Reviewer On Sales (V Notes) (De Leon, Villanueva, Ruyeras-Borromeo)

FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO
TITLE VI Hence, there is a marked difference between a sale of

CIVIL CODE OF THE PHILIPPINES hereditary rights and a waiver of hereditary rights. The
first presumes the existence of a contract or deed
SALES of sale between the parties. The second is,
technically speaking, a mode of extinction of
FIRST EXAM TOPICS ownership where there is an abdication or
intentional relinquishment of a known right with
NATURE AND FORM OF CONTRACT knowledge of its existence and intention to
relinquish it, in favor of other persons who are co-
Article 1458 heirs in the succession.
By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to Private respondent, being then a stranger to the
deliver a determinate thing, and the other to pay succession of Cosme Pido, cannot conclusively claim
therefor a price certain in money or its equivalent. ownership over the subject lot on the sole basis of the
waiver document which neither recites the elements of
A contract of sale may be absolute or conditional. either a sale, or a donation, or any other derivative
(1445a)
mode of acquiring ownership.
Contract of sale – contract whereby one of the parties
(seller/vendor) obligates himself to deliver something Right of first refusal (PUP v. CA)
to the other (buyer/purchaser/vendee) who on his A contract of sale must be mutually obligatory
part, binds himself to pay therefor a sum of money or It is therefore a general requisite for the existence of a
its equivalent (price). valid and enforceable contract of sale that it be
mutually obligatory, i.e., there should be a concurrence
Types of contracts of sale of the promise of the vendor to sell a determinate thing
1) Absolute and the promise of the vendee to receive and pay for
2) Conditional the property so delivered and transferred.
Sale v. declaration of heirship and waiver of All three (3) essential elements of a valid sale, without
rights (ACAP v. CA) which there can be no sale, were attendant in the
An asserted claim does not necessarily amount to ownership "disposition" and "transfer" of the property from
In the first place, an asserted right or claim to NDC to PUP - consent of the parties, determinate
ownership or a real right over a thing arising from a subject matter, and consideration therefor.
juridical act, however justified, is not per se sufficient
to give rise to ownership over the res. That right or title Consent to the sale is obvious from the prefatory
must be completed by fulfilling certain conditions clauses of Memorandum Order No. 214 which
imposed by law. explicitly states the acquiescence of the parties to the
sale of the property –
Modes of acquisition of ownership under Civil Code
Under Article 712 of the Civil Code, the modes of Furthermore, the cancellation of NDC's liabilities in
acquiring ownership are generally classified into two (2) favor of the National Government in the amount of
classes, namely, the original mode (i.e., through P57,193,201.64 constituted the "consideration" for the
occupation, acquisitive prescription, law or intellectual sale.
creation) and the derivative mode (i.e., through
succession mortis causa or tradition as a result of Transfer of title or an agreement to transfer title for a
certain contracts, such as sale, barter, donation, price paid, or promised to be paid, is the very essence
assignment or mutuum). of sale.
Sale and declaration of heirship and waiver of rights distinguished Art 1458 is a catchall provision
In a Contract of Sale, one of the contracting parties The Civil Code provision is, in effect, a "catch-all"
obligates himself to transfer the ownership of and provision which effectively brings within its grasp
to deliver a determinate thing, and the other party a whole gamut of transfers whereby ownership of
to pay a price certain in money or its equivalent. a thing is ceded for a consideration.
Upon the other hand, a declaration of heirship and Right of first refusal
waiver of rights operates as a public instrument In the instant case, the right of first refusal is an integral
when filed with the Registry of Deeds whereby the and indivisible part of the contract of lease and is
intestate heirs adjudicate and divide the estate left inseparable from the whole contract. The
by the decedent among themselves as they see fit. consideration for the right is built into the reciprocal
It is in effect an extrajudicial settlement between the obligations of the parties. Thus, it is not correct for
heirs under Rule 74 of the Rules of Court. petitioners to insist that there was no consideration
Sale of hereditary rights v. waiver of hereditary rights paid by FIRESTONE to entitle it to the exercise of the
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right, inasmuch as the stipulation is part and parcel of price is an essential element of a binding agreement to
the contract of lease making the consideration for the sell personal property.
lease the same as that for the option.
Earnest deposit (San Miguel Properties v.
It is a settled principle in civil law that when a lease Spouses Huang)
contract contains a right of first refusal, the lessor is The giving of deposit will not give rise to a perfected sale
under a legal duty to the lessee not to sell to anybody In the present case, the ₱1 million "earnest-
at any price until after he has made an offer to sell to deposit" could not have been given as earnest
the latter at a certain price and the lessee has failed to money as contemplated in Art. 1482 because, at the
accept it. The lessee has a right that the lessor's first time when petitioner accepted the terms of
offer shall be in his favor. respondents’ offer of March 29, 1994, their contract
had not yet been perfected. This is evident from the
Parties on a contract of sale following conditions attached by respondents to their
1) Buyer (vendee) – with an obligation pay a letter, to wit: (1) that they be given the exclusive option
price certain in money or its equivalent to purchase the property within 30 days from
2) Seller (vendor) – with an obligation to transfer acceptance of the offer; (2) that during the option
ownership and deliver a determinate thing period, the parties would negotiate the terms and
conditions of the purchase; and (3) petitioner would
Stages of a contract (NPC) secure the necessary approvals while respondents
1) Negotiation would handle the documentation.
2) Perfection
3) Consummation Thus, it is not the giving of earnest money, but the
proof of the concurrence of all the essential
Manner of payment (Toyota Shaw v. CA) elements of the contract of sale which establishes
Three stages of a contract the existence of a perfected sale.
There are three stages in the contract of sale, namely:
a) preparation, conception, or generation, which Stages of contract
is the period of negotiation and bargaining, In the present case, the parties never got past the
ending at the moment of agreement of the negotiation stage. The alleged "indubitable evidence"
parties; of a perfected sale cited by the appellate court was
b) perfection or birth of the contract, which is the nothing more than offers and counter-offers which
moment when the parties come to agree on the did not amount to any final arrangement
terms of the contract; and containing the essential elements of a contract of
c) consummation or death, which is the sale.
fulfillment or performance of the terms agreed
upon in the contract. Essential characteristics of a contract of sale
1) Nominate and principal –
The second phase of the generation or negotiation Nominate
stage in this case was the execution of the VSP. It must Given a special or particular name in the Civil
be emphasized that thereunder, the downpayment of Code “Law on Sales”, its nature and
the purchase price was P53,148.00 while the balance to consequences are governed by the laws on that
be paid on installment should be financed by B.A. particular name, the title given by the party is
Finance Corporation. It is, of course, to be assumed not as significant as its substance. The intent of
that B.A. Finance Corp. was acceptable to Toyota, the parties and not the nomenclature will
otherwise it should not have mentioned B.A. Finance prevail.
in the VSP. Principal
Does not depend its existence upon another
The VSP was a mere proposal which was aborted in contract
lieu of subsequent events. It follows that the VSP 2) Consensual – perfected by mere consent
created no demandable right in favor of Sosa for the  delivery is required only in the
delivery of the vehicle to him, and its non-delivery did consummation stage
not cause any legally indemnifiable injury. Article 1475. The contract of sale is
perfected at the moment there is a
Manner of payment is essential in a contract of sale meeting of minds upon the thing
This Court had already ruled that a definite agreement which is the object of the contract
on the manner of payment of the price is an essential and upon the price.
element in the formation of a binding and enforceable
contract of sale. This is so because the agreement as to From that moment, the parties may
the manner of payment goes into the price such that a reciprocally demand performance,
disagreement on the manner of payment is tantamount subject to the provisions of the law
to a failure to agree on the price. Definiteness as to the
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governing the form of contracts. Directors and subjected to other terms and conditions
(1450a) imposed by the Bank on the sale of acquired assets.
Level of mutuality (Villanueva v. PNB) In reply to the July 6, 1990 counter-offer, petitioner
What level of mutuality is required before the element of consent signed his July 11, 1990 conformity to the quoted price
is said to be present of P2,883,300.00 but inserted the term
Contracts of sale are perfected by mutual consent "downpayment of P600,000.00 and the balance
whereby the seller obligates himself, for a price certain, payable in two years at quarterly amortization."
to deliver and transfer ownership of a specified thing The CA viewed this July 11, 1990 conformity not as an
or right to the buyer over which the latter agrees. acceptance of the July 6, 1990 counter-offer but a
Mutual consent being a state of mind, its existence further counter-offer for, while petitioner accepted the
may only be inferred from the confluence of two P2,883,300.00 price for Lot No. 19, he qualified his
acts of the parties: an offer certain as to the object acceptance by proposing a two-year payment term.
of the contract and its consideration, and an
acceptance of the offer which is absolute in that it Moreover, petitioner’s payment of P200,000.00 was
refers to the exact object and consideration with the clear understanding that his July 11, 1990
embodied in said offer. While it is impossible to counter-offer was still subject to approval by
expect the acceptance to echo every nuance of the respondent. This is borne out by respondent’s Exhibits
offer, it is imperative that it assents to those points "2-a" and "2-b", which petitioner never controverted,
in the offer which, under the operative facts of where it appears on the dorsal portion of O.R. No.
each contract, are not only material but motivating 16997 that petitioner acceded that the amount he paid
as well. Anything short of that level of mutuality was a mere "x x x deposit made to show the
produces not a contract but a mere counter-offer sincerity of [his] purchase offer with the
awaiting acceptance. understanding that it shall be returned without
interest if [his] offer is not favorably considered x
Consent also must be unanimous on the rate of payment and its x x." This was a clear acknowledgment on his part
terms that there was yet no perfected contract with
More particularly on the matter of the consideration of respondent and that even with the payments he had
the contract, the offer and its acceptance must be advanced, his July 11, 1990 counter-offer was still
unanimous both on the rate of the payment and on its subject to consideration by respondent.
term. An acceptance of an offer which agrees to the
rate but varies the term is ineffective. In sum, the amounts paid by petitioner were not in the
nature of downpayment or earnest money but were
xxWhen petitioner suddenly introduced a term of mere deposits or proof of his interest in the purchase
payment in his July 11, 1990 counter-offer, he of Lot No. 19. Acceptance of said amounts by
interjected into the negotiations a new substantial respondent does not presuppose perfection of any
matter on which the parties had no prior discussion contract.
and over which they must yet agree. Petitioner’s July
11, 1990 counter-offer, therefore, did not usher the Ownership by the seller (Quijada v. CA)
parties beyond the negotiation stage of contract Ownership is not an essential element
making towards its perfection. He made a Ownership by the seller on the thing sold at the time
counter-offer that required acceptance by of the perfection of the contract of sale is not an
respondent. element for its perfection. What the law requires is
that the seller has the right to transfer ownership
Not consent but only counter-offers at the time the thing sold is delivered. Perfection
Respondent replied to the June 28, 1990 offer with a per se does not transfer ownership which occurs
July 6, 1990 letter that only Lot No. 19 is available and upon the actual or constructive delivery of the
that the price therefor is now P2,883,300.00. As the CA thing sold. A perfected contract of sale cannot be
pointed out, this reply was certainly not an acceptance challenged on the ground of non-ownership on the
of the June 28, 1990 offer but a mere counter-offer. part of the seller at the time of its perfection;
It deviated from the original offer on three material hence, the sale is still valid.
points: first, the object of the proposed sale is now only
Lot No. 19 rather than Lot Nos. 17 and 19; second, the Ownership at consummation stage
area of the property to be sold is still 41,190 sq. m but The consummation, however, of the perfected
an 8,797-sq. m portion is now part of a public road; contract is another matter. It occurs upon the
and third, the consideration is P2,883,300 for one lot constructive or actual delivery of the subject
rather than P3,677,000.00 for two lots. More matter to the buyer when the seller or her
important, this July 6, 1990 counter-offer imposed two successors-in-interest subsequently acquires
conditions: one, that petitioner submit a revised offer ownership thereof. Such circumstance happened in
to purchase based on the quoted price; and two, that this case when petitioners — who are Trinidad
the sale of the property be approved by the Board of Quijada's heirs and successors-in-interest — became
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the owners of the subject property upon the reversion and write in the English language, he did not bother to
of the ownership of the land to them. Consequently, fully explain to the latter the substance of the receipt
ownership is transferred to respondent Mondejar and (Exhibit "G"). He even dismissed the idea of asking
those who claim their right from him. somebody else to assist Fortunato considering that a
measly sum of thirty pesos was involved. Evidently, it
Characteristics of a valid consent (Vda. De Ape did not occur to Flores that the document he himself
v. CA) prepared pertains to the transfer altogether of
A contract of sale is consensual Fortunato's property to his mother-in-law. It is
A contract of sale is a consensual contract, thus, it is precisely in situations such as this when the wisdom of
perfected by mere consent of the parties. It is born Article 1332 of the Civil Code readily becomes
from the moment there is a meeting of minds upon the apparent which is "to protect a party to a contract
thing which is the object of the sale and upon the price. disadvantaged by illiteracy, ignorance, mental weakness
Upon its perfection, the parties may reciprocally or some other handicap."
demand performance, that is, the vendee may compel
the transfer of the ownership and to deliver the object Contract to sell v. contract of sale (Laforteza v.
of the sale while the vendor may demand the vendee Machuca)
to pay the thing sold. A contract of sale is consensual
A contract of sale is a consensual contract and is
Essence of consent perfected at the moment there is a meeting of the
The essence of consent is the agreement of the parties minds upon the thing which is the object of the
on the terms of the contract, the acceptance by one of contract and upon the price. From that moment the
the offer made by the other. It is the concurrence of parties may reciprocally demand performance
the minds of the parties on the object and the subject to the provisions of the law governing the form
cause which constitutes the contract. The area of of contracts.
agreement must extend to all points that the
parties deem material or there is no consent at all. There was a perfected contract of sale
In the case at bar, there was already a perfected
Characteristics of consent (IFS) contract. The condition was imposed only on the
To be valid, consent must meet the following performance of the obligations contained therein.
requisites: (a) it should be intelligent, or with an exact Considering however that the title was eventually
notion of the matter to which it refers; (b) it should be "reconstituted" and that the petitioners admit their
free and (c) it should be spontaneous. Intelligence in ability to execute the extrajudicial settlement of their
consent is vitiated by error; freedom by violence, fathers estate, the respondent had a right to demand
intimidation or undue influence; spontaneity by fraud. fulfillment of the petitioners obligation to deliver and
transfer ownership of the house and lot.
In this jurisdiction, the general rule is that he who
alleges fraud or mistake in a transaction must Condition imposed upon perfection v condition imposed upon
substantiate his allegation as the presumption is performance
that a person takes ordinary care for his concerns The issuance of the new certificate of title in the name
and that private dealings have been entered into of the late Francisco Laforteza and the execution of an
fairly and regularly. The exception to this rule is extrajudicial settlement of his estate was not a
provided for under Article 1332 of the Civil Code condition which determined the perfection of the
which provides that "[w]hen one of the parties is contract of sale. The petitioners fail to distinguish
unable to read, or if the contract is in a language between a condition imposed upon the perfection of
not understood by him, and mistake or fraud is the contract and a condition imposed on the
alleged, the person enforcing the contract must performance of an obligation. Failure to comply with
show that the terms thereof have been fully the first condition results in the failure of a
explained to the former." contract, while the failure to comply with the
second condition only gives the other party the
In this case, as private respondent is the one seeking to option either to refuse to proceed with the sale or
enforce the claimed contract of sale, she bears the to waive the condition.
burden of proving that the terms of the agreement
were fully explained to Fortunato Ape who was an Contract of sale and not contract to sell
illiterate. This she failed to do. While she claimed in There is nothing contained in the Memorandum
her testimony that the contents of the receipt were Agreement from which it can reasonably be deduced
made clear to Fortunato, such allegation was debunked that the parties intended to enter into a contract to sell,
by Andres Flores himself when the latter took the i.e. one whereby the prospective seller would explicitly
witness stand. reserve the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or
As can be gleaned from Flores's testimony, while he consent to transfer ownership of the property subject
was very much aware of Fortunato's inability to read of the contract to sell until the full payment of the
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price, such payment being a positive suspensive The settled rule is that the decisive factor in evaluating
condition, the failure of which is not considered a an agreement is the intention of the parties, as shown
breach, casual or serious, but simply an event which not necessarily by the terminology used in the contract
prevented the obligation from acquiring any obligatory but by their conduct, words, actions and deeds prior to,
force. There is clearly no express reservation of title during and immediately after executing the agreement.
made by the petitioners over the property, or any As such, therefore, documentary and parol evidence
provision which would impose non-payment of the may be submitted and admitted to prove such
price as a condition for the contracts entering into intention.
force. Although the memorandum agreement was also
denominated as a "Contract to Sell", we hold that the In the case at bar, the stipulation in the Deed of
parties contemplated a contract of sale. A deed of sale Absolute Sale was that the Corporation shall pay in full
is absolute in nature although denominated a the P2,200,000.00 down payment upon execution of
conditional sale in the absence of a stipulation the contract. However, as correctly noted by the Court
reserving title in the petitioners until full payment of of Appeals, the transcript of stenographic notes reveal
the purchase price. In such cases, ownership of the Cortes' admission that he agreed that the Corporation's
thing sold passes to the vendee upon actual or full payment of the sum of P2,200,000.00 would
constructive delivery thereof. The mere fact that the depend upon his delivery of the TCTs of the three lots.
obligation of the respondent to pay the balance of the In fact, his main defense in the Answer is that, he
purchase price was made subject to the condition that performed what is incumbent upon him by delivering
the petitioners first deliver the reconstituted title of the to the Corporation the TCTs and the carbon duplicate
house and lot does not make the contract a contract to of the Deed of Absolute Sale, but the latter refused to
sell for such condition is not inconsistent with a pay in full the down payment.
contract of sale.
By agreeing to transfer title upon full payment of
3) Bilateral and reciprocal – both contracting P2,200,000.00, Cortes' impliedly agreed to deliver the
parties are bound to fulfill obligations TCTs to the Corporation in order to effect said
reciprocally towards each other transfer. Hence, the phrase "execution of this
 Seller – deliver and transfer ownership instrument" as appearing in the Deed of Absolute Sale,
of the determinate thing and which event would give rise to the Corporation's
 Buyer – pay the price obligation to pay in full the amount of P2,200,000.00,
 Give and take relationship cannot be construed as referring solely to the signing
 To be performed simultaneously of the deed. The meaning of "execution" in the instant
case is not limited to the signing of a contract but
Legal effects of contracts being reciprocal includes as well the performance or implementation or
1) The power to rescind is implied and such accomplishment of the parties' agreement. With the
power need not even be stipulated in order for transfer of titles as the corresponding reciprocal
the parties to invoke the remedy (Art 1191) obligation of payment, Cortes' obligation is not only to
2) Neither incurs in delay if the other does not affix his signature in the Deed, but to set into motion
comply (Art 1168) the process that would facilitate the transfer of title of
3) From the moment one complies, the other the lots, i.e., to have the Deed notarized and to
incurs delay without need of demand (Art 1179) surrender the original copy thereof to the Corporation
together with the TCTs.
Compensatio morae (Cortes v. CA)
A contract of sale is reciprocal When delay is incurred
There is no doubt that the contract of sale in question Since Cortes did not perform his obligation to have the
gave rise to a reciprocal obligation of the parties. Deed notarized and to surrender the same together
Reciprocal obligations are those which arise from the with the TCTs, the trial court erred in concluding that
same cause, and which each party is a debtor and a he performed his part in the contract of sale and that it
creditor of the other, such that the obligation of one is is the Corporation alone that was remiss in the
dependent upon the obligation of the other. They are performance of its obligation. Actually, both parties
to be performed simultaneously, so that the were in delay. Considering that their obligation was
performance of one is conditioned upon the reciprocal, performance thereof must be
simultaneous fulfillment of the other. simultaneous. The mutual inaction of Cortes and
the Corporation therefore gave rise to a
In reciprocal obligations, neither party incurs in delay compensation morae or default on the part of both
if the other does not comply or is not ready to comply parties because neither has completed their part in
in a proper manner with what is incumbent upon him. their reciprocal obligation. Cortes is yet to deliver
From the moment one of the parties fulfills his the original copy of the notarized Deed and the TCTs,
obligation, delay by the other begins. while the Corporation is yet to pay in full the agreed
down payment of P2,200,000.00. This mutual delay
Intention of the parties must be looked into and not the title
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of the parties cancels out the effects of default, Commutative value (Buenaventura v. CA)
such that it is as if no one is guilty of delay. Failure to pay the consideration v. lack of consideration
Failure to pay the consideration is different from lack
4) Onerous – the thing sold is conveyed in of consideration. The former results in a right to
consideration of the price and vice versa demand the fulfillment or cancellation of the obligation
 Imposes a valuable consideration as under an existing valid contract while the latter
prestation (a price certain in money or prevents the existence of a valid contract.
its equivalent
Commutative value of the contract
Onerous and commutative (Gaite v. Fonacier) There is no requirement that the price be equal to the
Onerous and commutative contracts exact value of the subject matter of sale. All the
A contract of sale is normally commutative and respondents believed that they received the
onerous: not only does each one of the parties assume commutative value of what they gave. As we stated in
a correlative obligation (the seller to deliver and Vales v. Villa:
transfer ownership of the thing sold and the buyer to
pay the price), but each party anticipates performance Courts cannot follow one every step of his life and
by the other from the very start. The only rational view extricate him from bad bargains, protect him from
that can be taken is that the sale of the ore to Fonacier unwise investments, relieve him from one-sided
was a sale on credit, and not an aleatory contract where contracts, or annul the effects of foolish acts. Courts
the transferor, Gaite, would assume the risk of not cannot constitute themselves guardians of persons
being paid at all; and that the previous sale or shipment who are not legally incompetent. There must be, in
of the ore was not a suspensive condition for the addition, a violation of the law, the commission of
payment of the balance of the agreed price, but was what the law knows as an actionable wrong, before the
intended merely to fix the future date of the payment. courts are authorized to lay hold of the situation and
remedy it.
Nothing is found in the record to evidence that Gaite
desired or assumed to run the risk of losing his right In the instant case, the trial court found that the lots
over the ore without getting paid for it, or that Fonacier were sold for a valid consideration, and that the
understood that Gaite assumed any such risk. This is defendant children actually paid the purchase price
proved by the fact that Gaite insisted on a bond a to stipulated in their respective Deeds of Sale.
guarantee payment of the P65,000.00, and not only
upon a bond by Fonacier, the Larap Mines & Smelting 6) A title and not a mode of acquisition
Co., and the company's stockholders, but also on one Title and mode distinguished (SLDC v. CA)
by a surety company; and the fact that appellants did Definition of a mode and a title
put up such bonds indicates that they admitted the In relation to the acquisition and transfer of ownership,
definite existence of their obligation to pay the balance it should be noted that sale is not a mode, but merely a
of P65,000.00. title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed,
Rule of interpretation but title is only the legal basis by which to affect
The Civil Code of the Philippines, Article 1378, dominion or ownership. Contracts only constitute
paragraph 1, in fine, provides: titles or rights to the transfer or acquisition of
If the contract is onerous, the doubt shall be settled in ownership, while delivery or tradition is the mode of
favor of the greatest reciprocity of interests. accomplishing the same. Therefore, sale by itself
does not transfer or affect ownership; the most that
There can be no question that greater reciprocity sale does is to create the obligation to transfer
obtains if the buyer' obligation is deemed to be actually ownership. It is tradition or delivery, as a
existing, with only its maturity (due date) postponed or consequence of sale, that actually transfers
deferred, that if such obligation were viewed as non- ownership.
existent or not binding until the ore was sold.
Kinds of delivery
5) Commutative – thing sold is considered The law recognizes two principal modes of delivery, to
equivalent of the price paid and vice versa wit: (1) actual delivery; and (2) legal or constructive
*May be aleatory in case of sale of hope (ex. delivery.
sweepstakes)
 Value for value Actual delivery consists in placing the thing sold in
 No requirement that there is the control and possession of the vendee. Legal or
equivalence of the price and the exact constructive delivery, on the other hand, may be had
value of the subject matter through any of the following ways: the execution of a
 Sales on discounts would still be public instrument evidencing the sale;
considered valid
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1) symbolical tradition - such as the delivery of impediment that effectively prevented the passing of
the keys of the place where the movable sold is the property into the latter's hands. The execution of a
being kept; public instrument gives rise, therefore, only to a prima
2) traditio longa manu - by mere consent or facie presumption of delivery. Such presumption is
agreement if the movable sold cannot yet be destroyed when the instrument itself expresses or
transferred to the possession of the buyer at implies that delivery was not intended; or when by
the time of the sale; other means it is shown that such delivery was not
3) traditio brevi manu - if the buyer already had effected, because a third person was actually in
possession of the object even before the sale; possession of the thing. In the latter case, the sale
and traditio cannot be considered consummated.
4) constitutum possessorium - where the seller remains
in possession of the property in a different Essential elements
capacity. Consent
Article 1475. The contract of sale is perfected at the
Babasanta did not acquire ownership by the mere moment there is a meeting of minds upon the thing
execution of the receipt by Pacita Lu acknowledging which is the object of the contract and upon the
receipt of partial payment for the property. For one, price.
the agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument. From that moment, the parties may reciprocally
Hence, no constructive delivery of the lands could have demand performance, subject to the provisions of
been effected. For another, Babasanta had not taken the law governing the form of contracts. (1450a)
possession of the property at any time after the
perfection of the sale in his favor or exercised acts of Characteristics of consent (IFS)
dominion over it despite his assertions that he was the 1) Intelligent
rightful owner of the lands. Simply stated, there was no 2) Free
delivery to Babasanta, whether actual or constructive, 3) Spontaneous (Vda de Ape v. CA)
which is essential to transfer ownership of the
property. Thus, even on the assumption that the GR: As a general rule, all persons, whether natural or
perfected contract between the parties was a sale, juridical, who can bind themselves by contract have
ownership could not have passed to Babasanta in the also legal capacity to buy and sell.
absence of delivery, since in a contract of sale XPN: There are two (2) kinds of incapacity under the
ownership is transferred to the vendee only upon the law:
delivery of the thing sold.
1) Absolute incapacity – The incapacity is
Since SLDC acquired possession of the property in absolute when the person cannot bind himself
good faith in contrast to Babasanta, who neither in any contract. An example would be those
registered nor possessed the property at any time, enumerated in Article 38 of the Civil Code; or
SLDC’s right is definitely superior to that of
Babasanta’s. Article 38. Minority, insanity or imbecility, the
state of being a deaf-mute, prodigality and civil
interdiction are mere restrictions on capacity to
Presumptive nature of execution of public act, and do not exempt the incapacitated person
instrument as delivery (Equatorial Realty v. from certain obligations, as when the latter arise
Mayfair) from his acts or from property relations, such as
Constructive delivery is negated by the failure of the vendee to take easements. (32a)
actual possession
Thus, it has been held that while the execution of a Minors, insane, demented persons, and deaf-
public instrument of sale is recognized by law as mutes
equivalent to the delivery of the thing sold, such Article 1489. All persons who are authorized in this
constructive or symbolic delivery, being merely Code to obligate themselves, may enter into a
presumptive, is deemed negated by the failure of the contract of sale, saving the modifications contained
vendee to take actual possession of the land sold. It has in the following articles.
been held that the execution of a contract of sale as a
form of constructive delivery is a legal fiction. It holds Where necessaries are those sold and delivered to
true only when there is no impediment that may a minor or other person without capacity to act, he
prevent the passing of the property from the hands of must pay a reasonable price therefor. Necessaries
the vendor into those of the vendee. When there is are those referred to in article 290. (1457a)
such impediment, "fiction yields to reality — the
delivery has not been effected." Article 290. Support is everything that is
indispensable for sustenance, dwelling, clothing
Mayfair's opposition to the transfer of the property by and medical attendance, according to the social
position of the family.
way of sale to Equatorial was a legally sufficient
Sales | VENTEROSO
7
Support also includes the education of the person xxx (3) Those where both parties are incapable of
entitled to be supported until he completes his giving consent to a contract.
education or training for some profession, trade
or vocation, even beyond the age of majority. 2) Relative incapacity – The incapacitated
(142a) person cannot buy or sell a certain property
because of a special prohibition. An example
Article 1327. The following cannot give consent to would be those enumerated in Article 1490 and
a contract: 1491 of the Civil Code which will be discussed
1) Unemancipated minors; in this and the subsequent notes.
2) Insane or demented persons, and deaf-
mutes who do not know how to write.
Sales by spouses
(1263a)
Important dates
Date of transaction – to determine the governing law,
Article 1328. Contracts entered into during a lucid
interval are valid. Contracts agreed to in a state of whether it is the Civil Code or the Family Code
drunkenness or during a hypnotic spell are Date of marriage - only considered in determining the
voidable. (n) property regime of the spouses (i.e., whether it is
Conjugal Partnership of Gains or Absolute
GR: contracts entered into by a minor and other Community of Property)
incapacitated person (e.g., insane or demented persons,
deaf-mutes who do not how to write) are voidable Family Code Civil Code
XPN: where necessaries are sold and delivered to a On or after Aug 3, 1988
Before Aug 3, 1988
minor, without the intervention of a parent or Written consent Consent; express or
guardian, the minor must pay a reasonable price implied
therefor The administrator is The administrator is the
both the husband and husband
 Effect: the contract is, therefore, valid but the
the wife
minor has the right to recover any excess
Art 124 Art 166, 173, 207
above a reasonable value paid by him. The Void Voidable
following elements must concur:
1) Perfection of sale Civil Code
2) Delivery of the subject necessaries – absent CPOG
delivery – voidable Article 165. The husband is the administrator of
 Active misrepresentation - sale of real estate the conjugal partnership. (1412a)
effected by minors who have already passed
the ages of puberty and adolescence and are Article 166. Unless the wife has been declared a non
now in the adult age, when they pretended to compos mentis or a spendthrift, or is under civil
have already reached their majority, while in interdiction or is confined in a leprosarium, the
fact they have not, is valid. They cannot be husband cannot alienate or encumber any real
permitted afterwards to excuse themselves property of the conjugal partnership without the
from compliance with the obligations assumed wife's consent. If she refuses unreasonably to give
by them or to seek their annulment her consent, the court may compel her to grant the
same.
RULE:
VOIDABLE – when one of the parties are This article shall not apply to property acquired by
the conjugal partnership before the effective date of
incapacitated to give consent;
this Code. (1413a)
UNENFORCEABLE – when both of the parties are
incapacitated to give consent
Article 173. The wife may, during the marriage, and
within ten years from the transaction
Article 1390. The following contracts are voidable or questioned, ask the courts for the annulment of any
annullable, even though there may have been no contract of the husband entered into without her
damage to the contracting parties: consent, when such consent is required, or any act
1) Those where one of the parties is incapable or contract of the husband which tends to defraud
of giving consent to a contract; her or impair her interest in the conjugal partnership
2) Those where the consent is vitiated by property. Should the wife fail to exercise this
mistake, violence, intimidation, undue right, she or her heirs, after the dissolution of the
influence or fraud. marriage, may demand the value of property
fraudulently alienated by the husband. (n)
These contracts are binding, unless they are annulled
 The view that the contract made by Gimena is a
by a proper action in court. They are susceptible of
ratification. (n) voidable contract is supported by the legal provision that
contracts entered by the husband without the consent of
Article 1403. The following contracts are the wife when such consent is required, are annullable
unenforceable, unless they are ratified:
Sales | VENTEROSO
8
at her instance during the marriage and within ten years ACOP 207 96
from the transaction questioned. (Ainza v. Padua)
Sale between spouses
ACOP Article 1490. The husband and the wife cannot sell
Article 207. Neither spouse may alienate or property to each other, except:
encumber any common property without the 1) When a separation of property was
consent of the other. In case of unjustifiable refusal agreed upon in the marriage settlements;
by the other spouse, the courts may grant the or
necessary consent. 2) When there has been a judicial
separation of property under article 191.
Family Code (1458a)
ACOP
Art. 96. The administration and enjoyment of the A sale between husband and wife is inexistent and
community property shall belong to both spouses void from the beginning. They are also prohibited
jointly. In case of disagreement, the husband's from making donations to each other during the
decision shall prevail, subject to recourse to the marriage except moderate gifts on the occasion of any
court by the wife for proper remedy, which must be family rejoicing.
availed of within five years from the date of the
contract implementing such decision. The reason for the law is not based so much on the
union of the personality of the husband and wife nor
In the event that one spouse is incapacitated or on the weakness of the sex and on the possibility that
otherwise unable to participate in the the husband will induce his wife to engage in ruinous
administration of the common properties, the
operations. The prohibition is primarily for the
other spouse may assume sole powers of
administration. These powers do not include protection of third persons who, relying upon
disposition or encumbrance without authority of the supposed property of either spouse, enters into a
court or the written consent of the other spouse. In contract with either of them only to find out that the
the absence of such authority or consent, the property relied upon was transferred to the other
disposition or encumbrance shall be void. spouse.
However, the transaction shall be construed as
a continuing offer on the part of the consenting Sale between couple living as husband and wife - It is
spouse and the third person, and may be contrary to morals and public policy (Calimlim
perfected as a binding contract upon the Canullas v. Fortun)
acceptance by the other spouse or authorization
by the court before the offer is withdrawn by Others relatively incapacitated
either or both offerors. (206a)
Article 1491. The following persons cannot acquire
by purchase, even at a public or judicial auction,
CPOG either in person or through the mediation of
Art. 124. The administration and enjoyment of the another:
conjugal partnership shall belong to both spouses 1) The guardian, the property of the person
jointly. In case of disagreement, the husband's or persons who may be under his
decision shall prevail, subject to recourse to the guardianship;
court by the wife for proper remedy, which must be 2) Agents, the property whose
availed of within five years from the date of the administration or sale may have been
contract implementing such decision. intrusted to them, unless the consent of
the principal has been given;
In the event that one spouse is incapacitated or 3) Executors and administrators, the
otherwise unable to participate in the property of the estate under
administration of the conjugal properties, the administration;
other spouse may assume sole powers of 4) Public officers and employees, the
administration. These powers do not include property of the State or of any
disposition or encumbrance without authority of the subdivision thereof, or of any
court or the written consent of the other spouse. In government-owned or controlled
the absence of such authority or consent, the corporation, or institution, the
disposition or encumbrance shall be void. However, administration of which has been
the transaction shall be construed as a continuing intrusted to them; this provision shall apply
offer on the part of the consenting spouse and to judges and government experts who, in
the third person, and may be perfected as a any manner whatsoever, take part in the sale;
binding contract upon the acceptance by the 5) Justices, judges, prosecuting attorneys,
other spouse or authorization by the court clerks of superior and inferior courts, and
before the offer is withdrawn by either or both other officers and employees connected
offerors. (165a) with the administration of justice, the
property and rights in litigation or levied
Articles Civil Code Family Code upon an execution before the court
CPOG 166, 173 124 within whose jurisdiction or territory
Sales | VENTEROSO
9
they exercise their respective functions; Contingent fee - based on a certain percentage of the
this prohibition includes the act of value of the property or even a part of the property in
acquiring by assignment and shall apply litigation is not violative of Article 1491. The reason is
to lawyers, with respect to the property that the payment, which is contingent or dependent on
and rights which may be the object of victory, is effected only after the favorable decision had
any litigation in which they may take become final and executory. A contingent fee
part by virtue of their profession; arrangement is recognized under Canon 13 of the
6) Any others specially disqualified by law.
Canons of Professional Ethics, as an exception to
(1459a)
Canon 10 thereof which prohibits a lawyer from
VOIDABLE – 1, 2 ,3 purchasing any interest in the subject matter of the
VOID – 4, 5, 6 litigation he is conducting.
Guardians of property of the person or persons Champerty/champertous contracts – an

