LAW 3 Merged

CPA in Transit Reviewer: Law on Sales 1
2017-2018 ed. RFBT

I. SALES
Nature of Obligation Created
A contract where one party obliges himself
a.) For the SELLER: To transfer
to transfer ownership and to deliver a
ownership and to deliver possession
determinate thing and the another party to
of the subject matter
pay a price certain in money or its
equivalent.
b.) For the BUYER: to pay the price
Elements of a Contract of Sale
Sale as a Title
1. Essential Elements
Contract of sale DOES NOT transfer the
a. Consent
ownership of the subject matter. It is merely
b. Determinate object
a title that creates the obligation to transfer
c. Price certain in money
ownership and a mode thereof.
2. Natural Elements
a. Warranty against eviction
The contract of sale transfers no real rights.
b. Warranty against hidden
Ownership and position is transferred
defects and encumbrances
through delivery or tradition.
3. Accidental Elements- refer to the
stipulations of the contracting
II. SALE DISTINGUISH FROM
parties
OTHER CONTRACTS
Characteristics of a Contract of Sale
A) DONATION
1. Consensual- perfected by mere Sale Donation
consent Onerous Gratuitous
2. Principal- capable of standing alone Perfected by mere Perfected by
without the need of another consent donee’s acceptance
contract
3. Bilateral- there is a reciprocal Donation is an act of liberality whereby a
obligation between the parties person disposes gratuitously of a thing or
4. Onerous- valuable consideration is right in favor of another, who accepts it.
given by both parties
5. Commutative- the consideration B) BARTER
exchange are of equivalent values Sale Barter
6. Nominate- has a name given by law Cause or Cause or
consideration is in consideration is
Stages of a Contract of Sale money another thing
1. Preparation/Conception- the time By contract of barter or exchange, one of the

the contracting parties shows parties binds himself to give one thing in
interest in the contract. consideration of the other’s promise to give
2. Perfection/birth- concurrence of the another thing. [Art. 1638]
essential elements of the sale
3. Consummation/death- begins when Note: Consideration is partly in money and
the parties perform their respective partly in another thing.
undertakings, resulting in the
extinguishment thereof.

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2017-2018 ed. RFBT
The type of contract is determined under E) CONTRACT TO SELL
the following hierarchy; Contract of sale Contract to sell
a. Manifest intention of the parties Ownership is Ownership is
b. If intention is not clear, the transferred upon transferred upon full
following rules shall apply: delivery payment
i. Thing is more valuable than Non-payment is a Full payment is a
money- barter resolutory positive suspensive
ii. Money is equal or more than condition condition
to the value of the thing- sale Sale is already
No perfected sale yet
perfected
C) CONTRACT FOR PIECE OF WORK Subsequent buyer is Subsequent buyer is
Sale Contract for Piece of presumed to be in presumed to be in
Work bad faith good faith
Ordered in the Made specially for Vendor loses and
ordinary course of the customer upon cannot recover Title remains in the
the business his special order ownership of the vendor if the vendee
Thing transferred thing sold until does not comply
Thing transferred
already existed and contract of sale is with the conditions
existed due to the
can be a subject of resolved and set of the contract
order of the party
sale to other aside
desiring it.
persons
Within the statues Not within the Contract to sell cannot be considered as a
of fraud statues of fraud contract of sale because the first element
(consent) is lacking. The prospective seller
When each product or system executed is does not consent until the happening of an
always UNIQUE and could not mass- event. The seller only agrees is to fulfill his
produce the product because of its very promise to sell the subject when full
nature, such is a contract for a piece of work. payment is made.
[Commissioner vs. Engineering Equipment and
Supply Co., 1975] F) AGENCY TO SELL
Sale Agency to Sell
D) DACION EN PAGO Agent receives goods
Sale Dacion en Pago Buyer receives
of the principal who
No pre-existing goods as owner
Pre-existing debt retains ownership
debt Agent delivers the
Creates an Extinguishes an Buyer pays the price price which he got
obligation obligation from his buyer
Freedom in Price is value of the Buyer, as a general
determining price thing given Agent can return the
rule, cannot return
goods
The cause or Cause is the the object sold
consideration is extinguishment of Seller warrants the Agent makes no
the price and the the obligation and thing sold warranty
delivery of the the delivery of the Agent can deal with
object object the thing received as
Buyer can deal with
long as it is within
the thing sold
his authority given
by the principal

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2017-2018 ed. RFBT
G) KINDS OF CONTRACT OF SALE Goods which may be Object of Sale
1) Absolute- sale is not subjected to
a. Existing Goods- goods owned or
any condition and the title
possessed by the seller
immediately passes to the
b. Future Goods- goods to be
purchaser upon delivery
manufactures, raised or acquired by
2) Conditional- ownership of the
the seller after the perfection of the
object remains with vendor until
contract. These are things which are
fulfillment of condition/s.
expected
Conditional Contract Contract to Sell Objects must be within the commerce of
of Sale men. If the subject is illicit, contract is VOID
Sale is already Sale is not and cannot be ratified.
perfected perfected Instances of sale of things not actually or
Upon fulfillment Upon fulfillment already owned by seller at time of sale
of condition, of condition, 1. Sale of thing having potential
ownership ownership does existence
automatically not automatically 2. Sale of future goods
transfers to the transfers to the 3. Contract for the delivery at a certain
buyer buyer price of a thing the vendor produces
in the ordinary course of the
H) LEASE business or for the general market.
Sale Lease
Ownership LICIT
No transfer of
transferred by
ownership The thing is licit when:
delivery
Seller must be the 1) It is within the commerce of man
Lessor need not be
owner at the time 2) When right is transmissible
the owner
of delivery 3) It does not contemplate a future
inheritance, unless expressly
One person binds himself to grant authorized by law
temporarily the use of the thing or to render
Example of properties not within the
some service to another who undertakes to
commerce of man:-
pay some rent.-
a) Public property
III. OBJECT/SUBJECT MATTER a. Property for public use
b. Intended for public service
Requisites of a Valid Subject Matter c. Intended for development of
national wealth
a. For Things: b) Church
1. Licit/ lawful c) Narcotics or drugs
2. Should not be impossible
3. Determinate or determinable Kinds of Illicit Things
b. For Rights: 1) Per Se- of its nature
1. Transmissible 2) Per Accidens- due to provisions of
2. Licit law declaring it illegal

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Examples of illicit sale: Mere Hope or expectancy (Emptio Spei)
a. Sale of Future inheritance
The sale of a mere hope or expectancy is
b. Sale of animals suffering from
deemed subject to the condition that the
contagious disease
thing contemplated or expected will come
c. Sale of animal to be used for a
into existence.
service stated in a contract, and they
have found to be unfit therefor. The Sale it self is valid even if the thing
d. Sale or transfer of land to aliens hoped or expected does not come into
existence, unless if such hope or expectancy
EXISTING, FUTURE, CONTINGENT is in vain, such sale is VOID.
Goods which form the subject may either
Emptio Rei Speratae Emptio Spei
be:
Sale of an expected Sale of the hope
1) Existing
thing itself
2) Goods to be manufactures, raise or
Subjected to the Sale produces effect
acquired by the seller
condition that the even if the thing does
3) Things having potential existence
thing will come into not come into
4) Sale of specific things
existence existence
5) Fungible goods
6) Undivided interest Uncertain with
Uncertain with the
regard to quantity
existence of the
Future Goods (Emptio Rei Speratae) and quality of the
thing
thing
It is in the form of a present sale, is valid Object is a future Object is a present
only as an executory contract to be fulfilled thing thing
by the acquisition and delivery of the
goods specified. Upon the acquisition of Note: In case of doubt, presumption is in
goods, either party may demand the favor of emptio rei speratae since it is more in
execution of the contract. keeping the commutative character of the
Example of future things: contract.
1. Goods to be manufactured or
printed SALE OF SPECIFIC THINGS
2. To be raised or future agricultural
products A) Sale of Things in Litigation
3. To be acquired by seller after the Entered into by defendant, without
perfection of the contract knowledge and approval of the litigants
4. Things whose acquisition depends or the court is rescissible. [Art. 1381 (4)]
upon a contingency
Rescission will not take place when the
Potential Existence thing legally is in the possession of a 3rd
Goods not existing at the time can be an person who acted in good faith. [Art. 1385
object as long as it has a potential or (2)]
possible existence, that is, it is reasonably
certain to come into existence, and the title B) Sale of Undivided Interest
will vest in the buyer the moment the thing Makes the buyer a co-owner of the
comes into existence. thing. The co-owner can dispose his
share even without the consent of the
other co-owner/s.

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IV. PRICE
C) Sale of undivided share of a
Specific Mass of Fungible Goods It is the sum stipulated as equivalent of the
thing sold and also every incident taken into
The sale of an undivided share in a
consideration for the fixing of the price put
specific mass of fungible goods makes
to the debit of the buyer and agreed to by
the buyer a co-owner of the entire mass
him.
in proportion to the amount he bought.
Requisites
If later on it was discovered that the
1. Certain or ascertained at the time of
mass of fungible goods contain less than
perfection
what was agreed upon, the buyer
2. In money or its equivalent
becomes owner of whole mass and
3. Real, not fictitious
seller must make up for the difference.
A) CERTAINTY OF PRICE
D) Sale of Things Subject to a
Resolutory Condition Price must be certain, otherwise the sale
If the resolutory condition happens, the is void by reason of absence of meeting
vendor cannot transfer ownership of of minds.
what he sold since there is no object.
Price can be determined or certain when:
DETERMINATE OR DETERMINABLE
a.) Parties have fixed or agreed upon a
A) Determinate definite price
A thing is determinate when it is Fixing of price cannot be left to the
particularly designated or physically discretion of one of the parties unless if
segregated from all others of the same such was accepted by the other, therefor
class. the sale is perfected.
b.) If it be certain with reference to
B) Determinable another thing certain
c.) Determination is left to the
A thing is determinable when it is
judgement of a specified person
capable of being made determinate at
the time the contract was entered Price fixed by 3rd persons designated by
without the necessity of a new or further the parties is binding upon them.
agreement between the parties. Exemptions
1. If unable or unwilling: sale is
Note:
inefficacious unless parties
o Failure to state the exact location of the
subsequently agree about the
land does not make the object
price.
indeterminate, so long as it can be
2. If in bad faith/by mistake: Courts
located.
may fix the price.
o The fact that the exact area of the land
3. If 3rd person is prevented from fixing
specified in the contract of sale is
price by fault of seller or buyer:
subjected to the result of the survey does
Innocent party may avail of
not make the object indeterminate.
remedies through recession or
fulfillment of obligation, with
damages.

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B) INADEQUACY OF PRICE 2. Simulated Price (Absolute
Gross inadequacy of price does not Simulation)
affect the contract of sale except that it Price stated in the contract is not
may indicate a defect in consent. intended to be paid. Parties never
intended to be bound. Contract is
1. Voluntary Sales void and inexistent.
• General rule: Mere inadequacy of
the price does not affect validity of D) FAILURE TO DETERMINE
the sale. PRICE
1. Where contract executory- contract is
• Exceptions: without effect. There is no
a.) When low price indicates vice of obligation created.
consent, sale may be annulled
b.) Where the price is so low as to be 2. Where delivery has been made- buyer
“shocking to conscience”, sale must pay a reasonable price.
may be set aside
c.) Where the parties did not intend Reasonable Price
to be bound at all, sale is VOID What is a reasonable price is a question
of fact dependent on the circumstances
2. Involuntary Sales of each case.
• General Rule: Mere inadequacy of It may be determined on the basis of a
the price is not a sufficient ground company’s balance sheet showing the
for the cancellation of the sale if book or fair value of its shares.
property is real.
Generally, reasonable price is the
• Exceptions:
market price at the time and place fixed
1. Where the price is so low as to be
by the contract or by law for delivery of
shocking to the moral
goods.
conscience, judicial sale will be
set aside. E) EARNEST MONEY
2. In the event of resale, a better Partial payment of the purchase price &
price can be obtained. considered proof of the perfection of
the contract.
C) SIMULATION OF PRICE
Earnest Money Option Money
If the price is simulated, the contract
Part of purchase Separate and distinct
is void for the lack of cause or
price from purchase price
consideration, but can be shown as a
Given only when
donation or some other contract. Given when sale in
there is already a
Disagreement on the matter of payment not yet perfected
sale
is tantamount to a failure on the price
Buyer is bound to Would-be-buyer is
pay the balance not required to buy
1. False Price (Relative Simulation)
In case of non- In case of non-
Price stated in the contract is not the payment, specific payment, there can
true price parties intended to be performance or be an action for
bound rescission can be specific
filed performance.

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NOTE: Expenses for the execution and Kinds of Promises
registration of the sale shall be borne by 1. Unilateral promise to sell- promise
the vendor, unless there is a stipulation to elects to buy
the contrary. 2. Unilateral promise to buy- promise
Remedies of vendor to unpaid price elects to sell
3. Bilateral promise to buy and sell-
1. Exact fulfillment
either parties choose to exact
2. Cancel the sale, should vendee
fulfillment
failed to pay two or more
installments.
3. Foreclose the chattel mortgage. VI. ACCEPTANCE
Requisites
The acceptance referred to which
a.) Must be a contract of sale determines consent is the acceptance of the
b.) Object is personal property offer, and not of the goods delivered.
c.) Sale must be in installments
Requisites
Does not apply for sale for cash or straight
1. It must be absolute
terms.
2. Must be plain and unconditional
3. To bind the offeror, the offeree
V. OFFER must comply with the conditions of
the offer.
• General Rule: Offer may be withdrawn at
any time without even communicating VII. PERFECTION
such withdrawal to the interested buyer
Contract of sale is perfected at the moment
• Exception: When the offeror has allowed of the meeting of the minds of the parties.
the offeree a certain period to accept, may
be withdrawn at any time before acceptance From the moment of perfection, parties
by communicating such withdrawal. may reciprocally demand performance.
Exception to the exception: Cannot be Requirements for Perfection
withdrawn within a certain period if found 1. When parties are face to face, when an
under a consideration. offer is accepted without conditions and
without qualifications. If negotiation is
OPTION CONTRACT made through a phone, it is as if the parties
are face to face.
An accepted unilateral promise to buy or
2. When contract is through a
sell supported by a consideration distinct
correspondence or thru telegram, there is
from the price. It secures the privilege to
perfection when the offeror receives or has
buy.
knowledge of the acceptance by the
Option Contract Sale offeree.
Unilateral Bilateral 3. When sale is made subject to a
Sale of right to suspensive condition, perfection is when
Sale of Property
purchase from the moment the condition is fulfilled.
An option without consideration is VOID
and the effect is the same as if there was no
option.

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Statute of Fraud Effect of Perfection
The following transaction must be in After perfection, parties must now comply
writing, otherwise contract is unenforceable. with their mutual obligations. In the
Unless ratified by failure to object to oral meantime, buyer has personal rather than
acceptance of benefits under the contract. real right. Hence if seller sells again a parcel
of land to a stranger in good faith, the
1. Sale of property at price not less
proper remedy of the buyer would be to sue
than P500.00
for damages for he cannot recover
2. Sale not to be performs within one
ownership over something he had never
year
owned before.
3. Sale of real property or interest
therein
VIII. CAPACITY TO BUY AND SELL
NOTE: Applicable only to executory
contracts and not to contracts which are
All persons who can bind themselves by
totally or partially performed.
contract have also legal capacity to buy and
sell.
Sale by Auction
Perfected when the auctioneer accepts the Kinds of Incapacity
bid by the falloff the hammer, gavel, or in 1. Absolute Incapacity- persons cannot
any other customary manner. bind themselves at all
If the auction is announced “without a. Minors
reserved”, goods cannot be withdrawn from b. Insane or Demented
sale after the bid is made. c. Deaf-mutes who do not know
how to write
By taking part in the auction, the buyer d. Civil Interdiction
voluntarily submitted to the terms and 2. Relative Incapacity- only with
condition of the auction. regards to certain persons and
certain class of property
Sale Of Goods By Description
Seller sells things as being a particular kind, Husband and Wife
and buyer has not seen the article sold and • General Rule: Husband and wife cannot
relies on the description given by the sell to each other
vendor.
• Exception:
Sale by Sample
1) When separation of property was
Parties contracted solely with reference to agreed
the sample, with the understanding that the 2) There was a judicial separation of
bulk was like it. The vendor warrants the property
thing sold will conform with the sample in
kind, character, and quantity. It is the sole Relative Incapacity
basis or inducement of the sale.
The following persons cannot acquire
NOTE: goods must satisfy all the warranties. property by purchase, even at a public
Otherwise, contract may be rescind. auction, either in person or through the
mediation of another:
1) Guardian, with respect to the
property of his ward

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2) Agents, the property whose • After delivery: buyer bears the risk.
administration or sale may have Unless delivery was delayed
been in trusted to them, unless through the fault of either parties,
consent of principal is given the risk is with the party in fault; and
3) Executors and administrators, when the ownership of the goods
property of estate under his has been retained by the seller.
administration.
4) Public officers and employees, with
respect to the properties of the X. OBLIGATIONS OF THE
government, political subdivisions, VENDOR
or GOCCs, entrusted to them.
5) Judges, justice, prosecuting 1) Transfer ownership
attorney, clerks of court, etc., with 2) Deliver the thing, with its accessions
respect to the property in custogia and accessories, if any
legis. 3) Warrant against eviction and
6) Other persons disqualified by law against hidden defects
4) To take care of the thing, pending
Effect of violation delivery, with proper diligence
a. With respect to 1-3: VOIDABLE 5) To pay the expenses of the deed of
Reason: only private rights, which sale, unless there is stipulation to the
are subject to ratification are contrary
violated.
b. With respect to 4-6: NULL & VOID XI. DELIVERY
Reason: violation of public policy
cannot be subjected to ratification Ownership, as a consequence of certain
contracts such as sale, shall be transferred
IX. LOSS AND DETERIOTAION to the vendee upon actual or constructive
delivery
Res Perit Domino
The concept that owner bears risk of loss Intention to Transfer Ownership
and deterioration because ownership is not In all forms of delivery, the act of delivery
transferred until delivery. shall be coupled with the intention of
Rule on Risk of Loss and Deterioration: delivering the thing. The act without the
intention is insufficient.
• Before Perfection: Seller bears the Requisites of Delivery
risk
1. Identity
• At the time of perfection: Contract is 2. Integrity
VOID or inexistence 3. Intentional
• At the time of sale: if entirely lost,
contract is VOID or inexistence. If When vendor is not bound to deliver
partially lost, vendee may elect 1. Vendee has not paid the price
between withdrawing or demanding 2. No period for payment has been
the remaining part. fixed
• After perfection but before delivery: 3. Even if a period for payment has
risk of loss is shifted to the buyer but been fixed, if the vendee has lost the
stipulations in the contract will right to make use of the same
govern.

