SALES

TOPIC 4

X.SALE ON TRIAL, APPROVAL OR SATISFACTION

Q: What is sale on trial, approval or satisfaction?
A: It is a contract in the nature of an option to purchase if the goods prove to be satisfactory, the
approval of the buyer being a condition precedent.

Note: there is transfer of ownership only when

a. When buyer signifies approval or acceptance
b. If no approval, then upon the expiration of the time agreed. If there
is no time agreed, then within
reasonable time.

Q: What are the rules in case of sale on trial, approval or satisfaction?

Title Remains with seller
GR: Borne by seller
Risk of Loss XPN:
1. Buyer is at fault
2. Buyer agreed to bear the loss
GR: Buyer must give goods a trial
As to trial
XPN: Buyer need not do so if it is evident that it
cannot perform the work.
When period within which buyer It runs only when all the parts essential for the
must signify his acceptance runs operation of the object has been delivered

SALE OR RETURN
Ownership passes to buyer on delivery but may revest ownership to seller within the time fixed
in the contract

SALE BY DESCRIPTION/SAMPLE
1. Sample – goods must correspond with sample shown
2. Description – goods must correspond with description or sample
3. Effect if there is no compliance: RESCISSION may be availed of by the
buyer
XI. OBLIGATIONS OF BUYER
1. Pay the price
a. Buyer is obligated to pay price according to terms agreed upon
regarding time, place and amount
b. If payment of interest is stipulated – must pay; if amount of interest not
mentioned – apply legal rate
c. When buyer defaults – constitutes breach: subject to specific
performance/rescission and damages; interest to be paid also from default

2. Accept delivery of thing sold

a. Where to accept: at time and place stipulated in the contract; if none
specified – at the time and place of delivery goods; there is acceptance when:
i. He intimates to seller that he has accepted

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ii. When delivered and does any act inconsistent with ownership of seller
iii. Retains without intimating to seller that he has rejected
J.
3. Sale of Goods on installment
a. Goods must be delivered in full, except when stipulated
b. When not examined by buyer – not accepted until examined or at least
had reasonable time to examine

4. Acceptance of goods in general, absent contrary express stipulation, does not

discharge seller from liability in case of breach of warranties (unless no notice
or failure to give it within reasonable time)

5. When buyer has a right to refuse goods, no need to return; shall be

considered as depositary; unless there is stipulation to the contrary
SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE
See Articles 1475, 1477, 1505, 1506

I. SALE BY NON-OWNER
1. PERFECTION STAGE
a. Sale by owner – VALID
b. Sale by non-owner – VALID;
c. Reason why both sales are valid: ownership is necessary only at time
when transfer title to goods; at perfection stage, no obligation on
part of seller to transfer ownership
d. Law on estoppel further bolsters it: title passes by operation of law to
grantee when person who is not owner of the goods sold delivers it
and later on acquires title thereto
e. Since valid, action to annul is improper, there is already a perfected
contract

2. CONSUMMATION STAGE
a. Contract of sale is valid because it has passed perfected stage, despite
seller not being the owner or seller having no authority to sell
b. What is void is the transfer of title/ ownership did not pass
c. Effect: buyer acquired no better right than transferor
d. Legal effect: CAVEAT EMPTOR – BUYER BEWARE
e. Sale of co-owner of whole property or definite portion
GENERAL RULE:
i. co-owner sells whole property prior to partition – sale of property itself is
void but valid as to his spiritual share
ii. co-owner sells definite portion to partition – sale is void as to other co- owner
but valid as to his spiritual share if the buyer would have still bought such
spiritual share had he known that the definite portion sold would not be acquired by
him

II. EXCEPTIONS TO THE RULE ON THE EFFECT OF SALE OF A DEFINITE

PORTION BY A CO- OWNER
1. Subject matter is indivisible in nature or by intent;
2. Sale of a particular portion of a property is with consent of other co-owners;
3. Co-owner sells 1 of 2 commonly-owned lands and does not turn over ½
of the
proceeds, other co-owner, by law and equity,

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has exclusive claim over remaining land.