who may be under his guardianship arrangement wherein the lawyer assumes the litigation
expenses, without providing for reimbursement, in
Sale to a guardian Sale by a guardian in
behalf of his ward exchange for a contingency fee
Voidable Rescissible
The lesion, if there is If the lesion is more Champerty is characterized by “the receipt of a share
any, is immaterial than ¼ of the value of the proceeds of the litigation by the intermeddler.”
Some common law court decisions, however, add a
Agents second factor in determining champertous contracts,
Without consent by the principal – VOIDABLE namely, that the lawyer must also, “at his own expense
With consent by the principal – VALID maintain, and take all the risks of, the litigation. (The
Conjugal Partnership of the Spouses Vicente
XPN: “brokers” do not come within the coverage of Cadavedo v. Lacaya)
the prohibition as their authority consist merely in
looking for a buyer or a seller, and to bring the former Other persons disqualified by law
and the latter together to consummate the transaction; 1) Aliens who are disqualified to purchase private
therefore, they are not prohibited to buy for agricultural lands (Article XII, Sections 3 and
themselves. 7 of the Constitution)
XPN: transfer to Filipinos – defect is
Executors and administrators considered cured
The prohibition on the part of the executors and 2) An unpaid seller having a right of lien or having
administrators is only with reference to properties of stopped the goods in transitu, who is prohibited
the estate of the deceased under administration in the from buying the goods either directly or
probate court. Guardians, administrators and indirectly in the resale of the same at a public
executors are necessarily officers of the courts since or private sale which he may make (Article
they are appointed or confirmed to such position 1533 par.5 and Article 1476 [4]); and
pursuant to judicial proceedings 3) The officer conducting an execution sale of
property to enforce a court judgment rendered
Public officers and employees against the owner thereof cannot become the
The prohibition leveled against public officers and purchaser or be interested directly or indirectly
employees refers only to properties belonging to the in any purchase at such sale.
State or of any subdivision thereof, etc. placed under
their control or administration. The reason for the Object/ subject matter/ determinate thing
prohibition is grounded on public policy. Characteristics of a subject matter of sale
It is existing, future or contingent;
Justices, judges and lawyers Article 1461. Things having a potential existence may
The prohibition in paragraph 5 refers only to the sale be the object of the contract of sale.
or assignment of a property subject of a litigation. The
sale or assignment, to be assailable, must have been The efficacy of the sale of a mere hope or expectancy
is deemed subject to the condition that the thing will
made during the pendency of the litigation.
come into existence.
Judges Lawyers The sale of a vain hope or expectancy is void. (n)
Even if a judge had It is no longer unethical
purchased the property if the lawyer purchases
Article 1462. The goods which form the subject of a
after his decision had the property of a client contract of sale may be either existing goods, owned
already become final and after litigation
or possessed by the seller, or goods to be
executory, it is still manufactured, raised, or acquired by the seller after
unethical
the perfection of the contract of sale, in this Title
called "future goods."
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Sales | VENTEROSO
(7) Those expressly prohibited or declared void by

There may be a contract of sale of goods, whose law.
acquisition by the seller depends upon a contingency
which may or may not happen. (n) These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
Article 1465. Things subject to a resolutory condition
may be the object of the contract of sale. (n) 2 classes of illicit things
1) Illicit Per Se –by its nature it is heinous,
We do not consider the physical existence or non- immoral and wrongful.
existence of the subject matter but rather the type and Ex. house of prostitution.
nature thereof wherein taking into consideration the 2) Illicit Per Accidens – it is illegal only because
state of technology and science at the time the sale is there is a law prohibiting it.
perfected, it exists or could be made to exist to allow Ex. the sale of a parcel of land to a disqualified
the buyer reasonable certainty of being able to compel alien is void because it is prohibited by the
compliance by seller of his real obligation to deliver. Constitution (Article XII, Section 7 of the 1987
Constitution)
Sale of a future thing
 Emptio rei speratae The prohibition to sell illicit things under Article
 Strictly a contract covering future things, and 1459 of the Civil Code refers to both illicit per se and
subject to a suspensive condition that the illicit per accidens.
subject matter will come into existence
 If the subject matter does not come into It is determinate or at least determinable; and
existence, as in the case of conditional Article 1460. A thing is determinate when it is
obligations, the contract is deemed particularly designated or physical segregated from
extinguished as soon as the time expires or if it all others of the same class.
has become indubitable that the event will not
The requisite that a thing be determinate is satisfied
take place
if at the time the contract is entered into, the thing is
capable of being made determinate without the
Sale of a present object necessity of a new or further agreement between the
 Emptio spei parties. (n)
 Sale of hope or expectancy
 The contracting parties intended the contract Article 1409. The following contracts are inexistent
of sale to exist at all events, that is, whether or and void from the beginning:
not the expected thing will come into existence xxx
such that the buyer will have to pay the (6) Those where the intention of the parties relative
purchase price to the principal object of the contract cannot be
 The contract is aleatory in nature. ascertained;
 XPN: VOID
These contracts cannot be ratified. Neither can the
1) Sale of hope or expectancy in vain
right to set up the defense of illegality be waived.
2) The parties intended that if the hope or
expectancy will not materialize
Determinate - when it is particularly designated or
physical segregated from all others of the same class
If there is a doubt whether the sale is emptio rei speratae
or emptio spei, the presumption is in favor of emptio rei
Determinable
speratae because the former is more in keeping with
the commutative character of a contract of sale. 1) If the subject matter agreed upon is capable of
being made determinate (“Capacity to
Resolutory condition Segregate” Test);
An uncertain event upon the happening of which the 2) Without the necessity of a new or future
obligation (or right) subject to it is extinguished agreement between the parties (“No Further
Agreement” Test)
It is licit;
Article 1459. The thing must be licit xxx However, the fact that the quantity is not
determinate shall not be an obstacle to the existence
of the contract, provided it is possible to determine
Article 1409. The following contracts are inexistent
the same, without need of a new contract between
and void from the beginning:
the parties.
(1) Those whose cause, object or purpose is contrary
to law, morals, good customs, public order or public It is owned by the seller at the time of delivery.
policy; Article 1459. xxxthe vendor must have a right to
(4) Those whose object is outside the commerce of transfer the ownership thereof at the time it is
men; delivered. (n)
11
Sales | VENTEROSO
any substance, minds of the parties

Article 1477. The ownership of the thing sold shall because the parties had met, but not
be transferred to the vendee upon the actual or have no intention to declared, and what is
constructive delivery thereof. (n) be bound by it. stated in the
covering deed is not
Article 1409. The following contracts are inexistent the one intended to
and void from the beginning: be paid.
Absolute simulation Relative simulation
(5) Those which contemplate an impossible service; VOID VALID; subject to
Xxx reformation
These contracts cannot be ratified. Neither can the False consideration

right to set up the defense of illegality be waived. Old Civil Code New Civil Code
VOIDABLE; can VALID; subject to
Nemo dat quod non habet be annulled within 4 reformation
You cannot give what you cannot have years from date of
consummation of
The seller must have the right to transfer the ownership contract (Mapalo v.
of the thing or right sold to the buyer at the time of Mapalo)
delivery. Delivery may be actual or constructive. By
implication, at the time of the perfection of the Failure to pay the Lack of
contract, the seller need not be the owner of the thing price consideration
results in a right to prevents the
or right sold. What is important is that at the time of
demand the existence of a valid
delivery, he is already the owner of the thing or right. fulfillment or contract
cancellation of the
Effects if seller is not the owner at the time of delivery obligation
1) he can be made liable for damages for 1) Demand
breach of warranty of the seller’s right to sell or specific
warranty against eviction. performance
2) the seller may be liable for estafa, if he is 2) Rescission of
guilty of deceit in selling a thing which he the contract of
cannot own or which belongs to somebody sale
else. (Article 316, par. 1, Revised Penal Code) VALID VOID ab initio
Cause or consideration or price 2) It must be in MONEY OR ITS

Price - signifies the sum stipulated as the equivalent of EQUIVALENT (i.e., it must be of valuable
the thing sold and every incident taken into consideration); and
consideration for the fixing of the price, put to the Article 1458. By the contract of sale one of
debit of the buyer and agreed to by him the contracting parties obligates himself to
transfer the ownership and to deliver a
determinate thing, and the other to pay
Requisites
therefor a price certain in money or its
1) It must be REAL;
equivalent.
Article 1471. If the price is simulated, the sale
is void, but the act may be shown to have A contract of sale may be absolute or
been in reality a donation, or some other act conditional. (1445a)
or contract. (n)
Article 1468. If the consideration of the
Price is “real” when at the perfection of the contract consists partly in money, and partly
sale: in another thing, the transaction shall be
Buyer - there is legal intention on the part of characterized by the manifest intention of
the buyer to pay the price, the parties. If such intention does not clearly
Seller - and legal expectation on the part of the appear, it shall be considered a barter if the
seller to receive such price as the value of the value of the thing given as a part of the
subject matter he obligates himself to deliver consideration exceeds the amount of the
money or its equivalent; otherwise, it is a
If there is no such legal intention, the price is sale. (1446a)
said to be “simulated”
A contract of sale may still validly exist and
Simulated price v. false price thereby be governed by the Law on Sales, when
Simulated price False price it is supported by other valuable
There is a colorable There is a real price considerations.
contract but without upon which the
12
Sales | VENTEROSO
Money being the highest form or and/or centavos, which affirms the
representation of commercial value in society, proposition that money represents the best
removes any doubt that of what is “valuable model of valuable consideration
consideration” and functions merely as the
model of prestation, cause or consideration Ascertainable - it shall be sufficient that it be
that would promote the onerous nature of the so with reference to another thing certain, or
contract of sale. There is little doubt, that the determination thereof be left to the
therefore, that other forms of cause or judgment of a specified person or persons
consideration which are “valuable” would
support a valid contract of sale. RULES
1) If the prices are mere estimates, the
3) It must be CERTAIN or ASCERTAINABLE. transaction lacks the requisites
Article 1469. In order that the price may be essential for the perfection of the
considered certain, it shall be sufficient that contract
it be so with reference to another thing 2) The designation of a third party to fix
certain, or that the determination thereof be the price is valid, and such designation
left to the judgment of a special person or by itself makes the price ascertainable
persons. as to give rise to a valid contract of sale.
3) the fixing of the price cannot be validly left
Should such person or persons be unable or
to the discretion of one of the contracting
unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently parties for to consider a contract of sale
agree upon the price. already existing when the price has yet to
be fixed by one of the parties would render
If the third person or persons acted in bad the contract to be without the
faith or by mistake, the courts may fix the characteristics of mutuality and
price. obligatory force
XPN: When accepted by the other party
Where such third person or persons are
prevented from fixing the price or terms by Appropriation doctrine
fault of the seller or the buyer, the party not Tolentino explains the same by saying that if the terms
in fault may have such remedies against the of a sale are complete except for an agreement with
party in fault as are allowed the seller or the
reference to the price, the law implies a price equivalent
buyer, as the case may be. (1447a)
to the reasonable value of the goods in cases where the
buyer has appropriated the things sold. And where the
Article 1472. The price of securities, grain,
buyer accepts delivery knowing the price claimed by
liquids, and other things shall also be
considered certain, when the price fixed is the seller, he cannot thereafter refuse to pay for it at
that which the thing sold would have on that price, even if there is no agreement as to price. The
a definite day, or in a particular exchange appropriation doctrine is based on the principle of
or market, or when an amount is fixed unjust enrichment directed against the buyer who is not
above or below the price on such day, or allowed to retain the subject matter of the sale without
in such exchange or market, provided being liable to pay the price.
said amount be certain. (1448)
Terms or manner of payment of the price
Article 1473. The fixing of the price can An agreement on the manner of payment goes into the
never be left to the discretion of one of price so much so that a disagreement on the manner of
the contracting parties. However, if the payment is tantamount to a failure to agree on the
price fixed by one of the parties is accepted price, and no contract of sale is deemed to have been
by the other, the sale is perfected. (1449a) perfected
Article 1474. Where the price cannot be Even from an economist’s point of view, the manner
determined in accordance with the
and terms of payment of the price is an integral part of
preceding articles, or in any other manner,
the contract is inefficacious. However, if the the concept of “price” because of the time value of
thing or any part thereof has been delivered money. A seller may be willing to accept a comparative
to and appropriated by the buyer he must lower price for the object of the sale if it is payable
pay a reasonable price therefor. What is a within a short period of time as to allow him to make
reasonable price is a question of fact investments or apply the proceeds to earn more profits;
dependent on the circumstances of each and yet would be demanding a higher price if the
particular case. (n) purchase price were to be paid over a long stretch of
time.
Certain – price is certain when it has been
expressed and agreed in terms of specific pesos
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Sales | VENTEROSO
The agreement on the terms and manner of payment matter or object of the contract pursuant to
becomes more relevant when the payment is not made Article 1381 of the Civil Code –
in lump sum and outright. That is, if the parties are to RESCISSIBLE
have a mode of payment of the price other than
immediate payment. In such case, there could not be a Simulated price Gross inadequacy
final meeting of the minds as to the price because both The parties do not There is insufficiency in
parties knew and expected that certain negotiations still intend to be bound by a the price.
had to be made with respect to the manner of payment contract.
of the price There is no real GR: It will not by itself
agreement between the invalidate a contract
Article 1179. Every obligation whose performance parties. The contract is
does not depend upon a future or uncertain void XPN:
event, or upon a past event unknown to the 1) there be a defect in
parties, is demandable at once. consent or it be
proven that the
Every obligation which contains a resolutory intention is a
condition shall also be demandable, without donation or some
prejudice to the effects of the happening of the other contract
event. (1113) 2) judicial sale - the
contract of sale is not
the result of
In a contract to sell property by installments, it is
negotiations and
not enough that the parties agree on the price as well bargaining; in fact,
as the amount of downpayment. The parties must, the property of the
likewise, agree on the manner of payment of the supposed seller
balance of the purchase price and on the other terms would be sold at
and conditions relative to the sale. Even if the buyer public auction
makes a downpayment or portion thereof, such without his
payment cannot be considered as sufficient proof of intervention.
the perfection of any purchase and sale between the However, for a
parties. (Bank of Commerce v. Manalo) judicial sale to be set
aside on the ground
Inadequacy of price of inadequacy of the
price, the inadequacy
Article 1355. Except in cases specified by law, lesion
must be such as to be
or inadequacy of cause shall not invalidate a
shocking to the
contract, unless there has been fraud, mistake or
conscience of man.
undue influence. (n)
XPN of XPN: when
there is a right of
Article 1470. Gross inadequacy of price does not redemption - the
affect a contract of sale, except as it may indicate more inadequate the
a defect in the consent, or that the parties really winning bid at public
intended a donation or some other act or sale, the more easily
contract. (n) it is for the owner to
redeem the property
Article 1471. If the price is simulated, the sale is
void, but the act may be shown to have been in Natural and accidental elements
reality a donation, or some other act or contract. (n) 1) Natural elements – deemed to exist in certain
contracts, in the absence of any contrary
Gross inadequacy - There is “gross inadequacy” in stipulation
price if a reasonable man will not agree to dispose of o Warranty against eviction
his property at that amount. o Warranty against hidden effects
2) Accidental elements – may be present or
In determining the adequacy or inadequacy of the absent depending on the stipulations of the
price, the price obtaining at the time of the execution parties
of the contract shall be considered, and not the price o Conditions, penalties, interest
obtaining thereafter.
Two kinds of contract of sale
1) A sale TO a guardian involving a property of 1) Absolute – Sale is not subject to any condition
the person or persons who may be under his whatsoever and where the title or ownership
guardianship – VOIDABLE passes to the buyer upon delivery of the thing
2) a sale made BY a guardian on behalf of his sold
ward if the ward suffers a lesion by more than 2) Conditional – the sale contemplates a
one-fourth (1/4) of the value of the subject contingency and where the contract is subject
14
Sales | VENTEROSO
to certain conditions (usually the full payment estate. (Buenaventura

of the purchase price) v. CA)
Future things and goods As a rule, future property
Sales as distinguished from other contracts may be the object of the cannot be subject of
Sales v. Barter contract donation
Article 1638. By the contract of barter or exchange
one of the parties binds himself to give one thing in Donations cannot
consideration of the other's promise to give another comprehend future
thing. (1538a) property.
By future property is
Article 1468
understood anything
If the consideration of the contract consists partly in
which the donor cannot
money, and partly in another thing, the transaction
dispose of at the time of
shall be characterized by the manifest intention of
the donation. (Art 751)
the parties. If such intention does not clearly appear,
Imposed upon with Imposed upon with
it shall be considered a barter if the value of the thing
income tax, VAT or donor’s tax
given as a part of the consideration exceeds the
percentage tax, as the
amount of the money or its equivalent; otherwise, it
case may be
is a sale. (1446a)
Gross inadequacy of the price will affect the validity of
Sale Barter/exchange
a contract of sale if the real contract intended is one of
The main distinguishing element is the
consideration. donation
Vendor gives a thing in Vendor gives a thing in
consideration for a price consideration for Sales v. Contract for a piece of work
in money another thing Article 1467
The price is certain in No such element A contract for the delivery at a certain price of an
money or its equivalent article which the vendor in the ordinary course of his
Statute of frauds applies Does not apply business manufactures or procures for the general
to the sale of real market, whether the same is on hand at the time or
property and personal not, is a contract of sale, but if the goods are to be
property bought at manufactured specially for the customer and upon
500.00 or more his special order, and not for the general market, it
The right of legal Does not exist is a contract for a piece of work. (n)
redemption granted by
law to an adjoining Article 1713. By the contract for a piece of work the
owner of an urban land contractor binds himself to execute a piece of work
exists in a resale of for the employer, in consideration of a certain price
property or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
Sales v. donation (1588a)
Article 725. Donation is an act of liberality whereby
a person disposes gratuitously of a thing or right in New York rule
favor of another, who accepts it. (618a) If the article already exists, the contract is a sale
Sale Donation English rule

The main distinguishing element is the consideration If the material is more valuable than the work, the
Onerous contract Gratuitous contract contract is a sale. If it is the work or skill which is more
Consensual contract Formal/solemn contract valuable, it is a contract for a piece of work.
There is no diminution Diminishes the value of
of the estate but merely the estate Sale Piece of work
substitution of values, The thing transferred is The thing transferred is
that is, the property sold In their overzealousness one which would have one not in existence and
is replaced by the to safeguard their future existed and been the which never would have
equivalent monetary legitime, petitioners subject of sale to some existed but for the order
consideration forget that theoretically, other person, even if theof the party desiring to
the sale of the lots to order had not been given acquire it
their siblings does not The risk of loss is borneThe risk of loss before
affect the value of their by the buyer delivery is borne by the
parents estate. While the worker or contractor
sale of the lots reduced Within Statute of Frauds Not within Statute of
the estate, cash of Frauds
equivalent value replaced Imposed upon with sales Imposed upon with
the lots taken from the tax contractor’s tax
15
Sales | VENTEROSO
Action for specific Action for specific The seller profits from The agent is disqualified
performance is available performance is not the transaction from receiving any
because it involves an available because it personal profit from the
obligation to give involves an obligation to transaction covered by
do. To allow the same the agency and any
amounts to involuntary profit pertains to the
servitude. principal
Tests for determination Sales v. payment by cession

1) Test of special orders – When a factory Article 1255. The debtor may cede or assign his
requires the use of extraordinary or additional property to his creditors in payment of his debts.
equipment, or involves services not generally This cession, unless there is stipulation to the
performed by it – it thereby contracts for a contrary, shall only release the debtor from
piece of work – filing special orders within the responsibility for the net proceeds of the thing
meaning of Article 1467. (Celestino Co. v. assigned. The agreements which, on the effect of the
Collector) cession, are made between the debtor and his
creditors shall be governed by special laws. (1175a)
2) Consensuality test – The distinction between
the two contracts depends on the intention of
Sales Payment by cession
the parties (Engineering Machinery v. CA)
A title which allows a A mode of payment
party to demand
Sales v. agency to sell performance of an
Article 1868. By the contract of agency a person obligation
binds himself to render some service or to do
something in representation or on behalf of another, Sales v. dacion en pago
with the consent or authority of the latter. (1709a)
Article 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in
Article 1466 money, shall be governed by the law of sales. (n)
In construing a contract containing provisions
characteristic of both the contract of sale and of the Dacion en pago – constitutes the delivery and
contract of agency to sell, the essential clauses of
transmission of a thing by the debtor to the creditor as
the whole instrument shall be considered. (n)
an accepted equivalent of the performance of the
obligation. By express provision of law, dation in
Sale Agency to sell
Buyer receives the Ownership is not payment is governed by the Law on Sales since it
goods as owner transferred essentially involves the transfer of ownership of a
Buyer has to pay the Agent simply has to subject matter. It is legally considered as a sale.
price of the thing account for the
proceeds of the sale he Sales Dacion en pago
may make on the A title which allows a A mode of payment
principal’s behalf party to demand
Buyer, as a general rule, Agent can return the performance of an
cannot return the object object in case he is obligation
sold unable to sell the same No pre-existing credit With pre-existing credit
to a third person Gives rise to obligation Extinguishes obligation
Seller warrants the thing Agent makes no Price from the Extinguishes debt from
sold warranty for which he viewpoint of the seller; the viewpoint of the
assumes personal object from the debtor; acquisition of
liability as long as he viewpoint of the buyer the object from the
acts within the authority viewpoint of the
and in the name of the creditor
seller
Buyer can deal with the Agent in dealing with Cession Dation in payment
thing sold as he pleases, the thing received must In both, there is delivery of the thing in satisfaction
being the owner act and is bound of a debt.
according to the There are several There is only one
instructions of his creditors creditor
principal Debtor is insolvent at Does not presuppose
There is generally no The parties may agree the time of assignment the insolvency of the
commission between on commissions debtor or a situation of
the buyer and the seller financial difficulties
By its very nature, a sale Because it covers an No extinguishment of There is extinguishment
is not unilaterally underlying fiduciary obligation as a general of an obligation
revocable relationship, it is rule
essentially revocable
16
Sales | VENTEROSO
Involves the Does not involve all the Contract to sell - defined as a bilateral contract
universality of the properties of the debtor whereby the prospective seller, while expressly
properties of the reserving the ownership of the subject property despite
debtor, applied to delivery thereof to the prospective buyer, binds himself
creditors to sell the said property exclusively to the prospective
proportionately based buyer upon fulfillment of the condition agreed upon,
on their credit that is, full payment of the purchase price.
The creditors acquire The creditor becomes
only the right to sell the owner of the thing
the thing and apply the given by the debtor The determination of whether a contract is a contract
proceeds to their credits to sell, lies in locating the existence of two (2) clauses:
pro-rata and possession 1) Reservation of the ownership of the subject
of the thing matter with the seller, even if there should
be delivery thereof to the buyer; and
Sales v. lease 2) Reservation of the right of the seller to
ARTICLE 1642. The contract of lease may be of rescind the contract extra-judicially in the
things, or of work and service. (1542) event the suspensive condition (usually the
full payment of the purchase price) does
ARTICLE 1643. In the lease of things, one of the not happen.
parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and While the subsequent execution of the Deed of
for a period which may be definite or indefinite. Absolute Sale after full payment of purchase price is
However, no lease for more than ninety-nine years highly indicative that a contract is a contract to sell,
shall be valid. (1543a) the same is not in itself conclusive. It is only when
the subsequent execution of the Deed of Absolute
ARTICLE 1644. In the lease of work or service, one Sale is actually the consequence of the
of the parties binds himself to execute a piece of reservation by the seller of ownership prior to full
work or to render to the other some service for a payment of the purchase price that it results to the
price certain, but the relation of principal and agent inference that the one involved is a contract to sell
does not exist between them. (1544a)
Sale Contract to sell
Sale Lease Title over the property Ownership is retained by
Transfer of possession Transfer of possession passes to the buyer upon the seller whether or not
or delivery to vendee or delivery to the lessee delivery unless there is a there is delivery.
vests ownership to him does not vest ownership contrary agreement Ownership passes to
in the latter buyer only upon full
payment of price.
Sales v. contract to sell Non-payment of the The payment in full is a
Article 1479. A promise to buy and sell a determinate purchase price is a positive suspensive
thing for a price certain is reciprocally demandable. negative resolutory condition. If the price is
condition. The sale not paid, the obligation
An accepted unilateral promise to buy or to sell a becomes ineffective to deliver and to transfer
determinate thing for a price certain is binding upon upon the happening of ownership on the part of
the promisor if the promise is supported by a such condition. Seller the seller does not
consideration distinct from the price. (1451a) may rescind the contract become effective
or exact fulfillment
Article 1191. The power to rescind obligations is After delivery of the Whether there is delivery
implied in reciprocal ones, in case one of the object, the seller losesor not, the seller retains
obligors should not comply with what is incumbent ownership over it.
the ownership of the
upon him. Unless the contract is set
object. If the seller, due
aside, he cannot recoverto the non-payment of
The injured party may choose between the the object. the price is ousting the
fulfillment and the rescission of the obligation, with buyer from the property,
the payment of damages in either case. He may also he is not rescinding the
seek rescission, even after he has chosen fulfillment, contract of sale but is
if the latter should become impossible. precisely enforcing it.
Rescission can be The doctrine of
The court shall decree the rescission claimed, unless availed of only in case substantial breach has
there be just cause authorizing the fixing of a period. there has been no application, since
substantial breach. the non-happening of
This is understood to be without prejudice to the the condition by
rights of third persons who have acquired the thing, whatever means or
in accordance with articles 1385 and 1388 and the reason, substantial or
Mortgage Law. (1124) not, ipso jure
extinguishes the contract
17
Sales | VENTEROSO
Since delivery transfers The rescission can be 4) The nomenclature of the subject contract is not
ownership to the buyer, made extrajudicially. controlling, considering that the Court looks
rescission mustNo court intervention is beyond the title of said document, since the
necessarily be done needed to rescind. denomination or title given by the parties in
judicially since only the Should court their contract is not conclusive of the nature of
courts can grant the intervention is necessary, its contents. (Agustin v. de Vera)
remedy of recalling it is not for the rescission
ownership that has of the contract but for
passed to the buyer and the recovery of the Contract to sell Conditional contract
reverting it to the sellerpossession from the of sale
buyer who is not entitled The consent is lacking; The consent is present,
thereto, and refuses to the seller does not although it is
voluntarily return the consent to the sale but conditioned upon the
subject matter of the sale only promises to sell happening of a
The giving of the earnest The giving of the earnest once the condition is contingent event which
money is the proof of money will not change met may or may not happen
perfection of the the nature of the Upon the fulfillment of If the suspensive
contract contract entered the suspensive condition condition is not fulfilled,
(Serrano v. Caguiat) which is the full payment the perfection of the
of the purchase price, contract of sale is
ownership will not completely abated.
Distinguishing acts
automatically transfer to However, if the
1) Still controlling are the buyer although the suspensive condition is
 the lack of any stipulation in the sale property may have been fulfilled, the contract of
contract reserving the title of the property previously delivered to sale is thereby perfected,
on the vendors and him. The prospective such that if there had
 the lack of any stipulation giving the seller still has to already been previous
sellers the right to unilaterally rescind the convey title to the delivery of the property
contract upon non-payment of the prospective buyer by subject of the sale to the
balance thereof within a fixed period. The entering into a buyer, ownership thereto
absence of such stipulations in a sale contract of absolute automatically transfers
contract makes the said contract a sale. to the buyer by operation
of law without any
contract of sale. Hence, the Contract to
further act having to be
Purchase and Sale entered into by
performed by the seller.
Gregorio and Hipolito is a contract of
sale. (Agustin v. de Vera)
Article 1459
2) This stipulation, i.e., to execute a deed of The thing must be licit and the vendor must have a
absolute sale upon full payment of the right to transfer the ownership thereof at the time it
purchase price, is a unique and distinguishing is delivered. (n)
characteristic of a contract to sell. (Diego v.
Diego) Object of sales
 While a stipulation or promise to the Article 1347. All things which are not outside the
effect that a seller shall execute a deed commerce of men, including future things, may
of sale upon the completion of be the object of a contract. All rights which are not
payment of the purchase price by the intransmissible may also be the object of contracts.
buyer may be considered a factor or a
sign that a contract might possibly be a No contract may be entered into upon future
contract to sell, such stipulation in inheritance except in cases expressly authorized by
law.
itself, taken in isolation, is by no means
determinative and conclusive as to the
All services which are not contrary to law, morals,
contract being a contract to sell. good customs, public order or public policy may
(Agustin v. de Vera) likewise be the object of a contract. (1271a)
3) Contemporaneous acts of the parties show that
they agreed on a contract to sell, not of sale or Article 1348. Impossible things or services cannot
that the parties never intended to transfer be the object of contracts. (1272)
ownership except upon full payment of the
purchase price. (SLDC v. CA) (Diego v. Article 1349. The object of every contract must be
Diego) determinate as to its kind. The fact that the quantity
 Non- execution of the deed of absolute is not determinate shall not be an obstacle to the
sale even upon partial payment existence of the contract, provided it is possible to
 The title of possession is not delivered or determine the same, without the need of a new
surrendered contract between the parties. (1273)
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Sales | VENTEROSO
1) Things  If the object is VERY GENERIC, it

o Must be licit or lawful (Art 1347) cannot be an object (Galas)
1) Illicit per se (of its nature)
2) Illicit per accidens (because some Article 1461
provisions of the law declare it Things having a potential existence may be the
illegal) object of the contract of sale.
XPN: THINGS OUTSIDE The efficacy of the sale of a mere hope or expectancy
COMMERCE OF MAN - res nullus is deemed subject to the condition that the thing will
(nobody owns), res communes (common come into existence.
to all)
The sale of a vain hope or expectancy is void. (n)
THOSE CONTRARY TO LAW,
MORALS, GOOD CUSTOMS,
Sale of things having potential existence
PUBLIC ORDER AND PUBLIC
 Considered as future things (Art 1347)
o Must not be impossible (Art 1348)
1) Must be specific and identified
o Must be determinate (Art 1349)
2) Must be owned by the vendor at the time
2) Rights
Sale of hope or expectancy
o Must not be intransmissible (Art 1347)
GR: Sale of hope or expectancy can be the object of
o Must not be personal
sale
XPN: Sale of vain hope
Contract of sale Contracts in general
Services may not be an Services may be an
Article 1462
object object
The goods which form the subject of a contract of
sale may be either existing goods, owned or
Right of the vendor to transfer ownership possessed by the seller, or goods to be
GR: One can only sell what one owns (nemo dat quod manufactured, raised, or acquired by the seller after
non habet) the perfection of the contract of sale, in this Title
XPN: It is sufficient that he has the right to sell the called "future goods."
thing at the time it is delivered or at the time when
the ownership is to pass There may be a contract of sale of goods, whose
1) Future things/goods acquisition by the seller depends upon a contingency
2) Goods whose acquisition by the seller depends which may or may not happen. (n)
upon a contingency
Goods subject to a contract of sale
Article 1460 1) existing goods owned or possessed by the seller
A thing is determinate when it is particularly 2) goods to be manufactured, raised, or
designated or physical segregated from all others of acquired by the seller after the perfection of
the same class. the contract of sale (future goods)
 valid only as an executory contract to be
The requisite that a thing be determinate is satisfied fulfilled by the acquisition and delivery of the
if at the time the contract is entered into, the thing is goods specified
capable of being made determinate without the  XPN: contracts of piece of work
necessity of a new or further agreement between the
Article 1467. A contract for the delivery at a
parties. (n)
certain price of an article which the
vendor in the ordinary course of his
Determinate thing business manufactures or procures for the
1) particularly designated or general market, whether the same is on hand
2) physical segregated from all others of the same at the time or not, is a contract of sale, but
class if the goods are to be manufactured
specially for the customer and upon his
GR: The object of the sale must be determinate at the special order, and not for the general
time of the sale market, it is a contract for a piece of work.
XPN: Sufficient if the subject matter is capable of (n)
being determinable (capable of being made
determinate without the necessity of a new or further Article 1463
agreement between the parties), provided it becomes The sole owner of a thing may sell an undivided
determinate at the time of delivery interest therein. (n)
 when a generic thing belongs to a class,
then the class itself is LIMITED Sale of undivided interest
GENERIC and thus can be an object of 1) Goods (Art 1464)
a contract (Galas) 2) Things (Art 1463)
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Sales | VENTEROSO
the mass is specific or capable of being