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Kinds the risk of loss. The buyer must comply with
express or implied conditions otherwise,
1. Actual or real- placing the thing
the sale becomes absolute.
under the control and possession of
the buyer
Sale on Approval or Trial
2. Legal or constructive- delivery is
represented by other signs or acts Title remains with seller notwithstanding
indicative thereof delivery of the goods. It is in nature of an
3. Quasi-tradition- delivery of rights, option to purchase. Sale is dependent on
credits or incorporeal property, the quality of the goods; it is a sale with
made by (i) placing titles of suspensive condition. Buyer become owner
ownership in the hands of the when:
buyer or (ii) allowing the buyer to
make use of rights 1) Buyer signifies his approval or
4. Tradition by operations of law acceptance to seller
2) Does any other act adopting the
Kinds of Constructive or Legal Delivery transaction
a) By Legal Formalities- sale is made 3) Retains the goods without giving
through public instrument. Gives notice of rejection after the time
rise only to a prima facie presump- fixed has expired; it no time has
tion of delivery. been fixed, after the expiration of a
b) Symbolic Delivery (tradition reasonable time
simbolica)- delivery of keys or
depository where the movable is Sale or Return Sale on Trial
kept or stored. Subject to a
Subject to a
c) Traditio Longa Manu- delivery of a resolutory
suspensive condition
movable by mere consent or condition
agreement. Pointing at the thing Depends on the
Depends on the will
d) Traditio Brevi Manu- buyer simply character or quality
of the buyer
continues in possession of the thing of the goods
but under ownership. Applies to Ownership remains
movables only. Happens when in the seller until
Ownership passes
buyer already has possession of the buyer signifies his
to buyer on delivery
thing sold before the sale. approval (meeting of
e) Traditio Constitutum Posessorium- the minds)
seller continues to be in possession Risk of loss or Risk of loss and
of the property sold but not as a injury rest with the injury remains with
owner but in some other capacity. buyer seller
Sale or Return Goods Delivered Through Carrier

• General Rule: Delivery to carrier is deemed
Property is sold, but the buyer has the
to be delivery to the buyer.
option to return it to the seller instead of
paying the price. It depends on the • Exception: Where the right of possession
discretion of the buyer; it is a sale with a or ownership of specific goods sold is
resolutory condition. reserved.
It is a kind of sale with condition
subsequent. Buyer, being the owner, bears

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Seller’s Duty After Delivery to Carrier 4. Purchase in a merchant’s store, fairs
1. To enter on behalf of buyer into or markets (art. 559)
such contract reasonable under the 5. When a person who is not the owner
circumstances sells and delivers a thing,
2. To give notice to buyer regarding subsequently acquires title thereto.
necessity of insuring the goods. 6. When the seller has a voidable title
which has not been avoided at the
Instances Where Seller Is Still The Owner time of sale.
Despite Delivery
1. Sale on trial, approval or satisfaction Place of Delivery
2. Contrary intention appears by the 1. Where there is an agreement: Place
terms of the contract specified
3. Implied reservation of ownership 2. Where there is no agreement: Place of
a. Goods are shipped, but by delivery determined by usage of
the bill of landing goods are trade
delivered to seller or his 3. Where there is no agreement and no
agent or their order prevalent usage: seller’s place of
b. Bill of landing is kept by the business
seller or his agent 4. In any other case: seller’s residence
c. When the buyer does not
honor the bill of exchange by Payment of the Purchase Price
returning the bill of landing
to seller. • General Rule: Seller is not bound to deliver
unless the purchase price has been paid.
Sale by one having a Voidable Title • Exception: The Seller is bound to deliver
even if the price has not been paid, is a
If the seller has only a voidable title, buyer period of payments has been fixed.
acquires a good title to the goods provided
he buys them: Goods Delivered Less Than Quantity
a) Before the title of the seller has been Agreed
avoided 1. Buyer may reject; or
b) In goods faith for value 2. Buyer may accept and pay at the
c) Without notice of the seller’s defect contract rate
of title
Quantity More Than Agreed Upon
Sale of Goods by a Non-owner 1. Buyer may reject all; or
• General Rule: Buyer acquires no title even 2. Buyer may accept the goods agreed
if in good faith or for value. Nemo dat quid upon and reject the rest; or
non habet (“You cannot give what you do not 3. Buyer may accept all and must pay
have”). for them at the contract rate
• Exceptions: Goods Mixed With Goods Of Different
1. Owner is estopped or precluded by Description
his conduct
2. Sale is made by the registered owner Buyer may accept the goods which are in
or apparent owner accordance with the contract and reject the
3. Sales sanctioned by judicial or rest.
statutory authority

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Indivisible Goods Classes of Documents of Title
If the subject is indivisible, in case of a) Negotiable Documents of title- stated
delivery of a large quantity of goods or a that goods can be delivered to
mixed goods, the buyer may reject the bearer, or to the order of a person.
whole of the goods. b) Non-negotiable Instrument of Title-
Right of rejecting the whole of the goods stated that goods are to be delivered
delivered is given only if the subject matter to a specified person.
is indivisible.
Negotiation of negotiable document of
Rights of Vendee to the Fruits title
1.) By Delivery
Vendee has the right to the fruits of the 2.) By indorsement plus delivery
thing sold from the time obligation to
deliver arises. Generally at time of Forms of Indorsement
perfection, however parties may modify it
by agreement. a) Blank Indorsement- consist of
signature of the indorser without
XII. DOCUMENT OF TITLE specifying the name of the indorsee.
b) To bearer- where the indorsement
A document of title in which is stated that states that the goods are deliverable
the goods referred to therein will be to bearer.
delivered to the bearer, or to order of any c) Special Indorsement- name of
person named in such document is a indorsee is specified.
negotiable instrument of title.
Negotiable Document of title marked
Document is negotiable if: “Non-negotiable”
1.) Goods are deliverable to bearer
2.) Goods are deliverable to the order of Such mark will have no effect on the
a certain person instrument and remains to be negotiable.
Common forms of document of title Who may negotiate negotiable document

a) Bill of Landing- contract or receipt of title
for the transport of goods and their 1. By the owner
delivery to the person named 2. By the person to whom the
therein, to order or bearer. possession or custody of the
b) Dock Warrant- given by dock owners document has been entrusted by the
to an importer of goods recognizing owner.
the latter’s title of the said goods
c) Warehouse Receipt- contract or Rights of the Holder
receipt for goods deposited with a 1. Title of the person negotiating the
warehouseman containing the document, over the goods covered
latter’s undertaking to hold and by the document;
deliver the said goods to a specified 2. Title of the person to whose order by
person, to order or bearer. the terms of the document the goods
were to be delivered, over such
goods;
3. The direct obligation of the bailee to
hold possession of the goods for

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him, as if the bailee had contracted Bailee
to him directly. The bailee has the direct obligation to hold
NOTE: Mere transfer foes not acquire possession of the goods for the original
directly the obligation of the bailee. To owner. The goods cannot be attached or
acquire it, he must notify the bailee. levied and bailee cannot be compelled to
deliver the goods unless the document be
Rights of the Transferee first surrendered or its negotiation
The rights of a transferee, tot whom a prohibited by court.
document is transferred but not negotiated, Failure of bailee or previous indorsers to
are not absolute as it is subjected to the fulfill their obligations
terms of the agreement.
Indorser hall not be liable for any failure on
1. Title of the goods as against the
the part of the bailee or previous indorsers
transferor;
to fulfill their respective obligation.
2. Right to notify the bailee of the
transfer thereof; Effect of typographical or Grammatical
3. Right, thereafter, to acquire the Error
obligation of the bailee to hold It does not destroy the negotiability of the
goods for him. document of title, for what should be
considered is the intent.
Transfer for Value by Delivery
XIII. UNPAID SELLER
If a negotiable document of title is
transferred for value by delivery, and
Unpaid seller is one who has not been paid
indorsement is essential for negotiation,
the whole amount of the price or one who
The right of the transferee are:
received a negotiable instrument and it has
1. Right to the goods as against the been dishonored, buyer is insolvent, or
transferor; otherwise.
2. Right to compel the transferor to
indorse Rights of the Unpaid Seller
Negotiation shall take effect as to the time 1) Right to lien of goods or the rights to
when indorsement is actually made. retain them for the price while he is
in possession of them
Warranties on sale of document 2) Right of stoppage in transit
1. Document is genuine 3) Right of resale
2. He has a legal right to negotiate or 4) Right to rescind the sale
transfer it
3. He has knowledge of no fact which RIGHT TO LIEN
would impair the validity or worth Right to retain possession of goods until
of the document payment or tender of the whole price, or
4. He has the right to transfer the title unless he agrees to sell on credit
to the goods and that goods are
merchantable or fit for a particular A) When available:
purpose 1.) Goods sold without stipulation
as to credit
2.) Goods are sold on credit, but
credit term has expired
3.) Buyer becomes insolvent

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B) Lien on Partial Delivery: seller refused to received them
When unpaid seller made partial back.
delivery of the goods, he may C) How to exercise:
exercise his lien on the remainder, 1.) By obtaining actual possession
unless such part delivery shows an of the goods.
intent to waive the lien or right of 2.) By giving notice of his claim to
retention. the carrier or bailee.
C) When lien is lost: Such notice may be given in to the
1.) Delivers the goods to a carrier or person in actual possession or to his
other bailee for the purpose of principal. But if given to the
transmission to the buyer principal, it must be given at such
without reserving the ownership time and under such circumstances
in the goods or the right of to be effectual so the principal can
possession thereof; prevent delivery.
2.) Buyer or his agent lawfully D) Effects of exercise:
obtains possession of the goods; 1.) Goods are no longer in transit
3.) By waiver thereof 2.) Carrier shall be liable as
depositary or other bailee.
RIGHT OF STOPPAGE IN TRANSITU 3.) Carrier must redeliver the goods
to, or according to the
An extension of the lien for the price; instructions of the seller
entitles unpaid seller to resume possession E) When goods are no longer in transit:
of the goods while they are in transit before 1.) After delivery to the buyer or his
the goods come in possession of the vendee agent in that behalf;
A) When available: 2.) Buyer obtains delivery of the
1.) Buyer must be insolvent; goods before arrival at the
2.) Seller must be unpaid appointed destination
3.) Goods are in transit 3.) Carrier or bailee acknowledges
4.) Seller must actually take to hold the goods on behalf of
possession of the goods sold or the buyer
give notice of his claim to the 4.) Carrier or other bailee
carrier or other person in wrongfully refuses to deliver the
possession. goods to the buyer or his agent.
5.) Seller must surrender the
document of title, if any, issues RIGHT OF RESALE
by the carrier or bailee; A) When available:
6.) Seller must bear the expenses of 1.) Seller has the right to lien or
delivery after the exercise of the stoppage in transitu.
right 2.) Under the following cases:
B) When goods are considered in transit: a. Goods are perishable by
1.) After delivery to carrier or other nature
bailee and before the buyer or b. Right to resell is
his agent takes delivery of them; expressly reserved
2.) Goods are rejected by buyer, and c. Buyer delays in payment
carrier or bailee continues to be for an unreasonable time
in possession of them, even if

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B) Effects of resale Exceptions:
1.) Seller is not liable to the buyer 1.) Seller has given his consent
for any profit 2.) When purchaser or buyer is a
2.) If sells for less than the price, purchaser for value in good faith of
seller has right to sue for the a negotiable document of title.
balance from buyer
3.) New buyer acquires good title as IX. SALE OF REAL ESTATE
against the original buyer
Unit Price Contract
RIGHT TO RESCIND THE SALE Payment will be made only on the basis of
Return of the title over the undelivered contractual items actually performed. The
goods to the seller, and right to recover amount agreed upon is merely an estimate.
damages for breach of contract Price is depending upon the quantities
A) When available: performed multiplied by the unit prices
1.) Seller has the right to lien or previously agreed upon.
stoppage in transitu
2.) Under either of the 2 situations: Sale of Real Estate by the Unit
a. Right to rescind is The vendor must deliver the entire property
expressly reserved agreed upon. The immovable property
b. When buyer delays in the must be of the quality specified in the
payment of the price for contract.
an unreasonable time.
B) Effects of rescission If the entire area could not be delivered,
1.) Seller resumes ownership of the then the object of the contract is not
goods delivered. Hence the vendee is entitled to
2.) Seller shall not be liable to the rescind it. But he may, however, enforce the
buyer upon the contract contract with the corresponding decrease in
3.) Buyer may be held liable to the price.
seller for damages for any loss
occasioned by the breach of When Vendee is Entitled to Rescind Sale
contract of Real Property
C) How seller may rescind: 1.) If the lack of area is at least 1/10th
by notice to the buyer or by some than that stated or stipulated.
overt act showing an intention to 2.) If the deficiency in the quality
rescind. specified in the contract exceeds
Communication to buyer of rescission is not 1/10th of the price agreed upon
always necessary but giving/failure to give 3.) If the vendee would not have bought
notice is relevant in determining the immovable had he known of its
reasonableness of time given to the buyer to smaller area or inferior quality.
make good his obligation under contract.
Where immovable of a greater area or
Effect if Buyer Sold the Goods number
Generally, the unpaid seller's right of lien or Vendee may accept the area included in the
stopage in transitu remains even if the contract and reject the rest. The vendee may
buyer has sold or otherwise disposed of the not withdraw from the contract.
goods.

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Lump Sum Sale (A Cuerpo Cierto) 2.) Double Sale of Real Property
Sates the full purchase price based on the a. First registrant in good faith
estimate or where both area and boundaries b. First possessor in good faith
are stated. c. Person with oldest title in
good faith
Boundaries
Mentioning the boundaries of the land is The requirement of the law then is two-fold:
indispensable in every conveyance of real acquisition in good faith and registration in
estate. The vendor is bound to deliver all good faith. Good faith must concur with the
that is included within the said boundaries. registration. If it would be shown that a
The area of which, even if lesser or grater buyer was in bad faith, the alleged
than what is stipulated, is immaterial. registration they have made amounted to
no registration at all.
Real property not in Vendor's Possession
The failure of a person to take the ordinary XI. CONDITIONS
precautions, specially in buying a piece of
land in the actual, visible and public An uncertain event or contingency on the
possession of another person, other than happening. Conditions may be:
the vendor, constitutes gross negligence 1.) Waived; or
amounting to bad faith. One who purchases 2.) Considered as warranties
real property which is in the actual
possession of another should, at least make Effect of non-fulfillment of Condition
some inquiry concerning the right of those 1.) If the obligation of either party is
in possession. He can scarely, in the absence subjected to any condition and such
of such inquiry, be regarded as a bona fide condition is not fulfilled, such party
purchaser as against such possessors. may;
a. Refuse to proceed with the
Prescription of Action contract
The action for either recission of the or b. Proceed the contract,
reduction of the price must be brought 6 waiving the performance of
months from the day of delivery. the condition
2.) If condition is in nature a promise
X. DOUBLE SALE that it should happen, the non-
performance of such condition may
Requisites of Double Sale be treated by the other party as a
1. Two or more valid contract of sale; breach of warranty.
2. Two or more buyers ;
3. They must pertain exactly to the XII. WARRANTIES
same object; and
4. They must be bought from the It is a promise that a fact is true. In a sale, it
same seller. is a statement of fact abut the quality or
character of the goods sold to induce the
Rules of Preference sale relied upon by the buyer. Breach or
violation of it gives rise to a suit for damages.
1.) Double Sale of Movables Warranty is enforceable only against the
- who first takes possession in good immediate vendor of the party
faith dispossessed.

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Warranty vs Condition Implied Warranty
Warranty Condition It is a natural, not an essential element of a
Goes into the contract, and is deemed incorporated in the
performance of an contract of sale. It is inherent.
Affects the existence
obligation and may, Its reason is to protect naïve and
of the obligation
in itself, be an unsuspecting buyers from scrupulous
obligation sellers from running away from their
Stipulation or wrongful doings.
Must be stipulated
operation of law
Non-fulfillment Non-happening does It may be modified or suppressed by
constitutes breach not breach the agreement of the parties. Unless waived, the
of contract contract warranties stay.
May attach to the
Always relate to the Implied Warranties in sale
seller’s duty to
subject matter or the 1. Warranty as to seller’s title
deliver or some
seller’s obligations 2. Warrant against hidden defects
other circumstances
3. Warranty as to fitness or
Kinds of Warranties merchantability
1.) Express Warranty
2.) Implied Warranty When Implied Warranty not Applicable
1.) “As is and where is” sale
Express of Opinion 2.) Sale of secondhand articles
A mere expression of opinion by the seller 3.) Sale by virtue of authority in fact or
does not import a warranty unless: law
1.) Seller is an expert; and
2.) Opinion was relied upon by the SUBSECTION 1
buyer Warranty Against Eviction
Not every false representation voids the
contract, only those matters substantially Eviction
affecting the buyer’s interest Vendee is deprived of the whole or part of
the thing purchased. (art. 1548)
Express Warranty
Warranty against Eviction
It is an affirmation of fact or any promise by
the seller about the subject matter where Seller guarantees that he has the right to sell
the natural tendency of it is to induce the the thing sold and to transfer ownership to
buyer to purchase the thing and the buyer the buyer who shall not be disturbed in his
purchases the thing relying on such legal and peaceful possession thereof. If
affirmation or promise. evicted, vendor is liable thereof.
An express warranty can be made by and Elements of Warranty Against Eviction
also be binding on the seller even in the sale
of a second hand article. 1.) Vendee has been deprived in whole
or in part of the thing purchased
2.) Deprived by virtue of final
judgement

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3.) Judgement is based on right prior to
the sale or act imputable to the Eviction in Part
vendor Buyer may either enforce vendor’s liability
4.) Vendor was summoned in the suit for eviction or he may demand rescission of
for eviction at the instance of the the contract provided in article 1556, if the
vendee buyer lose, by eviction, a part of the thing
5.) There is no waiver on the part of the sold of such importance that he would not
vendee have bought it without said part.
NOTE: Rescission is not a remedy against 2. Intencionada
total eviction. Rescission contemplates that a. Made by vendee with
the one demanding it is able to return knowledge of risk of eviction
whatever he has received under the and assumption of its
contract. Since the buyer can no longer consequences
return the thing sold to the seller, rescission b. Vendor not liable unless
cannot be carried out. acted in bad faith
Rights and liabilities
Prescription In case eviction occurs, the vendee shall
Where one acquires ownership and other have the right to demand of the vendor the
real right through the lapse of time in the following:
manner and conditions prescribed by law. 1. Return of value of thing
2. Income or fruits of thing
a. Completed before sale- vendee can
3. Cost of the suit
enforce warranty against eviction
4. Expenses of the contract
b. Completed after sale- vendor is not
5. Damages and interest, and
liable for eviction. (art. 1550)
ornamental expenses, if sale is made
in bad faith. (art. 1555)
Effect of Waiving Warranty in Bad Faith
a. Vendor in bad faith- cannot be SUBSECTION 2
exempted from warranty. Because Warranty Against Hidden Defects of, or
he has knowledge beforehand of a Encumbrances upon, the Thing Sold
presence of a fact giving rise to
eviction. (art. 1553) Requisites for Warranty against Hidden
b. Vendee in bad faith- not entitled to Defects
warranty against eviction nor right 1. Defect must be important or serious;
to recover damages. He proceeded 2. Must be hidden
to the sale with the assumption of 3. Must exist at the time of sale
the risk of eviction. (art. 1554) 4. Vendee must give notice of defect to
vendor within reasonable time
Kinds of Waiver 5. Action for rescission or reduction in
1. Consciente price must be brought within 6
a. voluntarily made by the months from delivery or 40 days in
vendee without the case of animals
knowledge and assumption 6. No waiver of warranty on the part of
of the risks of eviction. vendee
b. Vendor shall only pay the
value of the thing sold at the
time of eviction

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When defect important Effects of Thing loss due to hidden defects
a) Renders the thing sold unfit for its a.) Vendor aware of hidden defect- he
intended use; shall bear the lost due to bad faith.
b) Diminishes its fitness for such use Vendee may recover:
1. Price paid
NOTE: The use contemplated must be that 2. Expenses of the contract
which is stipulated, and in absence of 3. Damages
stipulation, that which is adopted to the b.) Vendor is not aware- since he acted in
nature of the thing, and to the business of good faith, he shall be obliged only
the buyer. to return:
1. Price
Implied Warranty of Fitness 2. Interest
3. Expenses of the contract paid
Generally, there is no implied warranty of
by vendee
fitness for any particular purpose except
under the following:
Lost due to fault of Vendee
a) Buyer expressly or impliedly
manifest to the seller the particular If the thing sold had any hidden defects at
purpose of the goods acquired the time of sale, and it is lost through the
b) Buyer relies upon the seller’s skill or fault of the vendee, vendor shall be liable
judgement for the price paid less value of the thing had
when it was lost. (art. 1569)
There is an implied warranty that the goods
are reasonably fit for such special purpose.
RULES
IN CASE OF SALE OF ANIMALS
Implied Warrant of Merchantability
Redhibitory vice or defect
It’s a warranty that goods are reasonably fit
for the general purpose for which the same A defect which the seller is bound to
are sold. warrant in animals, the following special
rules shall apply:
Ignorance of Vendor of Hidden Defects
1. Defect must be hidden
Ignorance does not relieve the vendor from 2. Must be of such nature that expert
liability. Good faith cannot be availed of as knowledge is not sufficient to
a defense by the vendor. discover it
a) Doctrine of Caveat Venditor
Vendor is still liable even is he is not Veterinarian is liable if he fails to discover
aware due to this doctrine. It is based or disclose the hidden defect through
on the principle that a sound price ignorance or bad faith. (art. 1576)
warrants a sound article.
Seller liable if animal dies within 3 days
after its purchase due to a disease that
Alternative Remedies of the Buyer
existed at the time of sale.
Vendee has the option to either:
1. Accion redhibitoria (withdraw from Limitation of the action: Rehibitory action
the contract) must be brought 40 days from the date of
2. Accion quanti minoris (reduction in their delivery to the vendee. (art. 1577)
price)

