II.       Elements           A.     Parties

          A.     Parties           B.      Object

          B.      Object           C.     Cause 

          C.     Consideration            D.     Formalities 
III.      Effects VII.     Foreclosure

          A.     Rights of the antichretic creditor           A.     Kinds

                  a.     To receive the fruits (2132)  

                  b.     Right of foreclosure (2137)  

          B.      Obligations of the antichretic creditor  PART THREE. AGENCY

                  a.     To bear necessary expenses for I. Nature and kinds of agency

preservation
II. Obligations of the parties
                  b.     To pay the taxes and charges upon
the estate  III. Salient features

   

Chapter 5: CHATTEL MORTGAGE

Arts. 2140-2141

I.        Concept (2140 and Act 1508)

II.       Elements

          A.     Parties

          B.      Object

          C.     Cause

          D.     Form 

                  a.     To bind the parties

                  b.     To bind third persons 

III.      Effect of mortgage (Sec. 7, Act 1508)

IV.      Discharge of mortgage (Sec. 8, Act 1508)

          A.     Requisites 

          B.      Effect of failure to discharge 

V.      Redemption

          A.     Who may redeem

          B.      What must be paid