Sale of undivided interest of a sole owner made determinate
May sell: 2) The buyer becomes a co-owner
1) The entire thing 3) If the mass contains less than the number,
2) A specific portion weight or measure bought, the buyer
3) An undivided interest – aliquot part of the becomes the owner of the whole mass and the
whole seller is bound to make good the deficiency
 Legal effect: to make the buyer a co-  Applies only if the sale purports to a
owner of the thing sold definite number, weight or measure of
 The co-owner can dispose of his the goods in the mass
undivided share even without the 4) The whole mass is at risk of all the parties
consent of other co-owners (Art 493) interested in it, in proportion to their various
Article 493. Each co-owner shall holdings
have the full ownership of his part 5) The subject matter of the sale is intangible or
and of the fruits and benefits incorporeal
pertaining thereto, and he may
therefore alienate, assign or Article 1465
mortgage it, and even substitute Things subject to a resolutory condition may be the
another person in its enjoyment, object of the contract of sale. (n)
except when personal rights are
involved. But the effect of the Sale of thing subject to a resolutory condition
alienation or the mortgage, with
Resolutory condition – an uncertain event upon the
respect to the co-owners, shall be
happening of which the obligation or right subject to it
limited to the portion which may be
allotted to him in the division upon is extinguished
the termination of the co-ownership.
(399) Article 1466
In construing a contract containing provisions
Article 1464 characteristic of both the contract of sale and of the
In the case of fungible goods, there may be a sale of contract of agency to sell, the essential clauses of the
an undivided share of a specific mass, though the whole instrument shall be considered. (n)
seller purports to sell and the buyer to buy a definite
number, weight or measure of the goods in the mass, Principles
and though the number, weight or measure of the 1) A contract is what the law defines it to be, and
goods in the mass, and though the number, weight not what it is called by the contracting parties
or measure of the goods in the mass is 2) The law should be interpreted as a whole (ut
undetermined. By such a sale the buyer becomes magis valeat quam pereat)
owner in common of such a share of the mass as the 3) To classify a contract, due regard must be given
number, weight or measure bought bears to the to its essential clauses
number, weight or measure of the mass. If the mass
contains less than the number, weight or measure
bought, the buyer becomes the owner of the whole
Article 1467
mass and the seller is bound to make good the
A contract for the delivery at a certain price of an
deficiency from goods of the same kind and quality,
article which the vendor in the ordinary course of his
unless a contrary intent appears. (n)
business manufactures or procures for the general
market, whether the same is on hand at the time or
Sale of an undivided share of a specific mass not, is a contract of sale, but if the goods are to be
Fungible goods – goods of which any unit is, from its manufactured specially for the customer and upon
nature or by mercantile usage, treated as the equivalent his special order, and not for the general market, it
of any other unit is a contract for a piece of work. (n)
Application Contract of piece of work –

1) Applies when to fungible goods or goods Article 1713. By the contract for a piece of work the
incapable of being segregated contractor binds himself to execute a piece of work
2) The whole mass must be specific or for the employer, in consideration of a certain price
determinate or compensation. The contractor may either employ
3) Applies whether the sale purports to a definite only his labor or skill, or also furnish the material.
number, weight or measure of the goods in the (1588a)
mass or not
Article 1468
Effect of the sale If the consideration of the contract consists partly in
1) The owner of the mass of goods may sell only money, and partly in another thing, the transaction
the undivided portion thereof, provided that shall be characterized by the manifest intention of
the parties. If such intention does not clearly appear,
20
Sales | VENTEROSO
it shall be considered a barter if the value of the thing the party in fault as are allowed the seller or
given as a part of the consideration exceeds the the buyer
amount of the money or its equivalent; otherwise, it
is a sale. (1446a) Price
 must be certain or ascertainable
Rules to distinguish 1) The parties have fixed or agreed upon a
1) Manifest intentions of the parties – taking definite amount
into account the contemporaneous and  money – currency
subsequent acts of the parties  equivalent of money – promissory
2) When intentions of the parties are not notes, checks, and other mercantile
manifest instruments
 Value of thing > Value of money = 2) In reference with a thing certain (Art 1472)
BARTER  may be determined by the parties themselves
 Value of thing < Value of money = or third persons
SALE
 Value of thing = Value of money – SALE Effects when price is determined by third persons
(greatest reciprocity of interest) 1) unable or unwilling to fix – the contract
 If the intentions of the parties are manifest, the shall be INEFFICACIOUS (as if no price has
value of the thing nor the money will not been fixed)
matter as it is the intentions of the parties that XPN: the parties subsequently agree upon the
will be controlling price
 Mere error in judgment cannot serve as a basis
Article 1469 for disregarding the price fixed
In order that the price may be considered certain, it 2) acted in bad faith or by mistake – the courts
shall be sufficient that it be so with reference to may fix the price
another thing certain, or that the determination 3) prevented from fixing the price or terms by
thereof be left to the judgment of a special person or
fault of the seller or the buyer - party not in
persons.
fault may have such remedies against the party
Should such person or persons be unable or in fault as are allowed the seller or the buyer
unwilling to fix it, the contract shall be inefficacious, Remedies
unless the parties subsequently agree upon the price.  fulfillment with damages – courts shall
fix the price
If the third person or persons acted in bad faith or  rescission with damages
by mistake, the courts may fix the price.
Article 1191 (2). The injured party
Where such third person or persons are prevented may choose between the fulfillment
from fixing the price or terms by fault of the seller and the rescission of the obligation,
or the buyer, the party not in fault may have such with the payment of damages in
remedies against the party in fault as are allowed the either case. He may also seek
seller or the buyer, as the case may be. (1447a) rescission, even after he has chosen
fulfillment, if the latter should
Codal Dissection become impossible.
1st par – WHEN PRICE IS CONSIDERED Article 1470

CERTAIN Gross inadequacy of price does not affect a contract
1) The parties have fixed or agreed upon a of sale, except as it may indicate a defect in the
definite amount consent, or that the parties really intended a
2) Certain with reference to another thing donation or some other act or contract. (n)
3) Determination thereof is left to the
judgment of a special person or persons Effect of gross inadequacy of price
 Gross inadequacy of price does not affect a
2nd, 3rd, 4th par – EFFECTS WHEN PRICE IS
contract of sale, but may indicate a vitiated
DETERMINED BY THIRD PERSONS
1) unable or unwilling to fix – the contract consent. With this, the contract of sale is
shall be INEFFICACIOUS not void for the inadequacy (gross or
XPN: the parties subsequently agree upon otherwise) of the price but because of the
the price DEFECT IN CONSENT
2) acted in bad faith or by mistake – the
courts may fix the price VOLUNTARY SALES
3) prevented from fixing the price or terms GR: Mere inadequacy of price or the fact that the
by fault of the seller or the buyer - party bargain was a hard one generally does not affect its
not in fault may have such remedies against validity
21
Sales | VENTEROSO
XPN: The inadequacy of price may indicate vitiated 3) when an amount is fixed above or below the
consent (VOIDABLE) price on such day, or in such exchange or
 One of the badges of fraud is the gross market
inadequacy of the price
Effect when the price cannot be determined
INVOLUNTARY OR EXECUTION SALES The sale becomes INEFFICACIOUS (Art 1471)
GR: Mere inadequacy of price is not a sufficient
ground for the cancellation of an execution sale Article 1473
XPN: The fixing of the price can never be left to the
1) Judicial sales - When the price is so inadequate discretion of one of the contracting parties.
as to shock the conscience of the Court, a However, if the price fixed by one of the parties is
judicial sale will be SET ASIDE accepted by the other, the sale is perfected. (1449a)
SALES WITH RIGHT TO REPURCHASE Fixing of price

The validity of the sale is not necessarily affected where GR: fixing of the price can never be left to the
the law gives to the owner the right to redeem discretion of one of the contracting parties
Mutuality of contracts
WHEN THE SALE IS REALLY INTENDED Article 1308. The contract must bind both
AS A DONATION OR OTHER CONTRACT contracting parties; its validity or compliance
cannot be left to the will of one of them.
 When the sale is really intended as a donation
(1256a)
or other contract, the contract of sale is
relatively simulated – VOID AS A SALE,
XPN: The price fixed by one of the parties is accepted
BUT VALID AS A DONATION OR by the other, the sale is perfected. There is now true
OTHER ACT WHEN REFORMED (Art meeting of the minds
1471)
 When the price is absolutely simulated - VOID
Article 1474
Where the price cannot be determined in accordance
Article 1471 with the preceding articles, or in any other manner,
If the price is simulated, the sale is void, but the act the contract is inefficacious. However, if the thing or
may be shown to have been in reality a donation, or any part thereof has been delivered to and
some other act or contract. (n) appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a
1) The price is simulated or false, such as when question of fact dependent on the circumstances of
the vendor really intended to transfer the thing each particular case. (n)
gratuitously – VOID AS A SALE, VALID AS
A DONATION Codal Dissection
2) The contract is not shown to be donation or
any other act or contract transferring Part 1 – EFFECT WHEN PRICE CANNOT
ownership because the parties do not intend to BE DETERMINED
be bound at all – VOID AND The contract is INEFFICACIOUS
INEXISTENT
Part 2 – EFFECT PARTLY EXECUTED
SALES
Article 1472
The buyer must pay a reasonable price
The price of securities, grain, liquids, and other
 Despite the contract being inefficacious
things shall also be considered certain, when the
price fixed is that which the thing sold would have
Part 3 – WHAT IS A REASONABLE PRICE?
on a definite day, or in a particular exchange or
A question of fact dependent on the circumstances
market, or when an amount is fixed above or below
of each particular case
the price on such day, or in such exchange or market,
provided said amount be certain. (1448)
When the contract of sale is inefficacious
In reference with a thing certain 1) The third person is unwilling or unable to fix
the price (Art 1469)
 Applicable to price of fungible things such
2) The price cannot be determined under Art
as securities, grain, liquids, and other
1472 or in any other matter
things, the prices of which are subject to
fluctuations in the market
GR: When a contract is inefficacious, it is as if there is
1) price fixed is that which the thing sold would
no price agreed and the vendee is not in under any
have on a definite day
obligation to pay and vendor to deliver the thing
2) price fixed is that in a particular exchange or
XPN: When the contract, even though inefficacious,
market
was already partly executed, the buyer must pay a
reasonable price.
22
Sales | VENTEROSO
induce any person to bid at such sale on

Article 1475 behalf of the seller or knowingly to take any
The contract of sale is perfected at the moment there bid from the seller or any person employed
is a meeting of minds upon the thing which is the by him. Any sale contravening this rule may
object of the contract and upon the price. be treated as fraudulent by the buyer. (n)
From that moment, the parties may reciprocally Codal Dissection

demand performance, subject to the provisions of
the law governing the form of contracts. (1450a) Par 1 – SALE IN AUCTION BY LOTS
Each lot is the subject of a separate contract of sale
Perfection of a contract of sale
The contract of sale being consensual, it is perfected Par 2 – PERFECTION
without the necessity of any other circumstances. Upon announcement by the fall of the hammer or in
other customary manner
Transfer of ownership GR: Until such announcement is made, any bidder
While the perfection of the contract of sale happens at may retract his bid; and the auctioneer may withdraw
the goods from the sale
the exact time that there is meeting of the minds upon
XPN: Auction has been announced to be without
the object and the price, the ownership is not reserve
transferred until the thing has been delivered.
Par 3 – RIGHT TO BID
Right of owner GR: A right to bid may be reserved expressly by or
1) The owner has the right to quote his own price, on behalf of the seller
reasonable or unreasonable XPN: Unless otherwise provided by law or by
2) The owner may even impose a condition hard stipulation.
to fulfill and name a price quite out of
proportion Par 4 – EFFECTS IF NO NOTICE ON THE
3) He may quote a small or nominal consideration RIGHT TO BID BY THE SELLER
1) it shall not be lawful for the seller to bid
himself
Effect of failure to pay price/absence of price
2) it shall not be lawful for the seller to employ
1) If price is stipulated – non-payment does not
or induce any person to bid at such sale on
convert the contract into one without a his behalf or for the auctioneer
consideration. Payment at the time of the 3) it shall not be lawful to employ or induce any
establishment of the contract is not an essential person to bid at such sale on behalf of the
element for the existence of the contract of seller or knowingly to take any bid from the
sale. seller or any person employed by him.
2) If price is not stipulated – where the purchase
price which appears to be paid has in fact never
been paid by the buyer, the sale is void
(ABSENCE OF CONSIDERATION) Rules regarding sale by auction
 Each lot is the subject of a separate contract of
Article 1476 sale though the parties may subsequently
In the case of a sale by auction: consolidate all the purchases into one
transaction
1) Where goods are put up for sale by auction  In making the bids, the seller is merely making
in lots, each lot is the subject of a separate an invitation to those present to make offers.
contract of sale. The sale by auction is perfected upon
2) A sale by auction is perfected when the announcement by
auctioneer announces its perfection by the
 the fall of the hammer or
fall of the hammer, or in other customary
manner. Until such announcement is made,  in other customary manner
any bidder may retract his bid; and the
auctioneer may withdraw the goods from the  Before the perfection, any bidder may retract
sale unless the auction has been announced his bid; and the auctioneer may withdraw the
to be without reserve. goods from the sale unless the auction has been
3) A right to bid may be reserved expressly by announced to be without reserve
or on behalf of the seller, unless otherwise  When the auction is without reserve,
provided by law or by stipulation. the auctioneer cannot withdraw the
4) Where notice has not been given that a sale goods from sales once a bid has been
by auction is subject to a right to bid on made and the highest bidder has a right
behalf of the seller, it shall not be lawful for to enforce his bid
the seller to bid himself or to employ or
induce any person to bid at such sale on his
behalf or for the auctioneer, to employ or
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Sales | VENTEROSO
 The seller has the right to bid and he may do

so by reservation made expressly or in his
behalf unless otherwise provided by
 Law
 Stipulation
 Requisites for the right to bid by the seller
 Such right was reserved
 Notice was given that the sale is subject
to a right to bid on behalf of the seller
 The right to bid by the seller is not
prohibited by law or stipulation
 Effects when there is no notice of the right to
bid by the seller
 it shall not be lawful for the seller to bid
himself
 it shall not be lawful for the seller to
employ or induce any person to bid at
such sale on his behalf or for the
auctioneer
 it shall not be lawful to employ or
induce any person to bid at such sale
on behalf of the seller or knowingly to
take any bid from the seller or any
person employed by him.
 The purpose of the notice is to prevent
puffing or secret bidding by or on behalf of
the seller by people who are not themselves
bound
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Sales | VENTEROSO
SECOND EXAM TOPICS Article 1322. An offer made through an agent is

accepted from the time acceptance is
Article 1477 communicated to him. (n)
The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive Article 1323. An offer becomes ineffective upon the
delivery thereof. (n) death, civil interdiction, insanity, or insolvency
of either party before acceptance is conveyed. (n)
Article 1478
The parties may stipulate that ownership in the thing Prior to its acceptance,
shall not pass to the purchaser until he has fully paid 1) Offeror - It may be withdrawn or destroyed by
the price. (n) the offeror prior to its acceptance and it is not
even necessary that the offeree learns of the
FORMATION OF A CONTRACT OF SALE withdrawal
1) POLICITACION, negotiation, preparation,  The promisee (acceptor) has the
conception or generation stage, which is the burden of proving the existence of a
period of negotiation and bargaining, ending at consideration.
the moment of perfection; 2) Offeree - has no authority to treat the offer as
 there is “Freedom to Contract”, consisting of separate and distinct parts since
which signifies the right to choose with he must accept and comply with all the
whom to contract and what to contract requirements provided in the offer. He has
2) PERFECTION or “birth” of the contract, only the choice to accept or reject the offer in
which is the point in time when the parties its entirety. He has no choice to reject that
come to agree on the terms of the sale; and portion of the offer which is
3) CONSUMMATION or “death” of the disadvantageous and accept only that
contract, which is the process of fulfillment or which is beneficial.
performance of the terms agreed upon in the  has the choice to indicate further
contract. negotiations by making a counter-offer
Advertisements and invitations Counter-offer - always considered in law a rejection of

Business advertisements the original offer, and has the effect of extinguishing
Article 1325. Unless it appears otherwise, business the original offer
advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n) Option contracts
Article 1479
Advertisements for bidders A promise to buy and sell a determinate thing for a
Article 1326. Advertisements for bidders are simply price certain is reciprocally demandable.
invitations to make proposals, and the advertiser
is not bound to accept the highest or lowest bidder, An accepted unilateral promise to buy or to sell a
unless the contrary appears. (n) determinate thing for a price certain is binding upon
the promisor if the promise is supported by a
Offers consideration distinct from the price. (1451a)
Article 1319. Consent is manifested by the meeting
of the offer and the acceptance upon the thing and Article 1324. When the offerer has allowed the
the cause which are to constitute the contract. The offeree a certain period to accept, the offer may be
offer must be certain and the acceptance withdrawn at any time before acceptance by
absolute. A qualified acceptance constitutes a communicating such withdrawal, except when the
counter-offer. option is founded upon a consideration, as
something paid or promised. (n)
Acceptance made by letter or telegram does not bind
the offerer except from the time it came to his Article 1354. Although the cause is not stated in the
knowledge. The contract, in such a case, is contract, it is presumed that it exists and is
presumed to have been entered into in the place lawful, unless the debtor proves the contrary.
where the offer was made. (1262a) (1277)
Article 1320. An acceptance may be express or Three kinds of promises treated in Article 1479
implied. (n) 1) An accepted unilateral promise to sell in which
the promisee (acceptor) elects to buy;
Article 1321. The person making the offer may fix 2) An accepted unilateral promise to buy in which
the time, place, and manner of acceptance, all of the promisee (acceptor) elects to sell; and
which must be complied with. (n)
3) A bilateral promise to buy and sell reciprocally
accepted in which either of the parties chooses
to exact fulfillment.
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Sales | VENTEROSO
Obligations of the offeror in a valid option contract

Option 1) Not to offer to any third party the sale of the
1) A privilege existing in one person, for which he object of the option during the option period;
had paid a consideration, giving him the right, 2) Not to withdraw the offer or option during
if he chooses to buy/sell, for example, a certain the option period; and
merchandise or certain specified property at a 3) To hold the subject matter for sale and to
fixed price, from/to another person, at any transfer it to the offeree in the event that the
time within the agreed period or in compliance offeree exercises his option during the option
with certain conditions. period.
2) A preparatory contract in which one party
grants to the other, for a fixed period and Elements of a valid option contract
under specified conditions, the power to 1) Consent or meeting of the minds;
decide, whether or not to enter into a principal 2) Subject matter which is an option right to a
contract. It binds the party who has given the unilateral offer to sell or to buy;
option, not to enter into the principal contract 3) Prestation or a consideration separate and
with any other person during the period distinct from the purchase price for the
designated, and, within that period, to enter option given.
into such contract with the one to whom the  The more controlling concept is the
option was granted, if the latter should decide “separateness” of such consideration
to use the option. It is a separate agreement from the purchase price agreed upon.
distinct from the contract which the parties  without a consideration separate from
may enter into upon the consummation of the purchase price, an option contract
the option. (Jose Ramon Carceller vs. Court would be void as a contract but would
of Appeals) still constitute a valid offer (Sanchez
3) A valid option contract is essentially a v. Rigos)
“contracted certain offer”  Even if the promise is accepted, the
party will not be bound due to the
Sales Option absence of a distinct consideration.
As to burden Both are onerous (Diamante v. CA)
As to type of A principal A preparatory  the case of Sanchez vs. Rigos is a good
contract contract as it contract law and is the controlling doctrine
can stand on its entered in (Philippine National Oil Company
own preparation of vs. Keppel Philippines Holdings)
an eventual
 when the consideration is not
sales
transaction monetary, the consideration must be
As to Consideration is Consideration clearly specified as such in the option
consideration price certain in may be contract or clause (Philippine
money or its anything of National Oil Company vs. Keppel
equivalent or value and Philippines Holdings)
essentially “any which may be  For uniformity and consistency in
valuable something contract interpretation, the better rule
consideration.” paid or to follow is that the consideration for
promised the option contract should be clearly
As to nature Both are consensual contracts specified as such in the option contract
As to Sales contracts An option or clause. Otherwise, the offeree must
obligations are bilateral contract is bear the burden of proving that a
imposed since both the essentially a
separate consideration for the option
seller and the unilateral
buyer have contract, since contract exists (Philippine National
obligations. only the Oil Company vs. Keppel
offeror is Philippines Holdings)
obliged.  An option, though unsupported by a
As to subject An object The option to separate consideration, remains an
matter which must be purchase the offer that, if duly accepted, generates
possible, licit, subject matter into a contract to sell where the parties'
determinate or of the sale respective obligations become
determinable. reciprocally demandable (Philippine
As to Statute of Statute of National Oil Company vs. Keppel
applicability of Frauds is Frauds is not Philippines Holdings)
the Statute of applicable applicable
Frauds
Thus, when an offer is supported by a separate
consideration, a valid option contract exists, i.e.,
26
Sales | VENTEROSO
there is a contracted offer which the offerer cannot The right of first refusal to be an innovative juridical
withdraw from without incurring liability in relation which cannot be deemed a perfected sale
damages. On the other hand, when the offer is not under Article 1458 of the Civil Code and not an option
supported by a separate consideration, the offer contract under either Articles 1319 and 1479 thereof
stands but, in the absence of a binding contract, the because it merely pertains to a specific property
offeror may withdraw it any time. In either case, without containing an agreement as to the price or
once the acceptance of the offer is duly terms of payment in case of its exercise. (Ang Yu v.
communicated before the withdrawal of the
Asuncion v. Court of Appeals)
offer, a bilateral contract to buy and sell is
generated which, in accordance with the first
paragraph of Article 1479 of the Civil Code, Ang Yu case Equatorial case
becomes reciprocally demandable Recovery of damages Rescissible
Art 19, NCC Art 1381, NCC
The Constitution itself declares that "no doctrine or A right of first refusal A right of first refusal
principle of law laid down by the court in a decision belongs to a class of must be enforced
rendered en banc or in division may be modified or preparatory juridical according to the law on
reversed except by the court sitting en banc. Sanchez v. relations which is contracts instead of the
Rigos was an en banc decision which was affirmed in governed not by panoramic and indefinite
1994 in Asuncion v. CA, also an en banc decision, while contracts but by, among rule on human relations.
the decisions citing the Southwestern Sugar doctrine are other laws of general
all division cases. Based on the constitutional rule (as application, the pertinent
well as the inherent logic in reconciling Civil Code provisions on human
provisions), there should be no doubt that Sanchez relations. There is
v. Rigos remains as the controlling doctrine nothing to execute.
(Philippine National Oil Company vs. Keppel a right of first refusal pins the enforceability of
Philippines Holdings) cannot be the subject of a right of first refusal on
an action of specific the obligatory force of
Prescription performance because of the main contract of
Article 1144. The following actions must be brought the lack of agreement on lease to which it is
within ten years from the time the right of action the price. attached
accrues: Applicable if the Applicable when the
contract is limited to the obligation is embodied
(1) Upon a written contract; buying and selling of real in a contract
(2) Upon an obligation created by law; property (embodied in a
(3) Upon a judgment. (n) separate contract)
Law on human relations Law on contracts
Notice of the exercise of the option need not be
coupled with actual payment of the price, so long as In sum, the prevailing doctrine is that a sale entered
this is delivered to the owner of the property upon into in violation of a right of first refusal of another
performance of his part of the agreement. person found in a valid principal contract is
rescissible. The basis of the right of first refusal must
In one case, it was held that when the option contract be the current offer of the seller to sell or the offer to
does not contain a period, it cannot be presumed that purchase of a prospective buyer. Only after the lessee
the exercise thereof can be made indefinitely, grantee fails to exercise its rights under the same
otherwise, it would render uncertain the status of the terms and within the period contemplated can the
subject matter. Under Article 1144 (1) of the Civil owner validly offer to sell the property to a third
Code, actions upon written contract must be brought person, again under the same terms as offered to
within ten (10) years, and thereafter, the right of option the grantee.
would prescribe. Thus, the action for specific
performance to enforce the option to purchase must Right of first refusal v. option contract
be filed within ten (10) years after the accrual of the Right of first refusal Option contract
cause of action as provided under Article 1144 of the a contractual grant, not a contract by which the
of the sale of a owner of the property
New Civil Code
property, but of the agrees with another
first priority to buy the person that the latter
Right of first refusal property in the event the shall have the right to
Definition owner sells the same. buy the former’s
A contractual grant, not of a sale of property, but of (Polytechnic property at a fixed price
the first priority to buy the property in the event the University v. Golden within a certain time.
owner sells the same. It involves a promise on the part Horizon) (Polytechnic
of the owner that if he decides to sell the property any University v. Golden
time in the future, he would first negotiate its sale to Horizon)
the promissee. While the object might Object is determinate;
be made determinate, cause is certain
the exercise of the right (Polytechnic
27
Sales | VENTEROSO
of first refusal would be University v. Golden its payment. Until a sale is perfected, it cannot become
dependent not only on Horizon) an independent source of obligation, nor serve as a
the owner’s eventual binding juridical relation.
intention to enter into a
binding juridical relation Sale by auction
with another but also on Sale by auction is generally exercised by the sheriff in
terms, including the case of judicial sales arising from execution or
price, that are yet to be
foreclosure of mortgages. Notaries public are also
firmed up. (Polytechnic
University v. Golden authorized to sell mortgaged properties foreclosed
Horizon) extrajudicially under Act 3135 as amended.
Since the stipulation The consideration is
forms part of the entire separate and distinct Rules regarding sale by auction
lease contract, the (Ang Yu v. Court of  Each lot is the subject of a separate contract of
consideration for the Appeals) sale though the parties may subsequently
lease includes the consolidate all the purchases into one
consideration for the transaction
grant of the right of first  In making the bids, the seller is merely making
refusal. (Ang Yu v. an invitation to those present to make offers.
Court of Appeals) The sale by auction is perfected upon
Integral part of the A separate and distinct
announcement by
contract of lease contract (Equatorial
(Equatorial Realty v. Realty v. Mayfair)  the fall of the hammer or
Mayfair)  in other customary manner
Article 1475  Before the perfection, any bidder may retract