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No warranty against hidden defects When Vendee’s rights can’t be exercised
1.) When servitude is apparent
1. Animals sold at public fairs or public
2.) If non-apparent servitude is
auctions.
registered
2. Livestock sold as condemned
3.) If vendee has knowledge of the
Void Sale of Animals encumbrance, registered or not
a) animals sold are suffering from
contagious disease; or XIV. OBLIGATIONS OF THE
b) found unfit for the use or service VENDEE
stated in the contract.
Animal died with Vices Principal Obligations of the Vendee
If loss is caused for fortuitous event or by 1.) Accept delivery
fault of vendee and animal has vices, the 2.) Pay the price
buyer may either: 3.) Bear expenses for the execution and
1. withdraw from the contract; or registration of the sale and putting
2. demand a reduction in price. the goods in a deliverable state, if
such is the stipulation
XIII. EASEMENT OR SERVITUDE
Pertinent Rules:
Easement or servitude is an encumbrance 1. Vendor not required to deliver the thing
imposed upon an immovable for the benefit sold until the price is paid nor the vendee to
of another immovable owned by a different pay the price before the thing is delivered in
person. the absence of an agreement to the
Kinds of easement or servitude contrary; (art. 1524)
a) Apparent easement- expressly made 2. If stipulated, vendee is bound to accept
b) Non-apparent easement- no external delivery and to pay the price at the time and
indication of its existence place designated;
Requisites for Vendor’s Liability for 3. If there is no stipulation as to the time and
Immovable sold with Easement place of payment and delivery, the vendee
1.) Must be non-apparent is bound to pay at the time and place of
2.) Not indicated in the agreement delivery;
3.) Must be of such nature that the
vendee would not have acquired the 4. In the absence of stipulation as to the
immovable had he been aware place of delivery, it shall be made wherever
thereof. the thing might be at the perfection of the
contract (art. 1251); and
Remedies & Right of Vendee 5. If only the time for delivery has been fixed
1.) Within 1 year from execution of the the vendee is required to pay even before
deed of sale: the thing is delivered to him; (art. 1524)
a. Rescission; or
b. Damages. Delivery in installments (art. 1583)
2.) After one (1) year from of execution • General Rule: Buyer is not bound to
of deed of sale: accept delivery or pay the price thereof
a. Damages, within a period of by installments.
one (1) year from discovery of • Exception: If there is a stipulation
easement or servitude

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Right of Buyer to Examine Goods
• General Rule: Buyer has the right to a
reasonable opportunity to examine the 2) Buyer unjustifiably refuses
goods before accepting them. (art. 1584) a) Title passes to the buyer,
• Exception: (1) When there is an unless there is stipulation and
agreement; (2) stipulation that the goods seller reserved the ownership
shall not be delivered to buyer until he b) Obliged to pay the price
paid the price (C.O.D.). (art. 1588)
If seller refused to allow an opportunity for Time and place for payment of price
inspection, buyer may recind or recover the a. Time and place stipulated
price paid. b. Time and place of delivery of thing,
in absence of stipulation
NOTE: the right to examine the goods is a
condition precedent to the transfer of
ownership. When Vendee is liable for interest
Buyer shall pay interest for the period
When there is Acceptance of Goods between delivery and payment of price in
1. Express acceptance the following cases:
2. Buyer does an act which only an 1. If there is stipulation
owner can do 2. Thing sold produces fruits or
3. Failure to return after reasonable income
lapse of time 3. If he is in default, from the time
judicial or extrajudicial demand for
Effect of acceptance on vendor’s liability payment of price. (art. 1589)
for breach of warranty Suspension of Payment (art. 1590)
• General Rule: Seller is not discharged 1. When buyer may suspend payment
from liability for breach of warranty by a. If he is disturbed in the
the acceptance of the goods possession or ownership of thing
• Exception: (1) If there is an agreement, bought; or
express or implied; (2) if buyer fails to b. If he has a well-grounded fear
give notice to seller of breach of that his possession or ownership
warranty within a reasonable time after would be disturbed by a
buyer knows of such breach. (art. 1586) vindicatory action or foreclosure
of mortgage.
Effects if buyer refuses to accept delivery 2. When buyer may NOT suspend
1) Buyer justifiably refuses payment
a) Buyer has no duty to return a. Vendor give security for the
the goods return of the price;
b) Title does not pass b. It has been stipulated;
c) Not be obliged to pay the c. Vendor has caused the
price disturbance or danger to cease;
d) If he constitute himself as a d. Disturbance is a mere act of
depositary, he shall be liable trespass;
as such e. Vendee has fully paid the price.
e) Obligation to notify the seller
of such refusal (art. 1587)

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When Vendor may Rescind the Sale b. When buyer manifested his
1) Sale of immovable- seller must have a inability to perform his
reasonable ground to fear the: obligation; and
a. Loss of the immovable c. When buyer has committed a
property; AND breach in the contract.
b. Loss of the price. Action by the Buyer
If one or both grounds do not exist, 1. Bring an action for specific
the vendor may choose between: performance, if the seller has broken
a. Fulfillment with damages; the contract to deliver specific or
b. Rescission with damages. ascertained goods.
NOTE: Rescission of real property is not 2. In case of breach of warranty by
automatic. Demand is needed before seller:
rescission may take place. Demand is for a. Accept the goods and ask to
the rescission and not for the payment reduce or extinguish the price
of the price. b. Accept goods and maintain an
action for damages
2) Sale of Movables- rescission of the c. Refuse to accept the goods and
sale of movable shall take place at maintain an action for damages
the option of the vendor, if at the d. Rescind the contract by the
time fixed for the delivery of the return of goods and recover of
thing, the vendee: price
a. does not accept delivery
b. does not pay the price, unless When rescission by Buyer not allowed
a longer period of payment is 1. If buyer accepted the goods knowing
stipulated of the breach of warranty without
protest;
XV. BREACH OF CONTRACT OF 2. If he fails to notify the seller within a
SALE OF GOODS reasonable time
3. Fails to return or offer to return the
Actions by the Seller goods to the seller in substantially as
1. Action for payment of price good condition as they were in the
a. Ownership has passed to buyer time of delivery
and he wrongfully neglects or
refuses to pay the price; Rights and Obligation in Rescission
b. Price is payable on a certain day 1. Buyer
and buyer did not pay, even if a. Obliged to return the goods, and
there is no transfer of title; or cease to be liable for the price;
c. If the goods can’t be readily be b. If paid the price or any part
resold for a reasonable price and thereof, he may recover it;
buyer wrongfully refuses to c. Right to hold the goods as bailee
accept them before ownership if the seller refuse the return of
has passed. goods;
2. Action for damages d. Right to have a lien of the goods
3. Action for rescission for any portion of price paid, as if
a. When buyer repudiated the he were an unpaid seller.
contract of sale;

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2. Seller reserved the right to reacquire the thing
When seller may rescind before sold, provided that he:
delivery 1. Return to the vendee:
a. When the buyer repudiated the a. The price paid
contract of sale; b. Expenses of the contract and
b. When buyer manifested his other legitimate payments
inability to perform his made thereof
obligation c. Necessary and useful expenses
c. When buyer committed a made on the thing sold.
breach of the contract. 2. Comply with other stipulations
XVI. EXTINGUISHMENT OF SALE NOTE: the seller a retro must pay for useful
improvements introduced by the buyer a
Sales are extinguish by: retro; otherwise, the latter may retain
1. By the same causes as all obligations: possession of the land until reimbursement
a. Payment/performance is made.
b. Prescription
c. Loss of thing due Period of Redemption
d. Annulment a.) No agreement : 4 years from date of
e. Novation contract
f. Condonation/remission b.) There is agreement: should not
g. Confusion or merger exceed 10 years. The time in excess
h. Compensation of 10 years shall be null and VOID.
i. Rescission c.) Civil Action between the parties: 30
j. Resolutory Conditions days after final judgement was
2. by the various causes of made, provided that the contract
extinguishment in title VI (sales): was a true sale with a right to
a. Cancellation of sale of personal repurchase.
property in installments (art.
1484) Effect of Failure to exercise right of
b. Resale of the goods by unpaid repurchase
seller (art. 1532) Ownership shall be consolidated in the
c. Rescission of the sale by unpaid vendee. In case of real property, a judicial
seller (art. 1534 order is required for the purpose of
d. Rescission by the buyer in case recording the consolidation in the registry
of partial eviction (art. 1556) of property after the vendor has been duly
e. Rescission by buyer in case of heard. (art. 1607)
breach of warranty against
hidden defect (art. 1567) Who may Exercise the right to
f. Rescission by buyer in sale of Repurchase
animals with redihibitory 1. Vendor a retro
defects (art. 1580) a. Vendee, who acquired the whole
3. By redemption undivided interest, may compel
the vendor, who only sold part
A.) CONVENTIONAL REDEMPTION thereof, to redeem the whole
Also called the right to redeem or property.(art. 1611)
repurchase, takes place when the vendor

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b. Property sold by co-owners 2. Vendor remains in possession as
jointly and in the same contract lessee or otherwise;
may exercise the right in respect 3. Extension for period of right to
to his share only. (art. 1612) repurchase;
c. In the case above (b), vendee 4. Purchases retains for himself a part
cannot be compelled to consent of the purchase price;
to a partial redemption, he may 5. Vendor binds himself to pay the
demand all vendors or co-heirs to taxes of the thing sold;
agree to repurchase the whole 6. When the real intention of the
thing sold. (art. 1613) parties is to secure the payment of an
obligation.
2. Creditors of the Vendor
a. They cannot make use of the right NOTE: in case of doubt, a contract
of redemption until after they purporting to be a sale with right to
have exhausted the property of repurchase (pacto de retro sale) shall be
the vendor. (art. 1610) construed as an equitable mortgage.
NOTE: Vendor may ask for reformation, or

Rights of Parties as to the Fruits of Land to correct the instrument to express the true
1. If there were fruits at the time of sale intent of the parties.
and vendee paid for them, he must
be reimbursed. C.) LEGAL REDEMPTION
2. If vendee did not pay for the fruits, The right to be subrogated, upon the same
no reimbursement for those existing terms and conditions stipulated in the
at the time of redemption. contract, in the place of one who acquires a
3. No fruits at the time of same and thing by:
some exist at time of redemption, it (1) purchase or
is to be distributed proportionately (2) dation in payment, or
to the vendor and vendee, giving the
latter a share in proportion to the (3) by any other transaction whereby
time he possessed the property ownership is transferred by onerous
during the last year counted from title.
the anniversary from the date of sale May be effected against movables or
to compensate the vendee for his immovables. It must be exercised within
expenses. (art. 1617) thirty (30) days from the notice in writing by
the vendor.
B.) EQUITABLE MORTGAGE
One which lacks the proper formalities of a NOTE: Written notice under is mandatory
mortgage, but shows the intention of the for the right of redemption to commence.
parties to make the property subject of the
contract as security for a debt. Right of Legal Redemption of Co-owners
The following are the requisites for the right
A contract may be presumed to be an to exist:
equitable mortgage under the following 1. There must be co-ownership;
cases: (applies only to absolute sale) 2. There must be alienation of all or
1. Unusually inadequate purchase any of the shares of the other co-
price; owners;

Ver. 1.07 | BY: R.M.P
2017-2018 ed. RFBT
3. The sale must be to a third person or Rights of Adjacent Owner of URBAN
stranger; Lands
4. The sale must be before partition; The owners may exercise two (2) rights,
5. The right must be exercised within right of pre-emption or right of redemption.
the period provided; The following are the requisites in order to
6. Vendee must be reimbursed for the exercise such right:
price of the sale. 1. Land must be urban;
2. One exercising the right must be an
Against whom the right may be exercised adjacent owner;
The right of legal redemption is not granted 3. The land sold must be so small and
solely and exclusively to the original co- so situated that a major portion
owner but applies to those who thereof cannot be used for any
subsequently acquire their respective share practical purpose within a
while the co-ownership subsist. In other reasonable time;
words, the right cannot be exercised against 4. Such urban land was bought by its
another co-owner but rather it is exercised owner merely for speculation; and
against the buyer who bought the share. 5. It is about to be resold, or that its
resale has been perfected.
Legal Redemption of Adjacent Owners of NOTE: If two or more owner wish to
RURAL Lands exercise their rights, the one whose
The following are the requisites for the right intended use of the land appears best
to exist: justified shall be preferred. (art. 1622) Co-
1. The land must be rural; owners are preferred over adjacent owners.
2. Land must be adjacent; (art. 1623, par 2)
3. There must be alienation;
4. Rural land alienates must not Pre-emption
exceed 1 hectare; It is the act of purchasing before others. If
5. Vendee must already own some exercised, they will have preference over
rural land; and other potential buyers.
6. Rural land sold must not be
separated by brooks, drainage, Pre-emption vs Redemption
ravines, roads and other apparent Pre-emption Redemption
servitudes from the adjoining lands. Arises before the
Arises after sale
sale
NOTE: Legal right of redemption of rural No rescission There can be
land refers to land used for agriculture because no sale as rescission of the
rather than residential purposes. [Fabia vs yet exist original sale
Intermediate Appellate Court, Nov. 21, 1984] The action is
Action is directed
directed against the
If two or more adjoining owners desire to against the buyer
prospective buyer
exercise the right of redemption May attach to the
1. Owner of the smaller area shall be Always relate to the
seller’s duty to
preferred. subject matter or the
deliver or some
2. If both lands have same area, the one seller’s obligations
other circumstances
who first requested the redemption
shall be preferred. (art. 1621)

Ver. 1.07 | BY: R.M.P
2017-2018 ed. RFBT
Period which Right may be Exercised NOTE: Art. 1626 stresses “knowledge” rather
The period shall be exercised within 30 days than when notice is received.
from the notice in writing by the
prospective vendor, or by the vendor. Accessory Rights Included in Assignment
If notice is not given, the 30-day period has The assignment of a credit does not only
not even begun to run. [Vda. De Cangco v. includes the credit but also all accessory
Escudibo] However, no specific form of thereto. It includes the following: (art. 1627)
written notice is required. 1. Guaranty
2. Mortgage
The 30-day notice in writing should be
3. Pledge
counted from notice, not of the perfected
4. Preference
sale, but of the actual execution and
delivery of the document of sale. [Doromal v. NOTE: this inclusion is based on the rule
COA L-36083, Sept. 5, 1975] that accessory follows the principal. (art.
1537)
XVII. ASSIGNMENT OF CREDITS Warranties of Assignor (art. 1628)
AND OTHER INCORPOREAL RIGHTS 1. When a creditor assigns his credit,
he warrants only at the perfection of
Assignment of credit is a contract where one the contract the:
person (creditor/assignor) transfers to a. Existence; and
another his rights and actions against a b. Legality of the credit.
third person (debtor) to another person NOTE: He is not liable of credit was
(assignee) in consideration of a price certain sold as doubtful.
in money. 2. There is no warranty as to the
An assignment of credit not only entitles the solvency of the debtor unless:
assignee to the credit, but also the power to a. There is a stipulation; or
enforce it against the debtor of the assignor. b. The insolvency was already
existing and of public
Forms of assignment of credit
knowledge at the time of sale.
1. Between parties
a. May be in any form, oral or
Liability for breach of warranty
written. So long as the law does
1. In good faith
not require a specific form for
a. Price received
its validity.
b. Expenses of the contract
2. To be binding against 3rd persons
c. Other legitimate payments by
a. If personal property- public
reason of assignment
instrument
2. In bad faith
b. If real property- public
a. Price received
instrument must be recorded
b. Expenses of the contract
in the Registry of Property.
c. Other legitimate payments by
reason of assignment
Effects of payment by debtor to
d. Damages
creditor/assignor after assignment
1. No knowledge of assignment-
Released from obligation. (art. 1626)
2. With knowledge of assignment- not
released.

Ver. 1.07 | BY: R.M.P
2017-2018 ed. RFBT
Duration of Assignor’s Warranty 4. Right must be exercised 30 days
1. Period Stipulated from the date assignee demands
2. If no period stipulated, 1 year from payment from him. (art. 1634)
date of maturity or assignment,
which ever comes later. Exceptions to debtor’s right to legal
redemption
Sale of successional or hereditary rights The debtor’s right to legal redemption is not
The seller only warrants the fact that he is available when the assignment of the right
an heir if sold without specification of in litigation is made to a: (art. 1635)
properties. He does not warrants the objects 1. Co-heir or co-owner
which makes up the inheritance. 2. Creditor in payment of his credit;
3. Possessor of property in question.
Unless stipulated, the vendor is liable to
deliver the fruits of the inheritance; if <- - - - - - - END - - - - - - ->
consumed, he must reimburse them; if sold,
he must deliver the price of sale. (art. 1632)
Bibliography
The vendee must reimburse the vendor the
Civil Code of the Philippines. (n.d.).
debts and charges on the estate paid by the De Leon, H. S., & De Leon, Jr., H. M. (2013). The
latter. (art. 1633) Law on Sales, Agency and Credit
NOTE: Since vendor already sold the Transactions (2013 ed.). Manila: Rex Book
inheritance, he should not profit except, of Store.
course, insofar as the price is concerned. Domingo, A. D. (n.d.). RFBT MCQ CPA Reviewer
(2017 ed.). Benguet: Coaching for Results
Publishing.
Sale of whole of certain rights, rents, or
Paras, E. (2013). Civil Code Volume V (Special
products Contracts) (17th ed.). Rex Book Store.
Vendor only warrant the legitimacy of the Pineda, E. L. (2010). Sales and other Special
WHOLE and not obliged to warrant each of Contracts. Central Booksupply Inc.
the various parts of which it may be San Beda College of Law. (n.d.). Memory Aid in
composed. Vendor is liable for eviction for: Civil Law.
1. The whole of the thing; or Soriano, F. R. (2016). Notes in Business Law (2016
ed.).
2. Part of the grater value. (art. 1631)
UP Law Bar Operations Comission. (2016). UP
College of Law Bar Reviewer- Civil Law
Legal redemption in sale of credit or other (2016 ed.).
rights in litigation Villanueva, C. (2004). Law on Sales (2004 ed.). Res
Requisites before the right can be exercised: Books Store.
1. There must be a sale or assignment
of a credit
2. There must be a pending litigation
at the time of assignment
3. Debtor must pay the assignee:

a. Price paid by him
b. Judicial cost incurred.
c. Interest on the price from the
date of payment

Ver. 1.07 | BY: R.M.P
SALES
SALES b. Illicit object
6. Presence or absence of conditions:
Q: What is a sale? a. Absolute
b. Conditional
A: Sale is a contract where one party (seller) 7. Wholesale or retail:
obligates himself to transfer the ownership of and a. Wholesale
to deliver a determinate thing, while the other b. Retail
party (buyer) obligates himself to pay for said 8. Proximate inducement for the sale:
thing a price certain in money or its equivalent. a. Sale by description
(Tolentino, p.1, 2000 ed.) b. Sale by sample
c. Sale by description and sample
I. INTRODUCTION 9. When the price is tendered:
a. Cash sale
A. DEFINITION OF THE CONTRACT OF SALE b. Sale on installment plan

Q: What is a contract of sale? AS TO PRESENCEOR ABSENCE OF CONDITION

A: By the contract of sale, one of the contracting ABSOLUTE SALE
parties obligates himself to transfer the
ownership of and to deliver a determinate thing, Q: When is a sale absolute?
and the other to pay therefor a price certain in
money or its equivalent. (Art. 1458, NCC) A: The sale is absolute where the sale is not
subject to any condition whatsoever and where
KINDS OF SALES the title passes to the buyer upon delivery of the
thing sold. (De Leon, p. 15)
Q: What are the different kinds of sales?
Q: When is a deed of sale considered absolute in
A: As to: nature?
1. Nature of the subject matter:
a. Sale of real property; A: A deed of sale is considered absolute in nature
b. Sale of personal property where there is neither a stipulation in the deed
2. Value of the things exchanged: that title to the property sold is reserved in the
a. Commutative sale; seller until the full payment of the price, nor one
b. Aleatory sale giving the vendor the right to unilaterally resolve
3. Whether the object is tangible or the contract the moment the buyer fails to pay
intangible: within a fixed period.
a. Sale of property (tangible or
corporeal); CONDITIONAL SALE

Note: A tangible object is also called Q: When is a sale conditional?
chose in possession

A: It is conditional where the sale contemplates a
b. Sale of a right (assignment of a
contingency, and in general, where the contract is
right, or a credit or other
subject to certain conditions, usually in the case
intangibles such as copyright,
of the vendee, the full payment of the agreed
trademark, or good will);
purchase price and in the case of the vendor, the

fulfillment of certain warranties. (De Leon, p. 15)
Note: An intangible object is a

chose in action.