III. RULES ON LEGAL EFFECTS OF SALE BY A NON-OWNER

GENERAL RULE: Sale by non-owner, buyer acquires no better title than seller had.
EXCEPTIONS:
1. Owner by his conduct is precluded from denying seller’s authority (ESTOPPEL)
2. Contrary is provided for in recording laws (PD 1529)
3. Sale is made under statutory power of sale or under order of a court of competent jurisdiction
4. Sale is made in a merchant’s store in accordance with code of commerce and special laws

IV. SALE BY SELLER WITH VOIDABLE TITLE

1. PERFECTION STAGE
a. Valid sale – buyer acquires title of goods

2. CONSUMMATION STAGE
a. Valid sale – if title has not yet been avoided, buyer buys goods under following
condition:
o in good faith
o for value
o without notice of seller’s defect of title

V. TITLE AS TO MOVABLE PROPERTIES GENERAL RULE: Possession is

equivalent to title
Requisites: Possession of movable and Good Faith

VII. EXCEPTIONS:
1. Owner lost movable – owner can recover w/o reimbursing price
2. Owner is unlawfully deprived – owner can recover w/o reimbursing price

VIII. EXCEPTIONS TO THE EXCEPTIONS:

− movable is bought at public sale -owner can only recover after reimbursing price
− acquired in good faith and for value from auction

LOSS, DETERIORATION, FRUITS and OTHER BENEFITS

See Articles 1493 and 1494
Legal consequences from point of perfection are the same in both legal systems: upon perfection
of an unconditional contract of sale involving specific or determinate subject matter, the risk of
loss deterioration and the benefits of fruits and improvements, were fro the account of the buyer.

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 DOCUMENT OF TITLE OF GOODS (DOTG) See article 1507-1524

o Includes any bill of lading, dock warrant, quedan or warehouse receipt or
order for the delivery of goods or any other document issued in the ordinary
course of business in the sale or transfer of goods, as proof the possession of
the document to transfer or receive, either by endorsement or by delivery,
goods, represented by such document.
 Note: Goods – include all chattels personal but things in action or money in legal
tender of the Philippines
Types of Document of Titile of Goods
1. Bill of Lading - a document acknowledging the receipt of goods by a carrier or by
the shipper’s agent and the contract fo the transportation of those goods; a document
that indicates the receipt of goods for shipment and that is issued by a person
engaged in the business of transporting or forwarding goods
2. Dock warrant – document issued by maritime carrier to evidence delivery of goods at
the dock. Warrant given by dock owners to the owner of merchandise
3. Quedan – warehouse receipt of sugar
4. Warehouse receipt – a receipt issued by a person engaged in the business of storing
goods; it may be negotiable instrument and is often used for financing with inventory
as security; A receipt received by the bailee to be delivered to the bearer or to the
order of any person named in such receipt or to a specified person
 Who is a Bailee? A person who receives personal property from another and has
possession but NOT TITLE of the goods. He is responsible for safekeeping the
goods until it is returned to the owner. Usually the warehouseman or carrier
 NOTE; A DOT MAY be negotiable or non-negotiable
A. NEGOTIABLE DOTG
 Goods are deliverable to bearer
 Goods are deliverable to the order of a specified person
Ways of Negotiation
1. By delivery - the one issuing the same undertakes to delivery the goods to the
bearer
2. By indorsement and delivery – endorsement may be in blank, to bearer or to a
specified person
Who negotiates a negotiable DOTG?
1. Owner of DOTG
2. Person to whom possession or custody of document has been entrusted by the owner
if
a. Bailee undertakes to deliver the goods to such person
b. If document is in such form that it may be negotiated by delivery
Effects of negotiation? Person to whom a dotg has been duly negotiated acquires
a. Title to goods
b. Direct obligation of the bailee issuing the DOTG to hold or posses the goods for him
according to the terms of the document as if bailee had contracted with him directly
B. NON-NEGOTABLE DOTG
 Those delivered to a specified person
 Merely serves as evidence of the goods it covers
 Can be transferred but not negotiated, transferee acquires no rights
 RIGHTS of a TRANSFEREE OF NON NEGO DOTG
1. As against transferor, title to goods subject to the terms of any agreement with

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transferor
2. Right to notify bailee (warehouseman or carrier) of the transfer to him
of the DOTG
Important:
 Effect of notification – transferee acquires direct obligation of bailee to hold
possession of goods
 Effect of lack of notification – before notification, title of transferee is
defeated by:
a) Levy or an attachment or execution upon the goods by the CREDITOR of
the transferor
b) Notification to such bailee by the transferor OR a subsequent purchaser
from the transferor of a subsequent sale of the goods by the transferor