The contract of sale is perfected at the moment there his bid; and the auctioneer may withdraw the
is a meeting of minds upon the thing which is the goods from the sale unless the auction has been
object of the contract and upon the price. announced to be without reserve
 When the auction is without reserve,
From that moment, the parties may reciprocally the auctioneer cannot withdraw the
demand performance, subject to the provisions of goods from sales once a bid has
the law governing the form of contracts. (1450a) been made and the highest bidder
has a right to enforce his bid
Article 1476  The seller has the right to bid and he may do
In the case of a sale by auction: so by reservation made expressly or in his
behalf unless otherwise provided by
(1) Where goods are put up for sale by auction in
lots, each lot is the subject of a separate contract of  Law
sale.  Stipulation
(2) A sale by auction is perfected when the  Requisites for the right to bid by the seller
auctioneer announces its perfection by the fall of  Such right was reserved
the hammer, or in other customary manner.  Notice was given that the sale is
Until such announcement is made, any bidder may subject to a right to bid on behalf of the
retract his bid; and the auctioneer may withdraw the seller
goods from the sale unless the auction has been  The right to bid by the seller is not
announced to be without reserve. prohibited by law or stipulation
(3) A right to bid may be reserved expressly by or on
 Effects when there is no notice of the right to
behalf of the seller, unless otherwise provided by law
or by stipulation. bid by the seller
(4) Where notice has not been given that a sale by  it shall not be lawful for the seller to bid
auction is subject to a right to bid on behalf of the himself
seller, it shall not be lawful for the seller to bid  it shall not be lawful for the seller to
himself or to employ or induce any person to bid at employ or induce any person to bid at
such sale on his behalf or for the auctioneer, to such sale on his behalf or for the
employ or induce any person to bid at such sale on auctioneer
behalf of the seller or knowingly to take any bid from  it shall not be lawful to employ or
the seller or any person employed by him. Any sale induce any person to bid at such sale
contravening this rule may be treated as fraudulent on behalf of the seller or knowingly to
by the buyer. (n)
take any bid from the seller or any
person employed by him.
Perfection of a sale
 The purpose of the notice is to prevent
A contract of sale is “born” from the moment there is
puffing or secret bidding by or on behalf of
a meeting of minds upon the thing which is the object
of the contract and upon the price and the manner of
28
Sales | VENTEROSO
the seller by people who are not themselves be considered as part of the price and proof of the
bound perfection of the contract.
Article 1319 The rule under Article 1482 of the Civil Code is no
Consent is manifested by the meeting of the offer more than a disputable presumption and prevails only
and the acceptance upon the thing and the cause in the absence of contrary or rebuttal evidence. It is not
which are to constitute the contract. The offer must the giving of earnest money but the proof of the
be certain and the acceptance absolute. A qualified concurrence of all the essential elements of the sale
acceptance constitutes a counter-offer. which establishes the existence of a perfected sale.
Acceptance made by letter or telegram does not bind
(Rizalino Oesmer v. Paraiso Development
the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed Corporation)
to have been entered into in the place where the Earnest Option money
offer was made. (1262a) money
As to treatment part of the a distinct
Meeting of the minds purchase price consideration
1) Offer certain is met by absolute acceptance for an option
contract.
2) must be plain and unconditional (Zayco v.
As to when given only applies to a sale
Serra) given where there is not yet
3) substantial modification or correction – already a sale perfected.
XPN: if there is merely modificatory As to the When earnest When the
correction, it is considered meeting of the consequent money is given, would-be buyer
minds (Villonco v. Bormaheco) obligations of the buyer is gives the
4) The acceptance must be identical in all the payor bound to pay option money,
respects with that of the offer so as to the balance. he is not
produce consent or meeting of the minds. required to buy
(Heirs of Ignacio v. Home Bankers) but may even
5) While it is impossible to expect the acceptance forfeit it
to echo every nuance of the offer, it is depending on
imperative that it assents to those points in the terms of
the option
the offer which, under the operative facts of
each contract, are not only material but
RULES:
motivating as well. Anything short of that
1) Absent proof of the concurrence of all the
level of mutuality produces not a contract but
essential elements of a contract of sale, the
a mere counter-offer awaiting acceptance.
giving of earnest money cannot establish
(Villanueva v. PNB)
the existence of a perfected contract of sale.
6) An acceptance may be made either in a formal
(Manila Metal Container v. PNB)
or an informal manner, and may be shown by
2) Where the parties merely exchanged offers and
acts, conduct, or words of the accepting party
counter-offers, no contract is perfected since
that clearly manifest a present intention or
they did not yet give their consent to such
determination to accept the offer to buy or sell.
offers. Earnest money applies to a perfected
(Adelfa Proeprties v. CA)
sale. In a potential sale transaction, the prior
payment of earnest money even before the
Manifestation of contract
property owner can agree to sell his property is
Acceptance may be evidenced by some act, or conduct,
irregular, and cannot be used to bind the owner
communicated to the offeror, either in a formal or an
to the obligations of a seller under an otherwise
informal manner, that clearly manifest the intention or
perfected contract of sale; to cite a well-worn
determination to accept the offer to buy or sell.
cliché, the carriage cannot be placed before the
horse. (First Optima Realty v. Securitron)
Article 1482
Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as Article 1483
proof of the perfection of the contract. (1454a) Subject to the provisions of the Statute of Frauds
and of any other applicable statute, a contract of sale
may be made in writing, or by word of mouth, or
Earnest money
partly in writing and partly by word of mouth, or
“Arras”, the money given to the seller by the may be inferred from the conduct of the parties. (n)
prospective buyer to show that the latter is truly
interested in buying the property, and its aim is to bind Article 1356
the bargain. It is a statutory rule that whenever Contracts shall be obligatory, in whatever form they
earnest money is given in a contract of sale, it shall may have been entered into, provided all the
essential requisites for their validity are present.
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Sales | VENTEROSO
However, when the law requires that a contract be The following contracts are unenforceable, unless
in some form in order that it may be valid or they are ratified:
enforceable, or that a contract be proved in a certain (2) Those that do not comply with the Statute of
way, that requirement is absolute and indispensable. Frauds as set forth in this number. In the following
In such cases, the right of the parties stated in the cases an agreement hereafter made shall be
following article cannot be exercised. (1278a) unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
Article 1357 subscribed by the party charged, or by his agent;
If the law requires a document or other special form, evidence, therefore, of the agreement cannot be
as in the acts and contracts enumerated in the received without the writing, or a secondary
following article, the contracting parties may compel evidence of its contents:
each other to observe that form, once the contract
has been perfected. This right may be exercised (a) An agreement that by its terms is not to be
simultaneously with the action upon the contract. performed within a year from the making thereof;
(1279a) (d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred
Article 1358 pesos, unless the buyer accept and receive part of
The following must appear in a public document: such goods and chattels, or the evidences, or some
of them, of such things in action or pay at the time
(1) Acts and contracts which have for their object some part of the purchase money; but when a sale is
the creation, transmission, modification or made by auction and entry is made by the
extinguishment of real rights over immovable auctioneer in his sales book, at the time of the
property; sales of real property or of an interest sale, of the amount and kind of property sold, terms
therein are governed by articles 1403, No. 2, and of sale, price, names of the purchasers and person
1405; on whose account the sale is made, it is a sufficient
xxx memorandum;
All other contracts where the amount involved (e) An agreement for the leasing for a longer period
exceeds five hundred pesos must appear in writing, than one year, or for the sale of real property or of
even a private one. But sales of goods, chattels or an interest therein;
things in action are governed by articles, 1403, No.
2 and 1405. (1280a) Article 1406
When a contract is enforceable under the Statute of
Convenience Frauds, and a public document is necessary for its
Despite the seemingly mandatory provisions of Article registration in the Registry of Deeds, the parties may
1358, the Supreme Court has held that the provisions avail themselves of the right under Article 1357.
thereof on the necessity of public document are for
purposes of convenience, not for validity or Article 1874
When a sale of a piece of land or any interest therein
enforceability
is through an agent, the authority of the latter shall
be in writing; otherwise, the sale shall be void. (n)
Effects
1) Transactions enumerated under Article 1358 Article 1581
which are not found in a public instrument are The form of sale of large cattle shall be governed by
still valid and enforceable special laws. (n)
2) The article merely grants a cause of action to
the party to a contract in a suit to sue or compel Formal requisites
the other party to have the document covering GR: Form is not important for the validity of a sale
the contract acknowledged before a notary (Art 1483, 1356)
public. XPNs:
1) The power to sell a piece of land or interest
Public document therein which must be in writing, otherwise,
The deed of sale operates as a formal or symbolic the sale thereof by the agent would be void;
delivery of the property sold and authorizes the buyer (Art 1874)
to use the document as proof of ownership. To make 2) Sale of large cattle which must be in writing and
it a public document, a deed of sale must be properly registered with the municipal treasurer who
subscribed and acknowledged before a notary shall issue a certificate of transfer; otherwise,
public and when so acknowledged, a deed of sale the sale is void; (Art 1581)
enjoys the presumption of regularity and due 3) Sale of land by a Non-Muslim hill tribe cultural
execution. The execution and notarization of a minorities all throughout the Philippines which
deed of sale however, though a form of is void if not approved by the National
constructive delivery, is not a conclusive Commission on Indigenous Peoples.
presumption of delivery of possession. 4) Certain sales transactions come within the
coverage of the Statute of Frauds such that
Article 1403 failure to put the same in a note or
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Sales | VENTEROSO
memorandum make it unenforceable. An 2) ownership.

unenforceable contract cannot be enforced
through a court litigation. To deliver the fruits and accessories
A) A sale which by its terms is not to be Article 1164. The creditor has a right to the fruits of
performed within a year from the making the thing from the time the obligation to deliver
thereof; (FULLY EXECUTORY it arises. However, he shall acquire no real right
CONTRACTS) over it until the same has been delivered to him.
B) Sale of goods, chattels or things in action, (1095)
at a price not less than P500.00; and (SALE
OF GOODS) Article 1537
C) Sale of real property or an interest therein The vendor is bound to deliver the thing sold and its
(SALE OF REAL PROPERTY) accessions and accessories in the condition in
which they were upon the perfection of the
contract.
Statute of Frauds
Is descriptive of the statutes which require certain All the fruits shall pertain to the vendee from the
classes of contracts, such as agreements for the sale day on which the contract was perfected. (1468a)
of real property, to be in writing, the purpose being to
prevent fraud of perjury in the enforcement of This obligation is in accordance with the principle that
obligations depending for their evidence the the accessories always follow the principal; and since
unassisted memory of witnesses by requiring from the perfection the subject matter is intended for
certain enumerated contracts and transactions to delivery to the buyer, necessarily the accessories and
be evidenced by a writing signed by the party to fruits must then on be held for the account of the
be charged. The written note or memorandum, as buyer.
contemplated by Article 1403 of the Civil Code should
embody the essentials of the contract. To pay for the expenses for the execution and
registration of the deed of sale
CONSUMMATION Article 1487
Obligations of the seller The expenses for the execution and registration
1) To preserve the subject matter; of the sale shall be borne by the vendor, unless there
2) To deliver the subject matter and transfer is a stipulation to the contrary. (1455a)
ownership thereof;
3) To deliver the fruits and accessories; GR: The seller is bound to pay for the expenses for the
4) To pay for the expenses for the execution and execution and registration of the sale
registration of the deed of sale, unless there is XPN: When parties agree otherwise
a stipulation to the contrary; and
5) To warrant the subject matter. To warrant the subject matter
Article 1495
To preserve the subject matter The vendor is bound to transfer the ownership of
Article 1163. Every person obliged to give something and deliver, as well as warrant the thing which is
is also obliged to take care of it with the proper the object of the sale. (1461a)
diligence of a good father of a family, unless the
law or the stipulation of the parties requires another Article 1547
standard of care. (1094a) In a contract of sale, unless a contrary intention
appears, there is:
To deliver the subject matter
Article 1458 (1) An implied warranty on the part of the seller
By the contract of sale one of the contracting parties that he has a right to sell the thing at the time
obligates himself to transfer the ownership and to when the ownership is to pass, and that the buyer
deliver a determinate thing, and the other to pay shall from that time have and enjoy the legal and
therefor a price certain in money or its equivalent. peaceful possession of the thing;
A contract of sale may be absolute or conditional. (2) An implied warranty that the thing shall be free
(1445a) from any hidden faults or defects, or any charge
or encumbrance not declared or known to the
Article 1495 buyer.
The vendor is bound to transfer the ownership of
and deliver, as well as warrant the thing which is the This article shall not, however, be held to render
object of the sale. (1461a) liable a sheriff, auctioneer, mortgagee, pledgee,
or other person professing to sell by virtue of
authority in fact or law, for the sale of a thing in
Delivery, as used in the Law on Sales, refers to the
which a third person has a legal or equitable interest.
concurrent transfer of two (2) things: (n)
1) possession; and
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Sales | VENTEROSO
Warranties of the seller (FREHN) place or depository where it is stored or kept.

1) Warranty that the seller has the right to sell (at (1463a)
the time when the ownership is to pass);
2) Warranty against eviction; Article 1499
3) Warranty against non-apparent servitudes; The delivery of movable property may likewise be
4) Warranty against hidden defects; and made by the mere consent or agreement of the
5) Warranty as to fitness or quality. contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the
DELIVERY time of the sale, or if the latter already had it in
his possession for any other reason. (1463a)
Article 712. Ownership is acquired by occupation
and by intellectual creation.
Article 1500
Ownership and other real rights over property are There may also be tradition constitutum possessorium.
acquired and transmitted by law, by donation, by (n)
testate and intestate succession, and in consequence
of certain contracts, by tradition. Article 1501
With respect to incorporeal property, the provisions
They may also be acquired by means of prescription. of the first paragraph of article 1498 shall govern. In
(609a) any other case wherein said provisions are not
applicable, the placing of the titles of ownership in
Tradition - is a derivative mode of acquiring the possession of the vendee or the use by the
ownership by virtue of which one who has the right vendee of his rights, with the vendor's consent, shall
be understood as a delivery. (1464)
and intention to alienate a corporeal thing, transmits it
by virtue of a just title to one who accepts the same.
Execution of public instrument (Art 1498, 1)
GR: Execution of a public instrument shall be
Delivery of the thing, together with the payment of the
equivalent to the delivery of the thing which is the
price, marks the consummation of the contract of sale.
object of the contract, if from the deed the contrary
Delivery is also necessary to enable the vendee to enjoy
does not appear or cannot clearly be inferred.
and make use of the property purchased
XPN: There are three (3) instances when the execution
After delivery, the risk of loss of the thing is already
of a public instrument cannot produce the effects of
borne by the vendee. This is by virtue of the principle
delivery and that is when:
RES PERIT DOMINO which literally translates to
1) When there is a stipulation to that effect;
“the thing is lost to the owner” and in simpler terms
2) When at the time of the execution of the public
mean the owner bears the loss
instrument, the subject matter was not subject
to the control of the seller; and
Two kinds of delivery
3) When the control or ability to transfer
Article 1477
physical possession and enjoyment of the
The ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive subject matter does not subsist for a
delivery thereof. (n) reasonable length of time after the
instrument’s execution
1) Actual or physical
Nowhere in the Civil Code, however, does it
Article 1497 provide that execution of a deed of sale is a
The thing sold shall be understood as delivered, conclusive presumption of delivery of
when it is placed in the control and possession of possession. The Code merely said that the
the vendee. (1462a) execution shall be equivalent to delivery. The
presumption can be rebutted by clear and
convincing evidence. Presumptive delivery can be
What is determinative as to the effect of delivery is
negated by the failure of the vendee to take actual
control. possession of the land sold.
2) Constructive
As found by both the trial and appellate courts and
Article 1498 amply supported by the evidence on record,
When the sale is made through a public Salvador was never placed in control of the
instrument, the execution thereof shall be property. The original sellers retained their
equivalent to the delivery of the thing which is control and possession. Therefore, there was no
the object of the contract, if from the deed the real transfer of ownership. As found by both the trial
contrary does not appear or cannot clearly be and appellate courts and amply supported by the
inferred. evidence on record, Salvador was never placed in
control of the property. The original sellers retained
With regard to movable property, its delivery may their control and possession. Therefore, there was
also be made by the delivery of the keys of the no real transfer of ownership.
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Sales | VENTEROSO
have actual possession of the thing sold cannot

The critical factor in the different modes of effecting transfer constructive possession by the execution
delivery, which gives legal effect to the act is the and delivery of a public instrument."
actual intention of the vendor to deliver, and its
acceptance by the vendee. (Santos v. Santos) the execution of a public instrument gives rise only
to a prima facie presumption of delivery, which is
In the instant case, actual delivery of the subject negated by the failure of the vendee to take actual
tractor could not be made. However, there was possession of the land sold. "A person who does not
constructive delivery already upon the execution of have actual possession of the thing sold cannot
the public instrument pursuant to Article 1498 and transfer constructive possession by the execution
upon the consent or agreement of the parties when and delivery of a public instrument." (Santiago v.
the thing sold cannot be immediately transferred to Villamor)
the possession of the vendee. (Art. 1499)
The right (of first refusal) can be enforced by an
While it is true that Wilfredo Dy was not in action for specific performance upon a showing
actual possession and control of the subject of its breach by an actual sale of the property
tractor, his right of ownership was not divested under circumstances showing palpable bad faith on
from him upon his default. Neither could it be said the part of both seller and buyer. (Equatorial
that Libra was the owner of the subject tractor Realty v. Mayfair)
because the mortgagee cannot become the owner of
or convert and appropriate to himself the property The vendee has nothing to do with the act of
mortgaged. (Dy Jr. v. CA) delivery by the vendor. On the other hand,
acceptance is an obligation on the part of the vendee
In order that this symbolic delivery may produce the (Art. 1582). Delivery and acceptance are two distinct
effect of tradition, it is necessary that the vendor and separate acts of different parties. Consequently,
shall have had such control over the thing sold acceptance cannot be regarded as a condition to
that, at the moment of the sale, its material complete delivery.
delivery could have been made. It is not enough
to confer upon the purchaser the ownership and the The failure of La Fuerza to express categorically
right of possession. The thing sold must be placed whether they accepted or rejected the conveyors
in his control. When there is no impediment does not detract from the fact that the same were
whatever to prevent the thing sold passing into the actually in its possession and control; that,
tenancy of the purchaser by the sole will of the accordingly, the conveyors had already been
vendor, symbolic delivery through the execution of delivered by the plaintiff; and that, the period
a public instrument is sufficient. But if, prescribed in said Art. 1571 had begun to run. (La
notwithstanding the execution of the instrument, the Fuerza v. CA)
purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or Symbolic delivery or traditio symbolica (Art 1498,
through another in his name, because such tenancy 2)
and enjoyment are opposed by the interposition of Constructive delivery is symbolic when, to effect the
another will, then fiction yields to reality — the delivery, the parties must make use of a token symbol
delivery has not been effected. to represent the thing delivered.
The Supreme Court of Spain, interpreting article
1462 of the Civil Code, held in its decision of Tradition longa manu (Art 1499)
November 10, 1903, (Civ. Rep., vol. 96, p. 560) that An example of how it is effected is when the seller
this article "merely declares that when the sale is points the property subject matter of the sale and the
made through the means of a public instrument, the buyer agrees from that time on that he is the owner
execution of this latter is equivalent to the delivery thereof, without need of delivering physical possession
of the thing sold: which does not and cannot mean thereof.
that this fictitious tradition necessarily implies the
real tradition of the thing sold, for it is Traditio brevi manu (Art 1499)
incontrovertible that, while its ownership still This is a mode of delivery where, before the sale, the
pertains to the vendor (and with greater reason if it would-be buyer is already in possession of the would-
does not), a third person may be in possession of the be subject matter of the sale, say as a lessee, and
same thing; wherefore, though, as a general rule, he
pursuant to the sale, he would now hold possession in
who purchases by means of a public instrument
the concept of an owner. This type of delivery is also
should be deemed . . . to be the possessor in fact, yet
this presumption gives way before proof to the backed up by Article 1499 of the Civil Code.
contrary." (Addison v. Felix)
Constitutum possessorium (Art 1500)
the execution of a public instrument gives rise only At the time of the perfection of the sale, the seller held
to a prima facie presumption of delivery, which is possession of the subject matter in the concept of an
negated by the failure of the vendee to take actual owner, and pursuant to the contract, the seller
possession of the land sold. "A person who does not continues to hold physical possession thereof no
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Sales | VENTEROSO
longer in the concept of an owner, but as a lessee of buyer on shipment of the goods, the seller's
any other form of possession other than in the concept property in the goods shall be deemed to be only
of owner. This is the complete opposite of traditio for the purpose of securing performance by the
brevi manu. buyer of his obligations under the contract.
Quasi-delivery or quasi-traditio (Art 1501) Where goods are shipped, and by the bill of lading
Aside from delivery through the execution of a public the goods are deliverable to order of the buyer
or of his agent, but possession of the bill of lading
instrument, incorporeal property can make use of
is retained by the seller or his agent, the seller thereby
quasi-traditio, to wit: reserves a right to the possession of the goods as
a) By placing of the titles of ownership in the against the buyer.
possession of the buyer; or
b) By the use and enjoyment by the buyer of Where the seller of goods draws on the buyer for the
the rights pertaining to the incorporeal price and transmits the bill of exchange and bill of
property with the seller’s consent. lading together to the buyer to secure acceptance or
payment of the bill of exchange, the buyer is bound
TRADE TERMS to return the bill of lading if he does not honor the
These are rules of presumption bill of exchange, and if he wrongfully retains the bill
1) C.O.D. – The initials stand for the words, of lading he acquires no added right thereby. If,
“collect on delivery.” If the goods are marked however, the bill of lading provides that the goods
are deliverable to the buyer or to the order of the
C.O.D., the carrier acts for the seller in
buyer, or is indorsed in blank, or to the buyer by the
collecting the purchase price. The buyer must consignee named therein, one who purchases in
pay for the goods before he can obtain good faith, for value, the bill of lading, or goods
possession. C.O.D. terms do not prevent from the buyer will obtain the ownership in the
title from passing to the buyer on delivery goods, although the bill of exchange has not been
to the carrier where they are solely intended honored, provided that such purchaser has received
as security for the purchase price delivery of the bill of lading indorsed by the
consignee named therein, or of the goods, without
Article 1504. Unless otherwise agreed, the goods notice of the facts making the transfer wrongful. (n)
remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the 2) F.O.B. – The initials stand for the words, “free
ownership therein is transferred to the buyer the on board.” They mean that the goods are to be
goods are at the buyer's risk whether actual delivery delivered free of expense to the buyer to the
has been made or not, except that: point where they are F.O.B. In general, the
point of F.O.B., either the point of shipment
(1) Where delivery of the goods has been made to or the point of destination, determines when
the buyer or to a bailee for the buyer, in pursuance the ownership passes.
of the contract and the ownership in the goods has
A) F.O.B. Shipping Point – delivery of the
been retained by the seller merely to secure
performance by the buyer of his obligations goods to the carrier is equivalent to delivery
under the contract, the goods are at the buyer's to the buyer, and at that point, the risk of
risk from the time of such delivery; loss pertains to the buyer.
B) F.O.B. Destination – only when the vessel
(2) Where actual delivery has been delayed through has arrived at the point of destination
the fault of either the buyer or seller the goods would there be delivery to the buyer and
are at the risk of the party in fault. (n) prior to that point in time, the risk of loss
over the subject matter of the sale will be
XPN: borne by the seller.
Article 1503. When there is a contract of sale of
specific goods, the seller may, by the terms of the Article 1523. Where, in pursuance of a contract of
contract, reserve the right of possession or sale, the seller is authorized or required to send the
ownership in the goods until certain conditions goods to the buyer, delivery of the goods to a
have been fulfilled. The right of possession or carrier, whether named by the buyer or not, for
ownership may be thus reserved notwithstanding the purpose of transmission to the buyer is
the delivery of the goods to the buyer or to a carrier deemed to be a delivery of the goods to the
or other bailee for the purpose of transmission to buyer, except in the cases provided for in article
the buyer. 1503, first, second and third paragraphs, or unless a
contrary intent appears.
Where goods are shipped, and by the bill of lading
the goods are deliverable to the seller or his Unless otherwise authorized by the buyer, the seller
agent, or to the order of the seller or of his agent, must make such contract with the carrier on behalf
the seller thereby reserves the ownership in the of the buyer as may be reasonable, having regard to
goods. But, if except for the form of the bill of the nature of the goods and the other circumstances
lading, the ownership would have passed to the of the case. If the seller omits so to do, and the goods
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Sales | VENTEROSO
are lost or damaged in course of transit, the buyer through the carrier, it amounted to a delivery to
may decline to treat the delivery to the carrier as MOELCI.
a delivery to himself, or may hold the seller
responsible in damages. Furthermore, in the case of Behn, Meyer & Co. (Ltd.)
v. Yangco, it was pointed out that a specification in a
Unless otherwise agreed, where goods are sent by contract relative to the payment of freight can be
the seller to the buyer under circumstances in which taken to indicate the intention of the parties with
the seller knows or ought to know that it is usual to regard to the place of delivery. (David v. Misamis
insure, the seller must give such notice to the buyer Occidental)
as may enable him to insure them during their
transit, and, if the seller fails to do so, the goods shall Article 1523. Where, in pursuance of a contract of
be deemed to be at his risk during such transit. (n) sale, the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a
3) C.I.F. – The initials stand for the words “cost, carrier, whether named by the buyer or not, for
insurance and freight.” They signify that the the purpose of transmission to the buyer is
price fixed covers not only the cost of the deemed to be a delivery of the goods to the
goods, but the expenses of freight and buyer, except in the cases provided for in Articles
insurance to be paid by the seller up to the 1503, first, second and third paragraphs, or unless a
point especially named. contrary intent appears. xx
4) F.A.S. – Under a “free alongside ship”
Article 1503. When there is a contract of sale of
arrangement, the seller pays all the charges and
specific goods, the seller may, by the terms of the
is subject to risk until the goods are placed contract, reserve the right of possession or
alongside the vessel. In other words, the ownership in the goods until certain conditions have
goods alongside the vessel completes the been fulfilled. xxx
effect of tradition.
Where goods are shipped, and by the bill of lading
Determination of the place of delivery always the goods are deliverable to order of the buyer
resolves itself into a question of act. If the contract or of his agent, but possession of the bill of lading
be silent as to the person or mode by which the is retained by the seller or his agent, the seller
goods are to be sent, delivery by the vendor to a thereby reserves a right to the possession of the
common carrier, in the usual and ordinary goods as against the buyer. xxx
course of business, transfers the property to the
vendee. Articles 1523 and 1503 do not apply to a contract
of carriage between the shipper and the
If the buyer is to pay the freight, it is reasonable to common carrier. The third paragraph of Article
suppose that he does so because the goods become 1503, upon which DBI relies, does not oblige the
his at the point of shipment. On the other hand, if common carrier to withhold delivery of the goods in
the seller is to pay the freight, the inference is equally the event that the bill of lading is retained by the
so strong that the duty of the seller is to have the seller. Rather, it only gives the seller a better
goods transported to their ultimate destination and right to the possession of the goods as against
that title to property does not pass until the goods the mere inchoate right of the buyer. Thus,
have reached their destination. Articles 1523 and 1503 find no application here
(Designer Baskets v. Air Sea Transport)
Both the terms "c.i.f." and "F.O.B." merely make
rules of presumption which yield to proof of Here, the Deed of Sale executed by Banta on March
contrary intention. 21, 2005 and the Deed of Sale executed by Arcaina
on April 13, 2005 both show that the property was
With all due deference to the decision of the High conveyed to Ingram at the predetermined price of
Court of Australia, we believe that the word Manila ₱1,860,000.00. There was no indication that it was
in conjunction with the letters "c.i.f." must mean that bought on a per-square-meter basis.
the contract price, covering costs, insurance, and
freight, signifies that delivery was to made at Manila. Article 1542. In the sale of real estate, made for a
(Meyer v. Yangco) lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no
it is clear that MOELCI agreed that the power increase or decrease of the price, although there be
transformer would be delivered and that the freight, a greater or less area or number than that stated in
handling, insurance, custom duties, and incidental the contract.
expenses shall be shouldered by it.
The same rule shall be applied when two or more
Thus, the delivery made by David to William Lines, immovables as sold for a single price; but if, besides
Inc., as evidenced by the Bill of Lading, was deemed mentioning the boundaries, which is indispensable
to be a delivery to MOELCI. David was authorized in every conveyance of real estate, its area or
to send the power transformer to the buyer pursuant number should be designated in the contract,
to their agreement. When David sent the item the vendor shall be bound to deliver all that is
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Sales | VENTEROSO
included within said boundaries, even when it more than the area intended to be sold is not a
exceeds the area or number specified in the reasonable excess that can be deemed included in the
contract; and, should he not be able to do so, he sale. (Arcaina vs. Ingram)
shall suffer a reduction in the price, in proportion
to what is lacking in the area or number, unless SALE BY DESCRIPTION AND/OR SAMPLE
the contract is rescinded because the vendee does Article 1481
not accede to the failure to deliver what has been In the contract of sale of goods by description or by
stipulated. (1471) sample, the contract may be rescinded if the bulk
of the goods delivered do not correspond with the
The provision teaches that where both the area description or the sample, and if the contract be
and the boundaries of the immovable are by sample as well as description, it is not sufficient
declared in a sale of real estate for a lump sum, that the bulk of goods correspond with the sample
the area covered within the boundaries of the if they do not also correspond with the description.
immovable prevails over the stated area. The
vendor is obliged to deliver all that is included within The buyer shall have a reasonable opportunity of
the boundaries regardless of whether the actual area comparing the bulk with the description or the
is more than what was specified in the contract of sample. (n)
sale; and he/she shall do so without a corresponding
increase in the contract price. This is particularly A “sale by description and/or sample”, by its very
true when the stated area is qualified to be nature, should allow the buyer a reasonable
approximate only, such as when the words
opportunity of inspection or of comparing the bulk
"more or less" were used.
with the sample or the description before accepting
The Court, however, clarified that the rule laid down delivery.
in Article 1542 is not hard and fast and admits of an
exception. A caveat is in order, however. The use SALE OR RETURN AND SALE ON TRIAL
of "more or less" or similar words in Article 1502
designating quantity covers only a reasonable When goods are delivered to the buyer "on sale or
excess or deficiency. A vendee of land sold in return" to give the buyer an option to return the
gross or with the description "more or less" with goods instead of paying the price, the ownership
reference to its area does not thereby ipso facto take passes to the buyer on delivery, but he may revest
all risk of quantity in the land. the ownership in the seller by returning or tendering
the goods within the time fixed in the contract, or, if
Black's Law Dictionary defines the phrase "more or no time has been fixed, within a reasonable time. (n)
less" to mean:
The words are intended to cover slight or When goods are delivered to the buyer on approval
unimportant inaccuracies in quantity, and are or on trial or on satisfaction, or other similar terms,
ordinarily to be interpreted as taking care of the ownership therein passes to the buyer:
unsubstantial differences or differences of small
importance compared to the whole number of items (1) When he signifies his approval or acceptance to
transferred. the seller or does any other act adopting the
transaction;
GR: In a lump sum contract, a vendor is generally
obligated to deliver all the land covered within (2) If he does not signify his approval or acceptance
the boundaries, regardless of whether the real area to the seller, but retains the goods without giving
should be greater or smaller than that recited in the notice of rejection, then if a time has been fixed for
deed. the return of the goods, on the expiration of such
XPN: However, in case there is conflict between time, and, if no time has been fixed, on the
the area actually covered by the boundaries and expiration of a reasonable time. What is a reasonable
the estimated area stated in the contract of sale, time is a question of fact. (n)
he/she shall do so only when the excess or
deficiency between the former and the latter is A “sale or return” is a contract by which property is
reasonable. sold but the buyer, who becomes the owner of the
property on delivery, has the option to return the
Applying Del Prado to the case before us, we find same to the seller instead of paying the price.
that the difference of 5,800 sq. m. is too substantial Under this contract, the option to purchase or return
to be considered reasonable. We note that only 6,200 the goods rests entirely on the buyer without
sq. m. was agreed upon between petitioners and
reference to the quality of the goods.
Ingram. Declaring Ingram as the owner of the whole
12,000 sq. m. on the premise that this is the actual
area included in the boundaries would be ordering A “sale on trial or approval or satisfaction” on the
the delivery of almost twice the area stated in the other hand is a contract in the nature of an option to
deeds of sale. purchase if the goods prove satisfactory, the
approval of the buyer being a condition precedent.
Therefore, we rule that Ingram is entitled only to
6,200 sq. m. of the property. An area of 5,800 sq. m.
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Sales | VENTEROSO
Basis Sale or Return Sale on