4. Validity or defect of the transaction:

a. Valid

b. Rescissible

c. Voidable

d. Unenforceable

e. Void

5. Legality of the object:

a. Licit object
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II U N I V E R S I T Y O F S A N T O T O M A S
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C. MENDOZA
VICE C HAIR FOR A DMINISTRATION AND F INANCE : JEANELLE C. LEE Facultad de Derecho Civil
VICE CHAIRS FOR LAY‐OUT AND DESIGN: EARL LOUIE M. MASACAYAN & THEENA C. MARTINEZ
UST GOLDEN NOTES 2011

Q: Distinguish a conditional sale from an B. ESSENTIAL REQUISITES
absolute sale OF A CONTRACT OF SALE

A: Q: What are the elements of a contract of sale?
CONDITIONAL SALE ABSOLUTE SALE
One where the title to A: ANE
One where the seller is the property is not 1. Accidental elements – dependent on
granted the right to reserved to the seller or parties’ stipulations; Examples:
unilaterally rescind the if the seller is not a. Conditions
contract predicated on granted the right to b. Interest
the fulfillment or non‐ rescind the contract c. time & place of payment
fulfillment, as the case based on the fulfillment d. penalty
may be, of the or non‐fulfillment, as the

prescribed condition. case may be, of the
2. Natural elements – those that are
prescribed condition.
inherent even in absence of contrary
Contracts, first the
provision.
contract to sell (which is
conditional or E.g. warranties
preparatory sale) and
Contract executed 3. Essential elements – for validity:
second, the final deed of
between the seller and a. Consent
sale or the principal
the buyer b. Determinate subject matter
contract which is
executed after full c. Consideration
payment of the purchase
price Q: What is the effect and/or consequence of the
absence of consent of the owner in a contract of
Q: What is the effect of the non‐performance of sale of said property?
the condition or if the condition did not take
place? A: The contract of sale is void. One of the
essential requirements of a valid contract of sale
A: Where the obligation of either party to a is the consent of the owner of the property.
contract of sale is subject to any condition which
is not performed, such party may refuse to FORMALITIES REQUIRED
proceed with the contract or he may waive
performance of the condition. Unlike in a non‐ Q: Is there a formal requirement for the validity
fulfillment of a warranty which would constitute a of a contract of sale?
breach of the contract, the non‐happening of the
condition, although it may extinguish the A:
obligation upon which it is based, generally does GR: No form is required. It is a consensual
not amount to a breach of a contract of sale. contract. (Pineda, p. 78)

Q: In a sale with assumption of mortgage, is the XPN: Under Statute of Frauds, the following
assumption of mortgage a condition without contracts must be in writing; otherwise, they
which there will be no perfected contract of shall be unenforceable:
sale? 1. Sale of personal property at a price not
less than P500;
A: Yes. In sales with assumption of mortgage, the 2. Sale of a real property or an interest
assumption of mortgage is a condition to the therein;
seller’s consent so that without approval by the 3. Sale of property not to be performed
mortgagee, no sale is perfected (Ramos v. Court within a year from the date thereof;
of Appeals, G.R. No. 108294 Sept. 15, 1997) 4. When an applicable statute requires
that the contract of sale be in a certain
form. (Art. 1403, par.2)

Note: Statute of Frauds applies only to executory
contracts but not to partially executed contracts.
(Pineda, p.81)

CIVIL LAW TEAM:
ADVISER: ATTY. ELMER T. RABUYA; SUBJECT HEAD: ALFREDO B. DIMAFELIX II;
ASST. SUBJECT HEADS: KAREN FELIZ G. SUPNAD, LAMBERTO L. SANTOS III; MEMBERS: PAUL ELBERT E. AMON, ALSTON ANARNA, OZAN J.
FULLEROS, CECILIO M. JIMENO, JR., ISMAEL SARANGAYA, JR.; CONTRIBUTORS: LOISE RAE G. NAVAL, MONICA JUCOM

SALES
Q: Are there instances where the Statute of B. OPTION CONTRACT

Frauds is not essential for the validity of a
contract of sale? Q: What is an option contract?

A: Yes. A: A contract granting a privilege in one person,
1. When there is a note or memorandum for which he has paid a consideration, which gives
in writing and subscribed to by the party him the right to buy certain merchandise or
or his agent (contains essential terms of specified property, from another person, at
the contract); anytime within the agreed period, at a fixed price.
2. When there has been partial Note: Consideration in an option contract may be
performance/execution (seller delivers anything or undertaking of value, unlike in sale
with the intent to transfer title/receives where it must be a price certain in money.
price);
3. When there has been failure to object Q: What is the nature of an option contract?
to presentation of evidence aliunde as
to the existence of a contract without A: It is a preparatory contract in which one party
being in writing and which is covered by grants to another, for a fixed period and at a
the Statute of Frauds; determined price, the privilege to buy or sell, or
4. When sales are effected through to decide whether or not to enter into a principal
electronic commerce. (Villanueva, p. 92) contract. It binds the party who has given the
option not to enter into the principal contract
C. STAGES OF A CONTRACT OF SALE with any other person during the period
designated, and within that period, to enter into
Q: What are the 3 stages involved in the such contract with the one whom the option was
formation of a contract of sale? granted, if the latter should decide to use the
option. It is a separate and distinct contract.
A:
1. Negotiation/ Policitation Note: If the option is perfected, it does not result in
2. Perfection the perfection or consummation of the sale. (Diaz,
3. Consummation p.7)

1. NEGOTIATION/PREPARATORY Q: What is the period within which to exercise
the option?
A. OFFER
A:
Q: What are the rules in the conception stage
1. Within the term stipulated
about the offer?
2. If there is no stipulation, the court may

fix the term
A:

OFFER IS
RULE Notes: An action for specific performance to enforce
FLOATED
the option to purchase must be filed within 10 years
AND IT IS: from the time the cause of action accrues.
Prior to acceptance, may be
Offer is withdrawn at will by offeror but no The implied renewal of the lease on a month‐to‐
floated authority to modify it month basis did not have the effect of extending the
life of the option to purchase which expired at the
Must be accepted within the period, end of the original lease period. The lessor is correct
otherwise, extinguished at the end of in refusing to sell on the ground that the option had
With a period and may be withdrawn at will expired. (2001 Bar Question)
period by offeror but must not be arbitrary,
otherwise, liable for damages Q: How is an option exercised?
Extinguished by happening/ non‐
With a
happening of condition A: A notice of acceptance must be communicated
condition
to offeror even without actual payment as long as
without Continues to be valid depending upon payment is delivered in the consummation stage.
period/ circumstances of time, place and
condition person
With a
counter‐ Original offer is extinguished
offer

Q: What is the effect of a separate consideration Q: NDC and Firestone entered into a contract of
in an option contract? lease wherein it is stipulated that Firestone has
the right of first refusal to purchase the leased
A: property "should lessor NDC decide to sell the
1. With separate consideration: same”. After the rumor that NDC will transfer
a. Contract is valid the lot to PUP, Firestone instituted an action for
b. Offeror cannot withdraw offer specific performance to compel NDC to sell the
until after expiration of the option property in its favor. PUP moved to intervene
c. Is subject to rescission & damages arguing that the Memorandum issued by then
but not specific performance President Aquino ordered the transfer of the
whole NDC compound to the Government,
2. Without separate consideration: which in turn would convey it in favor of PUP.
a. the option contract is not deemed Can Firestone exercise its right of first refusal?
perfected
b. offer may be withdrawn at any A: Yes. It is a settled principle in civil law that
time prior to acceptance when a lease contract contains a right of first
refusal, the lessor is under a legal duty to the
Note: However, even though the option was not lessee not to sell to anybody at any price until
supported by a consideration, the moment it was after he has made an offer to sell to the latter at a
accepted, contract of sale is perfected. (Art. 1324) certain price and the lessee has failed to accept it.
The lessee has a right that the lessor's first offer
Q: What is the effect of acceptance and shall be in his favor. (PUP v. CA, G.R. No. 143513,
withdrawal of the offer? Nov. 14, 2001)

A: If the offer had already been accepted and Q: In a 20‐year lease contract over a building,
such acceptance has been communicated to the lessee is expressly granted a right of first
before the withdrawal is communicated, the refusal should the lessor decide to sell both the
acceptance creates a perfected contract, even if land and building. However, the lessor sold the
no consideration was as yet paid for the option. property to a third person who knew about the
lease and in fact agreed to respect it.
In which case, if the offeror does not perform his Consequently, the lessee brings an action against
obligations under the perfected contract, he shall both the lessor‐seller and the buyer (a) to
be liable for all consequences arising from the rescind the sale and (b) to compel specific
breach thereof based on any of the available performance of his right of first refusal in the
remedies such as specific performance, or sense that the lessor should be ordered to
rescission with damages in both cases. execute a deed of absolute sale in favor of the
lessee at the same price. The defendants
C. RIGHT OF FIRST REFUSAL contend that the plaintiff can neither seek
rescission of the sale nor compel specific
Q: What is the right of first refusal? performance of a "mere" right of first refusal.
Decide the case.
A: It is a right of first priority, all things and
conditions being equal; identity of the terms and A:
conditions offered to the optionee and all other a. The action filed by the lessee, for both
prospective buyers, with optionee to enjoy the rescission of the offending sale and
right of first priority. It creates a promise to enter specific performance of the right of first
into a contract of sale and it has no separate refusal which was violated, should
consideration. prosper. The ruling in (Equatorial Realty
Development, Inc. v. Mayfair Theater,
Note: A deed of sale executed in favor of a 3rd party Inc., G.R. No. 106063, Nov. 21, 1996), a
who cannot be deemed a purchaser in good faith, case with similar facts, sustains both
and which is in violation of the right of first refusal rights of action because the buyer in the
granted to the optionee is valid but rescissible. (Arts. subsequent sale knew the existence of
1380, 1381 [1])
right of first refusal, hence, in bad faith.

b. The action to rescind the sale and to
compel the right of first refusal will not
prosper. (Ang Yu Asuncion v. CA, G.R.

CIVIL LAW TEAM:

SALES
No. 109125, Dec. 2, 1994). The court Note: It is applicable only to executory contracts and

ruled that the right of first refusal is not not to contracts which are totally or partially
founded upon a contract but on a quasi‐ performed.
delictual relationship covered by the
principles of human relations and unjust If a particular form is required under the Statute of
enrichment (Art 19, et seq. Civil Code). Frauds: sale is valid & binding between the parties
Hence, the only action that will prosper but not to 3rd persons.
according to the Supreme Court is an
action for damages in a proper forum Q: May the right of first refusal be waived?
for the purpose. (1998 Bar Question)

A: Yes. Like other rights, the right of first refusal
Note: The offer of the person in whose favor the right
of first refusal was given must conform with the same may be waived or when a party entered into a
terms and conditions as those given to the offeree. compromise agreement. (Diaz, p. 55)
Q: Andres leased his house to Iris for a period of Q: Differentiate an option contract from a right

2 years, at the rate of P25, 000 monthly, payable of first refusal.
annually in advance. The contract stipulated that
it may be renewed for another 2‐year period A: An option contract is a preparatory contract in
upon mutual agreement of the parties. The which one party grants to another, for a fixed
contract also granted Iris the right of first refusal period and at a determined price, the privilege to
to purchase the property at any time during the buy or sell, or to decide whether or not to enter
lease, if Andres decides to sell the property at into a principal contract. It binds the party who
the same price that the property is offered for has given the option not to enter into the
sale to a third party. Twenty‐three months after principal contract with any other person during
execution of the lease contract, Andres sold the the period designated, and within that period, to
house to his mother who is not a third party. Iris enter into such contract with the one whom the
filed an action to rescind the sale and to compel option was granted, if the latter should decide to
Andres to sell the property to her at the same use the option. It is a separate and distinct
price. Alternatively, she asked the court to contract.
extend the lease for another two years on the
same terms. In a right of first refusal, while the object may be
determinate, the exercise of the right would be
Q: Can Iris seek rescission of the sale of the dependent not only on the grantor’s eventual
property to Andres’ mother? intention to enter into a binding juridical relation
with another but also on terms, including the
A: Iris can seek rescission because pursuant to price, that are yet to be firmed up. (Diaz, p. 54)
Equatorial Realty Co. v. Mayfair Theater rescission
is a relief allowed for the protection of one of the
contracting parties and even third persons from OPTION RIGHT OF FIRST
all injury and damage the contract of sale may CONTRACT REFUSAL
cause or the protection of some incompatible and Principal contract; Accessory; cannot stand
stands on its own on its own
preferred right.
Needs separate Does not need separate
consideration consideration
Q: Will the alternative prayer for extension of
There must be subject
the lease prosper? Subject matter & price
matter but price not
must be valid
important
A: No, the extension of the lease should be upon
Not conditional Conditional
the mutual agreement of the parties. (2008 Bar
Not subject to specific Subject to specific
Question)
performance performance
Q: Is it necessary that the right of first refusal be
embodied in a written contract?

A: Yes, the grant of such right must be clear and
express.


D. POLICITATION/MUTUAL PROMISE TO BUY interest on the contract to the time the contract
AND SELL/ comes into existence the perfection stage upon
the concurrence of the essential elements
Q: What is policitation? thereof. (Sps. Raet & Sps. Mitra v. CA, G.R. No.
128016, Sept. 17, 1998)
A: Policitation is defined as an unaccepted
unilateral promise to buy or sell. This produces no Q: Severino executed two deeds when he sold
judicial effect and creates no legal bond. This is a his property to Henry so that Henry can obtain a
mere offer, and has not yet been converted into a loan with Philam Life. He also authorized Henry
contract. It covers the period from the time the to file an ejectment suit against the lessees and
prospective contracting parties indicate interest when the prayer for ejectment was granted,
in the contract to the time the contract is Henry took possession of the property. Severino
perfected. (Villanueva, p. 6). now claims ownership over the property
claiming that the sale is fictitious therefore there
Q: Is there a legal bond already created in the was no sale to speak of. Is Severino’s contention
negotiation stage? correct?

A: None. In negotiation (policitation) stage, the A: No. There is a perfected contract of sale due to
offer is floated as well as the acceptance. the second deed of sale in this case. The basic
characteristic of an absolutely simulated or
2. PERFECTION
fictitious contract is that the apparent contract is
Q: When is a contract of sale deemed perfected? not really desired or intended to produce legal
effects or alter the juridical situation of the parties
A: in any way. However, in this case, the parties
GR: It is deemed perfected at the moment already undertook certain acts which were
there is meeting of minds upon the thing directed towards fulfillment of their respective
which is the object of the contract and upon covenants under the second deed, indicating that
the price. (Art.1475, par.1) they intended to give effect to their agreement.
Further, the fact that Severino executed the two
XPN: When the sale is subject to a suspensive deeds, primarily so that Henry could eject the
condition by virtue of law or stipulation. tenant and enter into a loan/mortgage contract
with Philam Life, is a strong indication that he
Q: Spouses Raet and Mitra negotiated with intended to transfer ownership of the property to
Gatus about the possibility of buying his rights to Henry. For why (Hernando R. Penalosa v. Severino
certain units at a subdivision developed by Phil‐ Santos, G.R. No. 133749, Aug. 23, 2001)
Ville for them to be qualified to obtain loans
from GSIS. They paid an amount for which Gatus Q: What is the effect of Severino’s and Henry’s
issued them receipts in her own name. GSIS failure to appear before the notary public who
disapproved their loan application. Phil‐Ville notarized the deed?
advised them to seek other sources of financing.
In the meantime, they were allowed to remain A: None. The non‐appearance of the parties
in the subject premises. Is there a perfected and before the notary public who notarized the deed
enforceable contract of sale or at least an does not necessarily nullify nor render the
agreement to sell over the disputed housing parties' transaction void ab initio. Article 1358,
units? NCC on the necessity of a public document is only
for convenience, not for validity or enforceability.
A: None. There was no contract of sale perfected Where a contract is not in the form prescribed by
between the private parties over the said law, the parties can merely compel each other to
property, there being no meeting of the minds as observe that form, once the contract has been
to terms, especially on the price thereof. At best, perfected.
only a proposed contract to sell obtained which
did not even ripen into a perfected contract due Note: Contracts are obligatory in whatever form
they may have been entered into, provided all
at the first instance to private respondents'
essential requisites are present. (Penalosa v. Santos,
inability to secure approval of their GSIS housing
G.R. No. 133749, Aug. 23, 2001)
loans. As it were, petitioners and private

respondents have not hurdled the negotiation
phase of a contract, which is the period from the
time the prospective contracting parties indicate

CIVIL LAW TEAM:

SALES
Q: When is an auction sale perfected? D. OBLIGATIONS CREATED

A: A sale by auction is perfected when the OBLIGATIONS OF THE BUYER
auctioneer announces its perfection by the fall of
the hammer, or in other customary manner. (Art. Q: What are the obligations of the buyer?
1476, par.2)
A:
Q: Does the seller have the right to bid in an 1. Payment of the price
auction sale? GR: Seller is not bound to deliver unless
the purchase price is paid
A: Yes. The seller has the right to bid provided XPN: A period of payment has been
that such right was reserved and notice was given fixed
to that effect. (Pineda, p. 53) 2. Accept delivery of thing sold
3. Pay for expenses of delivery
Q: When is a sale of foreign exchange considered
perfected? Note: A grace period granted the buyer in case of
failure to pay is a right not an obligation. Non‐
A: A sale of foreign exchange is considered payment would still generally require judicial or
perfected from the moment the Bangko Sentral extrajudicial demand before default can arise.
ng Pilipinas authorizes the purchase, even if the
foreign bank has not yet honored the letter of Q: What are the other obligations of the buyer?
credit. (Pacific Oxygen and Acetylene Co. v.
Central Bank, G.R. No. L‐21881, Mar. 1, 1968) A:
1. To take care of the goods without the
3. CONSUMMATION obligation to return, where the goods
are delivered to the buyer and he
Q: How does the consummation stage in a rightfully refuses to accept;
contract of sale take place?
Note: The goods in the buyer’s possession
A: It takes place by the delivery of the thing are at the seller’s risk.
together with the payment of the price.
2. To be liable as a depositary if he
Q: A and PDS Development Corp. executed a voluntarily constituted himself as such;
contract to sell a parcel of land. A died without 3. To pay interest for the period between
having completed the installment on the delivery of the thing and the payment
property. His heirs then took over the contract of the price in the following cases:
to sell and assumed his obligations by paying the a. should it have been stipulated;
selling price of the lot from their own funds, and b. should the thing sold and delivered
completed the payment. To whom should the produces fruits or income; or
final Deed of Absolute Sale be executed by PDS? c. should he be in default, from the
time of judicial or extra‐judicial
A: Having stepped into the shoes of the deceased demand for the payment of the
with respect to the said contract, and being the price.
ones who continued to pay the installments from
their own funds, A’s heirs became the lawful OBLIGATIONS OF THE SELLER
owners of the said lot in whose favor the deed of
absolute sale should have been executed by Q: What are the obligations of the seller?
vendor PDS. (Dawson v. Register of Deeds of
Quezon City, G.R. No. 120600 Sept. 22, 1998) A: DDTWTP
1. Deliver the thing sold;
2. Deliver fruits & accessions/accessories
accruing from perfection of sale;
3. Transfer the ownership;
4. Warranties;
5. Take care of the thing, pending delivery,
with proper diligence;
6. Pay for the expenses of the deed of sale
unless there is a stipulation to the
contrary

E. CHARACTERISTICS OF A CONTRACT OF SALE 2. Barter
SALE BARTER

Consideration is giving Consideration is
Q: What are the characteristics of a contract of
of money as payment giving of a thing
sale?
If consideration consists party in money & partly by

thing–look at manifest intention;
A: If intention is not clear – Art. 1468
1. Consensual Value of thing is equal Value of thing is more
2. Bilateral or less than amount of than amount of money =
3. GR: Commutative money = Sale Barter
Both are governed by law on sales
XPN: Aleatory – In some contracts of
sale, what one receives may in time be
greater or smaller than what he has 3. Agency to Sell
given. (Tolentino, p. 2, 2000 ed) SALE AGENCY TO SELL
4. Principal
Agent not obliged to pay
5. Title and not a mode of acquiring Buyer pays for price for price; must
ownership of object account for the
6. Onerous proceeds of the sale.
7. Reciprocal Principal remains the
8. Nominate Buyer becomes owner even if the
owner of thing object delivered to
Q: Is a contract of sale identified as such based agent
on the nomenclature given to the contract by Agent assumes no personal
the parties? Seller warrants liability as long as
within authority given
A: No. Contracts are not defined by the parties May be revoked
Not unilaterally
but by principles of law. To determine the nature unilaterally even w/o
revocable
of the contract, the courts are not bound by the ground
name or title given to it by the contracting Seller receives profit Agent not allowed to profit
parties. It is the intention of the parties which Real contract Personal contract
controls. (Diaz, Law on Sales as expounded by
Jurisprudence, 2006 ed., p.1) 4. Dacion en Pago
SALE DACION EN PAGO
Q: What are the factors to be considered in
determining the nature of the contract? No pre‐existing Contract where property is
A: credit alienated to extinguish pre‐
1. Language of the contract existing credit/debt
2. Conduct of parties Buyer‐seller Novates creditor‐debtor
relationship
relationship into seller‐buyer
F. DISTINCTIONS OF THE CONTRACT OF SALE
WITH OTHER CONTRACTS 5. Lease

Q: Distinguish Sale from the following: SALE LEASE
Use of thing is for
1. Donation. Obligation to absolutely
specified period only
transfer ownership of
with obligation to
thing
SALE DONATION return
Onerous Gratuitous/onerous Consideration is the
Consideration is the price
Consensual Formal contract rental
Seller needs to be owner of
Law on Sales Law on Donation thing to transfer
ownership.
Lessor need not be
Note: Lease with option to owner
buy – really a contract of
sale but designated as
lease in name.