Case: Dan deposited his goods on June 12 with Man, the warehouseman, who issued a non
negotiable warehouse receipt (WR) to Dan. On June 13, Dan assigned or transferred the WR
to Jan who in turned assigned to Han. Neither Jan or Han notified Man. Jan later sold his
goods covering the warehouse receipt to Van on June 20, who has the better title to the
goods? ANS. VAN
 EFFECT OF TRANSFER OF A NEGO DOTG WITHOUT ENDORSEMENT
o Tranferree acquires right against transferor to compel him to endorse the
document unless a contrary intention appears
o Negotiation takes effect when endorsemen is actually made
 WARRANTIES OF SELLER/PERSON WHO NEGOTIATES DOTG
1. genuineness of the document
2. legal right to negotiate or transfer
3. no knowledge of any fact that would impair the validity or worth of the document
(examples of impairment: DOTG was negotiated through breach of duty,
loss, theft, fraud, accident, mistake duress or conversion
4. right to transfer title to the goods
5. goods are merchantable and fit for a particular purpose
 note:
o failure of bailee or previous indorsers shall not make present indorsers liable
o validity of negotiable DOTY is not affected if the person to whom it was
negotiated paid for value and in good faith – without notice of any breach of
duty, loss, theft, fraud, accident, mistake duress or conversion
o
Q: Can goods while in the possession of the bailee be subject for attachment?
Article 1519 explained.
GR: Goods cannot be attached
EXC.
o When DOTG is surrendered to the bailee or
o Documents’ negotiation is enjoined

Attachment - The legal process of seizing property to ensure satisfaction of a judgment or to be

sold in satisfaction of a judgment.

THE CONDOMINIUM ACT (RA 4726)

PRELIMINARIES

Q: What is a condominium?

A: It is an interest in real property consisting of separate interest in a unit in a

residential, industrial or commercial building and an undivided interest in

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common, directly or indirectly, in the land on which it is located and

in other common areas of the building.

Note: It may include, in addition, a separate interest in other portions of such

real property.

Q: What comprises a real right in condominium?

A: The real right in condominium may be ownership or any other interest in

real property recognized by law, on property in the Civil Code and other
pertinent laws.

Q: What is a condominium unit?

A: It is a part of the condominium project intended for any type of independent

use or ownership, including one or more rooms or spaces located in one or
more floors (or part or parts of floors) in a building or buildings and such
accessories as may be appended thereto.

Q: What is a condominium project?

A: It is the entire parcel of real property divided or to be divided in condominiums, including all
structures thereon

Q: What are common areas?

A: The entire project excepting all units separately granted or held or reserved.

Q: What is meant by “to divide” real property?

A: To divide the ownership thereof or other interest therein by conveying one or more
condominiums therein but less than the whole thereof.

Q: What is the rule as regards acquisition of ownership over common areas?

A: Transfer or conveyance of a unit or apartment, office or store or other space therein

shall include the transfer or conveyance of the undivided interests in the common areas or,
in a proper case, the membership or shareholdings in the condominium corporation

Q: Are there any restrictions as regards ownership of condominium units provided under
the Condominium Act?

A:
1. As regards individuals:
GR: None.

XPN: where the common areas in the condominium project are owned by the owners of
separate units as co‐owners thereof, no condominium unit therein shall be conveyed or

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transferred to persons other than:

1. Filipino citizens, or
2. Corporations at least sixty percent of the capital stock of which belong to Filipino citizens

XPN to the XPN: in cases of hereditary succession.

2. As regards corporations:
Where the common areas in a condominium project are held by a corporation, no transfer
or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant
membership or stockholding in the corporation will cause the alien interest in such
corporation to exceed the limits imposed by existing laws.

Note: Whenever the common areas in a condominium project are held by a condominium
corporation, such

COMMON QUESTIONS!
 Can I freely sell my unit?

A. Yes. It is not prohibited in the condominium law. When selling your unit, however,
you are also selling your interest in the common areas, as well as your membership and
shareholdings in the condominium corporation.

 Can I mortgage my unit for a loan?

A. Yes. The condominium law states that “each condominium owner shall have the
exclusive right to mortgage, pledge, or encumber his condominium and to have the
same appraised independently of the other condominium owner is personal to him.”

 The Condominium Act stipulates that the owners can sell the condominium after 50
years. Do I not have any say in the sale?

A. No.

Upon turnover of the unit to you, you become a member of the corporation that owns the
condominium. Hence, your concurrence or dissent on the matter will count. If, however,
it has been decided that the building shall be sold, then you will be compensated your
appropriate share from the proceeds of the sale.

 Who owns the common areas in a condominium?

A. Generally, titles to the common areas are held by a corporation formed for the
purpose. However, the condominium law also states that the common areas are held in
common by the unit holders, in equal share for each unit.

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