approval In interpreting this provision, the Court declared that
Premise It depends It depends the governing principle is Primus Tempore, Potior Jure
upon the will upon the which means “First in Time, Stronger in Right”.
of the buyer. suitability,
quality or Application
character of the 1) The vendor has an existing right over the
goods
property and power of disposal;
Transfer of Ownership Ownership
2) There are at least two (2) sales executed by
ownership immediately does not
passes to the immediately the same vendor;
buyer on pass to the 3) The sales involve the same property; and
delivery buyer. It passes 4) There are two (2) or more vendees of the
only upon same property sold by the vendor.
approval or
satisfaction of Rules in knowledge or notice
the buyer duly 1) knowledge gained by the first buyer of the
manifested second sale cannot defeat the first buyer’s
after trial rights
Revesting of Ownership is There is no XPN: where the second buyer registers in
ownership revested in the revesting of good faith the second sale ahead of the first as
seller if the ownership provided by the afore-quoted provision of the
buyer so because it is
Civil Code
decides. retained by the
seller until the 2) knowledge gained by the second buyer of the
sale becomes first sale defeats his rights even if he is first to
absolute register the second sale, since such
Risk of loss The risk rests The risk knowledge taints his prior registration with
on the buyer remains in the bad faith.
before the seller while the
revestment of goods are on Good faith - status, state or condition of honesty
ownership. trial. which presupposes that the buyer of a property
belonging to another, is without notice or awareness
DOUBLE SALE that some other person has a right to, or interest in,
Article 1544. If the same thing should have been sold such property.
to different vendees, the ownership shall be
transferred to the person who may have first taken GR: Good faith is presumed
possession thereof in good faith, if it should be Article 527. Good faith is always presumed, and upon
movable property. him who alleges bad faith on the part of a possessor
rests the burden of proof. (434)
Should it be immovable property, the ownership
shall belong to the person acquiring it who in good
The presumption is rebuttable by the opposite party by
faith first recorded it in the Registry of Property.
presenting clear, strong, and convincing evidence to
Should there be no inscription, the ownership shall overcome the presumption.
pertain to the person who in good faith was first in XPN: In Art 1544, the buyer does NOT enjoy the
the possession; and, in the absence thereof, to the presumption of good faith, because it is he who has the
person who presents the oldest title, provided there burden of proof to establish that he was in good faith.
is good faith. (1473)
Buyer in good faith
A buyer in good faith is not only one who buys the
Movable property property of another without notice that some other
The ownership shall be transferred to the person who person has a right to, or interest in, such property but
may have first taken possession thereof in good faith also pays a full and fair price for the same at the time
of such purchase or before he has notice of the claim
Immovable property or interest of some other person in the property.
1) The first to register the property in good faith
2) The first to possess the property in good faith When double sale cannot be invoked
3) The one who presents the oldest title in good 1) Where there are two (2) different contracts of
faith sale made by two (2) different persons, one of
whom not being the owner of the property
Good faith must be present in the three instances sold;
1) First buyer – primus tempore poture jure 2) When the earlier transaction is a pacto de retro
2) Second buyer – Uraca case sale of an unregistered land and the subsequent
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Sales | VENTEROSO
conveyance is a donation of the land in favor GR: Nemo dat quod non habet. Article 1505 of the
of another by the vendor a retro; Civil Code provides that where goods are sold by a
3) Where one of the deeds of sale is a forgery or person who is not the owner thereof, and who does
if one sale is simulated and the other is genuine; not sell them under authority or with the consent
4) Where one sale is absolute and the other is a of the owner, the buyer acquires no better title to the
pacto de retro transaction where the period to goods than the seller had.
redeem has not yet expired; XPNs:
5) Where one of the sales is subject to a 1) Under Article 1505 of the Civil Code, when the
suspensive condition which condition was not owner is, by his conduct, precluded from
complied with and the other is an absolute sale denying the seller’s authority to sell;
being that a conditional sale is not a full-fledged  the owner must, by word or conduct,
sale before the condition had been performed; have caused or allowed it to appear that
6) Where one contract is a sale of the land itself the title or authority to sell is with the
and the other contract was either a mere seller and the buyer must have been
promise to assign or at most, an actual misled to his damage.
assignment of the right to repurchase the same 2) Under Article 1505 of the Civil Code, when the
property; contrary is provided for in recording laws;
7) Where one transaction is a sale and the other is  Recording laws - refer to the Property
a mortgage; Registration Decree and related
8) Where one claim is based on prescription and statutes
the other is on sale; and 3) Under Article 1505 of the Civil Code, sales
9) In a contract to sell, there being no previous made under statutory power of sale or under
sale of the property. the order of a court of competent
jurisdiction;
SALE BY A NON-OWNER  Judgment of courts divesting the
Article 1505 registered owner of title and vesting
Subject to the provisions of this Title, where goods them in the other party are valid
are sold by a person who is not the owner thereof, although the courts may not be the
and who does not sell them under authority or with owner of the land.
the consent of the owner, the buyer acquires no 4) Under Article 1505 of the Civil Code, sales
better title to the goods than the seller had, unless
made in a merchant’s store in accordance
the owner of the goods is by his conduct precluded
with the Code of Commerce and special laws;
from denying the seller's authority to sell.
 acquires a valid title to the thing
Nothing in this Title, however, shall affect: although his predecessors-in-interest
did not have any right of ownership
(1) The provisions of any factors' act, recording laws, over it.
or any other provision of law enabling the apparent  Protecting innocent third parties who
owner of goods to dispose of them as if he were the have made purchases at merchant’s
true owner thereof; stores in good faith and for value
(2) The validity of any contract of sale under appears to be a wise and necessary rule
statutory power of sale or under the order of a court not only to facilitate commercial sales
of competent jurisdiction; on movables but to give stability to
(3) Purchases made in a merchant's store, or in fairs,
business transactions.
or markets, in accordance with the Code of
5) Special rights of an unpaid seller of goods
Commerce and special laws. (n)
under Articles 1526 and 1533 of the Civil Code;
Q: Can you sell what you do not own?
A: Yes, as long as you own it during consummation Article 1526. Subject to the provisions of this Title,
stage. A valid sale exists to bind both parties even if at notwithstanding that the ownership in the
goods may have passed to the buyer, the unpaid
the at the time of perfection, the seller was not the
seller of goods, as such, has:
owner thereof. It is the consummation stage that
concerns itself with the actual transfer of ownership of (1) A lien on the goods or right to retain them for
the subject matter and the payment of the price; the price while he is in possession of them;
perfection merely concerns itself with the creation of (2) In case of the insolvency of the buyer, a right of
the obligations to transfer and to pay. stopping the goods in transitu after he has parted
with the possession of them;
Nemo dat quod non habet (3) A right of resale as limited by this Title;
It is at the consummation stage where the principle of (4) A right to rescind the sale as likewise limited by
nemo dat quod non habet applies. this Title.
Sale of a non-owner Where the ownership in the goods has not passed to
the buyer, the unpaid seller has, in addition to his
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Sales | VENTEROSO
other remedies a right of withholding delivery

similar to and coextensive with his rights of lien Doctrine/theory of irreivindicability
and stoppage in transitu where the ownership GR: possession of movable property acquired in good
has passed to the buyer. (n) faith is equivalent to title.
XPN: one who has either lost any movable or has been
Article 1533. Where the goods are of perishable unlawfully deprived thereof may recover it from the
nature, or where the seller expressly reserves the person in possession of the same.
right of resale in case the buyer should make default,
XPN of XPN: if acquired in a public sale or merchant
or where the buyer has been in default in the
payment of the price for an unreasonable time, an store, the one unlawfully deprived cannot recover
unpaid seller having a right of lien or having if the buyer acquired it in good faith at a public
stopped the goods in transitu may resell the sale unless he reimburses the buyer for the price
goods. He shall not thereafter be liable to the paid.
original buyer upon the contract of sale or for any
profit made by such resale, but may recover from the Article 1506. Where the seller of goods has a
buyer damages for any loss occasioned by the breach voidable title thereto, but his title has not been
of the contract of sale. avoided at the time of the sale, the buyer acquires
a good title to the goods, provided he buys them
Where a resale is made, as authorized in this article, in good faith, for value, and without notice of the
the buyer acquires a good title as against the original seller's defect of title. (n)
buyer.
Seller with voidable title
It is not essential to the validity of resale that notice If the seller of the goods has a voidable title thereto,
of an intention to resell the goods be given by the the buyer can still acquire a good title thereof.
seller to the original buyer. But where the right to
resell is not based on the perishable nature of the
Application
goods or upon an express provision of the contract
The Article applies only if the seller has a title to the
of sale, the giving or failure to give such notice shall
be relevant in any issue involving the question property although it may be voidable. It cannot apply
whether the buyer had been in default for an to a situation where the seller has no title at all to the
unreasonable time before the resale was made. property which he is selling.
It is not essential to the validity of a resale that notice Requisites for buyer to acquire good title
of the time and place of such resale should be given 1) He is in good faith; (GOOD FAITH)
by the seller to the original buyer. 2) He paid something of value for the property;
and (FOR VALUE)
The seller is bound to exercise reasonable care and 3) He is not aware of the seller’s defect or flaw on
judgment in making a resale, and subject to this the title. (NO KNOWLEDGE)
requirement may make a resale either by public or
private sale. He cannot, however, directly or
Rationale
indirectly buy the goods. (n)
1) A voidable contract is valid until it is duly
annulled; and
6) Under Article 1506 of the Civil Code, the sale
2) Where one of two (2) innocent parties must
by a seller who at the time of delivery had
suffer, he who places the offender in a position
voidable title to the thing delivered; and
to do wrong must be the one to suffer the
7) In case of movables, under Article 559 of the
consequences of his actions.
Civil Code, acquisition of possession in good
faith under a claim of ownership where the real
owner has NOT lost or has NOT been
unlawfully deprived of the movable makes
the possessor the rightful owner of the
movable.
Sale by one having a voidable title

COMPARISON OF CASES
Article 559. The possession of movable property
acquired in good faith is equivalent to a title. Aznar EDCA Tagatac
Nevertheless, one who has lost any movable or has Possessor is in good faith
been unlawfully deprived thereof, may recover it Not acquired in a public sale
from the person in possession of the same. Unlawfully Not unlawfully deprived
deprived
If the possessor of a movable lost or which the No transfer of There is transfer of ownership
owner has been unlawfully deprived, has acquired it ownership
in good faith at a public sale, the owner cannot Remedy is Remedy is an ordinary action for
obtain its return without reimbursing the price Article 559; collection of sum of money
paid therefor. (464a) Can recover
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Sales | VENTEROSO
without against the buyer, with recovery (1) Where delivery of the goods has been made to
indemnity of damages the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has
Sale by a co-owner been retained by the seller merely to secure
Rules performance by the buyer of his obligations under
1) Every co-owner has the right to sell his pro- the contract, the goods are at the buyer's risk from
indiviso share in the co-owned property even the time of such delivery;
without the consent of the other co-owners; (2) Where actual delivery has been delayed through
the fault of either the buyer or seller the goods are
2) But that none of the co-owners may claim
at the risk of the party in fault. (n)
any right, title or interest to a particular
portion of the thing owned in common; and Rules governing loss
3) Therefore, a co-owner has no right to sell a GR: the goods remain at the seller's risk until the
divided part of the real estate. ownership therein is transferred to the buyer
XPN:
Loss, deterioration, fruits and other benefits 1) Where delivery of the goods has been made to
Application the buyer or to a bailee for the buyer, in
Only contracts of sale where the subject matter is pursuance of the contract and the ownership in
determinate or specific pursuant to the maxim Genus the goods has been retained by the seller merely
Nunquam Perit (generic thing never perishes) to secure performance by the buyer of his
obligations under the contract, the goods are at
During negotiation stage/before perfection the buyer's risk from the time of such delivery;
Res perit domino – The thing perishes with its owner 2) Where actual delivery has been delayed
through the fault of either the buyer or seller
At time of perfection the goods are at the risk of the party in fault
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the
Article 1537. The vendor is bound to deliver the
contract has been entirely lost, the contract shall be
thing sold and its accessions and accessories in the
without any effect.
condition in which they were upon the perfection of
the contract.
But if the thing should have been lost in part only,
the vendee may choose between withdrawing from
All the fruits shall pertain to the vendee from the
the contract and demanding the remaining part,
day on which the contract was perfected. (1468a)
paying its price in proportion to the total sum agreed
upon. (1460a)
Article 1538. In case of loss, deterioration or
improvement of the thing before its delivery, the
Article 1494. Where the parties purport a sale of
rules in article 1189 shall be observed, the vendor
specific goods, and the goods without the
being considered the debtor. (n)
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 Article 1189. When the conditions have been
may at his option treat the sale: imposed with the intention of suspending the
efficacy of an obligation to give, the following
(1) As avoided; or rules shall be observed in case of the improvement,
(2) As valid in all of the existing goods or in so much loss or deterioration of the thing during the
thereof as have not deteriorated, and as binding the pendency of the condition:
buyer to pay the agreed price for the goods in which
the ownership will pass, if the sale was divisible. (n) Xxx
(3) When the thing deteriorates without the fault of
Totally lost – the contract shall be without any effect the debtor, the impairment is to be borne by the
creditor;
Partially lost - the buyer may choose between
(4) If it deteriorates through the fault of the debtor,
withdrawing from the contract and demanding the the creditor may choose between the rescission of
remaining part, paying its price in proportion to the the obligation and its fulfillment, with indemnity for
total sum agreed upon. damages in either case;
(5) If the thing is improved by its nature, or by time,
After perfection but before delivery the improvement shall inure to the benefit of the
Article 1504. Unless otherwise agreed, the goods creditor;
remain at the seller's risk until the ownership (6) If it is improved at the expense of the debtor, he
therein is transferred to the buyer, but when the shall have no other right than that granted to the
ownership therein is transferred to the buyer the usufructuary. (1122)
goods are at the buyer's risk whether actual delivery
has been made or not, except that: Rules governing deterioration and improvement
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Sales | VENTEROSO
1) When the thing deteriorates without the fault buyer at the time of the purchase or before receipt of
of the seller, the impairment is to be borne by any notice of claims or interest of some other person
the buyer; in the property. To successfully invoke and be
2) If the thing deteriorates through the fault of considered as a buyer in good faith, the presumption is
the seller, the buyer may choose between the that first and foremost, the "buyer in good faith" must
rescission of the obligation and its fulfillment, have shown prudence and due diligence in the exercise
with indemnity for damages in either case; of his/her rights.
3) If the thing is improved by its nature, or by
time, the improvement shall inure to the Information asymmetry
benefit of the buyer; and The “Caveat Emptor” principle arises primarily from
4) If the thing is improved at the expense of the the asymmetry of information between a purchaser and
seller, he shall have no other right than that a seller. The information is asymmetric or
granted to the usufructuary. disproportionate because the seller tends to possess
more information regarding the product than the
The only logical and reasonable conclusion one can buyer.
derive from the foregoing discussion is that the rule
of Res Perit Domino provided in Article 1504 on REMEDIES OF THE BUYER
goods, applies only to “loss” and provides no 1) file an action for specific performance with
application to issues pertaining to “deterioration”, damages in case of failure to deliver
“fruits” and “improvements over the subject matter
of the sale.
Article 1598. Where the seller has broken a contract
to deliver specific or ascertained goods, a court may,
Upon consummation/after delivery on the application of the buyer, direct that the
Article 1504. Unless otherwise agreed, the goods contract shall be performed specifically, without
remain at the seller's risk until the ownership therein giving the seller the option of retaining the
is transferred to the buyer, but when the ownership goods on payment of damages. The judgment or
therein is transferred to the buyer the goods are at decree may be unconditional, or upon such terms
the buyer's risk whether actual delivery has been and conditions as to damages, payment of the price
made or not xxx and otherwise, as the court may deem just. (n)
REMEDIES IN CASE OF BREACH 2) accept or reject the goods or rescind the

1) the remedies of the buyer; sale in case of breach of seller’s warranty
2) the ordinary remedies of the seller;
3) the special remedies of an unpaid seller of Article 1599. Where there is a breach of warranty
goods; and by the seller, the buyer may, at his election:
4) the sale of movable on installments.
(1) Accept or keep the goods and set up against the
Caveat emptor seller, the breach of warranty by way of recoupment
GR: Requires the buyer to be aware of the supposed in diminution or extinction of the price;
title of the seller to the subject matter and that a buyer (2) Accept or keep the goods and maintain an
who buys without checking the seller’s title takes action against the seller for damages for the
all the risks and losses consequent to such failure. breach of warranty;
The doctrine is not meant to excuse the seller from his (3) Refuse to accept the goods, and maintain an
action against the seller for damages for the breach
warranties, but is essentially used to determine whether
of warranty;
the buyer, in taking delivery of the subject matter of (4) Rescind the contract of sale and refuse to
sale, can be considered a buyer in good faith or to receive the goods or if the goods have already
determine whether the buyer assumed the risks and been received, return them or offer to return them
contingencies attached to the subject matter of sale. to the seller and recover the price or any part
XPN: Torrens title, an innocent buyer/purchaser thereof which has been paid.
for value need only rely upon the title of a registered
land and has no obligation to look beyond such title When the buyer has claimed and been granted a
(the “Mirror Principle”), provided remedy in anyone of these ways, no other remedy
1) must still ensure that he is dealing with the can thereafter be granted, without prejudice to the
actual registered owner. provisions of the second paragraph of article 1191.
2) must conduct an ocular examination of the
Where the goods have been delivered to the buyer,
land or real estate he is purchasing and cannot
he cannot rescind the sale if he knew of the
just rely upon the description in the title
breach of warranty when he accepted the goods
without protest, or if he fails to notify the seller
Innocent purchaser for value within a reasonable time of the election to
One who buys the property of another, without notice rescind, or if he fails to return or to offer to return
that some other person has a right or interest in the the goods to the seller in substantially as good
property, for which a full and fair price is paid by the condition as they were in at the time the
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Sales | VENTEROSO
ownership was transferred to the buyer. But if them to the seller and recover the price or any
deterioration or injury of the goods is due to the part thereof which has been paid.
breach of warranty, such deterioration or injury
shall not prevent the buyer from returning or 3) Suspension of payments in anticipation of
offering to return the goods to the seller and breach
rescinding the sale. Article 1590. Should the vendee be disturbed in the
possession or ownership of the thing acquired, or
Where the buyer is entitled to rescind the sale and should he have reasonable grounds to fear such
elects to do so, he shall cease to be liable for the disturbance, by a vindicatory action or a
price upon returning or offering to return the foreclosure of mortgage, he may suspend the
goods. If the price or any part thereof has already payment of the price until the vendor has caused
been paid, the seller shall be liable to repay so much the disturbance or danger to cease, unless the
thereof as has been paid, concurrently with the latter gives security for the return of the price in a
return of the goods, or immediately after an offer to proper case, or it has been stipulated that,
return the goods in exchange for repayment of the notwithstanding any such contingency, the vendee
price. shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of
Where the buyer is entitled to rescind the sale and the payment of the price. (1502a)
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
When payments may be suspended
thereafter be deemed to hold the goods as bailee
for the seller, but subject to a lien to secure the 1) Vendee is disturbed in the possession or
payment of any portion of the price which has ownership
been paid, and with the remedies for the  A mere act of trespass shall not
enforcement of such lien allowed to an unpaid authorize the suspension of the
seller by article 1526. payment of the price.
2) Vendee has reasonable grounds to fear such
(5) In the case of breach of warranty of quality, such disturbance by a vindicatory action or
loss, in the absence of special circumstances foreclosure of a mortgage
showing proximate damage of a greater amount, is
the difference between the value of the goods at Exceptions
the time of delivery to the buyer and the value 1) Seller gives security for the return of the price
they would have had if they had answered to the
in a proper case
warranty. (n)
2) It has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound
In case the seller breaches his warranty, the buyer
to make the payment.
may avail of the following remedies:
1) Accept or keep the goods and set up against
ORDINARY REMEDIES OF A SELLER
the seller, the breach of warranty by way of
1) File an action for specific performance for
recoupment in diminution or extinction of
non-payment of the price
the price;
 reduction or extinction of the price of
Article 1595. Where, under a contract of sale, the
the same item or unit sold and not to
ownership of the goods has passed to the buyer and
a different transaction or contract of
he wrongfully neglects or refuses to pay for the
sale. (First United Constructors goods according to the terms of the contract of sale,
Corporation v. Bayanihan the seller may maintain an action against him for
Automotive Corporation) the price of the goods.
 That there was a series of purchases
made by petitioners could not be Where, under a contract of sale, the price is payable
considered as a single transaction on a certain day, irrespective of delivery or of
(First United Constructors transfer of title and the buyer wrongfully neglects or
Corporation v. Bayanihan refuses to pay such price, the seller may maintain
Automotive Corporation) an action for the price although the ownership
2) Accept or keep the goods and maintain an in the goods has not passed. But it shall be a
action against the seller for damages for the defense to such an action that the seller at any
time before the judgment in such action has
breach of warranty;
manifested an inability to perform the contract
3) Refuse to accept the goods, and maintain an of sale on his part or an intention not to perform
action against the seller for damages for the it.
breach of warranty;
4) Rescind the contract of sale and refuse to Although the ownership in the goods has not
receive the goods or if the goods have already passed, if they cannot readily be resold for a
been received, return them or offer to return reasonable price, and if the provisions of article
1596, fourth paragraph, are not applicable, the seller
may offer to deliver the goods to the buyer, and,
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Sales | VENTEROSO
if the buyer refuses to receive them, may notify In the case of the remedies of the unpaid seller, the
the buyer that the goods are thereafter held by minimum requirement is that the goods are in
the seller as bailee for the buyer. Thereafter the the possession of the seller so as to prevent an
seller may treat the goods as the buyer's and may actual physical tussle with the buyer in the exercise
maintain an action for the price. (n) of such remedies.
2) File an action for damages in case of Doctrine of self-help

wrongful refusal to accept the goods Article 429. The owner or lawful possessor of a thing
has the right to exclude any person from the
Article 1596. Where the buyer wrongfully neglects or enjoyment and disposal thereof. For this purpose, he
refuses to accept and pay for the goods, the seller may use such force as may be reasonably
may maintain an action against him for damages necessary to repel or prevent an actual or
for nonacceptance. threatened unlawful physical invasion or
usurpation of his property. (n)
The measure of damages is the estimated loss
directly and naturally resulting in the ordinary Unpaid seller
course of events from the buyer's breach of Article 1525. The seller of goods is deemed to be an
contract. unpaid seller within the meaning of this Title:
Where there is an available market for the goods (1) When the whole of the price has not been paid
in question, the measure of damages is, in the or tendered;
absence of special circumstances showing proximate (2) When a bill of exchange or other negotiable
damage of a different amount, the difference instrument has been received as conditional
between the contract price and the market or current payment, and the condition on which it was
price at the time or times when the goods ought to received has been broken by reason of the
have been accepted, or, if no time was fixed for dishonor of the instrument, the insolvency of the
acceptance, then at the time of the refusal to accept. buyer, or otherwise.
If, while labor or expense of material amount is In articles 1525 to 1535 the term "seller" includes an
necessary on the part of the seller to enable him to agent of the seller to whom the bill of lading has
fulfill his obligations under the contract of sale, the been indorsed, or a consignor or agent who has
buyer repudiates the contract or notifies the seller to himself paid, or is directly responsible for the price,
proceed no further therewith, the buyer shall be or any other person who is in the position of a seller.
liable to the seller for labor performed or (n)
expenses made before receiving notice of the
buyer's repudiation or countermand. The profit Article 1526. Subject to the provisions of this Title,
the seller would have made if the contract or the sale notwithstanding that the ownership in the goods
had been fully performed shall be considered in may have passed to the buyer, the unpaid seller of
awarding the damages. (n) goods, as such, has:
3) Recission in case the buyer has repudiated (1) A lien on the goods or right to retain them for
the sale or manifested inability to perform the price while he is in possession of them;
his obligations (2) In case of the insolvency of the buyer, a right of
stopping the goods in transitu after he has
Article 1597. Where the goods have not been parted with the possession of them;
delivered to the buyer, and the buyer has repudiated (3) A right of resale as limited by this Title;
the contract of sale, or has manifested his inability to (4) A right to rescind the sale as likewise limited by
perform his obligations thereunder, or has this Title.
committed a breach thereof, the seller may totally
rescind the contract of sale by giving notice of Where the ownership in the goods has not passed
his election so to do to the buyer. (n) to the buyer, the unpaid seller has, in addition to his
other remedies a right of withholding delivery
SPECIAL REMEDIES OF AN UNPAID similar to and coextensive with his rights of lien and
SELLER stoppage in transitu where the ownership has passed
to the buyer. (n)
The provisions of the Civil Code on the remedies of an
unpaid seller demonstrate the intention of the Code
1) Possessory lien
Commission to empower individuals with remedies to
take matters into their own hands when the
Article 1527. Subject to the provisions of this Title,
circumstances warrant the same, provided it does not
the unpaid seller of goods who is in possession of
involve physical intrusion into the person or them is entitled to retain possession of them until
privacy of the buyer in default, by being able to payment or tender of the price in the following cases,
achieve the legal effects without need of seeking namely:
the intervention of the courts.
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Sales | VENTEROSO
(1) Where the goods have been sold without any to the buyer or his agent that he holds the goods
stipulation as to credit; on his behalf and continues in possession of
(2) Where the goods have been sold on credit, but them as bailee for the buyer or his agent; and it is
the term of credit has expired; immaterial that further destination for the goods
(3) Where the buyer becomes insolvent. may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses
The seller may exercise his right of lien to deliver the goods to the buyer or his agent in
notwithstanding that he is in possession of the goods that behalf.
as agent or bailee for the buyer. (n)
If the goods are delivered to a ship, freight train,
Article 1528. Where an unpaid seller has made part truck, or airplane chartered by the buyer, it is a
delivery of the goods, he may exercise his right of question depending on the circumstances of the
lien on the remainder, unless such part delivery has particular case, whether they are in the
been made under such circumstances as to show an possession of the carrier as such or as agent of
intent to waive the lien or right of retention. (n) the buyer.
Article 1529. The unpaid seller of goods loses his lien If part delivery of the goods has been made to the
thereon: buyer, or his agent in that behalf, the remainder of
the goods may be stopped in transitu, unless such
(1) When he delivers the goods to a carrier or other part delivery has been under such circumstances as
bailee for the purpose of transmission to the buyer to show an agreement with the buyer to give up
without reserving the ownership in the goods or the possession of the whole of the goods. (n)
right to the possession thereof;
(2) When the buyer or his agent lawfully obtains Article 1532. The unpaid seller may exercise his right
possession of the goods; of stoppage in transitu either by obtaining actual
(3) By waiver thereof. possession of the goods or by giving notice of
his claim to the carrier or other bailee in whose
The unpaid seller of goods, having a lien thereon, possession the goods are. Such notice may be
does not lose his lien by reason only that he has given either to the person in actual possession of the
obtained judgment or decree for the price of the goods or to his principal. In the latter case the notice,
goods. (n) to be effectual, must be given at such time and
under such circumstances that the principal, by
2) Stoppage in transitu the exercise of reasonable diligence, may
prevent a delivery to the buyer.
Article 1530. Subject to the provisions of this Title,
When notice of stoppage in transitu is given by the
when the buyer of goods is or becomes insolvent,
seller to the carrier, or other bailee in possession of
the unpaid seller who has parted with the
the goods, he must redeliver the goods to, or
possession of the goods has the right of
according to the directions of, the seller. The
stopping them in transitu, that is to say, he may
expenses of such delivery must be borne by the
resume possession of the goods at any time while
seller. If, however, a negotiable document of title
they are in transit, and he will then become
representing the goods has been issued by the
entitled to the same rights in regard to the goods
carrier or other bailee, he shall not be obliged to
as he would have had if he had never parted with
deliver or justified in delivering the goods to the
the possession. (n)
seller unless such document is first surrendered
for cancellation. (n)
Article 1531. Goods are in transit within the meaning
of the preceding article:
Notwithstanding that the ownership in the goods may
(1) From the time when they are delivered to a have passed to the buyer, the unpaid seller of goods
carrier by land, water, or air, or other bailee for the has, in case of the insolvency of the buyer, a right of
purpose of transmission to the buyer, until the stopping the goods in transit. This remedy allows the
buyer, or his agent in that behalf, takes delivery seller to resume possession of the goods at any time
of them from such carrier or other bailee; while they are in transit. He will then become entitled
(2) If the goods are rejected by the buyer, and the to the same rights in regard to the goods as he would
carrier or other bailee continues in possession of have had if he had never parted with the possession.
them, even if the seller has refused to receive them
back. 3) Special right of resale
Goods are no longer in transit within the meaning Article 1533. Where the goods are of perishable
of the preceding article: nature, or where the seller expressly reserves the
(1) If the buyer, or his agent in that behalf, obtains right of resale in case the buyer should make
delivery of the goods before their arrival at the default, or where the buyer has been in default in
appointed destination; the payment of the price for an unreasonable
(2) If, after the arrival of the goods at the appointed time, an unpaid seller having a right of lien or
destination, the carrier or other bailee acknowledges having stopped the goods in transitu may resell
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Sales | VENTEROSO
the goods. He shall not thereafter be liable to the manifested by notice to the buyer or by some
original buyer upon the contract of sale or for other overt act an intention to rescind. It is not
any profit made by such resale, but may recover necessary that such overt act should be
from the buyer damages for any loss occasioned communicated to the buyer, but the giving or failure
by the breach of the contract of sale. to give notice to the buyer of the intention to rescind
shall be relevant in any issue involving the question
Where a resale is made, as authorized in this article, whether the buyer had been in default for an
the buyer acquires a good title as against the unreasonable time before the right of rescission
original buyer. was asserted. (n)
It is not essential to the validity of resale that notice An unpaid seller having the right of lien or having
of an intention to resell the goods be given by the stopped the goods in transitu, may rescind the transfer
seller to the original buyer. But where the right to of title and resume the ownership in the goods, where;
resell is not based on the perishable nature of the 1) The expressly reserved the right to do so in
goods or upon an express provision of the case the buyer should make default; or
contract of sale, the giving or failure to give such
2) The buyer has been in default in the payment
notice shall be relevant in any issue involving the
question whether the buyer had been in default of the price for an unreasonable time.
for an unreasonable time before the resale was
made. *The four (4) remedies of an unpaid seller have a hierarchical
application
It is not essential to the validity of a resale that notice
of the time and place of such resale should be given SALE OF MOVABLES ON INSTALLMENT
by the seller to the original buyer. (“RECTO LAW”)
Article 1484. In a contract of sale of personal
The seller is bound to exercise reasonable care property the price of which is payable in
and judgment in making a resale, and subject to installments, the vendor may exercise any of the
this requirement may make a resale either by public following remedies:
or private sale. He cannot, however, directly or
indirectly buy the goods. (n) (1) Exact fulfillment of the obligation, should the
vendee fail to pay;
The special right of resale can be made only when the (2) Cancel the sale, should the vendee's failure to
unpaid seller has previously exercised either his pay cover two or more installments;
1) right of possessory lien or (3) Foreclose the chattel mortgage on the thing
2) stoppage in transit sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In
Conditions this case, he shall have no further action against the
1) The goods are of perishable nature;
purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. (1454-
2) The seller expressly reserves the right of resale
A-a)
in case the buyer should make default; or
3) Where the buyer has been in default in the Remedies
payment of the price for an unreasonable time.
1) Exact fulfillment of the obligation, should the
The seller can resell the subject matter herein vendee fail to pay;
without need of first rescinding the contract
2) Cancel or Rescind the sale, should the vendee's
judicially. That is, he can effect these even without
failure to pay cover two or more installments;
judicial action.
or
4) Special right to rescind 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
Article 1534. An unpaid seller having the right of lien
or having stopped the goods in transitu, may rescind installments. In this case, he shall have no
the transfer of title and resume the ownership in the further action against the purchaser to recover
goods, where he expressly reserved the right to do any unpaid balance of the price. Any agreement
so in case the buyer should make default, or where to the contrary shall be void.
the buyer has been in default in the payment of  actual foreclosure is necessary to bar
the price for an unreasonable time. The seller the vendor from recovering the unpaid
shall not thereafter be liable to the buyer upon the balance.
contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the First, the first remedy is available even after the first
contract. default. However, the second and third remedies are
only available after failure to pay two (2) or more
The transfer of title shall not be held to have been
installments. Second, when the third remedy is chosen,
rescinded by an unpaid seller until he has
there is an explicit provision that the seller can have no
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Sales | VENTEROSO
further action against the buyer to recover any unpaid 1) The Maceda Law” (Republic Act 6552)
balance of the price. Any agreement to the contrary 2) The Subdivision and Condominium Buyers’
shall be void. Protective Decree” (Presidential Decree No.
957).
GR: The remedies under Article 1484 have been
recognized as alternative, not cumulative, in that the Remedies of seller
exercise of one would bar the exercise of the others. 1) Sue for rescission of the sale in anticipation of
XPN: when you chose the first option (i.e., exact breach
fulfillment) and the vendee refuses to comply or the 2) Action to collect the balance or to rescind the
same has become impossible, resort to rescission of the contract in case of failure to pay the price
contract will still be allowed. Also, the seller may still
recover from the buyer the unpaid balance of the Sue for rescission of the sale in anticipation of breach
purchase price if after choosing the first remedy there Article 1591
exists a deficiency. Should the vendor have reasonable grounds to
fear the loss of immovable property sold and its
Article 1485. The preceding article shall be applied to price, he may immediately sue for the rescission
contracts purporting to be leases of personal of the sale.
property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment Should such ground not exist, the provisions of
of the thing. (1454-A-a) article 1191 shall be observed. (1503)
Article 1486. In the case referred to in the two Article 1191. The power to rescind obligations is
preceding articles, a stipulation that the installments implied in reciprocal ones, in case one of the
or rents paid shall not be returned to the vendee or obligors should not comply with what is incumbent
lessee shall be valid insofar as the same may not be upon him.
unconscionable under the circumstances. (n)
The injured party may choose between the
A stipulation for the forfeiture of the amounts paid by fulfillment and the rescission of the obligation, with
the buyer even when the contract is rescinded is not the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment,
really contrary to the remedy of rescission since to a
if the latter should become impossible.
great extent, it offers a means of restitution to the
obligee for the loss in value or deterioration of the The court shall decree the rescission claimed, unless
thing subject of the sale, or recompense for the lost there be just cause authorizing the fixing of a period.
opportunity suffered by the seller due to the default of
the buyer. This is understood to be without prejudice to the
rights of third persons who have acquired the thing,
The contract, in the instant case, while a sale of in accordance with articles 1385 and 1388 and the
personal property, is not, however, one on Mortgage Law. (1124)
installments, but on straight term, in which the
balance, after payment of the initial sum, should be RULES
paid in its totality at the time specified in the 1) If the seller has reasonable grounds to fear the
promissory note. The transaction is not, therefore, loss of the immovable property and its price,
the one contemplated in Act No. 4122 and he may immediately sue for the rescission of
accordingly the mortgagee is not bound by the the sale.
prohibition therein contained as to the right to the 2) Should such grounds not exist, upon
recovery of the unpaid balance.
substantial breach by the buyer for failure to
Undoubtedly, the law is aimed at those sales where comply with his obligation to pay the price
the price is payable in several installments, for, when due, the seller may sue for rescission of
generally, it is in these cases that partial payments the sale.
consist in relatively small amounts, constituting thus
a great temptation for improvident purchasers to Action to collect the balance or to rescind the contract
buy beyond their means. There is no such in case of failure to pay the price
temptation where the price is to be paid in cash, or, Article 1592. In the sale of immovable property, even
as in the instant case, partly in cash and partly in one though it may have been stipulated that upon
term, for, in the latter case, the partial payments are failure to pay the price at the time agreed upon
not so small as to place purchasers off their guard the rescission of the contract shall of right take
and delude them to a miscalculation of their ability place, the vendee may pay, even after the
to pay. (Levy Hermanos, Inc. v. Lazaro expiration of the period, as long as no demand
Gervacio) for rescission of the contract has been made
upon him either judicially or by a notarial act.
SALE OF IMMOVABLE PROPERTIES After the demand, the court may not grant him a
Governing laws new term. (1504a)
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2) To rescind or resolve the contract of sale