CIVIL LAW TEAM:

SALES
G. CONTRACT TO SELL document entitled "Receipt of Down Payment"

in favor of Alcaraz for the purchase of their
Q: What is a contract to sell? house and lot, with the condition that Ramona
will make a down payment upon execution of
A: It is one form of conditional sale where the document. The Coronels would then cause
ownership or title is retained by the seller until the transfer of the property in the name of
the fulfillment of a positive suspensive condition, Ramona and will execute a deed of absolute sale
normally the payment of the purchase price by in favor of Ramona. Ramona paid the
the buyer in the manner agreed upon. (Gomez v. downpayment as agreed. Is there a perfected
CA, et. al., G.R. 120747, Sept. 21, 2000) contract of sale or a mere contract to sell?

Q: Distinguish a contract to sell from a contract A: The agreement could not have been a contract
of sale. to sell because the sellers herein made no express
reservation of ownership or title to the subject
A:
parcel of land. The Coronels had already agreed
CONTRACT OF SALE CONTRACT TO SELL
to sell the house and lot they inherited from their
As regards transfer of ownership
father, completely willing to transfer full
Ownership is transferred
ownership of the subject house and lot to the
to the buyer upon Ownership is
buyer if the documents were then in order.
delivery of the object to transferred upon full
him. payment of the However, the TCT was then still in the name of
Note: Vendor has lost purchase price. their father, that is why they caused the issuance
and cannot recover Note: Prior to full of a new TCT in their names upon receipt of the
ownership until and payment, ownership is down payment. As soon as the new TCT is issued
unless the contract is retained by the seller. in their names, they were committed to
resolved or rescinded immediately execute the deed of absolute sale.
As to numbers of contracts involved Only then will the obligation of the buyer to pay
There are two contracts: the remainder of the purchase price arise. This
1. The contract to sell suspensive condition was fulfilled. Thus, the
conditional contract of sale became obligatory,
Note: Conditional or the only act required for the consummation
preparatory sale thereof being the delivery of the property by
There is only one
means of the execution of the deed of absolute
contract executed
2. The deed of absolute sale in a public instrument, which they
between the seller and
sale unequivocally committed themselves to do as
the buyer.

evidenced by the "Receipt of Down Payment."
Note: The principal
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
contract is executed
1996)
after full payment of the
purchase price.
Q: Instead of executing a deed of Absolute Sale
Payment as a condition
in favor of Ramona, the Coronels sold the
Full payment of the
Non‐payment of the price is a positive
property to Catalina and unilaterally and
price is a resolutory suspensive condition. extrajudicially rescinded the contract with
condition. Vendor loses Note: Failure to fully Ramona. Ramona then filed a complaint for
ownership over the pay the price is not a specific performance. Will Ramona’s action
property and cannot breach but an event prosper?
recover it until and that prevents the
unless the contract is obligation of the vendor A: Yes. Under Article 1187, the rights and
resolved or rescinded. to convey title from obligations of the parties with respect to the
becoming effective. perfected contract of sale became mutually due
Remedies available and demandable as of the time of fulfillment or
1. Specific occurrence of the suspensive condition. Hence,
2. Performance 1. Resolution petitioner‐sellers' act of unilaterally and
3. Rescission 2. Damages extrajudicially rescinding the contract of sale
4. Damages cannot be justified, there being no express
stipulation authorizing the sellers to
extrajudicially rescind the contract of sale.
Q: Having agreed to sell property which they
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
inherited from their father, which was then still
1996)
in their father’s name, the Coronels executed a

Q: What are the instances when what is involved a. when a separation of property was
is a contract to sell? agreed upon in the marriage
settlements; or
A: b. when there has been a judicial
1. Where subject matter is indeterminate separation of property agreed
2. Sale of future goods upon between them
3. Stipulation that deed of sale &
corresponding certificate of sale would B. ABSOLUTE INCAPACITY
be issued only after full payment
Q: Who are those absolutely incapacitated to
II. PARTIES TO A CONTRACT OF SALE enter into a contract of sale?

Q: Who are the parties to a contract of sale? A:
1. Unemancipated minors(Art. 1327, NCC);
A: 2. Insane or demented persons, and deaf‐
1. Seller – one who sells and transfers the mutes who do not know how to write
thing and ownership to the buyer (Art. 1327, NCC)
2. Buyer – one who buys the thing upon
payment of the consideration agreed Q: May a capacitated person file an action for
upon annulment using as basis the incapacity of the
incapacitated party?
A. CAPACITY OF THE PARTIES
A: No. He is disqualified from alleging the
Q: Who may enter into a contract of sale? incapacity of the person whom he contracts (Art.
1397, NCC);
A:
GR: Any person who has capacity to contract Q: In a defective contract, where such defect
or enter into obligations, may enter into a consists in the incapacity of a party, does the
contract of sale, whether as party‐seller or as incapacitated party have an obligation to make
party‐buyer. restitution?

XPN: A:
1. Minors, insane and demented persons GR: he incapacitated person is not obliged to
and deaf‐mutes who do not know how make any restitution.
to write XPN: insofar as he has been benefited by the
2. Persons under a state of drunkenness thing or price received by him. (Art. 1399,
or during hypnotic spell NCC)
3. Husband and wife ‐ sale by and
between spouses C. RELATIVE INCAPACITY

Note: Contracts of sale entered by such legally
Q: Who are those relatively incapacitated to
incapacitated persons are merely voidable,
enter into a contract of sale?
subject to annulment or ratification. However,
the action for annulment cannot be instituted
by the person who is capacitated since he is A:
disqualified from alleging the incapacity of the 1. Spouses (Art. 1490, NCC)
person with whom he contracts. 2. Agents, Guardians, Executors and
Administrators, Public Officers and
However, status of prohibited sales between Employees, Court Officers and
spouses is not merely voidable, but null and Employees, and others specially
void. disqualified by law. (Art. 1491, NCC)

XPN to XPN: Note: Under Art. 1490 of the NCC, spouses cannot
sell property to each other, except:
1. Where necessaries are sold and
delivered to a minor or other person a. When a separation of property was
without capacity to act, he must pay a agreed in the marriage settlements; or
reasonable price therefor. b. When there has been a judicial separation
2. In case of sale between spouses: of property agreed upon between them.

CIVIL LAW TEAM:

SALES
Q : What is the status of the following contracts XPN: Even when the property

of sale? regime prevailing was the conjugal
partnership of gains, the Supreme
A: Court held the sale by the husband
1. That entered into by minors: of a conjugal property without the
a. Merely voidable, subject to consent of the wife is void, not
annulment or ratification merely voidable under Art. 124 of
b. Action for annulment cannot be the Family Code since the resulting
instituted by the person who is contract lack one of the essential
capacitated since he is disqualified elements of full consent. (Guiang
from alleging the incapacity of the v. CA, G.R. No. 125172, June 26,
person with whom he contracts 1998)
(with partial restitution in so far as
the minor is benefited) where 3. Between Common Law Spouses ‐ also
necessaries are sold and delivered null and void.
to a minor or other person without
capacity to act, he must pay a In Calimlim‐Canullas v. Fortun, the
reasonable price (Art. 1489) Court decided that sale between
common law spouses is null and void
2. Sale by & between spouses (Art. 1490): because Art. 1490 prohibits sales
a. Status of prohibited sales between between spouses to prevent the
spouses: exercise of undue influence by one
GR: Null and void spouse over the other, as well as to
protect the institution of marriage. The
XPN: In case of sale between prohibition applies to a couple living as
spouses: husband and wife without the benefit
of marriage, otherwise, the condition of
i. When a separation of those incurred guilt would turn out to
property was agreed upon in be better than those in legal union.
the marriage settlements; or (Calimlim‐Canullas v. Fortun, et. al., G.R.
ii. When there has been a No. L‐57499, June 22, 1984)
judicial separation of property
agreed upon between them But when the registered property has
been conveyed subsequently to a third‐
Reasons: party buyer in good faith and for value,
i. Prevent defrauding creditors then reconveyance is no longer
ii. Avoid situation where available to common‐law spouse‐seller,
dominant spouse takes since under the Torrens system every
advantage over the weaker buyer has a right to rely upon the title
spouse of his immediate seller. (Cruz v. CA, G.R.
iii. Avoid circumvention on No. 120122, Nov. 6, 1997)
prohibition of donation
between spouses Q: Who has the right to assail the validity of the
transaction between spouses?
rd
b. Contract of sale with 3 parties:
GR: Under the law on sales, it A: The following are the only persons who can
would seem that a spouse may, question the sale between spouses:
without the consent of the other 1. The heirs of either of the spouses who
spouse, enter into sales have been prejudiced;
transactions in the regular or 2. Prior creditors; and
normal pursuit of their profession, 3. The State when it comes to the
vocation or trade. (in relation with payment of the proper taxes due on the
Art. 73, Family Code) transactions


Q: Who are the persons with relative incapacity to be the vendee in a contract of sale?

A: AGE‐COP
RELATIVELY RATIFICATION
PROPERTIES INVOLVED STATUS OF SALE
INCAPACITATED TO BUY
Property entrusted to them for
administration or sale
Agents
XPN: When principal gave his
Can be ratified after the
consent
inhibition has ceased
Property of the ward during

period of guardianship
Reason: the only wrong that
subsists is the private wrong
Note: Contracts entered by Voidable to the ward, principal or
Guardian guardian in behalf of ward are estate; and can be condoned
rescissible if ward suffers lesion by the private parties
by more than ¼ of the value of themselves
property.
Executors and Property of the estate under
administrators administration
Property and rights in litigation or
Court officers and Cannot be ratified
levied upon on execution before
employees
the court under their jurisdiction
Void Reason: It is a private wrong.
Others specially
(Villanueva, Law on Sales, p.
disqualified by law
Pubic officers and Property of the State entrusted to 30‐31)
employees them for administration

Note: Prohibitions are applicable to sales in legal redemption, compromises and renunciations.

In the case of Rubias v. Batiller (51 SCRA 120), it sought to declare the difference in the nullity between contracts
entered into by guardians, agents, administrators and executors, from the contracts entered into by judges, judicial
officers, fiscals and lawyers.

CIVIL LAW TEAM:

SALES
D. SPECIAL DISQUALIFICATIONS
Q: Who are those persons specially disqualified
by law to enter into contracts of sale?

A: ALIEN‐UnOS
1. ALIENs who are disqualified to purchase
private agricultural lands (Art. XII Secs. 3
& 7)
2. Unpaid seller having a right of lien or
having stopped the goods in transitu, is
prohibited from buying the goods either
directly or indirectly in the resale of the
same at public/private sale which he
may make (Art. 1533 [5]; Art. 1476 [4])
3. The Officer holding the execution or
deputy cannot become a purchaser or
be interested directly or indirectly on
any purchase at an execution. (Sec. 21
Rule 39, Rules of Court)
4. In Sale by auction, seller cannot bid
unless notice has been given that such
sale is subject to a right to bid in behalf
of the seller. (Art. 1476)

Q: Atty. Leon G. Maquera acquired his client’s
property as payment for his legal services, then
sold it and as a consequence obtained an
unreasonable high fee for handling his client’s
case. Did he validly acquire his client’s property?

A: No. Article 1491 (5) of the New Civil Code
prohibits lawyer’s acquisition by assignment of
the client’s property which is the subject of the
litigation handled by the lawyer. Also, under
Article 1492, the prohibition extends to sales in
legal redemption. (In Re: Suspension from the
Practice of Law in the territory of Guam of Atty.
Leon G. Maquera, B.M. No. 793, July 30, 2004)


III. SUBJECT MATTER OF SALE Note: Where land is sold for a lump sum and not so
much per unit of measure or number, the
A. REQUISITES OF A VALID SUBJECT MATTER boundaries of the land stated in the contract
determine the effects and scope of the sale, not the
area thereof. The vendors are obligated to deliver all
Q: What are the requisites of a proper object of the land included within the boundaries, regardless
sale? of whether the real area should be greater or
smaller than that recited in the deed. This is
A: particularly true where the area is described as
1. Things "humigit kumulang," that is, more or less. (Semira v.
a. Determinate or determinable CA, G.R. No. 76031, Mar. 2, 1994)
b. Lawful (licit), otherwise contract is
void Q: Can rights be the objects of sale?
c. Should not be impossible (within
the commerce of men) A: Yes, if they are transmissible. (Art. 1347)

2. Rights
B. PARTICULAR KINDS
GR: Must be transmissible.
XPN: Q: What may be objects of sale?
a. Future inheritance
b. Service – cannot be the object of A:
sale. They are not determinate 1. Existing Goods – owned/ possessed by
things and no transfer of seller at the time of perfection
ownership is available but it can be
the object of certain contracts such 2. Future Goods – goods to be
uas contract for a piece of work. manufactured, raised, acquired by seller
(Pineda, Sales, 2002 ed., p. 13) after perfection of the contract or
whose acquisition by seller depends
Q: Rodriguez first purchased a portion of a Lot A upon a contingency (Art. 1462)
consisting of 345 square meters located in the
middle of Lot B, which has a total area of 854 Note: Sale of future goods is valid only as an
executory contract to be fulfilled by the acquisition
square meters, from Juan. He then purchased
& delivery of goods specified.
another portion of said lot. As shown in the
3. Sale of Undivided Interest or Share
receipt, the late Juan received P500.00 from
a. Sole owner may sell an
Rodriguez as "advance payment for the
undivided interest. (Art. 1463)
residential lot adjoining his previously paid lot
Ex. A fraction or percentage of
on three sides excepting on the frontage. Juan’s
such property
heirs now contests the validity of the
b. Sale of an undivided share in a
subsequent sale, alleging that the object is not
specific mass of fungible
determinate or determinable. Decide.
goods makes the buyer a co‐

owner of the entire mass in
A: Their contention is without merit. There is no
proportion to the amount he
dispute that Rodriguez purchased a portion of Lot
bought. (Art. 1464)
A consisting of 345 square meters. This portion is
c. A co‐owner cannot sell more
located in the middle of B, which has a total area
than his share (Yturralde v.
of 854 square meters, and is clearly what was
CA)
referred to in the receipt as the "previously paid

lot." Since the lot subsequently sold to Rodriguez
4. Sale of Things in Litigation
is said to adjoin the "previously paid lot" on three
a. Sale of things under litigation
sides thereof, the subject lot is capable of being
is rescissible if entered into by
determined without the need of any new
the defendant , without the
contract. The fact that the exact area of these
approval of the litigants or the
adjoining residential lots is subject to the result of
court (Art. 1381)
a survey does not detract from the fact that they
b. No rescission is allowed where
are determinate or determinable. Concomitantly,
the thing is legally in the
the object of the sale is certain and determinate. rd
possession of a 3 person
(Heirs of San Andres v. Rodriguez, G.R. No.
135634, May 31, 2000)

CIVIL LAW TEAM:

SALES
who did not acted in bad A. SALE BY A PERSON WHO DOES NOT OWN THE

faith. THING SOLD

5. Things subject to Resolutory Condition. Q: What is the status of a sale by a person who
Ex. Things acquired under legal or does not own the thing subject of the sale?
conventional right of redemption, or
subject to reserva troncal. (Art. 1465) A: It depends upon the stage of the sale.
1. When seller is not owner at perfection
6. Indeterminate Quantity of Subject stage – the sale is valid.
Matter Ownership of the subject matter by the
a. The fact that the quantity is seller at this stage is not an essential
not determinate shall not be requirement for the validity of sale. It is
an obstacle to the existence necessary at the time of delivery.
of the contract provided it is Hence, a valid contract of sale can cover
possible to determine the subject matter that is not yet existing or
same, without need of a new even a thing having only a potential
contract. (Art. 1349) existence at the time of perfection; or
even a thing subject to a resolutory
condition.
IV. OBLIGATION OF THE SELLER
TO TRANSFER OWNERSHIP Note: If the seller later acquires title thereto
and delivers it, title passes by operation of
Q: Should the seller be the owner at the time of law.
perfection of the contract?
2. When seller is not owner at
A: consummation stage
GR: No. Seller must have the right to transfer a. Old view – the contract of sale is
ownership at the time of delivery or valid, but the transfer of title is
consummation stage. He need not be the void. (Mindanao‐Academy, Inc. v.
owner at the time of perfection of the Yap, G.R. No. L‐17681, Feb. 26,
contract. 1965)
b. New view – the sale by a non‐
XPN: Foreclosure sale wherein the mortgagor owner of the subject property is
should be the absolute owner. void instead of treating the
tradition/delivery aspect as having
Q: EJ was subjected to a buy‐bust operation no effect on transferring
where police officers posed to buy 500 pesos ownership to the buyer. (DBP v.
worth of “S”. She was then charged with a CA, G.R. No. 110053, Oct. 16, 1995)
violation of the Dangerous Drugs Act for
trafficking drugs. EJ uses as defense her lack of Note: Nemo dat quod non habet – you
possession of the object of the sale. Would her cannot give what you do not have, properly
contention free her from liability? applicable to the consummation of a sale.

A: No. Though she was not in possession of the Q: What is the legal effect of sale by a non‐
object of sale, Article 1459 merely requires that owner?
the vendor must have the right to transfer
ownership of the object sold at the time of A:
delivery. In the case at bar, though Beth is not GR: The buyer requires no better title to the
the owner, she had the right to dispose of the goods than the seller had; caveat emptor
prohibited drug. Ownership was thereafter (buyer beware).
acquired upon her delivery to the men in the alley
after her payment of the price. (People v. XPN:
Ganguso, G.R. No. 115430, Nov. 23, 1995) 1. Estoppel – when the owner of the
goods is by his conduct precluded from
denying the seller’s authority to sell
2. When the contrary is provided for in
recording laws


3. When the sale is made under statutory existence as long as
power of sale or under the order of a the hope itself validly
court of competent jurisdiction existed. (eg. lotto)
4. When the sale is made in a merchant’s Note: The presumption is Emptio Rei Speratae
store in accordance with the Code of
Commerce and special laws Q: Jose, as co‐owner, sold the entire land in
5. When a person who is not the owner favor of his minor daughter, Ida. Alleging that
sells and delivers a thing, and Jose had fraudulently registered it in his name
subsequently acquired title thereto alone, his sisters, sued him for recovery of 2/3
6. When the seller has a voidable title share of the property. Ida did not pay for the
which has not been avoided at the time land. Is the sale valid?
of the sale
7. Sale by co‐owner of the whole property A: No. Jose did not have the right to transfer
or a definite portion thereof ownership of the entire property to petitioner
8. Special rights of unpaid seller since 2/3 thereof belonged to his sisters. Also, Ida
could not have given her consent to the contract,
Q: What are the instances when the Civil Code being a minor at the time. Consent of the
recognizes sale of things not actually or already contracting parties is among the essential
owned by the seller at the time of sale? requisites of a contract, including one of sale,
absent which there can be no valid contract.
A: Moreover, Ida admittedly did not pay any centavo
1. Sale of a thing having potential for the property, which makes the sale void.
existence (Art.1461, NCC) Article 1471 of the Civil Code provides: If the price
2. Sale of future goods (Art. 1462, NCC) is simulated, the sale is void, but the act may be
3. Contract for the delivery at a certain shown to have been in reality a donation, or
price of an article, which the seller in some other act or contract. (Labagala v. Santiago,
the ordinary course of business G.R. No. 132305, Dec. 4, 2001)
manufactures/ procures for the general
market, whether the same is on hand at
the time or not (Art. 1467, NCC) V. PRICE

B. SALE BY A PERON HAVING A VOIDABLE TITLE A. MEANING OF PRICE

Q: What is the effect of a sale made by the seller Q: What is a price?
with voidable title over the object?
A: Price signifies the sum stipulated as the
A: equivalent of the thing sold and also every
1. Perfection stage: valid – buyer acquires incident taken into consideration for the fixing of
title of goods the price put to the debit of the buyer and agreed
2. Consummation stage: valid – If the title to by him. (Villanueva, p. 52)
has not yet been avoided at the time of
sale and the buyer must buy the goods B. REQUISITES FOR A VALID PRICE
under the following conditions:
a. In good faith Q: What are the requisites of price?
b. For value
c. Without notice of seller’s defect of A: Must be:
title 1. Real
2. In money or its equivalent
EMPTIO REI SPERATAE EMPTIO SPEI 3. Certain or ascertainable at the time of
Sale of thing having Sale of mere hope or the perfection of the contract
potential existence expectancy
Uncertainty is w/ regard Uncertainty is w/ regard C. HOW PRICE IS DETERMINED
to quantity & quality to existence of thing
Contract deals w/ Q: When is price certain?
Contract deals w/ future
thing
present thing – hope
or expectancy A:
Sale is valid only if the Sale is valid even though 1. If there is a stipulation
expected thing will expected thing does 2. If it be with reference to another thing
exist. not come into certain

CIVIL LAW TEAM:

SALES
3. If the determination of the price is left Q: What is the effect on the contract of sale in
to the judgment of specified person(s) case of a breach in the agreed manner of
4. By reference to certain fact(s) as payment?
referred to in Art. 1472 (Art. 1469)
A: None. It is not the act of payment of price that
Note: If the price is based on estimates, it is determines the validity of a contract of sale.
uncertain. Payment of the price has nothing to do with the
perfection of the contract, as it goes into the
D. GROSS INADEQUACY OF THE PRICE performance of the contract. Failure to pay the
consideration is different from lack of
Q: What is the effect of gross inadequacy of consideration. Failure to pay such results in a
price? right to demand the fulfillment or cancellation of
the obligation under an existing valid contract. On
A: the other hand, lack of consideration prevents the
GR: It does not affect the validity of the sale if existence of a valid contract. (Sps. Bernardo
it is fixed in good faith and without fraud Buenaventura and Consolacion Joaqui v. CA, GR
No. 126376, Nov. 20, 2003)
XPN: CoRDS
1. If Consent is vitiated (may be annulled Q: Is payment of the purchase price essential to
or presumed to be equitable mortgage) transfer ownership?
2. If the parties intended a Donation or
some other act/ contract A: Unless the contract contains a stipulation that
3. If the price is so low as to be “Shocking ownership of the thing sold shall not pass to the
to the conscience” purchaser until he has fully paid the price,
4. If in the event of Resale, a better price ownership of the thing sold shall be transferred to
can be obtained the vendee upon the actual or constructive
delivery thereof. (Diaz, p. 48)
Note:
GR: The validity of the sale is not necessarily affected E. WHEN NO PRICE IS AGREED UPON BY THE
where the law gives the owner the right to redeem PARTIES
because the lesser the price, the easier it is for the

owner to effect redemption.
Q: What is the effect of failure to determine the

XPN: While there is no dispute that mere inadequacy
price?
of the price per se will not set aside a judicial sale of
real property, nevertheless, where the inadequacy of A:
the price is purely shocking to the conscience, such 1. Where contract is executory –
that the mind revolts at it and such that a reasonable ineffective
man would neither directly or indirectly be likely to 2. Where the thing has been delivered to
consent to it, the same will be set aside. (Cometa v. and appropriated by the buyer – the
CA 351 SCRA 294) buyer must pay a reasonable price
therefore
Q: What is the effect if the price is simulated?
Note: The fixing of the price cannot be left to the
A: discretion of one of the parties. However, if the price
GR: Contract of sale is void. fixed by one of the parties is accepted by the other,
the sale is perfected.
XPN: The act may be shown to have been in
reality a donation or some other act or
contract.

Q: What is considered reasonable price?

A: Generally the market price at the time and
place fixed by the contract or by law for the
delivery of the goods.


F. MANNER OF PAYMENT Q: Distinguish the failure to pay the
consideration from lack of consideration.
Q: What is the effect of a breach of the agreed
manner of payment to the contract of sale? A:
FAILURE TO PAY LACK OF
A: None. A contract of sale being a consensual CONSIDERATION CONSIDERATION
contract, it becomes binding and valid upon the As to validity of contract of sale
meeting of the minds as to price. It is not the act of payment
1. If there is such meeting of the minds as of price that determines
to price, the contract of sale is valid, the validity of a contract of
despite the manner of payment, or sale.
Lack of consideration
even the breach of that manner of
prevents the
payment. Note: Payment of the price
existence of a valid
has nothing to do with the
2. If the real price is not stated in the contract.
perfection of the contract.
contract, then the contract of sale is
Instead, it goes into the
valid but subject to reformation.
performance of the
3. If there is no meeting of the minds as to contract.
the price because the price stipulated in As to resultant right
the contract is simulated, then the Failure to pay the
contract is void, in accordance with consideration results in a The contract of sale is
Article 1471 of the Civil Code. (Sps. right to demand the null and void and
Buenaventura v. CA, G.R. No. 126376, fulfillment or cancellation produces no effect
Nov. 20, 2003) of the obligation under an whatsoever
existing valid contract.
Note: A definite agreement on the manner of
payment of the price is an essential element in the G. EARNEST MONEY VIS‐A‐VIS OPTION MONEYY
formation of a binding and enforceable contract of
sale. (Co v. CA, G.R. No. 123908, Feb. 9, 1998) OPTION MONEY

Q: In an action for specific performance with Q: What is the effect of failure to determine the
damages, X alleged that there was an agreement price?
to purchase the lot of Y. As regards the manner
of payment, however, Y’s receipts contradicted A:
the testimony of X. The receipts failed to state 1. Where contract is executory –
the total purchase price or prove that full ineffective
payment was made. For this reason, it was 2. Where the thing has been delivered to
contended that there was no meeting of their and appropriated by the buyer – the
minds and there was no perfected contract of buyer must pay a reasonable price
sale. Decide. therefore

A: The question to be determined should not be Note: The fixing of the price cannot be left to the
whether there was an agreed price, but what that discretion of one of the parties. However, if the price
agreed price was. The sellers could not render fixed by one of the parties is accepted by the other,
invalid a perfected contract of sale by merely the sale is perfected.
contradicting the buyer’s obligation regarding the
price, and subsequently raising the lack of Q: What is an option money?
agreement as to the price. (David v. Tiongson,
G.R. No. 108169, Aug. 25, 1999) A: The distinct consideration in case of an option
contract. It does not form part of the purchase
price hence, it cannot be recovered if the buyer
did not continue with the sale.

Q: When is payment considered option money?

A: Payment is considered option money when it is
given as a separate and distinct consideration
from the purchase price. Consideration in an
option contract may be anything or undertaking
of value.

CIVIL LAW TEAM:

SALES
EARNEST MONEY Simeon suddenly has a change of heart, claiming
that the deal is disadvantageous to him as he
Q: What is an earnest money or “arras”? has found out that the property can fetch three
times the agreed purchase price. Bert seeks
A: This is the money given to the seller by the specific performance but Simeon contends that
prospective buyer to show that the latter is truly he has merely given Bert an option to buy and
interested in buying the property, and its aim is to nothing more and offers to return the option
bind the bargain. (Pineda, p. 75) money which Bert refuses to accept.

Q: What is the effect of giving an earnest 1. Will Bert's action for specific
money? performance prosper? Explain.
2. May Simeon justify his refusal to
A: It forms part of the purchase price which may proceed with the sale by the fact that
be deducted from the total price. It also serves as the deal is financially disadvantageous
a proof of the perfection of the contract of sale. to him? Explain.
The rule is no more than a disputable
presumption and prevails only in the absence of A:
contrary or rebuttable evidence. (PNB v CA, 262 1. Bert's action for specific performance
SCRA 464, 1996) will prosper because there was a
binding agreement of sale, not just an
Note: Option money may become earnest money if option contract. The sale was perfected
the parties so agree. upon acceptance by Simeon of 10% of
the agreed price. This amount is in
Q: When is payment considered an earnest reality an earnest money which, under
money? Art. 1482, "shall be considered as part
of the price and as proof of the
A: When the payment constitutes as part of the perfection of the contract." (Topacio v.
purchase price. Hence, in case when the sale did CA, G.R. No. 102606, July 3, 1992;
not happen, it must be returned to the Villongco Realty v. Bormaheco, G.R. No.
prospective buyer. L‐26872, July 25, 1975).

Q: Distinguish option money from earnest 2. Simeon cannot justify his refusal to
money. proceed with the sale by the fact that
the deal is financially disadvantageous
A: to him. Having made a bad bargain is
OPTION MONEY EARNEST MONEY not a legal ground for pulling out of a
Money given as binding contract of sale, in the absence
distinct Forms part of the of some actionable wrong by the other
consideration for purchase price party (Vales v. Villa, G.R. No. 10028,
an option contract Dec. 16, 1916), and no such wrong has
Applies to a sale Given only when there is been committed by Bert. (2002 Bar
not yet perfected already a sale Question)
Prospective buyer is When given, the buyer is
not required to bound to pay the
VI. FORMATION OF CONTRACT OF SALE
buy. balance.

If buyer does not If sale did not materialize,
Note: see Introduction, Stages of Contract of Sale
decide to buy, it it must be returned. pp. 230‐234
cannot be (Villanueva, p. 87,
recovered. Pineda, p.77)

Q: Bert offers to buy Simeon's property under
the following terms and conditions: P1 million
purchase price, 10% option money, the balance
payable in cash upon the clearance of the
property of all illegal occupants. The option
money is promptly paid and Simeon clears the
property of all illegal occupants in no time at all.
However, when Bert tenders payment of the
balance and asks for the deed of absolute sale,

VII. TRANSFER OF OWNERSHIP this case, the subject motor vehicle) the thing
sold remained at the seller’s risk. The Union
A. MANNER OF TRANSFER Motor should therefore bear the loss of the
subject motor vehicle after its agent allegedly
Q: What is the effect of delivery? stole the same. (Union Motor Corp. v. CA, G.R. No.
117187, July 20, 2001)
A:
GR: Title /ownership is transferred Q: How may the buyer accept the delivery of the
thing sold?
XPN: Contrary is stipulated as in the case of:
1. Pactum reservatii in domini – A:
agreement that ownership will remain 1. Express – he intimates to seller that he
with seller until full payment of price has accepted
(Contract to sell); 2. Implied
2. Sale on acceptance/approval; a. Buyer does not act inconsistent
3. Sale on return; with ownership of seller after
4. There is implied reservation of delivery
ownership; b. Retains without intimating to seller
that he has rejected
Note: Seller bears expenses of delivery.
Q: What is the effect if the buyer refuses to
Q: Spouses Bernal purchased a jeepney from accept despite delivery of the object of the sale?
Union Motor to be paid in installments. They
then executed a promissory note and a deed of A: Delivery is completed. Since delivery of the
chattel mortgage in favor of Union Motor which subject matter of the sale is an obligation on the
in turn assigned the same with Jardine Finance. part of the seller, the acceptance thereof by the
To effectuate the sale as well as the assignment buyer is not a condition for the completeness of
of the promissory note and chattel mortgage, the delivery. (Villanueva, p. 117)
the spouses were required to sign documents,
one of which was a sales invoice. Although the Note: Thus, even with such refusal of acceptance,
Spouses have not yet physically possessed the delivery (actual/constructive), will produce its legal
vehicle, Union Motor’s agent required them to effects. (e.g. transferring the risk of loss of the
sign the receipt as a condition for the delivery of subject matter to the buyer who has become the
the vehicle. It was discovered that the said agent owner thereof) (Villanueva, p. 117)
stole the vehicle even prior to its delivery to the
spouses. Was there a transfer of ownership of Under Art. 1588, when the buyer’s refusal to accept
the subject vehicle? the goods is without just cause, the title thereto
passes to him from the moment they are placed at

his disposal. (Villanueva, p. 117)
A: No. The issuance of a sales invoice does not

prove transfer of ownership of the thing sold to
Q: Is payment of the purchase price essential to
the buyer; an invoice is nothing more than a
transfer ownership?
detailed statement of the nature, quantity and

cost of the thing sold and has been considered
A: Unless the contract contains a stipulation that
not a bill of sale.
ownership of the thing sold shall not pass to the

purchaser until he has fully paid the price,
The registration certificate signed by the spouses
ownership of the thing sold shall be transferred to
does not conclusively prove that constructive
the vendee upon the actual or constructive
delivery was made nor that ownership has been
delivery thereof. (Diaz, p. 48)
transferred to the respondent spouses. Like the

receipt and the invoice, the signing of the said
Q: What are the effects of a sale of goods on
documents was qualified by the fact that it was a
installment?
requirement of Union Motor for the sale and

financing contract to be approved. In all forms of
A:
delivery, it is necessary that the act of delivery,
1. Goods must be delivered in full except
whether constructive or actual, should be
when stipulated
coupled with the intention of delivering the thing.

The act, without the intention, is insufficient.
Inasmuch as there was neither physical nor
constructive delivery of a determinate thing, (in

CIVIL LAW TEAM:

SALES
2. When not examined by the buyer – it is c. when the seller of the

c.
not accepted until examined or at least goods draws on the buyer for
had reasonable time to examine the price and transmits the
bill of exchange and the bill of
Q: When may the buyer suspend payment of the lading to the buyer , and the
price? latter does not honor the bill
of exchange by returning the
A: bill of lading to the seller
GR: 4. When sale is not VALID
1. If he is disturbed in the possession or 5. When the seller is not the owner of the
ownership of the thing bought goods
2. If he has well‐grounded fear that his XPNs:
possession or ownership would be a. Estoppel: when the owner is
disturbed by a vindicatory action or precluded from denying the
foreclosure of mortgage. sellers authority to sell
b. Registered land bought in
Note: These grounds are not exclusive. It can good faith: Ratio: Buyer need
only be exercised if the price or any part not go beyond the Torrens
thereof has not yet been paid and the contract title
is not yet consummated. (Art. 1590) If the c. Order of Courts in a Statutory
disturbance is caused by the existence of non‐ Sale
apparent servitude, the remedy is rescission. d. When the goods are
purchased in a Merchant’s
XPN: store, Fair or Market (Art.
1. Seller gives security for the return of the 1505)
price in a proper case;
2. A stipulation that notwithstanding any SALE ON TRIAL, APPROVAL OR SATISFACTION
such contingency, the buyer must make
payment; Q: What is sale on trial, approval or satisfaction?
3. Disturbance or danger is caused by the
seller; A: It is a contract in the nature of an option to
4. If the disturbance is a mere act of purchase if the goods prove to be satisfactory, the
trespass; approval of the buyer being a condition
5. Upon full payment of the price. precedent.

Q: What are the rules in case of sale on trial,
B. WHEN DELIVERY DOES NOT TRANSFER TITLE approval or satisfaction?

Q: When does delivery does not transfer title? A:

A: Title Remains with seller
1. Sale on Trial, Approval, or Satisfaction
GR: Borne by seller
2. When there is an EXPRESS XPN:
RESERVATION Risk of Loss 1. Buyer is at fault
a. If it was stipulated that 2. Buyer agreed to
ownership shall not pass to bear the loss
the purchaser until he has
GR: Buyer must give goods a
fully paid the price (Art. 1478) trial
3. When there is an IMPLIED As to trial XPN: Buyer need not do so if
RESERVATION it is evident that it cannot
a. a. When goods are shipped, perform the work.
but the bill of lading states
When period
that goods are deliverable to It runs only when all the parts
within which buyer
the seller or his agent, or to essential for the operation of
must signify his
the order of the seller or his the object has been delivered
acceptance runs
agent
b. b. When the bill of lading is
retained by the seller or his
agent

Validity of b. Allowing buyer to make use of
stipulation that a rights
Valid, provided the 3 person
rd
3rd person must 4. Tradition by operation of law –
is in good fath
satisfy approval or Execution of a public instrument is
satisfaction equivalent to delivery. But to be
If the sale is made effective, it is necessary that the seller
to a buyer who is Generally, it cannot be have such control over the thing sold
an expert on the considered a sale on approval that, at the moment of sale, its material
object purchased delivery could have been made.

C. KINDS OF DELIVERY GR: There is presumption of delivery

Q: What are the different kinds of delivery? XPN:
a. Contrary stipulation;
A: b. When at the time of execution,
1. Actual – thing sold is placed under the subject matter was not subject to
control and possession of buyer/agent; the control of seller;
2. Constructive – does not confer physical c. Seller has no capacity to deliver at
possession of the thing, but by time of execution;
construction of law, is equivalent to acts d. Such capacity should subsist for a
of real delivery. reasonable time after execution of
instrument.
Requisites:
a. The seller must have control over Note: Delivery should be coupled with intention of
the thing delivering the thing, and acceptance on the part of
b. The buyer must be put under the buyer to give legal effect of the act. Without
control such intention, there is no such tradition.
c. There must be intention to deliver
the thing for purposes of Q: Susan invested in commodity futures
ownership trading in OCP, which involves the buying or
selling of a specified quantity and grade of a
i. Tradicion Symbolica – delivery commodity at a future date at a price
of certain symbols established at the floor of the exchange. As per
representing the thing terms of the trading contract, customer's orders
ii. Tradicion Instrumental – shall be directly transmitted by OCP as broker to
delivery of the instrument of its principal, Frankwell Enterprises, which in turn
conveyance. must place the customer's orders with the Tokyo
iii. Traditio Longa Manu – Exchange. In this case, however, there is no
Delivery of thing by mere evidence of such transmission. When Susan
agreement; when seller points withdrew her investment, she was not able to
to the property without need recover the entire amount. She thus filed a
of actually delivering complaint and the trial court ruled in her favor,
iv. Tradicion Brevi Manu – Before saying that the contract is a species of gambling
contract of sale, the would‐be and therefore void. Is the court’s ruling correct?
buyer was already in
possession of the would‐be A: Yes. A trading contract is a contract for the sale
subject matter of sale of products for future delivery, in which either
v. Constitutum Possessorium – at seller or buyer may elect to make or demand
the time of perfection of delivery of goods agreed to be bought and sold,
contract, seller continues to but where no such delivery is actually made. In
have possession merely as a this case, no actual delivery of goods and
holder commodity was intended and ever made by the
parties. In the realities of the transaction, the
3. Quasi‐tradition – delivery of rights, parties merely speculated on the rise and fall in
credits or incorporeal property, made the price of the goods/commodity subject matter
by: of the transaction. If Susan’s speculation was
a. Placing titles of ownership in the correct, she would be the winner and OCP, the
hands of the buyer; loser, so OCP would have to pay her the "margin".