Application either judicially or by a notarial act; and
The rule under Article 1592 does not apply to a sale of 3) In either (1) or (2), to recover damages for
immovable on installment as the procedure to be the breach of the contract.
followed therein is the Maceda Law.
Remedies of buyer
Nuñez v. Moises-Palma 1) Suspension of payment in case of
What is the legal effect of the non-payment of the disturbance
purchase price? 2) Reimbursement of the total amount paid in
case of subdivision or condominium
1) Art 1595 - Where, under a contract of sale, the projects
ownership of the goods has passed to the
buyer, and he wrongfully neglects or refuses to Suspension of payment in case of disturbance
pay for the goods according to the terms of the Article 1590
contract of sale, the seller may maintain an Should the vendee be disturbed in the possession or
action against him for the price of the ownership of the thing acquired, or should he have
goods. reasonable grounds to fear such disturbance, by a
2) Art 1596 - Where the buyer wrongfully neglects vindicatory action or a foreclosure of mortgage, he
or refuses to accept and pay for the goods, the may suspend the payment of the price until the
seller may maintain an action against him for vendor has caused the disturbance or danger to
damages for nonacceptance. cease, unless the latter gives security for the
return of the price in a proper case, or it has been
stipulated that, notwithstanding any such
The measure of damages is the estimated loss
contingency, the vendee shall be bound to make
directly and naturally resulting in the the payment. A mere act of trespass shall not
ordinary course of events from the buyer's authorize the suspension of the payment of the
breach of contract. price. (1502a)
With respect to the sale of immovable properties, Reimbursement of the total amount paid in case of
the remedies of the vendor are provided in the subdivision or condominium projects
following Civil Code provisions: THE SUBDIVISION AND
1) Art 1591 - Should the vendor have reasonable CONDOMINIUM BUYERS’ PROTECTIVE
grounds to fear the loss of immovable DECREE PRESIDENTIAL DECREE
property sold and its price, he may (P.D.) NO. 957
immediately sue for the rescission of the sale. Section 1. Title. This Decree shall be known as THE
Should such ground not exist, the provisions of SUBDIVISION AND CONDOMINIUM
Article 1191 shall be observed. BUYERS' PROTECTIVE DECREE. xxx
2) Art 1592 - In the sale of immovable property,
even though it may have been stipulated that Section 23. Non-Forfeiture of Payments. No installment
upon failure to pay the price at the time payment made by a buyer in a subdivision or
agreed upon the rescission of the contract shall condominium project for the lot or unit he contracted
of right take place, the vendee may pay, even to buy shall be forfeited in favor of the owner or
after the expiration of the period, as long as no developer when the buyer, after due notice to the
demand for rescission of the contract has been owner or developer, desists from further payment
made upon him either judicially or by a due to the failure of the owner or developer to
notarial act. After the demand, the court may develop the subdivision or condominium project
not grant him a new term. according to the approved plans and within the time
3) Art 2242 - With reference to specific limit for complying with the same. Such buyer may,
immovable property and real rights of the at his option, be reimbursed the total amount paid
debtor, the following claims, mortgages and including amortization interests but excluding
liens shall be preferred, and shall constitute an delinquency interests, with interest thereon at the
encumbrance on the immovable or real right: legal rate.
xxx (2) For the unpaid price of real property Section 24. Failure to pay installments. The rights of the
sold, upon the immovable sold. Xxx buyer in the event of this failure to pay the
installments due for reasons other than the failure of
The remedies of the unpaid seller, after ownership of the owner or developer to develop the project shall be
the real property not covered by Republic Act No. governed by Republic Act No. 6552.
6552 or the Maceda Law, has been vested to the
buyer, are: Where the transaction or contract was entered into
1) To compel specific performance by filing prior to the effectivity of Republic Act No. 6552 on
an action against the buyer for the agreed August 26, 1972, the defaulting buyer shall be entitled
purchase price; or to the corresponding refund based on the
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Sales | VENTEROSO
installments paid after the effectivity of the law in at least two years of installments, the buyer is
the absence of any provision in the contract to the entitled to the following rights in case he defaults in the
contrary. payment of succeeding installments:
The buyer’s cause of action ripens only when the A) To pay, without additional interest, the
developer fails to complete the project on the lapse unpaid installments due within the total grace
of the completion period stated on the sale period earned by him which is hereby fixed
contract or the developer’s Licenses to Sell. at the rate of one month grace period for
every one year of installment payments
However, the mere dissatisfaction of the buyer as made: Provided, That this right shall be
to the completion date of the project does not itself exercised by the buyer only once in every five
constitute substantial breach as to authorize the years of the life of the contract and its
buyer to rescind the contract and ask for refund of the extensions, if any.
amounts paid to the seller. B) If the contract is canceled, the seller shall
refund to the buyer the cash surrender value
This decree, aptly entitled "The Subdivision and of the payments on the property equivalent
Condominium Buyers' Protective Decree", was to fifty per cent (50%) of the total payments
issued in the wake of numerous reports that many made, and, after five years of installments,
real estate subdivision owners, developers, operators an additional five per cent (5%) every year
and/or sellers "have reneged on their but not to exceed ninety per cent (90%) of
representations and obligations to provide and the total payments made: Provided, That the
maintain properly subdivision roads, drainage, actual cancellation of the contract shall
sewerage, water systems, lighting systems and other take place after thirty (30) days from receipt
basic requirements" for the health and safety of
by the buyer of the notice of cancellation or
home and lot buyer's. It was designed to stem the
the demand for rescission of the contract by
tide of "fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers a notarial act and upon full payment of the
and operators, such as failure to deliver titles to cash surrender value to the buyer.
buyers or titles free from liens and encumbrances."
(Casa Filipina Realty Corporation v. Office of Down payments, deposits or options on the
the President) contract shall be included in the computation of
the total number of installment payments made.
On this score, it is apt to mention that it is the intent (DON’T YOU FORGET!!! 😊)
of PD 957 to protect the buyer against unscrupulous
developers, operators and/or sellers who reneged on Section 4. In case where less than two years of
their obligations. Thus, in order to achieve this installments were paid, the seller shall give the buyer
purpose, equity and justice dictate that the injured
a grace period of not less than sixty (60) days from
party should be afforded full recompense and as
the date the installment became due. If the buyer
such, be allowed to recover the prevailing market
value of the undelivered lot which had been fully fails to pay the installments due at the expiration of the
paid for. (Gotesco Properties, Inc. v. Spouses grace period, the seller may cancel the contract after
Eugenio and Angelina Fajardo) thirty (30) days from receipt by the buyer of the
notice of cancellation or the demand for rescission
SALE OF REAL PROPERTY IN of the contract by a notarial act.
INSTALLMENTS OR “THE MACEDA LAW”
REPUBLIC ACT No. 6552 Section 5. Under Section 3 and 4, the buyer shall have
AN ACT TO PROVIDE PROTECTION TO the right to sell his rights or assign the same to
BUYERS OF REAL ESTATE ON another person or to reinstate the contract by
INSTALLMENT PAYMENTS updating the account during the grace period and
Section 1. This Act shall be known as the "Realty before actual cancellation of the contract. The deed of
Installment Buyer Act." sale or assignment shall be done by notarial act.
Section 2. It is hereby declared a public policy to
protect buyers of real estate on installment payments Section 6. The buyer shall have the right to pay in
against onerous and oppressive conditions. advance any installment or the full unpaid balance
of the purchase price any time without interest and
Section 3. In all transactions or contracts involving the to have such full payment of the purchase price
sale or financing of real estate on installment annotated in the certificate of title covering the
payments, including residential condominium property.
apartments but excluding industrial lots,
commercial buildings and sales to tenants under Section 7. Any stipulation in any contract hereafter
Republic Act Numbered Thirty-eight hundred forty- entered into contrary to the provisions of Sections 3,
four, as amended by Republic Act Numbered Sixty- 4, 5 and 6, shall be null and void.
three hundred eighty-nine, where the buyer has paid
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Section 8. If any provision of this Act is held invalid

or unconstitutional, no other provision shall be At least two years of installment paid
affected thereby. 1) If not canceled - Entitled to one (1) month
grace period for every one (1) year of
Section 9. This Act shall take effect upon its approval. installment payments made: Provided, That
this right shall be exercised by the buyer only
Approved: August 26, 1972. once in every five (5) years of the life of the
contract and its extensions, if any.
Objectives of the Maceda Law (Active Realty & 2) If canceled –
Development Corporation v. Daroya) a) refund to the buyer the cash surrender
The law seeks to address the acute housing shortage value of the payments on the property
problem in our country that has prompted thousands equivalent to fifty per cent (50%) of the
of middle and lower class buyers of houses, lots and total payments made,
condominium units to enter into all sorts of contracts b) after five (5) years of installments, an
with private housing developers involving installment additional five per cent (5%) every year
schemes. Lot buyers, mostly low-income earners eager but not to exceed ninety per cent (90%)
to acquire a lot upon which to build their homes, of the total payments made
readily affix their signatures on these contracts, without c) Actual cancellation must be
an opportunity to question the onerous provisions  thirty (30) days from receipt by
therein as the contract is offered to them on a "take it the buyer of a notice of
or leave it" basis. Most of these contracts of adhesion, cancellation or the demand for
drawn exclusively by the developers, entrap innocent rescission by a notarial act
buyers by requiring cash deposits for reservation  upon full payment of the cash
agreements which oftentimes include, in fine print, surrender value to the buyer.
onerous default clauses where all the installment *Until and unless the seller complies with these
payments made will be forfeited upon failure to pay any twin mandatory requirements, the contract
installment due even if the buyers had made payments remains valid and subsisting.
for several years. Real estate developers thus enjoy an
unnecessary advantage over lot buyers who they often Other rights granted to the buyer
exploit with iniquitous results. They get to forfeit all 1) The right to sell his rights or assign the
the installment payments of defaulting buyers and same to another person or to reinstate the
resell the same lot to another buyer with the same contract by updating the account during the
exigent conditions. grace period and before actual cancellation
of the contract. (Section 5 of the Maceda
Application Law)
1) The Maceda Law does not cover all sales of 2) The right to pay in advance any installment
realty on installments but primarily or the full unpaid balance of the purchase price
residential real estate. any time without interest and to have such full
2) The Maceda Law covers not only sales but payment of the purchase price annotated in the
also financing of such acquisitions certificate of title covering the property.
3) Excludes industrial lots, commercial buildings (Section 6 of the Maceda Law)
and sales to tenants.
4) The Maceda Law clearly includes in its CONDITIONS AND WARRANTIES
provisions both contracts of sale and contracts
to sell. CONDITIONS
5) The rights granted to a buyer under the Maceda Article 1545
Law depends upon the number of installments Where the obligation of either party to a contract of
already paid. sale is subject to any condition which is not
performed, such party may refuse to proceed with
Less than 2 years of installment paid the contract or he may waive performance of the
1) The vendor shall give the vendee a grace period condition. If the other party has promised that the
condition should happen or be performed, such
of not less than sixty (60) days from the date
first mentioned party may also treat the
the installment became due, without additional nonperformance of the condition as a breach of
interest. warranty.
2) If despite the grant of the grace period the
vendee still fails to pay the installments due, Where the ownership in the thing has not passed,
the vendor may cancel the contract after the buyer may treat the fulfillment by the seller of his
thirty days (30) days from receipt by the obligation to deliver the same as described and as
vendee of the notice of cancellation or the warranted expressly or by implication in the
demand for rescission of the contract by a contract of sale as a condition of the obligation
notarial act.
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Sales | VENTEROSO
of the buyer to perform his promise to accept

and pay for the thing. (n) A perfected contract of sale may either be absolute
or conditional depending on whether the agreement
Condition v. warranty is devoid of, or subject to, any condition imposed on
Condition Warranty the passing of title of the thing to be conveyed or on
The non-happening of The non-fulfillment of the obligation of a party thereto. When ownership is
the condition, although a warranty would retained until the fulfillment of a positive condition
it may extinguish the constitute a breach of the breach of the condition will simply prevent the
obligation upon which the contract duty to convey title from acquiring an obligatory
it is based, generally force. If the condition is imposed on an obligation
does not amount to a of a party which is not complied with, the other party
breach of the contract may either refuse to proceed or waive said condition
of sale. (XPN: Art 1545, (Art. 1545, Civil Code). Where, of course, the
par 2) condition is imposed upon the perfection of the
Generally, goes into the Goes into the contract itself, the failure of such condition would
root of the existence of performance of such prevent the juridical relation itself from coming into
the obligation. obligation, and in fact existence.
may constitute an
obligation in itself From the moment the contract is perfected, the
Must be stipulated by May form part of the parties are bound not only to the fulfillment of what
the parties in order to obligation or the has been expressly stipulated but also to all the
form part of an contract by provision of consequences which, according to their nature, may
obligation law, without the parties be in keeping with good faith, usage and law. Under
having expressly the agreement, private respondent is obligated to
agreed thereto evict the squatters on the property. The ejectment
May attach itself either to Whether express or of the squatters is a condition the operative act
the obligations of the implied, related to the of which sets into motion the period of
seller or the buyer subject matter itself or compliance by petitioner of his own obligation,
the obligations of the i.e., to pay the balance of the purchase price. Private
seller as to the subject respondent's failure "to remove the squatters from
matter of the sale. the property" within the stipulated period gives
petitioner the right to either refuse to proceed with
the agreement or waive that condition in
Condition imposed on Condition imposed in
consonance with Article 1545 of the Civil Code.
the perfection of a the performance of an
contract obligation
In contracts of sale particularly, Article 1545 of the
Failure to comply results Merely gives the other
Civil Code, aforementioned, allows the obligee to
in the failure of a party the option to either
choose between proceeding with the agreement
contract refuse to proceed with
or waiving the performance of the condition. It
the sale or to waive the
is this provision which is the pertinent rule in the
condition
case at bench. Here, evidently, petitioner has waived
the performance of the condition imposed on
The alleged "failure" of respondent spouses to eject private respondent to free the property from
the lessees from the lot in question and to deliver squatters. (Romero v. CA)
actual and physical possession thereof cannot be
considered a substantial breach of a condition for
In the case at bar, respondents obviously did not
two reasons: first, such "failure" was not
choose the first option as they proceeded with
stipulated as a condition — whether resolutory
their contract with petitioner despite the latter's
or suspensive — in the contract; and second, its
non-fulfillment of the condition in the
effects and consequences were not specified
agreement. In fact, in their comment, they stated
either. (Power Commercial v. CA)
that they "took possession of the properties and
caused extensive improvement and installed facilities
and equipment" thereon.
Effect of non-fulfillment of condition
1) If the obligation of either party is subject to Did respondents, however, waive fulfillment of the
any condition and such condition is not condition? Yes. The records reveal that respondents
fulfilled, such party may either: negotiated directly with Tanglaw for a new lease
 Refuse to proceed with the contract contract even without the required official
 Proceed with the contract, waiving the communication that petitioner was supposed to
performance of the condition obtain for them, a condition in the "Agreement"
2) If the condition is in the nature of a which they themselves imposed on the latter.
promise that it should happen, the non- Although they had the right to require his
compliance with the condition or compel his
performance of such condition may be
performance of the undertaking, they opted
treated by the other party as a breach of
otherwise.
warranty.
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Moreover, respondents' contention that the 2) Implied – Art 1547; those which by law
condition did not preclude them from dealing with constitute part of every contract of sale,
Tanglaw or that they were "to refrain from whether or not the parties were aware of them,
negotiating directly" can only mean that they did not and whether or not the parties intended them.
really expect petitioner to comply strictly and
absolutely with it. Respondents' conduct showed (Pilipinas Makro vs. Coco Charcoal)
that they did not only disregard the condition
Express Implied
but also placed petitioner in a position that his
Any affirmation of fact One which the law
compliance was no longer necessary. We are
or any promise by the derives by application or
thus constrained to rule that they had effectively
seller relating to the inference from the
waived compliance with the condition.
thing, the natural nature of transaction or
(Gonzales v. Lim)
tendency of which is to the relative situation or
induce the buyer to circumstances of the
Paragraph 1(b) of the Conditional Deed of Sale, purchase the same. parties, irrespective of
stating that respondent shall pay the balance of the any intention of the
purchase price when he has successfully negotiated seller to create it
and secured a road right of way, is not a condition includes all warranties
on the perfection of the contract nor on the validity derived from the
of the entire contract or its compliance as language of the contract
contemplated in Article 1308. It is a condition
imposed only on respondent’s obligation to pay the
remainder of the purchase price. In our view and
applying Article 1182, such a condition is not purely Requisites of express warranty
potestative as petitioners contend. It is not 1) It must be an affirmation of fact or any
dependent on the sole will of the debtor but also on promise by the seller relating to the subject
the will of third persons who own the adjacent land matter of the sale;
and from whom the road right of way shall be 2) The natural tendency of such affirmation or
negotiated (Catungal v. Rodriguez) promise is to induce the buyer to purchase the
thing; and
WARRANTIES 3) The buyer purchases the thing relying on such
Article 1546 affirmation or promise thereon.
Any affirmation of fact or any promise by the
seller relating to the thing is an express warranty if Exceptions
the natural tendency of such affirmation or promise Article 1340. The usual exaggerations in trade, when
is to induce the buyer to purchase the same, and the other party had an opportunity to know the facts,
if the buyer purchases the thing relying thereon. are not in themselves fraudulent. (n)
No affirmation of the value of the thing, nor any
statement purporting to be a statement of the Article 1341. A mere expression of an opinion does
seller's opinion only, shall be construed as a not signify fraud, unless made by an expert and
warranty, unless the seller made such affirmation the other party has relied on the former's special
or statement as an expert and it was relied upon knowledge. (n)
by the buyer. (n)
Article 1343. Misrepresentation made in good faith is
Warranty not fraudulent but may constitute error. (n)
Any representation made by the seller of the thing with
respect to its character, quality, or ownership by which 1) Affirmation of the value of the thing
he induces the buyer to purchase the same relying on 2) Any statement purporting to be a statement of
said representation. the seller’s opinion only
XPN of XPN:
A warranty is a collateral undertaking in a sale of either 1) When the seller made such affirmation or
real or personal property, express or implied; that if the statement as an expert.
property sold does not possess certain incidents or 2) The buyer relied
qualities, the purchaser may either consider the sale
void or claim damages for breach of warranty. Thus, a Remedies in case of breach
warranty may either be express or implied. (Pilipinas In case the seller breaches his warranty, the buyer
Makro v. Coco Charcoal) may avail of the following remedies:
1) Accept or keep the goods and set up against
Kinds of warranties the seller, the breach of warranty by way of
1) Express – Art 1546; They are stipulated by the recoupment in diminution or extinction of
parties. Hence, even if the law does not provide the price;
for this certain warranty but the seller still  reduction or extinction of the price of
provided it, and the buyer relied on the the same item or unit sold and not to
promise, the seller is liable for damages. a different transaction or contract of
sale. (First United Constructors
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Corporation v. Bayanihan condition of the machine was merely dealer's talk.

Automotive Corporation) Private respondent was not a dealer of printing
 That there was a series of purchases or linotype machines to whom could be ascribed
made by petitioners could not be the supposed resort to the usual exaggerations
considered as a single transaction of trade in said items. His certification as to the
(First United Constructors condition of the machine was not made to induce
petitioner to purchase it but to confirm in writing for
Corporation v. Bayanihan
purposes of the financing aspect of the transaction
Automotive Corporation) his representations thereon. Ordinarily, what does
2) Accept or keep the goods and maintain an not appear on the face of the written instrument
action against the seller for damages for the should be regarded as dealer's or trader's talk;
breach of warranty; conversely, what is specifically represented as true in
3) Refuse to accept the goods, and maintain an said document, as in the instant case, cannot be
action against the seller for damages for the considered as mere dealer's talk. (Moles v. IAC)
breach of warranty;
4) Rescind the contract of sale and refuse to Sale of secondhand items
receive the goods or if the goods have already It is generally held that in the sale of a designated and
been received, return them or offer to return specific article sold as secondhand, there is no
them to the seller and recover the price or any implied warranty as to its quality or fitness for the
part thereof which has been paid. purpose intended, at least where it is subject to
inspection at the time of the sale. On the other hand,
It is true that the ownership of the trucks shifted to there is also authority to the effect that in a sale of a
private respondent after the sale. But petitioner must secondhand articles there may be, under some
remember that prior to its consummation it circumstances, an implied warranty of fitness for the
expressly intimated to her that it had already paid the ordinary purpose of the article sold or for the
taxes and customs duties. Such representation shall particular purpose of the buyer. (Moles v. IAC)
be considered as a seller's express warranty under
Art. 1546 of the Civil Code which covers any Article 1547
affirmation of fact or any promise by the seller which In a contract of sale, unless a contrary intention
induces the buyer to purchase the thing and actually appears, there is:
purchases it relying on such affirmation or promise.
It includes all warranties which are derived from (1) An implied warranty on the part of the seller that
express language, whether the 7 language is in the he has a right to sell the thing at the time when
form of a promise or representation. Presumably, the ownership is to pass, and that the buyer shall
therefore, private respondent would not have from that time have and enjoy the legal and
purchased the two (2) Elf trucks were it not for peaceful possession of the thing;
petitioner's assertion and assurance that all taxes on (2) An implied warranty that the thing shall be free
its imported parts were already settle. (Harrison from any hidden faults or defects, or any charge
Motors v. Navarro) or encumbrance not declared or known to the
buyer.
All in all, these "vague oral statements" were express
affirmations not only of the costs that could be This article shall not, however, be held to render
saved if the buyer used PhilSteel's G.I. sheets, but liable a sheriff, auctioneer, mortgagee, pledgee,
also of the compatibility of those sheets with the or other person professing to sell by virtue of
acrylic painting process customarily used in authority in fact or law, for the sale of a thing in
Amianan Motors. Angbengco did not aimlessly utter which a third person has a legal or equitable interest.
those "vague oral statements" for nothing, but with (n)
a clear goal of persuading Quinones to buy
PhilSteel's product. Types of implied warranties
Warranty that seller has right to sell (Art 1547, par
Since what was proven was express warranty, the 1)- AT THE TIME THE OWNERSHIP IS TO
remedy for implied warranties under Article 1567 of PASS
the Civil Code does not apply to the instant case. - there can be no legal waiver of such
Instead, following the ruling of this Court in Harrison warranty without changing the basic nature
Motors Corporation v. Navarro, Article 1599 of the Civil of the relationship, for the warranty on the
Code applies when an express warranty is breached. part of the seller that he has the capacity to
(Philippine Steel Coating v. Quiñones) sell, i.e., to transfer ownership of the
subject matter pursuant to the sale, is the
On the basis of the foregoing circumstances, the essence of sale
inescapable conclusion is that private respondent is Warranty against eviction (Art 1548 – 1559) – TO
indeed bound by the express warranty he executed
ENJOY THE LEGAL AND PEACEFUL
in favor of herein petitioner.
POSSESSION OF THE THING
We disagree with respondent court that private
respondents express warranty as to the A-1
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Article 1548. Eviction shall take place whenever by a (5) The damages and interests, and ornamental
final judgment based on a right prior to the sale expenses, if the sale was made in bad faith. (1478)
or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing Article 1556. Should the vendee lose, by reason of
purchased. the eviction, a part of the thing sold of such
importance, in relation to the whole, that he would
The vendor shall answer for the eviction even not have bought it without said part, he may demand
though nothing has been said in the contract on the the rescission of the contract; but with the
subject. obligation to return the thing without other
encumbrances that those which it had when he
The contracting parties, however, may increase, acquired it.
diminish, or suppress this legal obligation of the
vendor. (1475a) He may exercise this right of action, instead of
enforcing the vendor's liability for eviction.
Article 1549. The vendee need not appeal from the
decision in order that the vendor may become liable The same rule shall be observed when two or more
for eviction. (n) things have been jointly sold for a lump sum, or for
a separate price for each of them, if it should clearly
Article 1550. When adverse possession had been appear that the vendee would not have purchased
commenced before the sale but the prescriptive one without the other. (1479a)
period is completed after the transfer, the vendor
shall not be liable for eviction. (n) Article 1557. The warranty cannot be enforced until
a final judgment has been rendered, whereby the
Article 1551. If the property is sold for nonpayment vendee loses the thing acquired or a part thereof.
of taxes due and not made known to the vendee (1480)
before the sale, the vendor is liable for eviction.
(n) Article 1558. The vendor shall not be obliged to
make good the proper warranty, unless he is
Article 1552. The judgment debtor is also summoned in the suit for eviction at the
responsible for eviction in judicial sales, unless it is instance of the vendee. (1481a)
otherwise decreed in the judgment. (n)
Article 1559. The defendant vendee shall ask, within
Article 1553. Any stipulation exempting the vendor the time fixed in the Rules of Court for answering
from the obligation to answer for eviction shall be the complaint, that the vendor be made a co-
void, if he acted in bad faith. (1476) defendant. (1482a)
Article 1554. If the vendee has renounced the right Requisites (Pilipinas Makro v. Coco Charcoal)
to warranty in case of eviction, and eviction (Escaler v. CA)
should take place, the vendor shall only pay the 1) Purchaser has been deprived of, or evicted
value which the thing sold had at the time of the from, the whole or part of the thing sold;
eviction. Should the vendee have made the waiver 2) Eviction is by a final judgment;
with knowledge of the risks of eviction and
3) Basis thereof is by virtue of a right prior to
assumed its consequences, the vendor shall not
be liable. (1477) the sale made by the seller; and
XPN: execution sales
Article 1555. When the warranty has been agreed In execution sales, the rule of caveat
upon or nothing has been stipulated on this point, in emptor applies; the sheriff does not
case eviction occurs, the vendee shall have the right warrant the title to the property sold by
to demand of the vendor: him, and it is not incumbent on him to
place the purchaser in possession of the
(1) The return of the value which the thing sold had property.
at the time of the eviction, be it greater or less than
the price of the sale; 4) Seller has been summoned and made co-
defendant in the sui for eviction at the
(2) The income or fruits, if he has been ordered to instance of the buyer.
deliver them to the party who won the suit against 1) by way of asking that the former be
him; made a co-defendant; or
2) by the filing of a third-party complaint
(3) The costs of the suit which caused the eviction, against said vendors (Escaler v. CA)
and, in a proper case, those of the suit brought
against the vendor for the warranty;
Obvious to us in the ambivalent stance of petitioner
(4) The expenses of the contract, if the vendee has is its failure to establish any breach of the warranty
paid them; against eviction. Despite its protestation that its
acquisition of the lot was to enable it to set up a
warehouse for its asbestos products and that
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Sales | VENTEROSO
failure to deliver actual possession thereof EFFECT: the vendor shall only pay the value
defeated this purpose, still no breach of warranty which the thing sold had at the time of the
against eviction can be appreciated because the facts eviction
of the case do not show that the requisites for
such breach have been satisfied. 2) Specific waiver - Should the vendee have
made the waiver with knowledge of the risks of
xxxPetitioner argues in its memorandum that it has eviction and assumed its consequences
not yet ejected the occupants of said lot, and not that
EFFECT: the vendor shall not be liable.
it has been evicted therefrom. As correctly pointed
out by Respondent Court, the presence of lessees
does not constitute an encumbrance of the land, nor As stated, the provision adverted to in the contract
does it deprive petitioner of its control thereof. pertains to the usual warranty against eviction,
and not to a condition that was not met.
We note, however, that petitioner's deprivation of
ownership and control finally occurred when it The terms of the contract are so clear as to leave no
failed and/or discontinued paying the room for any other interpretation.
amortizations on the mortgage, causing the lot
to be foreclosed and sold at public auction. But Furthermore, petitioner was well aware of the
this deprivation is due to petitioner's fault, and presence of the tenants at the time it entered into the
not to any act attributable to the vendor- sales transaction. As testified to by Reynaldo,
spouses. (Power Commercial v. CA) petitioner's counsel during the sales negotiation even
undertook the job of ejecting the squatters. In fact,
In the case at bar, the fourth requisite—that of petitioner actually filed suit to eject the occupants.
being summoned in the suit for eviction (Case Finally, petitioner in its letter to PNB of December
No. 4252) at the instance of the vendee—is not 23, 1980 admitted that it was the "buyer(s) and new
present. All that the petitioners did, per their very owner(s) of this lot." (Power Commercial v. CA)
admission, was to furnish respondents, by registered
mail, with a copy of the opposition they (petitioners Warranty against non-apparent servitudes (Art
filed in the eviction suit. Decidedly, this is not the 1560)
kind of notice prescribed by the aforequoted Articles
1558 and 1559 of the New Civil Code. The term Article 1560
"unless he is summoned in the suit for eviction at If the immovable sold should be encumbered with
the instance of the vendee" means that the any non-apparent burden or servitude, not
respondents as vendor/s should be made parties to mentioned in the agreement, of such a nature that it
the suit at the instance of petitioners-vendees, either must be presumed that the vendee would not have
by way of asking that the former be made a co- acquired it had he been aware thereof, he may ask
defendant or by the filing of a third-party for the rescission of the contract, unless he should
complaint against said vendors. Nothing of that prefer the appropriate indemnity. Neither right
sort appeared to have been done by the petitioners can be exercised if the non-apparent burden or
in the instant case. (Escaler v. CA) servitude is recorded in the Registry of Property,
unless there is an express warranty that the thing
Amount for which seller is liable (VICED) [Art 1555] is free from all burdens and encumbrances.
1) Return of the value which the thing sold had
at the time of the eviction, be it greater or lesser Within one year, to be computed from the
than the price of the sale; execution of the deed, the vendee may bring the
action for rescission, or sue for damages.
2) Income or fruits, if buyer has been ordered to
deliver them to the party who won the suit One year having elapsed, he may only bring an
against him; action for damages within an equal period, to be
3) Costs of the suit which caused the eviction, counted from the date on which he discovered the
and, in a proper case, those of the suit brought burden or servitude. (1483a)
against the seller for the warranty;
4) Expenses of the contract, if the buyer has Rules on warranty against non-apparent
paid them; and servitudes
5) Damages and interests and ornamental GR: If the immovable sold should be encumbered with
expenses, if the sale was made in bad faith. any non-apparent burden or servitude, not mentioned
in the agreement, of such a nature that it must be
Waiver of the right to warranty against eviction [Art presumed that the vendee would not have acquired it
1554] had he been aware thereof, he may ask for
1) General waiver - If the vendee has renounced 1) the rescission of the contract
the right to warranty in case of eviction 2) unless he should prefer the appropriate
(without knowledge of a particular risk), and indemnity
eviction should take place XPN: The non-apparent burden or servitude is
recorded in the Registry of Property.
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XPN of XPN: There is an express warranty that the