CIVIL LAW TEAM:

SALES
But if she was wrong in her speculation then she 2. FOB (Free On Board) – when goods are

would emerge as the loser and OCP, the winner. delivered at the point of shipment,
OCP would then keep the money or collect the delivery to carrier by placing the goods
difference from her. This is clearly a form of on vessel is delivery to buyer
gambling provided for with unmistakable 3. CIF (Cost, Insurance, Freight) –
certainty under Article 2018. (Onapal Phils. a. When buyer pays for services of
Commodities, Inc. vs. CA and Susan Chua, G.R. No. carrier, delivery to carrier is
90707, Feb. 1, 1993) delivery to buyer, carrier as agent
of buyer;
Note: Futures Commission Merchant/Broker refers b. When buyer pays seller the price –
to a corporation or partnership, which must be from the moment the vessel is at
registered and licensed as a Futures Commission the port of destination, there is
Merchant/Broker and is engaged in soliciting or in already delivery to buyer
accepting orders for the purchase or sale of any 4. COD (Collect On Delivery) – the carrier
commodity for future delivery on or subject to the acts for the seller in collecting the
rules of the contract market and that, in connection purchase price, which the buyer must
with such solicitation or acceptance of orders,
pay to obtain possession of the goods.
accepts any money, securities or property (or

extends credit in lieu thereof) to margin, guarantee
or secure any trade or contract that results or may
Q: What are the seller’s duties after delivery to
result therefrom. the carrier?

Q: Given that actual possession, control and A:
enjoyment is a main attribute of ownership, is 1. To enter on behalf of the buyer into
symbolic delivery by mere execution of the deed such contract reasonable under the
of conveyance sufficient to convey ownership circumstances;
over property? 2. To give notice to the buyer regarding
necessity of insuring the goods.
A: Yes, possession is also transferred along with
ownership thereof by virtue of the deed of Q: Where is the place of delivery?
conveyance. The mere execution of the deed of
conveyance in a public document is equivalent to A:
the delivery of the property, prior physical 1. That agreed upon
delivery or possession is not legally required. The 2. Place determined by usage of trade
deed operates as a formal or symbolic delivery of 3. Seller’s place of business
the property sold and authorizes the buyer or 4. Seller’s residence
transferee to use the document as proof of 5. In case of specific goods, where they
ownership. Nothing more is required. (Sps. Sabio can be found
v. International Corporate Bank, Inc. et. at. G.R.
No. 132709, Sept. 4, 2001) Q: When should the object be delivered?

Q: Can delivery be effected through a carrier? A:
1. Stipulated time
A: 2. If there is none, at a reasonable hour.
GR: Yes, if the seller is authorized. Delivery to
carrier is delivery to the buyer. Q: What are the effects of a sale of goods on
installment?
XPN:
1. A contrary intention appears A:
2. Implied reservation of ownership under 1. Goods must be delivered in full except
Art. 1503, pars 1, 2, 3. when stipulated
2. When not examined by the buyer – it is
Q: What are the kinds of delivery to carrier? not accepted until examined or at least
had reasonable time to examine
A:
1. FAS (Free Along Side) – when goods are
delivered alongside the ship, there is
already delivery to the buyer

Q: When is the seller not bound to deliver the property had not been delivered to Ten Forty;
thing sold? hence, it did not acquire possession either
materially or symbolically. As between the two
A: buyers, therefore, respondent was first in actual
1. If the buyer has not paid the price; possession of the property. (Ten Forty Realty &
2. No period for payment has been fixed in Dev’t. Corp. v. Cruz, G.R. No. 151212, Sept. 10,
the contract; 2003)
3. A period for payment has been fixed in
the contract but the buyer has lost the Q: Explain the principle of prius tempore, potior
right to make use of the time. jure.

D. DOUBLE SALE A: Knowledge by the first buyer of the second sale
cannot defeat the first buyer’s rights except when
Q: When is there a double sale? the second buyer first registers in good faith the
second sale. Conversely, knowledge gained by the
A: There is double sale when the same object of second buyer of the first sale defeats his rights
the sale is sold to different vendees. even if he is first to register, since such knowledge
taints his registration with bad faith to merit the
nd
Note: Requisites: protection of Art. 1544 (2 par.), the second
1. Same subject matter realty buyer must act in good faith in registering
2. Same immediate seller his deed of sale. (Diaz, p. 125)
3. Two or more different buyers
4. Both sales are valid Note: Where one sale is absolute and the other is a
pacto de retro transaction where the period to
Q: What is the rule on double sale? redeem has not yet expired, Art. 1544 will not apply.
(Pineda, p. 223)
A: First in time, priority in right
Q: Juliet offered to sell her house and lot,
Note: Rule on Double Sale regarding immovables: together with all the furniture and appliances
GR: Apply Art.1544 therein, to Dehlma. Before agreeing to purchase
XPN: Sale of registered lands – apply Torrens the property, Dehlma went to the Register of
System Deeds to verify Juliet’s title. She discovered that
while the property was registered in Juliet’s
Q: What are the rules according to Article 1544 name under the Land Registration Act, as
of the Civil Code? amended by the Property Registration Decree, it
was mortgaged to Elaine to secure a debt of P80,
A: 000. Wanting to buy the property, Dehlma told
c. Movable – Owner who is first to possess Juliet to redeem the property from Elaine, and
in good faith gave her an advance payment to be used for
d. Immovable – purposes of releasing the mortgage on the
d. First to register in good faith property. When the mortgage was released,
e. No inscription, first to possess in Juliet executed a Deed of Absolute Sale over the
good faith property which was duly registered with the
f. No inscription & no possession in Registry of Deeds, and a new TCT was issued in
good faith – Person who presents Dehlma’s name. Dehlma immediately took
oldest title in good faith possession over the house and lot and the
movables therein. Thereafter, Dehlma went to
E. PROPERTY REGISTRATION DECREE the Assessor’s Office to get a new tax
declaration under her name. She was surprised
Q: Ten Forty Realty purchased from Galino a to find out that the property was already
parcel of land. However, the Deed of Sale was declared for tax purposes in the name of XYZ
not recorded in the Registry of Deeds. Bank which had foreclosed the mortgage on the
Subsequently, Galino sold the same property to property before it was sold to her. XYZ Bank was
Cruz who immediately took possession of the also the purchaser in the foreclosure sale of the
said property. Who has a better right between property. At that time, the property was still
Ten Forty and Cruz? unregistered but XYZ Bank registered the
A: In the absence of the required registration, the Sheriff’s Deed of Conveyance in the day book of
law gives preferential right to the buyer who in the Register of Deeds under Act 3344 and
good faith is first in possession. The subject obtained a tax declaration in its name.

CIVIL LAW TEAM:

SALES
Was Dehlma a purchaser in good faith? Knowledge gained by the second buyer of the

first sale defeats his rights even if he is first to
A: Yes, Dehlma is a purchaser in good faith. She register the second sale, since such knowledge
learned about the XYZ tax declaration and taints his prior registration with bad faith (Art.
foreclosure sale only after the sale to her was 1544) (Uraca, et. al v. CA, G.R. No. 115158, Sept.
registered. She relied on the certificate of title of 5, 1997)
her predecessor‐in‐interest. Under the Torrens
System, a buyer of registered lands is not VIII. RISK OF LOSS
required by law to inquire further than what the
Torrens certificate indicates on its face. If a Q: When is a thing considered lost?
person proceeds to but it relying on the title, that
person is considered a buyer in good faith. A: It is understood that the thing is lost when it:
1. perishes, or
The “priority in time” rule could not be invoked 2. goes out of commerce, or
by XYZ Bank because the foreclosure sale of the 3. disappears in such a way that its
land in favour of the bank was recorded under Act existence is unknown or cannot be
nd
3344, the law governing transactions affecting recovered. (Art. 1189, 2 par.)
unregistered land, and thus, does not bind the
land. Q: What is deterioration?

Q: Who as between Dehlma and XYZ Bank has a A: Deterioration is the lowering of the value or
better right to the house and lot? character of a thing. It normally occurs by reason
of ordinary wear and tear. (Pineda, Credit, p. 20)
A: Between Dehlma and the bank, the former has
a better right to the house and lot. Q: Who bears the risk of loss or deterioration?

Q: Who owns the movables inside the house? A:

A: Unless there is a contrary stipulation in the Res perit domino – Seller is the
BEFORE
absolute deed of sale, Dehlma owns the movables owner so seller bears risk of loss
PERFECTION
covered by the Deed of Sale and her ownership is
perfected by the execution and delivery of public
document of sale. The delivery of the absolute Res perit domino
deed of sale is a symbolical delivery of the house
and lot, including the contents of the house. This AT Contract shall be without any
PERFECTION effect – the seller bears the loss
is an obligation to deliver a specific thing, which
since the buyer is relieved of his
includes the delivery of the specific thing itself
obligation under the contract
and all of its accessions and accessories even
Two Views:
though they may not have been mentioned (Art.
Paras: Buyer, except:
1166, CC). (2008 Bar Question) 1. when object sold consists of
fungible goods for a price fixed
Q: Does prior registration by the second buyer of AFTER 2. when seller is guilty of fraud,
a property subject of a double sale confer PERFECTION negligence, default, or
ownership or preferred right in his favor over BUT violation of contractual terms;
that of the first buyer? BEFORE or
DELIVERY 3. when object sold is generic.
A: Prior registration of the disputed property by
the second buyer does not by itself confer Tolentino: Seller;
ownership or a better right over the property. Deterioration & fruits – Buyer
Article 1544 requires that such registration must bears loss
be coupled with good faith. Res perit domino

Knowledge gained by the first buyer of the Buyer becomes the owner so
second sale cannot defeat the first buyer's rights AFTER buyer bears risk of loss
DELIVERY
except where the second buyer registers in good
Delivery extinguish ownership vis‐
faith the second sale ahead of the first, as
a‐vis the seller & creates a new
provided by the Civil Code. one in favor of the buyer


Q: What is the effect of the loss of the thing
subject of the contract at the time of sale? Q: Who may negotiate a Negotiable Document
of Title?
A:
1. Total loss – contract is void & inexistent A:
2. Partial loss – buyer may elect between 1. Owner
withdrawing from the contract or 2. Person to whom the possession pr
demanding the remaining part, paying custody of the document has been
its proportionate price entrusted by the owner
a. If bailee undertakes to
E. When Ownership is Transferred deliver the goods to such
person
See Transfer of Ownership. p. 247 b. If document is in such
form that it may be
negotiated by delivery.
IX. DOCUMENTS OF TITLE
Non‐Negotiable Documents of Title
Q: What is a Document of Title?
Q: What are Non‐negotiable documents of title?
A: A document used in the ordinary course of
business in the sale or transfer of goods , as proof A:
of the possession or control of the goods , or 1. They are delivered only to a
authorizing or purporting to authorize the specified person
possessor of the document to transfer or receive , 2. Carrier will not deliver the goods to
either by endorsement or by delivery , goods any holder of the document or to
represented by such document (Art. 1636). whom such document may have
been endorsed by the consignee
Q: What is the purpose of the Documents of 3. Must present the deed of sale or
Title? donation in his favour

A: Q: What are the warranties of seller of
1. Evidence of possession or control of documents of title?
goods described therein
2. Medium of transferring title and A:
possession over the goods described 1. Genuiness of the Document
therein without having to effect actual 2. Legal right to negotiate or transfer
delivery (Villanueva, 2009 ed.) 3. No knowledge of fact which would
3. The custody of a negotiable warehouse impair the validity or worth of the
receipts issued to the order of the document
owner, or to bearer, is a representation 4. Right to transfer Title to the goods and
of title upon which bona fide merchantability or fitness for a
purchasers for value are entitled to rely particular purpose, whenever such
, despite breaches of t rust or violations warranties would have been implied
of agreement on the part of the had the contract transfer the goods
apparent owner (Siy Cong Bieng v. without a document.
HSBC, 56 Phil 598)
Rules Regarding Levy and Garnishment of Goods
Negotiable Documents of Title
Q: What does a person to whom a non‐
Q: What is a Negotiable Document of Title? negotiable instrument has been transferred but
not negotiated, acquire as against the
A: A document of title which states that the transferor?
goods referred therein will be delivered to the
bearer, or to the order of any person named in A: He acquires:
such document (Art. 1509, NCC). 1. Title to the goods, subject to the terms
of any agreement with the transferor;
2. Right to notify the bailee who issued
the document of the transfer thereof,

CIVIL LAW TEAM:

SALES
and thereby to acquire the direct X. REMEDIES OF AN UNPAID SELLER

obligation of such bailee to hold
possession of the goods for him A. DEFINITION OF UNPAID SELLER
according to the terms of the
document. Q: Who is an unpaid seller?

Q: How may the transferor’s creditor defeat the A: The seller of goods is deemed to be an unpaid
aforementioned rights of the transferee? seller either:
1. when the whole of the price has not
A: Prior to the notification to such bailee by the been paid or tendered; or
transferor or transferee of a non‐negotiable 2. when a bill of exchange or other
document of title, the title of the transferee to negotiable instrument has been
the goods and the right to acquire the obligation received as conditional payment, and
of such bailee may be defeated by the the condition on which it was received
transferor’s creditor by the levy of an attachment has been broken by reason of the
or execution upon the goods. (Art. 1514, NCC) dishonor of the instrument, the
insolvency of the buyer, or otherwise.
Q: If the goods are delivered to a bailee by the
owner or by a person whose act in conveying the Note: It includes an agent of the seller to whom the
title to them to a purchaser in good faith for bill of lading has been indorsed, or consignor or
value and a negotiable instrument was issued agent who has himself paid, or is directly responsible
for them, can the said goods be attached, for the price, or any other person who is in the
garnished or levied upon? position of a seller.

A: B. REMEDIES OF UNPAID SELLER
GR: No, the goods cannot be attached,
garnished or levied upon while they are in Q: What are the remedies of an Unpaid Seller?
the bailee’s possession.
A:
XPN: I. Ordinary
1. When the document is first
surrendered; or 1. Action for Price
2. When its negotiation is enjoined. Exercised when:
a. ownership has passed to buyer;
Note: The bailee shall in no case be compelled b. price is payable on a day certain
to deliver the actual possession of the goods c. goods cannot readily be resold for
until the document is: reasonable price and Art. 1596 is
1. Surrendered to him; or inapplicable
2. Impounded by the court.
(Art. 1519, NCC) 2. Action for Damages – In case of
wrongful neglect or refusal by the buyer
Q: What are the rights of a creditor whose to accept or pay for the thing sold
debtor is the owner of a negotiable document of
title? II. Special

A: He is entitled to such aid from courts of 1. Possessory Lien – Seller not bound to
appropriate jurisdiction by: deliver if buyer has not paid him the
1. injunction; price. It is exercisable only in following
2. attaching such document; circumstances:
3. as regards property which cannot be readily a. goods sold without stipulation as
attached or levied upon by ordinary legal process to credit
‐ satisfying the claim by means allowed by law or b. goods sold on credit but term of
equity. (Art. 1520, NCC) credit has expired
c. buyer becomes insolvent

Note: When part of goods delivered, may
still exercise right on goods undelivered


2. Stoppage in Transitu Q: When are goods considered to be in transit?
Requisites: I‐SENT‐U
a. Insolvent buyer A:
b. Seller must Surrender the 1. After delivery to a carrier or other
negotiable document of title, if any bailee and before the buyer or his agent
c. Seller must bear the Expenses of takes delivery of them; and
delivery of the goods after the 2. If the goods are rejected by the buyer,
exercise of the right. and the carrier or other bailee
d. Seller must either actually take continues in possession of them. (Art.
possession of the goods sold or 1531, par. 1)
give Notice of his claim to the
carrier or other person in Q: When are goods deemed to be no longer in
possession transit?
e. Goods must be in Transit
f. Unpaid seller A:
1. After delivery to the buyer or his agent
2. If the buyer/agent obtains possession of
3. Special Right to Resell the Goods the goods at a point before the
Exercised when: destination originally fixed;
a. Goods are perishable, 3. If the carrier or the bailee acknowledges
b. Stipulated the right of resale in that he holds the goods in behalf of the
case of default, or buyer/ his agent;
c. Buyer in default for unreasonable 4. If the carrier or bailee wrongfully
time refuses to deliver the goods to the
buyer or his agent. (Villanueva, p. 181)
4. Special Right to Rescind
Requisites: XI. PERFORMANCE OF CONTRACT
a. Expressly stipulated OR buyer is in
default for unreasonable time A. SALE OF PERSONAL PROPERTY.
b. Notice needed to be given by seller
to buyer RULES ON SALE OF PERSONAL PROPERTY.

Note: Ownership of goods already with buyer but INSTALLMENT SALES LAW
seller may still rescind; ownership is destroyed even
without court intervention but in ordinary sale, need Q: What is the Installment Sales Law?
to go to court.
A: Commonly known as the Recto Law. It is
Q: What are the instances when possessory lien embodied in Art. 1484 of the NCC which provides
is lost? for the remedies of a seller in the contracts of
sale of personal property by installments.
A:
1. Seller delivers without reserving Note: Art. 1484 of the NCC incorporates the
ownership in goods or right to possess provisions of Act No. 4122 passed by the Philippine
them Legislature on Dec. 9, 1939, known as the
2. Buyer or agent lawfully obtains "Installment Sales Law" or the "Recto Law," which
possession of goods then amended Art. 1454 of the Civil Code of 1889.
3. Waiver
Q: To what does the Recto Law apply?
Note: Seller loses lien when he parts with goods (but
still, stoppage in transitu can be exercised) A: This law covers contracts of sale of personal
property by installments (Act No. 4122). It is also
Q: What is the right of stoppage in transitu? applied to contracts purporting to be leases of
personal property with option to buy, when the
A: The seller may resume possession of the goods lessor has deprived the lessee of the possession
at any time while they are in transit, and he will or enjoyment of the thing. (PCI Leasing and
then become entitled to the same rights in regard Finance Inc. v. Giraffe‐ X Creative Imaging, Inc.,
to the goods as he would have had if he had G.R. No. 142618, July 12, 2007)
never parted with the possession. (Art. 1530,
NCC)

CIVIL LAW TEAM:

SALES
Q: What are the alternative remedies in case of payable on installments. The law declares as

sale of personal property in installments? "public policy to protect buyers of real estate on
installment payments against onerous and
A: oppressive conditions.
1. Specific Performance: Exact fulfillment
should the buyer fail to pay Note: The purpose of the law is to protect buyers in
installment against oppressive conditions.
GR: If availed of, the unpaid seller
cannot anymore choose other Q: What are the transactions/sale covered by
remedies; the Maceda Law?

XPN: if after choosing, it has become A: The law involves the sale of immovables on
impossible, rescission may be pursued installment (Maceda Law, R.A. 6552).
1. Coverage: Residential Real Estate
2. Rescission: Cancel the sale if buyer fails (Villanueva, p. 431)
to pay 2 or more installments 2. Exclude:
a. Industrial lots
Deemed chosen when: b. Commercial buildings (and
a. Notice of rescission is sent commercial lots by implication)
b. Takes possession of subject matter c. Sale to tenants under agrarian laws
of sale
c. Files action for rescission Q: What are the rights granted to buyers?