thing is free from all burdens and encumbrances. This provision shall not apply if the contrary has
been stipulated, and the vendor was not aware of
Remedies and prescriptive period the hidden faults or defects in the thing sold.
1) Within one year from the execution of the (1485)
deed - the vendee may bring the action for
rescission, or sue for damages. Article 1567. In the cases of articles 1561, 1562, 1564,
1565 and 1566, the vendee may elect between
2) After one year – may bring action for
withdrawing from the contract and demanding a
damages for 1 year counted from the date on proportionate reduction of the price, with
which he discovered the burden or servitude. damages in either case. (1486a)
Warranty against hidden effects (Art 1561 – Article 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor
Article 1561. The vendor shall be responsible for was aware of them, he shall bear the loss, and
warranty against the hidden defects which the shall be obliged to return the price and refund the
thing sold may have, should they render it unfit for expenses of the contract, with damages. If he was
the use for which it is intended, or should they not aware of them, he shall only return the price and
diminish its fitness for such use to such an extent interest thereon, and reimburse the expenses of
that, had the vendee been aware thereof, he would the contract which the vendee might have paid.
not have acquired it or would have given a lower (1487a)
price for it; but said vendor shall not be
answerable for patent defects or those which Article 1569. If the thing sold had any hidden fault
may be visible, or for those which are not visible at the time of the sale, and should thereafter be lost
if the vendee is an expert who, by reason of his by a fortuitous event or through the fault of the
trade or profession, should have known them. vendee, the latter may demand of the vendor the
(1484a) price which he paid, less the value which the
thing had when it was lost.
Article 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of If the vendor acted in bad faith, he shall pay
the goods, as follows: damages to the vendee. (1488a)
(1) Where the buyer, expressly or by implication, Article 1570. The preceding articles of this
makes known to the seller the particular Subsection shall be applicable to judicial sales,
purpose for which the goods are acquired, and it except that the judgment debtor shall not be
appears that the buyer relies on the seller's skill or liable for damages. (1489a)
judgment (whether he be the grower or
manufacturer or not), there is an implied warranty Article 1571. Actions arising from the provisions of
that the goods shall be reasonably fit for such the preceding ten articles shall be barred after six
purpose; months, from the delivery of the thing sold.
(2) Where the goods are brought by description (1490)
from a seller who deals in goods of that
description (whether he be the grower or Requisites for warranty against hidden defects
manufacturer or not), there is an implied warranty (Nutrimix Feeds Corp v. CA)
that the goods shall be of merchantable quality. (n) 1) Defect must be hidden;
2) Defect must exist at the time the sale was made;
Article 1563. In the case of contract of sale of a 3) Defect must ordinarily have been excluded
specified article under its patent or other trade
from the contract;
name, there is no warranty as to its fitness for any
particular purpose, unless there is a stipulation to 4) Defect, must be important (render the thing
the contrary. (n) unfit or considerably decreases fitness);
5) Action must be instituted within the statute of
Article 1564. An implied warranty or condition as to limitations.
the quality or fitness for a particular purpose may be
annexed by the usage of trade. (n) Conditions that must be med for the implied
warrant against hidden defects to be applicable
Article 1565. In the case of a contract of sale by (Spouses Batalla v. Prudential Bank)
sample, if the seller is a dealer in goods of that kind, 1) Defect is Important or Serious
there is an implied warranty that the goods shall be  The thing sold is unfit for the use
free from any defect rendering them which it is intended
unmerchantable which would not be apparent
 Diminishes its fitness for such use or to
on reasonable examination of the sample. (n)
such an extent that the buyer would not
Article 1566. The vendor is responsible to the vendee have acquired it had he been aware
for any hidden faults or defects in the thing sold, thereof
even though he was not aware thereof. 2) Defect is Hidden
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3) Defect Exists at the time of the sale Actions on warranties against hidden defects shall be
4) Buyer gives Notice of the defect to the seller barred after six (6) months from the delivery of the
within reasonable time thing sold.
Defect (Nutrimix Feeds Corp v. CA) In the sale of animal feeds, there is an implied
The defect must be present warranty that it is reasonably fit and suitable to be
1) upon the delivery or manufacture of the used for the purpose which both parties
product; or contemplated. To be able to prove liability on the
2) when the product left the seller’s or basis of breach of implied warranty, three things
manufacturer’s control; or must be established by the respondents.
3) when the product was sold to the purchaser; or 1) The first is that they sustained injury
because of the product;
4) the product must have reached the user or
2) the second is that the injury occurred
consumer without substantial change in the because the product was defective or
condition it was sold. unreasonably unsafe; and
3) finally, the defect existed when the
Remedies of buyer and obligation of seller for product left the hands of the petitioner.
breach of warranty [Art 1567]
If the thing has not been lost A manufacturer or seller of a product cannot be held
1) Accion redhibitoria – withdraw from the liable for any damage allegedly caused by the product
contract in the absence of any proof that the product in
2) Accion quanti minoris - to demand a question was defective. The defect must be present
proportionate reduction of the price with upon the delivery or manufacture of the product;
damages in either case or when the product left the seller’s or
manufacturer’s control; or when the product was
sold to the purchaser; or the product must have
If the thing has been lost
reached the user or consumer without
As a consequence of hidden faults substantial change in the condition it was sold.
1) If the seller was aware of them, he shall bear Tracing the defect to the petitioner requires some
the loss, and shall be obliged to return the evidence that there was no tampering with, or
price and refund the expenses of the contract, changing of the animal feeds. The nature of the
with damages; or animal feeds makes it necessarily difficult for the
2) If seller was not aware of them, the seller is respondents to prove that the defect was existing
obliged only to return the price and interest when the product left the premises of the petitioner.
thereon, and reimburse the expenses of the
contract which the buyer might have paid, but A review of the facts of the case would reveal that
not for damages. the petitioner delivered the animal feeds, allegedly
containing rat poison, on July 26, 1993; but it is
astonishing that the respondents had the animal
As a consequence of fortuitous event or through fault of buyer
feeds examined only on October 20, 1993, or barely
1) If the seller was not aware of the hidden three months after their broilers and hogs had died.
defects, the buyer may demand from the seller (Nutrimix Feeds Corp v. CA)
the price which he paid, less the value which
the thing had when it was lost; Neither could the alleged defects of the car door be
2) If the seller acted in bad faith, in addition he sufficient basis to prove that what was delivered to
shall pay damages to the buyer. Spouses Batalla was a secondhand car. As they
admitted, they immediately had a remote-control
Waiver of warranty door mechanism installed. It could not be readily
If there has been a stipulation exempting the seller ascertained whether the defects in the car door were
from hidden defects, then: existing at the time of the car's manufacture or was
1) If the seller was not aware of the hidden caused by the installation of the remote-control door
defects, the loss of the thing by virtue of such system. Thus, the defects in the car door or in the
defect will not make the seller liable at all to paint, neither establish that the car was second hand
nor could it be attributed, to the fault of Honda.
the buyer; or
2) If the seller was fully aware of such defect, such In case of a breach of an implied warranty against
waiver is in bad faith, and the seller would still hidden defects, the buyer may either elect between
be liable for the warranty. withdrawing from the contract and demanding a
proportionate reduction of the price, with damages
Applicability to judicial sales in either case. Here, Spouses Batalla opted to
GR: Applicable to judicial sales withdraw from the contract of sale after their
XPN: The judgment debtor shall not be liable for demand for a replacement car was not granted.
damages
As can be seen, the redhibitory action pursued by
Prescription Spouses Batalla was without basis. For one, it was
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Sales | VENTEROSO
not sufficiently proven that the defects of the car vendee would not have purchased the sound
door were important or serious. The hidden defect animal or animals without the defective one.
contemplated under Article 1561 of the Civil Code
is an imperfection or defect of such nature as to The latter case shall be presumed when a team,
engender a certain degree of importance and yoke pair, or set is bought, even if a separate price
not merely one of little consequence. Spouses has been fixed for each one of the animals
Batalla failed to prove that such defect had severely composing the same. (1491)
diminished the roadworthiness of the motor vehicle.
In fact, they admitted that they had no problem as Article 1573. The provisions of the preceding article
to the road worthiness of the car. with respect to the sale of animals shall in like
manner be applicable to the sale of other things.
In addition, it cannot be ascertained whether the (1492)
defects existed at the time of the sale.1âшphi1 As
previously mentioned, a remote control door Article 1574. There is no warranty against hidden
mechanism was immediately installed after the car defects of animals sold at fairs or at public
was delivered to Spouses Batalla. (Spouses Batalla auctions, or of live stock sold as condemned.
v. Prudential Bank) (1493a)
Respondent's complaint filed with the RTC seeks to Article 1575. The sale of animals suffering from
recover from petitioner the money he paid for the contagious diseases shall be void.
vehicle due to the latter's breach of his warranty
against hidden defects under Articles 1547,13 A contract of sale of animals shall also be void if the
1561,14 and 156615 of the Civil Code. The vehicle, use or service for which they are acquired has
after it was delivered to respondent, malfunctioned been stated in the contract, and they are found to
despite repeated repairs by petitioner. Obviously, the be unfit therefor. (1494a)
vehicle has hidden defects. A hidden defect is one
which is unknown or could not have been known to Article 1576. If the hidden defect of animals, even in
the vendee. case a professional inspection has been made, should
be of such a nature that expert knowledge is not
"The evidence clearly shows that Flores [now sufficient to discover it, the defect shall be
respondent] was justified in opting to rescind the considered as redhibitory.
sale given the hidden defects of the vehicle,
allowance for the repair of which he patiently But if the veterinarian, through ignorance or bad
extended, but which repair did not turn out to be faith should fail to discover or disclose it, he shall
satisfactory. be liable for damages. (1495)
It is well within respondent's right to recover Article 1577. The redhibitory action, based on the
damages from petitioner who committed a breach of faults or defects of animals, must be brought within
warranty against hidden defects. Article 1599 of the forty days from the date of their delivery to the
Civil Code partly provides: vendee.
"Article 1599. Where there is a breach of warranty This action can only be exercised with respect to
by the seller, the buyer may, at his election: faults and defects which are determined by law or by
local customs. (1496a)
xxx
Article 1578. If the animal should die within three
(4) Rescind the contract of sale and refuse to receive days after its purchase, the vendor shall be liable
the goods, or if the goods have already been if the disease which cause the death existed at
received, return them or offer to return them to the the time of the contract. (1497a)
seller and recover the price or any part thereof which
has been paid. Article 1579. If the sale be rescinded, the animal
shall be returned in the condition in which it was
When the buyer has claimed and been granted a sold and delivered, the vendee being answerable
remedy in anyone of these ways, no other remedy for any injury due to his negligence, and not arising
can thereafter be granted, without prejudice to the from the redhibitory fault or defect. (1498)
provisions of the second paragraph of Article 1191.
(Supercars v. Flores) Article 1580. In the sale of animals with redhibitory
defects, the vendee shall also enjoy the right
Redhibitory defects of animals mentioned in article 1567; but he must make use
Article 1572. If two or more animals are sold thereof within the same period which has been
together, whether for a lump sum or for a separate fixed for the exercise of the redhibitory action.
price for each of them, the redhibitory defect of (1499)
one shall only give rise to its redhibition, and not
that of the others; unless it should appear that the Article 1581. The form of sale of large cattle shall
be governed by special laws. (n)
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DOCUMENTS OF TITLE 2) Non-negotiable document of title - It is a

Article 1636 document of title which does not state that the
In the preceding articles in this Title governing the goods referred to therein are deliverable either
sale of goods, unless the context or subject matter to bearer or to the order of any person named
otherwise requires: therein. It cannot be negotiated and the
endorsement of such a document gives the
(1) "Document of title to goods" includes any bill of transferee no additional right.
lading, dock warrant, "quedan," or warehouse EFFECT: its sale constitutes actually an
receipt or order for the delivery of goods, or any
assignment which under Article 1624 is
other document used in the ordinary course of
business in the sale or transfer of goods, as proof perfected by mere consent, but which under
of the possession or control of the goods, or Article 1625 would require its appearance in a
authorizing or purporting to authorize the public instrument, otherwise it “shall produce
possessor of the document to transfer or receive, no effect as against third persons”
either by indorsement or by delivery, goods
represented by such document. xxx Warranties on negotiation and assignment of
documents of title
Purposes 1) The document is genuine;
1) as evidence of the possession or control of the 2) He has a legal right to negotiate or transfer
goods described therein it;
2) as the medium of transferring title and 3) He has no knowledge of any fact which
possession over the goods described therein, would impair the validity or worth of the
without having to effect actual delivery thereof document;
4) He has a right to transfer the title to the
A warehouse receipt represents the goods, but the goods; and
entrusting of the receipt is more than the mere 5) The goods are merchantable or fit for a
delivery of the goods; it is a representation that the particular purpose, whenever such warranties
one to whom the possession of the receipt has been would have been implied if the contract of the
so entrusted has the title to the goods. (Siy Cong parties had been to transfer without a
Bieng v. Hongkong & Shanghai Bank) document of title the goods represented
thereby
Article 1495. The vendor is bound to transfer the
ownership of and deliver, as well as warrant the
The warranties of one who negotiates a negotiable
thing which is the object of the sale. (1461a)
document of title, and one who assigns a non-
negotiable document of title are the same.
Transfer through documents of title
The seller is allowed, by fiction of law, to deal with the DELIVERY THROUGH CARRIER
goods described therein as though he had physically GR: Delivery to carrier is deemed delivery to the buyer,
delivered them to the buyer; and the buyer may take the premise being that the carrier acts as an agent of
the document of title as though he had actually taken the buyer.
possession and control over the goods described XPN: Stipulation or circumstance to the contrary.
therein. It is the title to the goods that is being the
subject of transfer, unlike traditional delivery where
Article 1523. Where, in pursuance of a contract of
the actual or constructive delivery of the actual sale, the seller is authorized or required to send
object of the sale is pertained to. the goods to the buyer, delivery of the goods to
a carrier, whether named by the buyer or not, for
Examples of documents of title the purpose of transmission to the buyer is
1) bill of lading deemed to be a delivery of the goods to the
2) dock warrant buyer, except in the cases provided for in article
3) quedan 1503, first, second and third paragraphs, or unless a
4) warehouse receipt contrary intent appears.
5) order for the delivery of goods
6) any other document used in the ordinary Unless otherwise authorized by the buyer, the
course of business in the sale or transfer of seller must make such contract with the carrier on
behalf of the buyer as may be reasonable, having
goods
regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to
Types do, and the goods are lost or damaged in course
1) Negotiable documents of title - It is a of transit, the buyer may decline to treat the
document of title in which it is stated that the delivery to the carrier as a delivery to himself, or
goods referred to therein are deliverable “to may hold the seller responsible in damages.
bearer,” or “to order” of any person named in
such document. (Art 1507) Unless otherwise agreed, where goods are sent by
the seller to the buyer under circumstances in which
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Sales | VENTEROSO
the seller knows or ought to know that it is usual to shall be equivalent to a warranty
insure, the seller must give such notice to the buyer registration with the manufacturer,
as may enable him to insure them during their producer, or importer. Such registration
transit, and, if the seller fails to do so, the goods shall is sufficient to hold the manufacturer,
be deemed to be at his risk during such transit. (n) producer, or importer liable, in appropriate
ARTICLES 66 TO 73 OF THE CONSUMER cases, under its warranty.
ACT OF THE PHILIPPINES 2) Failure to make or send report. — Failure of
the distributor to make the report or send
REPUBLIC ACT No. 7394 them the form required by the
Consumer Act of the Philippines manufacturer, producer, or importer shall
ARTICLE 66. Implementing Agency. — The relieve the latter of its liability under the
Department of Trade and Industry, shall strictly warranty: Provided, however, That the
enforce the provision of this Chapter and its distributor who failed to comply with its
implementing rules and regulations. obligation to send the sales report shall be
personally liable under the warranty.
ARTICLE 67. Applicable Law on Warranties. — The For this purpose, the manufacturer shall be
provisions of the Civil Code on conditions and obligated to make good the warranty at the
warranties shall govern all contracts of sale with expense of the distributor.
conditions and warranties. 3) Retail. — The retailer shall be subsidiarily
liable under the warranty in case of
ARTICLE 68. Additional Provisions on Warranties. — In failure of both the manufacturer and
addition to the Civil Code provisions on sale with distributor to honor the warranty. In
warranties, the following provisions shall govern such case, the retailer shall shoulder the
the sale of consumer products with warranty: expenses and costs necessary to honor the
warranty. Nothing therein shall prevent
a) Terms of express warranty. — Any seller or the retailer from proceeding against the
manufacturer who gives an express warranty distributor or manufacturer.
shall:
1) set forth the terms of warranty in clear and SUMMARY
readily understandable language and Hierarchy of liability
clearly identify himself as the 1) manufacturer, producer, or importer of
warrantor; the product sold – liable if a sales report is
2) identify the party to whom the warranty presented by the distributor
is extended; 2) distributor – personally liable if there is
3) state the products or parts covered; failure to make or send report
4) state what the warrantor will do in the 3) retailer - subsidiarily liable under the
event of a defect, malfunction of failure warranty in case of failure of both the
to conform to the written warranty and at manufacturer and distributor to honor the
whose expense; warranty.
5) state what the consumer must do to
avail of the rights which accrue to the 4) Enforcement of warranty or guarantee. — The
warranty; and warranty rights can be enforced by
6) stipulate the period within which, after presentment of a claim. To this end, the
notice of defect, malfunction or failure to purchaser needs only to present to the
conform to the warranty, the warrantor will immediate seller either the warranty card
perform any obligation under the warranty. or the official receipt along with the
b) Express warranty — operative from moment of sale. product to be serviced or returned to
— All written warranties or guarantees issued the immediate seller. No other
by a manufacturer, producer, or importer shall documentary requirement shall be
be operative from the moment of sale. demanded from the purchaser. If the
1) Sales Report. — All sales made by immediate seller is the manufacturer’s
distributors of products covered by this factory or showroom, the warranty shall
Article shall be reported to the immediately be honored. If the product
manufacturer, producer, or importer of was purchased from a distributor, the
the product sold within thirty (30) days distributor shall likewise immediately
from date of purchase, unless otherwise honor the warranty. In the case of a
agreed upon. The report shall contain, retailer other than the distributor, the
among others, the date of purchase, model former shall take responsibility without
of the product bought, its serial number, cost to the buyer of presenting the
name and address of the buyer. The report warranty claim to the distributor in the
made in accordance with this provision consumer’s behalf.
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5) Record of purchases. — Distributors and merchantability accompanies an express

retailers covered by this Article shall keep a warranty, both will be of equal duration.
record of all purchases covered by a
warranty or guarantee for such period of Any other implied warranty shall endure not less
time corresponding to the lifetime of than sixty (60) days nor more than one (1) year
the product’s respective warranties or following the sale of new consumer products.
guarantees.
6) Contrary stipulations — null and void. — All SUMMARY
covenants, stipulations or agreements Duration of warranty
contrary to the provisions of this Article 1) Express warranty – seller and consumer
shall be without legal effect. may stipulate the period
2) Implied warranty – not less than 60 days
c) Designation of warranties. — A written warranty nor more than 1 years following the sale of
shall clearly and conspicuously designate such new consumer products
3) Express warranty with implied warranty
warranty as:
on merchantability – both will be of equal
1) “Full warranty” if the written warranty duration
meets the minimum requirements set
forth in paragraph; or f) Breach of warranties. — 1) In case of breach of
2) “Limited warranty” if the written express warranty, the consumer may elect to
warranty does not meet such minimum have the goods repaired or its purchase price
requirements. refunded by the warrantor. In case the repair
of the product in whole or in part is elected,
d) Minimum standards for warranties. — For the the warranty work must be made to
warrantor of a consumer product to meet the conform to the express warranty within
minimum standards for warranty, he shall: thirty (30) days by either the warrantor or
1) remedy such consumer product within his representative. The thirty-day period,
a reasonable time and without charge in however, may be extended by conditions
case of a defect, malfunction or failure which are beyond the control of the
to conform to such written warranty; warrantor or his representative. In case the
2) permit the consumer to elect whether to refund of the purchase price is elected, the
ask for a refund or replacement without amount directly attributable to the use of
charge of such product or part, as the the consumer prior to the discovery of the
case may be, where after reasonable non-conformity shall be deducted. 2) In
number of attempts to remedy the case of breach of implied warranty, the
defect or malfunction, the product consumer may retain in the goods and recover
continues to have the defect or to damages, or reject the goods, cancel and
malfunction. contract and recover from the seller so much
of the purchase price as has been paid,
The warrantor will not be required to perform the including damages.
above duties if he can show that the defect,
malfunction or failure to conform to a written warranty SUMMARY
was caused by damage due to unreasonable use thereof. Remedies
1) Express warranty
SUMMARY  Have the goods repaired - the
GR: Minimum standards for warranties warranty work must be made to
1) remedy the defect or malfunction conform to the express warranty within
2) where after reasonable number of attempts thirty (30) days by either the
to remedy the defect or malfunction, the warrantor or his representative.
product continues to have the defect or to o may be extended by conditions
malfunction. which are beyond the control of the
 Ask for a refund warrantor or his representative
 Ask for a replacement without  Have the refund of the purchase
charge price - amount directly attributable to
the use of the consumer prior to the
XPN: if he can show that the defect, malfunction or discovery of the non-conformity shall
failure to conform to a written warranty was caused be deducted
by damage due to unreasonable use thereof
2) Implied warranty
e) Duration of warranty. — The seller and the  Retain and recover damages
consumer may stipulate the period within  Reject the goods, cancel the contract
which the express warranty shall be and recover from the seller so much of
enforceable. If the implied warranty on
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the purchase price as has been paid, fine of not less than Five hundred pesos (P500.00) but
including damages. not more than Five thousand pesos (P5,000.00) or an
imprisonment of not less than three (3) months but
not more than two (2) years or both upon the
ARTICLE 69. Warranties in Supply of Services. — discretion of the court. A second conviction under this
a) In every contract for the supply of services to paragraph shall also carry with it the penalty or
a consumer made by a seller in the course of a revocation of his business permit and license.
business, there is an implied warranty that the b) Any person, natural or juridical, committing any of
service will be rendered with due care and the illegal acts provided for in Chapter III, except with
skill and that any material supplied in respect to Article 67, shall be liable for a fine of not
connection with such services will be less than One thousand pesos (P1,000.00) but not
reasonably fit for the purpose for which it more than Fifty thousand pesos (P50,000.00) or
is supplied. imprisonment for a period of at least one (1) year but
b) Where a seller supplies consumer services in not more than five (5) years, or both, at the discretion
the course of a business and the consumer, of the court.
expressly or by implication, makes known to
the seller the particular purpose for which The imposition of any of the penalties herein provided
the services are required, there is an implied is without prejudice to any liability incurred under the
warranty that the services supplied under warranty or guarantee.
the contract and any material supplied in
connection therewith will be reasonably fit GROUNDS FOR EXTINGUISHMENT OF
for that purpose or are of such a nature or SALE
quality that they might reasonably be expected
to achieve that result, unless the circumstances Article 1600
show that the consumer does not rely or that it Sales are extinguished by the same causes as all other
is unreasonable for him to rely, on the seller’s obligations, by those stated in the preceding articles
skill or judgment. of this Title, and by conventional or legal
redemption. (1506)
ARTICLE 70. Professional Services. — The provisions
of this Act on warranty shall not apply to Causes for extinguishment of sale
professional services of certified public 1) Common - those causes that are also the
accountants, architects, engineers, lawyers, means of extinguishing all other contracts.
veterinarians, optometrists, pharmacists, nurses,
nutritionists, dietitians, physical therapists, Article 1231. Obligations are extinguished:
salesmen, medical and dental practitioners and
other professionals engaged in their respective (1) By payment or performance;
professional endeavors. (2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of
ARTICLE 71. Guaranty of Service Firms. — Service
creditor and debtor;
firms shall guarantee workmanship and replacement of
(5) By compensation;
spare parts for a period not less than ninety (90) days (6) By novation.
which shall be indicated in the pertinent invoices.
Other causes of extinguishment of obligations, such
ARTICLE 72. Prohibited Acts. — The following acts as annulment, rescission, fulfillment of a
are prohibited: resolutory condition, and prescription, are
governed elsewhere in this Code. (1156a)
a) refusal without any valid legal cause by the
total manufacturer or any person obligated Payment or performance only extinguishes the
under the warranty or guarantee to honor a obligations to which they pertain to in a contract of
warranty or guarantee issued; sale, but not necessarily the contract itself, since the
b) unreasonable delay by the local manufacturer relationship between buyer and seller remains after
or any person obligated under the warranty or performance or payment, such as the continuing
guarantee in honoring the warranty; enforceability of the warranties of the seller.
c) removal by any person of a product’s
warranty card for the purpose of evading said 2) Special - causes that are recognized by the law
warranty obligation; of sales
d) any false representation in an advertisement 3) Extra-special - those causes that are given
as to the existence of a warranty or guarantee. special discussion by the Civil Code and these are
 conventional redemption; and
ARTICLE 73. Penalties. — a) Any person who shall  legal redemption.
violate the provisions of Article 67 shall be subject to
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Common Special Extra effectively on the

special buyer
As to causes This refers to This refers to This refers to As to effect Extinguishes an Results into the
causes which are causes which causes that existing contract of perfection of a
also the means are recognized are given sale contract of sale
of extinguishing by the law on special
all other sales. discussion by
contracts. the Civil Once the instrument of absolute sale is executed, the
Code and vendor can no longer reserve the right to repurchase,
these are
conventional
and any right thereafter granted the vendor by the
redemption vendee in a separate instrument cannot be a right to
and legal repurchase but some other right like an option to
redemption.
As to legal Article 1231 of Those covered Conventional
buy. (Torres v. CA)
basis the New Civil by Arts. 1484, redemption
Code 1532, 1539, (Arts. 1601- Article 1601
1540, 1542, 1618); and
1556, 1560, Legal Conventional redemption shall take place when the
1567, and 1591 Redemption vendor reserves the right to repurchase the thing
(Arts. 1619- sold, with the obligation to comply with the
1623)
As to Payment or Exact Conventional provisions of article 1616 and other stipulations
applicability performance, fulfillment of and legal which may have been agreed upon. (1507)
loss of the thing, the obligation, redemption.
condonation or cancellation of
remission, the sale, Article 1616
confusion or foreclosure of The vendor cannot avail himself of the right of
merger, the mortgage, repurchase without returning to the vendee the
compensation, stoppage in
and novation. transit, and etc. price of the sale, and in addition:
CONVENTIONAL REDEMPTION (1) The expenses of the contract, and any other
legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on
Conventional redemption - right which the vendor
the thing sold. (1518)
reserves to himself, to reacquire the property sold
provided he returns to the vendee the price of the Conventional redemption shall take place when the
sale, the expenses of the contract, any other seller reserved for himself the right to repurchase the
legitimate payments made therefor and the necessary thing sold, with the obligation to: (David v. David)
and useful expenses made on the thing sold (Art. 1) return the price of the sale,
1616.), and fulfills other stipulations which may have 2) the expenses of the contract,
been agreed upon.
3) any other legitimate payments made by reason
of the sale, and
Sale with right to repurchase - title and ownership of
4) the necessary and useful expenses made on the
the property sold are immediately vested in the vendee,
thing sold.
subject to the resolutory condition of repurchase by the
vendor within the stipulated period. A sale with right
ARTICLE 1602
to repurchase is governed by Article 1601 of the Civil The contract shall be presumed to be an equitable
Code. mortgage, in any of the following cases:
Right of Option to purchase
redemption
(1) When the price of a sale with right to
As to its nature Part of the main Generally a principal repurchase is unusually inadequate;
contract and cannot contract, albeit (2) When the vendor remains in possession as
exist unless reserved preparatory and may lessee or otherwise;
at the time of the be created
perfection of the independent of (3) When upon or after the expiration of the right
contract of sale another contract to repurchase another instrument extending the
As to its existence Must be embedded May exist prior to or period of redemption or granting a new period
in a contract of sale after the perfection
at its perfection of the sale, or be is executed;
embedded in another (4) When the purchaser retains for himself a part
contract upon that of the purchase price;
contract’s perfection
As to necessity of Does not need a Must have a (5) When the vendor binds himself to pay the
consideration separate consideration taxes on the thing sold;
consideration to be separate and distinct (6) In any other case where it may be fairly inferred
valid and effective from the purchase
price that the real intention of the parties is that the
As to period Redemption period An option right may transaction shall secure the payment of a debt or the
cannot exceed 10 exceed 10 years performance of any other obligation.
years
As to requirement of Required notice to Requires only a
notice be accompanied by a notice of such In any of the foregoing cases, any money, fruits, or
tender of payment or exercise be given the other benefit to be received by the vendee as rent
consignment when optioner
tender of payment
or otherwise shall be considered as interest which
cannot be made shall be subject to the usury laws. (n)
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Equitable mortgage - one which although lacking in or mortgage, or dispose of them; any stipulation to the
some formality, or form or words, or other requisites contrary is null and void.
demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as Elements of pactum commissorium
security for a debt, and contains nothing impossible or 1) There should be a property mortgaged by
contrary to law. way of security for the payment of the
principal obligation;
Requisites (Kings Properties v. Galido) 2) There should be a stipulation for automatic
1) The parties entered into a contract appropriation by the creditor of the thing
denominated as a contract of sale; and mortgaged in case of non-payment of the
2) Their intention was to secure existing debt by principal obligation within the stipulated
way of a mortgage. period, and which thereby enable the
mortgagee to acquire ownership of the
Presumption (Kings Properties v. Galido) mortgaged property without any foreclosure
In order for the presumption of equitable mortgage to proceedings.
apply, there must be:
1) something in the language of the contract; or Proper remedies (Montevirgin v. CA)
2) Something in the conduct of the parties which The proper remedy if the borrower refuses to pay the
shows clearly and beyond doubt that they “price” is to foreclose on the mortgage. In such a case,
intended the contract to be a mortgage and not the return of the redemption price would be equivalent
a pacto de retro sale. to the payment of the principal loan, which has the
effect of extinguishing the equitable mortgage as an
In case of doubt, a contract purporting to be a sale ancillary security contract.
with right to repurchase shall be considered as an
equitable mortgage. In a contract of mortgage, the Period of redemption
mortgagor merely subjects the property to a lien, but Article 1606
the ownership and possession thereof are retained by The right referred to in article 1601, in the absence
him. (Saclolo v. Marquito) of an express agreement, shall last four years from
the date of the contract.
In determining whether a deed absolute in form is a
mortgage, the court is not limited to the written Should there be an agreement, the period cannot
memorials of the transaction. The decisive factor in exceed ten years.
evaluating such agreement is the intention of the
However, the vendor may still exercise the right to
parties, as shown not necessarily by the terminology repurchase within thirty days from the time final
used in the contract but by all the surrounding judgment was rendered in a civil action on the
circumstances, such as the relative situation of the basis that the contract was a true sale with right
parties at that time, the attitude acts, conduct, to repurchase. (1508a)
declarations of the parties, the negotiations between
them leading to the deed, and generally, all pertinent Rules on period for conventional redemption
facts having a tendency to fix and determine the real 1) If agreed upon - the period cannot exceed
nature of their design and understanding. (Spouses ten years; if it exceeds 10 years, the agreement
Raymundo v. Spouses Bandong) is only valid for the first 10 years.
2) If not agreed upon - four years from the
The presence of even one of the circumstances date of the contract
enumerated in Article 1602, and not a concurrence or 3) After finality of judgment of a civil action
an overwhelming number thereof, suffices. (San filed – 30 days from the time of final
Pedro v. Lee) judgment
Article 2088 Effect of filing a civil action

The creditor cannot appropriate the things given by The completion of the redemption process is tolled by
way of pledge or mortgage, or dispose of them. Any the filing of a civil action relating to the issue of such
stipulation to the contrary is null and void. (1859a) redemption, provided that the exercise of redemption
right and the filing of the suit are done within the
Pactum commissorium - a stipulation empowering redemption period.
the creditor to appropriate the thing given as guaranty
for the fulfillment of the obligation in the event the The vendor may still exercise the right to repurchase
obligor gails to live up to his undertakings, without within 30 days from the time final judgment was
further formality, such as foreclosure proceedings, and rendered in a civil action on the basis that the contract
a public sale. It is explicitly prohibited under Article was a true sale with right to repurchase.
2088 of the Civil Code, which provides that a creditor
cannot appropriate the things given by way of pledge Article 1607
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In case of real property, the consolidation of each of them except for his own share, whether
ownership in the vendee by virtue of the failure of the thing be undivided, or it has been partitioned
the vendor to comply with the provisions of article among them.
1616 shall not be recorded in the Registry of
Property without a judicial order, after the But if the inheritance has been divided, and the thing
vendor has been duly heard. (n) sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the
Article 1607 abolished automatic consolidation of whole. (1517)
ownership in the buyer a retro upon expiration of the
redemption period by requiring the buyer to institute Article 1617. If at the time of the execution of the
an action for consolidation where the vendor a retro sale there should be on the land, visible or
may be duly heard. 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
Other rules purchaser when the sale was executed.
Article 1608. The vendor may bring his action
against every possessor whose right is derived Should there have been no fruits at the time of the
from the vendee, even if in the second contract no sale and some exist at the time of redemption,
mention should have been made of the right to they shall be prorated between the redemptioner
repurchase, without prejudice to the provisions of and the vendee, giving the latter the part
the Mortgage Law and the Land Registration Law corresponding to the time he possessed the land in
with respect to third persons. (1510) the last year, counted from the anniversary of the
date of the sale. (1519a)
Article 1609. The vendee is subrogated to the
vendor's rights and actions. (1511) SUMMARY
Rules on fruits
Article 1610. The creditors of the vendor cannot 1) When there is a sharing agreement – shall
make use of the right of redemption against the be respected
vendee, until after they have exhausted the 2) When there is no sharing agreement
property of the vendor. (1512)  Existing at the time of the
execution of the sale - no
Article 1611. In a sale with a right to repurchase, the reimbursement for or prorating
vendee of a part of an undivided immovable who of those existing at the time of
acquires the whole thereof in the case of article 498, redemption, if no indemnity
may compel the vendor to redeem the whole was paid by the purchaser when
property, if the latter wishes to make use of the right the sale was executed.
of redemption. (1513)  no fruits at the time of the sale
and some exist at the time of
Article 1612. If several persons, jointly and in the redemption - prorated between
same contract, should sell an undivided the redemptioner and the vendee
immovable with a right of repurchase, none of
them may exercise this right for more than his Article 1618. The vendor who recovers the thing sold
respective share. shall receive it free from all charges or mortgages
constituted by the vendee, but he shall respect
The same rule shall apply if the person who sold an the leases which the latter may have executed in
immovable alone has left several heirs, in which good faith, and in accordance with the custom of the
case each of the latter may only redeem the part place where the land is situated. (1520)
which he may have acquired. (1514)
LEGAL REDEMPTION
Article 1613. In the case of the preceding article, the
vendee may demand of all the vendors or co-
heirs that they come to an agreement upon the Legal redemption - right to be subrogated upon the
repurchase of the whole thing sold; and should same terms and conditions stipulated in the contract,
they fail to do so, the vendee cannot be in the place of one who acquires a thing by purchase or
compelled to consent to a partial redemption. dation in payment, or by any other transaction whereby
(1515) ownership is transmitted by onerous title.
Article 1614. Each one of the co-owners of an Rationale

undivided immovable who may have sold his 1) nature of a privilege created by law partly for
share separately, may independently exercise the reasons of public policy and partly for the
right of repurchase as regards his own share, and benefit and convenience of the
the vendee cannot compel him to redeem the
redemptioner,
whole property. (1516)
2) It is intended to minimize co-ownership.
Article 1615. If the vendee should leave several heirs,
the action for redemption cannot be brought against Conventional Legal
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Sales | VENTEROSO
As to how it can be Can only be Does not have to be not exceed one hectare, is alienated, unless
constituted constituted by expressly reserved (it
express reservation is a right granted by the grantee does not own any rural land.
in a contract of sale law), and covers sales
at time of perfection and other “onerous This right is not applicable to adjacent lands
transfers of title”
As to who It is in favor of the Given to a third
which are separated by brooks, drains,
possesses the right seller party to the sale ravines, roads and other apparent servitudes
As to effect The exercise of the The exercise of the for the benefit of other estates.
right a retro legal right of
extinguishes the redemption,
underlying contract although it If two or more adjoining owners desire to
of sale as though extinguishes the exercise the right of redemption at the same
there was never any original sale, actually
contract at all constitutes a new
time, the owner of the adjoining land of
sale in substitution of smaller area shall be preferred; and should
the original sale. both lands have the same area, the one who
first requested the redemption. (1523a)
Rules under the Civil Code
1) Among co-heirs (Art 1088) In order for the right of redemption to apply,
Article 1088. Should any of the heirs sell his both lands sought to be redeemed and the
hereditary rights to a stranger before the adjacent property belonging to the person
partition, any or all of the co-heirs may be exercising the right of redemption must be
subrogated to the rights of the purchaser rural lands; if one or both are urban lands, the
by reimbursing him for the price of the right under Article 1621 cannot be invoked.
sale, provided they do so within the period
of one month from the time they were
4) Among adjoining owners of urban land
notified in writing of the sale by the
vendor. (1067a) ARTICLE 1622. Whenever a piece of urban
land which is so small and so situated that
a major portion thereof cannot be used
2) Among co-owners
for any practical purpose within a
Article 1620. A co-owner of a thing may reasonable time, having been bought
exercise the right of redemption in case merely for speculation, is about to be re-sold,
the shares of all the other co-owners or of the owner of any adjoining land has a
any of them, are sold to a third person. If right of pre-emption at a reasonable
the price of the alienation is grossly price.
excessive, the redemptioner shall pay only a
reasonable one. If the re-sale has been perfected, the owner
of the adjoining land shall have a right of
Should two or more co-owners desire to redemption, also at a reasonable price.
exercise the right of redemption, they may
only do so in proportion to the share they When two or more owners of adjoining
may respectively have in the thing owned in lands wish to exercise the right of pre-
common. (1522a) emption or redemption, the owner whose
intended use of the land in question
The right of redemption to be exercised, appears best justified shall be preferred.
co-ownership must exist at the time of the (n)
conveyance is made by a co-owner and the
redemption is demanded by the other co- 5) Sale of credit in litigation
owner or co-owners. When a credit or other incorporeal right in
litigation is sold, the debtor shall have a right
By a co-heir By a co-owner to extinguish it by reimbursing the
An heir may validly Redemption by a co- assignee for the price the latter paid
redeem for himself owner of the therefor, the judicial costs incurred by him,
alone the hereditary property owned in and the interest on the price from the day
rights sold by common, even when on which the same was paid. The debtor
another co-heir. he uses his own fund,
may exercise his right within 30 days from the
within the period
prescribed by law date the assignee demands payment from him.
inures to the benefit
of all the other co- When to exercise
owners Article 1623. The right of legal pre-emption or
redemption shall not be exercised except within
3) Among adjoining owners of rural lands thirty days from the notice in writing by the
Article 1621. The owners of adjoining lands prospective vendor, or by the vendor, as the case
shall also have the right of redemption when may be. The deed of sale shall not be recorded in the
a piece of rural land, the area of which does Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
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 Under free/homestead patent

The right of redemption of co-owners excludes provisions of the Public Land Act a
that of adjoining owners. (1524a) period of 5 years from the date of
conveyance is provided, to be reckoned
30 days from from the date of the sale and not from
1) from the notice in writing by the the date of registration in the Register
prospective vendor, or of Deeds (Berin v. CA)
2) by the vendor 3) Other redemptions covered by law
 Redemption in tax sales - within one
In stressing the mandatory character of the (1) year from the date of sale (Sec 214,
requirement, the law states that the deed of sale shall NIRC)
not be recorded in the Registry of Property unless  Redemptions by judgment debtor -
the same is accompanied by an affidavit of the
at any time within one (1) year from
vendor that he has given notice thereof to all
the date of registration of the certificate
possible redemptioners. The existence of a clause
in the deed of sale to the effect that the seller has of sale; 365 days (Sec. 28, Rule 39 of
complied with the provisions of Article 1623 the 1997 Rules of Civil Procedure)
cannot be taken to being the written affirmation  Redemption in extrajudicial
under oath, as well as the evidence, that the foreclosure - within 1-year from the
required written notice to petitioner under date of auction sale (Sec 6, Act 3135)
Article 1623 has been met since party entitled to  Redemption in judicial foreclosure -
redemption is not a party to the deed of sale and No right to redeem from a judicial
has had no hand in the preparation and foreclosure sale, except those granted
execution of the deed of sale. It could not thus be by banks or banking institutions.
considered a binding equivalent of the obligatory  Foreclosure by banking institutions
written notice prescribed by the Code. (Primary
within two (2) years from the date of
Structures v. Valencia)
foreclosure or from the registration of
the sheriff's certificate of sale at such
Written notice is indispensable, actual
knowledge of the sale acquired in some other foreclosure if the property is not
manners by the redemptioner, notwithstanding. covered or is covered, respectively, by
He or she is still entitled to written notice, as exacted Torrens title.
by the Code, to remove all uncertainty as to the sale, If the mortgagor fails to exercise such
its terms and its validity, and to quiet any doubt that right, he or his heirs may still
the alienation is not definitive. repurchase within five (5) years from
expiration of the two (2) year
Petitioner heirs, therefore, have not lost their right redemption period pursuant to Sec.
to redeem the property, for in the absence of a 119 of the Public Land Act (C.A. 141)
written notification of the sale by the vendors,  Legal right to redeem under the
the 30-day period has not even begun to run. Agrarian Reform Code - within 180
(Garcia v. Calaliman)
days from notice in writing and at a
reasonable price and consideration
Other rules
(Sec 12, RA 3844)
1) Notice must cover a perfected sale - to
avoid any controversy as to the terms and
ASSIGNMENT
conditions under which the right to redeem
may be exercised, it is best that the period
Article 1624
therefor should not be deemed to have
An assignment of creditors and other incorporeal
commenced unless the notice of the rights shall be perfected in accordance with the
disposition is made after the formal deed of provisions of article 1475. (n)
disposal has been duly executed.
2) Exceptions to the written notice Article 1475. The contract of sale is perfected at the
 Alonzo doctrine - As a matter of moment there is a meeting of minds upon the
exception in Alonzo and due to the thing which is the object of the contract and upon
peculiar circumstances of the case the price.
where the co-heirs only brought an
action for redemption of hereditary From that moment, the parties may reciprocally
right sold by another coheir only after demand performance, subject to the provisions of
13 years after having actual knowledge the law governing the form of contracts. (1450a)
thereof, by their actuations, they are
deemed to have lost their right to Assignment - An assignment of credit is an act of
redeem. (Alonzo c. IAC) transferring, either onerously or gratuitously, the right
of an assignor to an assignee who would then be
capable of proceeding against the debtor for
66
Sales | VENTEROSO
enforcement or satisfaction of the credit. The transfer 4) The copyright is not deemed assigned inter vivos
of rights takes place upon perfection of the contract, in whole or in part unless there is a written
and ownership of the right, including all appurtenant indication of such intention.
accessory rights, is thereupon acquired by the assignee. 5) where an assignor executed a Deed of
The assignment binds the debtor only upon acquiring Assignment covering her leasehold rights in
knowledge of the assignment but he is entitled, even order to secure the payment of promissory
then, to raise against the assignee the same defenses he notes covering the loan she obtained from the
could set up against the assignor. bank, the Court held that such assignment is
equivalent to an equitable mortgage, and the
Assignment Sale non-payment of the loan cannot authorize the
As to consideration Consideration is not Consideration is a
always a requisite requisite assignee to register the assigned leasehold
As to the parties Assignor and Vendor and vendee rights in its name as it would be a violation of
Assignee Article 2088 of the Civil Code against pactum
As to transfer of Tradition, except Tradition
ownership actual or physical commissorium. The proper remedy of the
delivery assignee-bank is to proceed to foreclose on the
As to subject Intangible Tangible
matter leasehold right assigned as security for the loan.
As to perfection Mere consent (DBP v. CA)
As to accessories Both include all the accessory rights, such as
and accessions a guaranty, mortgage, pledge or preference.
As to warranties Generally has no Applicable Warranties
against hidden application to an Article 1628. The vendor in good faith shall be
defects intangible because it
has no physical responsible for the existence and legality of the
existence credit at the time of the sale, unless it should have
been sold as doubtful; but not for the solvency of
Conventional Assignment of credit the debtor, unless it has been so expressly stipulated
subrogation or unless the insolvency was prior to the sale and of
Extinguishes the old There is mere transfer of common knowledge.
obligation and creates a the same right or credit
new one Even in these cases he shall only be liable for the
Requires the debtor’s Does not require the price received and for the expenses specified in No.
consent debtor’s consent 1 of article 1616.
(notification is
sufficient) The vendor in bad faith shall always be answerable
The defect of the old The defect in the credit for the payment of all expenses, and for damages.
obligation may be cured or right is not cured (1529)
in such a way that the simply by assigning the
new obligation becomes same Assignment does not make the assignor warrant the
entirely valid solvency of the debtor to the credit, unless:
There is no right to The debtor generally still 1) There is a stipulation to that effect; or
present against the new has the right to present 2) b. The insolvency of the debtor was prior to
creditor any defense against the new creditor the assignment and of common knowledge.
which he, the debtor, any defense available as
could have set up against against old creditor But even when the assignor warrants the solvency of
the creditor the debtor, the warranty should last for one (1) year
only, from the time of the assignment if the credit is
Rules
already due; otherwise, the warranty shall cease only
1) Where the assignment is on account of pure
one (1) year after the maturity of the credit.
liberality on the part of the assignor, the rules
on donation would likewise be pertinent;
Right to redeem
where valuable consideration is involved, the
The right to redeem can be exercised by the debtor
assignment partakes of the nature of a contract
within thirty (30) days from the demand by the
of sale or purchase.
assignee for payment. This right shall not exist with
2) The “binding effect” of an assignment as to
respect to the following assignments which the law
third persons is not present unless it appears in
considers not for speculation:
a public instrument, or the instrument is
1) Assignment of the credit or incorporeal right
recorded in the Registry of Property in case the
to the co-heir or co-owner of the rights
assignment involves real rights.
assigned;
3) When the assignment is still at the executory
2) Assignment to a creditor in payment for his
stage and not evidenced in writing, and since
own credit; and
assignment is merely a species of the genus
3) Assignment to the possessor of a tenement or
sale, it is covered by the Statute of Frauds.
piece of land which is subject to the right in
litigation assigned.
67
Sales | VENTEROSO
LEASE proportional reduction of rent or rescission

Contract of lease - an agreement whereby one person of the contract of lease;
(lessor) binds himself to grant temporarily the 5) To suspend payment in case lessor fails to
enjoyment or use of a thing or to render some work or make necessary repairs or to maintain peaceful
service to another (lessee) who undertakes to pay rent, and adequate enjoyment;
compensation or price therefor. 6) To terminate lease if it brings imminent and
serious danger to the life or health of the lessee
Nature or it becomes uninhabitable;
1) Lease is only a personal right. 7) To also ask for proportional reduction for
2) It is a real right only except as in the case of urgent repairs made by lessor wherein the
lease of real estate recorded in the Registry of repairs last for more than 40 days
Property which makes it binding upon third
persons. Obligations of lessee [Art 1657]
3) The purpose of a contract of lease is for the 1) Payment of the agreed price of the lease
lessee to make use of the subject matter. 2) Proper use of the thing leased – diligent father
4) Ownership is not required for the perfection of of a family, devoting it to the use stipulated; in
the contract of lease. What is important is that absence, custom of the place
the lessor has the right to lease it to other 3) Payment of the expenses
persons. Lease Sale
5) The object of the lease must be within the The obligation to The expenses for the
commerce of man pay expenses for the execution in
deed of lease is on registration of the
Kinds of lease the lessee unless deed of sale is borne
1) Lease of things there is stipulation to by the seller unless
2) Lease of work and service the contrary there is stipulation to
the contrary.
 contract for a piece of work involving
an obligation on the part of the
Other obligations
contractor (lessor) to execute a piece of
1) To notify the owner for urgent repairs;
work for the employer (lessee) in
2) To tolerate the work for urgent repairs;
consideration of a certain price or
3) To notify the lessor of every usurpation or
compensation (Art. 1713)
untoward act of third persons;
 involving an obligation on the part of
4) To return the thing leased at the end of the
the housekeeper (Art. 1689),
lease;
 laborer or employee (Art. 1700),
5) Liable for loss or deterioration due to his own
 or common carrier (Art. 1732)
fault/negligence, or due to the fault of the
members of his household or his own guests
Lease of work Piece of work
and visitors
the object is the work the object is the end
performed by the lessor result
When and where to make lease payments
1) Stipulations
Characteristics
1) Consensual 2) If not agreed –
2) Bilateral  Place – Art 1251
3) Onerous o place designated in the lease
4) Commutative contract;
o in the absence of stipulation, at
Elements the domicile of the lessee
1) Cause or the place where the leased
2) Object premises are located, or
3) Consent if the rent is payable in the form
of a determinate thing,
Rights of the lessee wherever the thing might be at
1) Demand delivery of the thing leased;
the moment the contract was
2) To be in peaceful and adequate enjoyment of
entered into.
the thing leased for the duration of the  Time – custom of the place
contract;
3) To sublease the property unless there is a
Rule on reduction of rent
contrary stipulation; The reduction of rent in rural leases cannot be applied
4) If the thing leased was partially destroyed due
analogously to ordinary leases because of its special
to a fortuitous event, to choose between character. It is a provision of social justice designed to
68
Sales | VENTEROSO
relieve poor farmers from harsh consequences of their Lessees may suspend the payment of rent under Art.
contracts with rich landowners. 1658 of the Civil Code only if their legal possession
is disrupted.
Rules on sublease
Article 1649. The lessee cannot assign the lease After termination, Racelis demanded that Sps. Javier
without the consent of the lessor, unless there is a vacate the premises, but instead of surrendering the
stipulation to the contrary. (n) premises to Racelis, Sps. Javier unlawfully withheld
the possession of the property. They continue to stay
Article 1650. When in the contract of lease of things in the premises until they move to their new
there is no express prohibition, the lessee may residence later. At that point, Racelis was no longer
sublet the thing leased, in whole or in part, obligated to maintain Sps. Javier in peaceful and
without prejudice to his responsibility for the adequate enjoyment of the lease for the entire
performance of the contract toward the lessor. duration of the contract. Therefore, they cannot use
(1550) the disconnection of electrical service as justification
to suspend the payment of rent. (Racelis v. Javier)
Article 1651. Without prejudice to his obligation
toward the sublessor, the sublessee is bound to the Extension of the lease period
lessor for all acts which refer to the use and Article 1670. If at the end of the contract the lessee
preservation of the thing leased in the manner should continue enjoying the thing leased for
stipulated between the lessor and the lessee. fifteen days with the acquiescence of the lessor,
(1551) and unless a notice to the contrary by either party
has previously been given, it is understood that there
Article 1652. The sublessee is subsidiarily liable to is an implied new lease, not for the period of the
the lessor for any rent due from the lessee. However, original contract, but for the time established in
the sublessee shall not be responsible beyond the articles 1682 and 1687. The other terms of the
amount of rent due from him, in accordance with original contract shall be revived. (1566a)
the terms of the sublease, at the time of the extra-
judicial demand by the lessor. Article 1671. If the lessee continues enjoying the
thing after the expiration of the contract, over the
Payments of rent in advance by the sublessee shall lessor's objection, the former shall be subject to
be deemed not to have been made, so far as the the responsibilities of a possessor in bad faith. (n)
lessor's claim is concerned, unless said payments
were effected in virtue of the custom of the place. Article 1682. The lease of a piece of rural land, when
(1552a) its duration has not been fixed, is understood to
have been for all the time necessary for the gathering
Article 1653. The provisions governing warranty, of the fruits which the whole estate leased may yield
contained in the Title on Sales, shall be applicable in one year, or which it may yield once, although
to the contract of lease. two or more years have to elapse for the purpose.
(1577a)
In the cases where the return of the price is required,
reduction shall be made in proportion to the time Article 1687. If the period for the lease has not
during which the lessee enjoyed the thing. (1553) been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month
Remedies by the lessee to month, if it is monthly; from week to week, if
Article 1658. The lessee may suspend the payment the rent is weekly; and from day to day, if the rent is
of the rent in case the lessor fails to make the to be paid daily. However, even though a monthly
necessary repairs or to maintain the lessee in rent is paid, and no period for the lease has been set,
peaceful and adequate enjoyment of the property the courts may fix a longer term for the lease after
leased. (n) the lessee has occupied the premises for over one
year. If the rent is weekly, the courts may likewise
Article 1659. If the lessor or the lessee should not determine a longer period after the lessee has been
comply with the obligations set forth in articles 1654 in possession for over six months. In case of daily
and 1657, the aggrieved party may ask for the rent, the courts may also fix a longer period after the
rescission of the contract and indemnification for lessee has stayed in the place for over one month.
damages, or only the latter, allowing the contract to (1581a)
remain in force. (1556)
A sublessee, much less a mere occupant, is not entitled
Art. 1658 of the Civil Code allows a lessee to postpone to the benefits in Art 1687
payment of rent if the lessor fails to either: (Racelis v.
Javier) An implied new lease or tacita reconduccion will set in
1) Make the Necessary Repairs on the property; when the following requisites are found to exist:
or, (Samelo v. Manotok)
2) Maintain the Lessee in Peaceful an Adequate 1) The term of the original contract of lease has
Enjoyment of the property leased expired;
69
Sales | VENTEROSO
2) The lessor has not given the lessee a notice to during the relevant time. In this regard, we find it
vacate; and significant that it was only on June 20, 2003, or three
3) The lessee continued enjoying the thing leased (3) years after the last payment of the monthly
for fifteen days with the acquiescence of the rentals, that Zosima filed the complaint for unlawful
lessor; detainer against Salimbagat. It does not help that
4) Notice to the contrary by either party should Zosima failed to adduce any additional evidence to
rebut the allegation that by April 2000, no office
not have been previously given;
building stood to be leased because it had been
5) No express contract has been entered into after
demolished to pave way for the construction of the
the old contract has ended. LRT Line II Project. (Zosima v. Salimbagat)
In this case, there was a contract of lease for one (1)

year with option to purchase. The contract of lease REPUBLIC ACT NO. 9653
expired without the private respondent, as lessee, RENT CONTROL ACT OF 2009
purchasing the property but remained in possession Policy
thereof. Hence, there was an implicit renewal of the
Republic Act No. 9653, or the Rent Control Act of
contract of lease on a monthly basis. The other terms
of the original contract of lease which are revived in 2009, regulates housing rents in the Philippines and
the implied new lease under Article 1670 of the New serves as a level of security for Filipino tenants
Civil Code are only those terms which are germane around the country. Its purpose is to protect those in
to the lessee's right of continued enjoyment of the the lowest income brackets against unjustified
property leased. increases in the monthly rent
Therefore, an implied new lease does not ipso Application

facto carry with it any implied revival of private This law is only limited to regulating rents for
respondent's option to purchase (as lessee residential properties. It also only covers those rents
thereof) the leased premises. The provision not exceeding P10,000.00/month for residential units
entitling the lessee the option to purchase the leased in the NCR or P5,000.00/month for other regions.
premises is not deemed incorporated in the
impliedly renewed contract because it is alien to the
Rules
possession of the lessee. Private respondent's right
to exercise the option to purchase expired with the Section 4. Limit on Increases in Rent. - For a period of
termination of the original contract of lease for one one (1) year from its effectivity, no increase shall be
year. (Dizon v. CA) imposed upon the rent of any residential unit
covered by this Act: Provided, That after such
period until December 31, 2013, the rent of any
Article 1677. The purchaser in a sale with the right of
residential unit covered by this Act shall not be
redemption cannot make use of the power to
increased by more than seven percent (7%)
eject the lessee until the end of the period for the
annually as long as the unit is occupied by the same
redemption. (1572)
lessee: Provided, further, That when the residential
unit becomes vacant, the lessor may set the initial
Lease CANNOT be terminated despite sale if: rent for the next lessee: Provided, however, That in
1) The lease is recorded in the Registry of the case of boarding houses, dormitories, rooms and
Property bedspaces offered for rent to students, no increase
2) There is a stipulation in a contract of sale that in rental more than once per year shall be allowed.
the purchases shall respect the lease
3) The purchaser knows the existence of the lease Section 5. Coverage of this Act. - All residential units
4) The sale is fictitious in the National Capital Region and other highly
5) The sale is made with the right to repurchase urbanized cities, the total monthly rent for each of
which ranges from One peso (P1.00) to Ten
The defendant’s possession becomes illegal thousand pesos (P10,000.00) and all residential
only when the plaintiff demands the return of units in all other areas, the total monthly rent for
the property, either because of the expiration of the each of which ranges from One peso (P1.00) to
right to possess it or the termination of their Five thousand pesos (P5,000.00) as of the
contract, and the defendant refuses to heed the effectivity date of this Act shall be covered, without
demand. prejudice to existing contracts.
In the present case, Zosima, as plaintiff, bears the Comparison

burden of proving that Salimbagat has been in actual Civil Code RA 9653
Assignment Prohibited without consent Prohibited without
possession of the property between April 2000 and of lease of lessor, unless there is a written consent
June 2003 when a demand to vacate was made. stipulation to the contrary (Section 8, RA
Zosima cannot reason out that Salimbagat was (Art 1649, NCC) 9653)
Sublease Allowed as long as there is Prohibited without
likewise not able to prove that she had not been in no stipulation to the contrary written consent
possession of the property as the burden of (Art 1650, NCC) (Section 8, RA
adducing proof arises only after Zosima, as plaintiff, 9653)
had proven that Salimbagat had been in possession
70
Sales | VENTEROSO
Grounds for (1) When the period agreed (1) Assignment of

judicial upon, or that which is lease or sublease
ejectment fixed for the duration of without written
leases under articles 1682 consent
and 1687, has expired; (2) Failure to pay
required monthly
(2) Lack of payment of the rent for total of 3
price stipulated; months, subject to
conditions provided;
(3) Violation of any of the (3) The owner/lessor
conditions agreed upon in or his immediate
the contract; family members
have a legitimate
(4) When the lessee devotes need to use the unit
the thing leased to any use subject to
or service not stipulated conditions
which causes the provided;
deterioration thereof; or if he (4) If the unit is the
does not observe the subject of an order
requirement in No. 2 of of condemnation
article 1657, as regards the by appropriate
use thereof. authorities and the
owner/lessor needs
to do necessary
repairs to make the
property safe and
livable. subject to
conditions provided;
(5) Expiration of
the lease/rental
contract
END
71
Sales | VENTEROSO

Reviewer On Sales (V Notes) (De Leon, Villanueva, Ruyeras-Borromeo)

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Reviewer On Sales (V Notes) (De Leon, Villanueva, Ruyeras-Borromeo)

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FROM THE ANNOTATIONS OF DE LEON, VILLANUEVA AND DISCUSSIONS OF ATTY RUYERAS-BORROMEO

TITLE VI Hence, there is a marked difference between a sale of

Guardians of property of the person or persons Champerty/champertous contracts – an

(7) Those expressly prohibited or declared void by

any substance, minds of the parties

These contracts cannot be ratified. Neither can the False consideration

Cause or consideration or price 2) It must be in MONEY OR ITS

to certain conditions (usually the full payment estate. (Buenaventura

Sale Donation English rule

Tests for determination Sales v. payment by cession

1) Things  If the object is VERY GENERIC, it

the mass is specific or capable of being

Application Contract of piece of work –

1st par – WHEN PRICE IS CONSIDERED Article 1470

SALES WITH RIGHT TO REPURCHASE Fixing of price

induce any person to bid at such sale on

From that moment, the parties may reciprocally Codal Dissection

 The seller has the right to bid and he may do

SECOND EXAM TOPICS Article 1322. An offer made through an agent is

Advertisements and invitations Counter-offer - always considered in law a rejection of

Obligations of the offeror in a valid option contract

Article 1475  Before the perfection, any bidder may retract

memorandum make it unenforceable. An 2) ownership.

Warranties of the seller (FREHN) place or depository where it is stored or kept.

have actual possession of the thing sold cannot

Basis Sale or Return Sale on

other remedies a right of withholding delivery

Sale by one having a voidable title

REMEDIES IN CASE OF BREACH 2) accept or reject the goods or rescind the

2) File an action for damages in case of Doctrine of self-help

2) To rescind or resolve the contract of sale

Section 8. If any provision of this Act is held invalid

of the buyer to perform his promise to accept

Corporation v. Bayanihan condition of the machine was merely dealer's talk.

XPN of XPN: There is an express warranty that the

DOCUMENTS OF TITLE 2) Non-negotiable document of title - It is a

5) Record of purchases. — Distributors and merchantability accompanies an express

Common Special Extra effectively on the

Article 2088 Effect of filing a civil action

Article 1614. Each one of the co-owners of an Rationale

 Under free/homestead patent

LEASE proportional reduction of rent or rescission

In this case, there was a contract of lease for one (1)

Therefore, an implied new lease does not ipso Application

In the present case, Zosima, as plaintiff, bears the Comparison

Grounds for (1) When the period agreed (1) Assignment of

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