3. Foreclosure: Foreclose on chattel A:
mortgage if buyer fails to pay 2 or more 1. Buyer paid at least 2 years installment
installments a. Pay w/o interest the balance
within grace period of 1 month for
GR: Actual foreclosure is necessary to every year of installment payment.
bar recovery of balance Grace period to be exercised once
- Extent of barring effect: every 5 years.
purchase price b. When no payment – cancelled;
buyer entitled to 50% of what he
XPN: Mortgagor refuses to deliver has paid + 5% for every year but
property to effect foreclosure; expenses not exceeding 90% of payments
incurred in attorneys fees, etc. made

Q: When the lessor of the property chose to Note: Cancellation to be effected 30
deprive the lessee of the subject personal days from notice & upon payment of
property, can the former recover any unpaid cash surrender value.
rentals from the latter?
2. Buyer paid less than 2 years installment
A: In choosing, through replevin, to deprive the a. Grace period is not less than 60
respondent of possession of the leased days from due date
equipment, the petitioner waived its right to b. Cancellation if failure to pay w/in
bring an action to recover unpaid rentals on the 60 days grace
said leased items. c. 30 days notice before final
cancellation
B. SALE OF REAL PROPERTY.
Note: buyer can still pay w/in the 30
RULES ON SALE OF REAL PROPERTY days period with interest.

REALTY INSTALLMENT BUYER ACT Q: What are the other rights granted to a buyer?

Q: What is the Realty Installment Buyer Act? A:
1. Sell or assign rights to another
A: Commonly known as the “Maceda Law.” It is 2. Reinstate contract by updating within
embodied in R.A. 6552 which provides for certain 30 days before and cancellation
protection to particular buyers of real estate 3. Deed of Sale to be done by notarial act

4. Pay full installment in advance the Bernie discovered that DEVLAND had failed to
balance of price anytime w/o interest develop the subdivision in accordance with the
5. Have full payment annotated in approved plans and specifications within the
certificate of title time frame in the plan. He thus wrote a letter to
DEVLAND informing it that he was stopping
Note: Applies to contracts even before the law was payment. Consequently, DEVLAND cancelled the
enacted. Stipulation to the contrary is void sale and wrote Bernie, informing him that his
payments are forfeited in its favor.
Q: What are the so‐called “Maceda” and “Recto” 1. Was the action of DEVLAND proper?
laws in connection with sales on installments? Explain.
Give the most important features on each law. 2. Discuss the rights of Bernie under the
circumstances.
A: The Maceda Law (R.A. 6552) is applicable to 3. Supposing DEVLAND had fully
sales of immovable property on installments. The developed the subdivision but Bernie
most important features are: failed to pay further installments after
4 years due to business reverses.
1. After having paid installments for at least Discuss the rights and obligations of
two years, the buyer is entitled to a the parties.
mandatory grace period of one month for
every year of installment payments made, A:
to pay the unpaid installments without 1. Assuming that the land is a
interest. residential subdivision project under
P.D. No. 957 (The Subdivision and
If the contract is cancelled, the seller shall Condominium Buyers Protective
refund to the buyer the cash surrender Decree), DEVLAND's action is not
value equivalent to fifty percent (50%) of proper because under Section 23 of said
the total payments made, and after five Decree, no installment payment shall be
years of installments, an additional five forfeited to the owner or developer
percent (5%) every year but not to exceed when the buyer, after due notice,
ninety percent (90%) of the total desists from further payment due to the
payments made. failure of the owner‐developer to
develop the subdivision according to
2. In case the installments paid were less the approved plans and within the time
than 2 years, the seller shall give the buyer limit for complying with the same.
a grace period of not less than 60 days. If
the buyer fails to pay the installments due 2. Under the same Section of the Decree,
at the expiration of the grace period, the Bernie may, at his option, be
seller may cancel the contract after 30 reimbursed the total amount paid
days from receipt by the buyer of the including amortization interests but
notice of cancellation or demand for excluding delinquency interests at the
rescission by notarial act. (Rillo v. CA, G.R. legal rate. He may also ask the Housing
No. 125347 June 19, 1997) and Land Use Regulatory Board to apply
penal sanctions against DEVLAND
The Recto Law (Art.1484) refers to sale of consisting of payment of administrative
movables payable in installments and limiting the fine of not more than P20.000.00
right of seller, in case of default by the buyer, to and/or imprisonment for not more than
one of three remedies: 20 years.
1. Exact fulfillment;
2. Cancel the sale of two or more 3. Under R.A. No. 6552 (Maceda Law),
installments have not been paid; DEVLAND has the right to cancel the
3. Foreclose the chattel mortgage on the contract but it has to refund Bernie the
things sold, also in case of default of two cash surrender value of the payments
or more installments, with no further on the property equivalent to 50% of
action against the purchaser. (1999 Bar the total payments made. (2005 Bar
Question) Question)

Q: Bernie bought on installment a residential
subdivision lot from DEVLAND. After having
faithfully paid the installments for 48 months,

CIVIL LAW TEAM:

SALES
XII. WARRANTIES B. IMPLIED WARRANTIES

Q: What is a warranty? Q: What are implied warranties?

A: A statement or representation made by the A: Warranties deemed included in all contracts of
seller of goods, as part of the contract of sale, sale by operation of law. (Art. 1547)
having reference to the character, quality, or title,
of the goods, and by which he promises or 1. Warranty that seller has right to sell –
undertakes to insure that certain facts are or shall refers to consummation stage. Not
be as he then represents. applicable to sheriff, auctioneer,
mortgagee, pledge
Note: May either be express or implied.
2. Warranty against eviction
Q: What is the effect of a breach of warranty?
Requisites: JPENS
A: Buyer may: a. Buyer is Evicted in whole or in part
1. Refuse to proceed with the contract; or from the subject matter of sale
2. Proceed with the contract; waive the b. Final Judgment
condition. c. Basis of eviction is a right Prior to
sale or act imputable to seller
Note: If the condition is in the nature that it should d. Seller has been Summoned in the
happen, the non‐performance may be treated as a suit for eviction at the instance of
breach of warranty. buyer; or made 3rd party
defendant through 3rd party
Q: What are the kinds of warranties? complaint brought by buyer
Distinguish. e. No waiver on the part of the buyer

A: Note: For eviction – disturbance in law is
i. Express required and not just trespass in fact.
ii. Implied
3. Warranty against encumbrances (non‐
A. EXPRESS WARRANTIES apparent)

Q: What are express warranties? Requisites:
a. immovable sold is encumbered
A: Any affirmation of fact or any promise by the with non‐apparent burden or
seller relating to the thing if the natural tendency servitude not mentioned in the
of such affirmation or promise is to induce the agreement
buyer to purchase the same, and if the buyer b. nature of non‐apparent servitude
purchases the thing relying thereon. (Art. 1546) or burden is such that it must be
presumed that the buyer would
Q: What are the requisites of express not have acquired it had he been
warranties? aware thereof

A: AIR XPN: warranty not applicable when
1. It must be an Affirmation of fact non‐apparent burden or servitude is
relating to the subject matter of sale recorded in the Registry of Property –
2. Natural tendency is to Induce buyer to unless there is expressed warranty that
purchase subject matter the thing is free from all burdens &
3. Buyer purchases the subject matter encumbrances
Relying thereon
4. Warranty against Hidden Defects
Q: What is the liability of the seller for breach of
express warranties? Requisites: HENNAS
a. Defect is important or Serious
A: The seller is liable for damages. (Villanueva, p. i. The thing sold is unfit for the
249) use which it is intended
ii. Diminishes its fitness for such
use or to such an extent that

the buyer would not have Q: What is covered by a warranty against
acquired it had he been aware eviction?
thereof
b. Defect is Hidden A: It covers eviction by a final judgment based on
c. Defect Exists at the time of the sale a right prior to the sale or an act imputable to the
d. Buyer gives Notice of the defect to vendor, the vendee is deprived of the whole or of
the seller within reasonable time a part of the thing purchased.
e. Action for rescission or reduction of
the price is brought within the The vendor shall answer for the eviction even
proper period though nothing has been said in the contract on
i. 6 months – from delivery of the subject. (Art. 1548, NCC)
the thing sold
ii. Within 40 days – from the Q: What is the effect of a breach of warranty
delivery in case of animals against eviction?
f. There must be No waiver of
warranty on the part of the buyer. A: The buyer shall have the right to demand the
seller:
Q: When is implied warranty not applicable?
1. The return of the value which the thing
A: ASAP sold had at the time of the eviction, be
1. “As is and where is” sale it greater or lesser than the price of the
2. Sale of second hand articles sale
3. Sale by virtue of authority in fact or law 2. The income or fruits, if he has been
4. Sale at public auction for tax ordered to deliver them to the party
delinquency who won the suit against him
3. The costs of suit which caused the
C. EFFECTS OF WAIVER OF IMPLIED WARRANTIES eviction, and, in a proper case, those of
suit brought against the vendor for the
Q: What are the effects of waiver of an implied waranty
warranty? 4. The expenses of contract if buyer has
paid them
A: 5. The damages and interests and
1. Seller in bad faith & there is waiver ornamental expenses if sale was made
against eviction –void in bad faith.
2. When buyer w/o knowledge of a
particular risk, made general Note: Vendor is liable for any hidden defect even if
renunciation of warranty – is not a he is not aware. (Caveat Venditor)
waiver but merely limits liability of seller
in case of eviction Purchaser must be aware of the title of the vendor.
3. When buyer with knowledge of risk of (Caveat Emptor)
eviction assumed its consequences &
made a waiver – seller not liable Q: What are the rights of buyer in case of partial
(applicable only to waiver of warranty eviction?
against eviction)
A:
WARRANTY AGAINST EVICTION 1. Restitution (with obligation to return
the thing w/o other encumbrances than
Q: What is a warranty against eviction? those which it had when he acquired it)
2. Enforcement of warranty against
A: In a contract of sale, unless a contrary eviction (Paras, p. 153 and Art. 1556)
intention appears, there is an implied warranty
on the part of the seller that when the ownership WARRANTY AGAINST HIDDEN DEFECT
is to pass, and that the buyer shall from that time
have and enjoy the legal and peaceful possession Q: What is a hidden defect?
st
of the thing. (Art. 1547, 1 paragraph)
A: A hidden defect is one which is unknown or
could not have been known to the buyer. (Diaz, p.
145)

CIVIL LAW TEAM:

SALES
Note: Seller does not warrant patent defect; Caveat 3. If the contrary has been stipulated, and
emptor (buyer beware) the vendor was not aware of the hidden
faults or defects in the thing sold. (Art.
Q: What is a redhibitory defect? 1566)

A: It is a defect in the article sold against which Q: What is the effect of a breach of warranty
defect the seller is bound to warrant. The vice against hidden defects?
must constitute an imperfection, a defect in its
nature, of certain importance; and a minor defect A: It would depend on whether the seller had
does not give rise to redhibition. (De Leon, knowledge of such defect and whether there has
Comments and Cases on Sales and Lease, 2005 been a waiver of the warranty.
ed, p. 318)
1. If the thing should be lost in
Q: What is a redhibitory defect on animals? consequence of the hidden faults, and
seller was aware of them – he shall:
A: If the hidden defect of animals, even in case a a. bear the loss,
professional inspection has been made, should be b. return the price and
of such a nature that expert knowledge is not c. refund the expenses of the contract
sufficient to discover it, the defect shall be with damages
considered as redhibitory.
2. If the thing is lost and seller was not
Q: When is the sale of animal void? aware of the hidden faults – he shall:
a. return the price and interest
A: The sale is void if animal is: b. reimburse the expenses of the
1. Suffering from contagious diseases; contract which the buyer might
2. Unfit for the use or service for which have paid, but not for damages.
they were purchased as indicated in the (Villanueva, Law on Sales,2004 ed,
contract pp. 548‐549)

Q: When is a vendor responsible for hidden Q: What are the remedies of the buyer in case of
defects? sale of things with hidden defects?

A: If the hidden defects which the thing sold may A: The vendee may elect between:
have: 1. Withdrawing from the contract, or
1. Render it unfit for the use for which it is 2. Demanding a proportionate reduction
intended, or of the price, with damages in either
2. Diminish its fitness for such use to such case.
an extent that, had the vendee been
aware thereof, he would not have Q: Is there a waiver of warranty against hidden
acquired it or would have given a lower defects when the lessee inspected the premises
price for it. (Art. 1561) and pushed through with the contract?

Q: Up to what extent does the seller warrant A: Yes. Under Arts. 1561 and 1653 of the Civil
against hidden defects? Code, the lessor is responsible for warranty
against hidden defects, but he is not answerable
A: The seller is responsible to the vendee for any for patent defects or those, which are visible. Jon
hidden faults or defects in the thing sold, even de Ysasi admitted on cross‐examination that he
though he was not aware thereof. inspected the premises three or four times before
signing the lease contract. During his inspection,
Q: When is the seller not answerable for the he noticed the rotten plywood on the ceiling,
defects of the thing sold? which in his opinion was caused by leaking water
or termites. Yet, he decided to go through with
A:
the lease agreement. Hence, respondents cannot
1. For patent defects or those which are be held liable for the alleged warranty against
visible, or hidden defects. (Jon and Marissa De Ysasi v.
2. Even for those which are not visible if Arturo and Estela Arceo, G.R. No. 136586, Nov.
the buyer is an expert who, by reason of 22, 2001)
his trade or profession, should have
known them (Art. 1561), or

IMPLIED WARRANTIES IN CASE OF SALE OF are inscribed on the face of certificate of title.
GOODS (Pineda sales, p. 275)

Q: What are the specific implied warranties in Q: Does caveat emptor apply in judicial sales?
sale of goods?
A: Yes. The purchaser in a judicial sale acquires no
A: higher or better title or right than that of the
1. Warranty of fitness judgment debtor. If it happens that the judgment
debtor has no right, interest, or lien on and to the
GR: No implied warranty property sold, the purchaser acquires none.
(Pineda sales, p. 280)
XPN:
a. Buyer manifests to the seller the D. REMEDIES IN CASE OF BREACH OF WARRANTY
particular purpose for which the
goods are required; and Q: What are the remedies of the buyer in case of
b. Buyer relies upon the seller’s skill breach of warranty?
or judgment
A:
2. Warranty of merchantability – That 1. Accept goods & set up breach of
goods are reasonably fit for the general warranty by way of recoupment in
purpose for which they are sold. diminution or extinction or the price.
2. Accept goods & maintain action against
CAVEAT EMPTOR seller for damages
3. Refuse to accept goods & maintain
Q: What does the principle of caveat emptor action against seller for damages
mean? 4. Rescind contract of sale & refuse to
receive goods/return them when
A: It literally means, ‘Let the buyer beware’. The already received.
rule requires the purchaser to be aware of the
supposed title of the vendor and one who buys Q: Are the remedies of the buyer in case of
without checking the vendor’s title takes all the breach of warranty absolute?
risks and losses consequent to such failure.
(Agcaoili, p. 184) A: No. The vendee's remedies against a vendor
with respect to the warranties against hidden
Q: In what particular sale transactions does defects of or encumbrances upon the thing sold
caveat emptor apply? are not limited to those prescribed in Article 1567
where the vendee, in the case of Arts. 1561,
A: 1562, 1564, 1565 and 1566, may elect either to
1. Sales of animals (Art. 1574) withdraw from the contract or demand a
2. Double sales (Art. 1544) proportionate reduction of the price, with
3. In sheriff’s sales (Art. 1570) damages in either case.
4. Tax sales (Art. 1547, last paragraph)
The vendee may also ask for the annulment of the
Note: In the above sales, there is no warranty of title contract upon proof of error or fraud, in which
or quality on the part of the seller. The purchaser case the ordinary rule on obligations shall be
who buys without checking the title of the vendor is applicable. Under the law on obligations,
assuming all risks of eviction.
responsibility arising from fraud is demandable in

all obligations and any waiver of an action for
In sheriff’s sales, the sheriff does not guarantee the
title to real property and it is not incumbent upon
future fraud is void. Responsibility arising from
him to place the buyer in possession of such negligence is also demandable in any obligation,
property. (Pineda sales, p. 275) but such liability may be regulated by the courts,
according to the circumstances.
Q: Is caveat emptor applicable in sales of
registered land? The vendor could likewise be liable for quasi‐
delict under Article 2176 of the Civil Code, and an
A: No. The purchaser of a registered land under action based thereon may be brought by the
the Torrens system is merely charged with notice vendee. While it may be true that the pre‐existing
of the burdens and claims on the property which contract between the parties may, as a general

CIVIL LAW TEAM:

SALES
rule, bar the applicability of the law on quasi‐ XIII. BREACH OF CONTRACT
delict, the liability may itself be deemed to arise
from quasi‐delict, i.e., the acts which breaks the A. REMEDIES OF THE SELLER
contract may also be a quasi‐delict. (Coca‐Cola Note: see Recto and Maceda Law (XI. Performance of
Bottlers Philippines, Inc. v. CA, G.R. No. 110295, Contract) p. 258
Oct. 18, 1993)
B. REMEDIES OF THE BUYER
Q: What are the instances when the buyer
cannot rescind the sale in case there is a breach Q: What are the remedies of the buyer?
of warranty?
A: A:
1. If he knew of the breach of warranty I. Immovables in general
2. If he fails to return or offer to return 1. Disturbed in possession or with
goods to seller in substantially as good reasonable grounds to fear disturbance
condition as they were at time – Suspend payment
ownership was transferred 2. In case of subdivision or condo projects
3. If he fails to notify the seller within a – If real estate developer fails to comply
reasonable time of his election to with obligation according to approved
rescind plan:
a. Rescind
E. CONDITION VIS‐À‐VIS WARRANTY b. Suspend payment until seller
complies
Q: What is the effect of non‐fulfillment of a II. Movables
condition? 1. Failure of seller to deliver – Action for
specific performance without giving the
A: If imposed on the perfection of contract – seller the option of retaining the goods
prevents the juridical relation itself from coming on payments of damages
into existence 2. Breach of seller’s warranty – The buyer
may, at his election, avail of the
The other party may: following remedies:
1. Refuse to proceed with the contract a. Accept goods & set up breach of
2. Proceed w/ contract, waiving the warranty by way of recoupment in
performance of the condition diminution or extinction or the
price.
Q: What is the difference between a condition b. Accept goods & maintain action
and a warranty? against seller for damages
c. Refuse to Accept goods & maintain
A: action against seller for damages
CONDITION WARRANTY d. Rescind contract of sale & refuse
Purports to the to receive goods/return them
Purports to the when already received.
performance of
existence of obligation
obligation
Need not be stipulated; Note: When the buyer has claimed and been
Must be stipulated to granted a remedy in any of these ways, no other
may form part of
form part of the remedy can thereafter be granted, without
obligation by provision
obligation prejudice to the buyer’s right to rescind, even if
of law
Relates to the subject previously he has chosen specific performance
May attach itself to when fulfillment has become impossible.
matter itself or to
obligation of seller to (Villanueva, p. 389 in relation with Art. 1191,
obligation of the seller
deliver possession & NCC)
as to the subject matter
transfer
of the sale
3. Disturbed in possession or with
reasonable grounds to fear disturbance
– Suspend payment


XIV. EXTINGUISHMENT OF SALE Q: What is the difference between pre‐emption
and redemption?
A. CAUSES OF EXTINGUISHMENT
A:
Q: What are the causes for extinguishment of PRE‐EMPTION REDEMPTION
sale? Arises before sale Arises after sale
There can be rescission
Rescission inapplicable
A: A contract of sale is extinguished by: of original sale
Action is directed against Action is directed
1. Same causes as all other obligations, prospective seller against buyer
namely:
a. Payment or performance B. PERIOD OF REDEMPTION
b. Loss of the thing due
c. Condonation or remission of the Q: What is the period of redemption?
debt
d. Confusion or merger of the rights A:
of creditor and debtor 1. No period agreed upon – 4 years from
e. Compensation date of contract
f. Novation 2. When there is agreement – should not
g. Annulment exceed 10 years; but if it exceeded,
h. Rescission valid only for the first 10 years.
i. Fulfillment of resolutory condition 3. When period to redeem has expired &
j. prescription there has been a previous suit on the
2. Causes stated in the preceding articles; nature of the contract – seller still has
3. Conventional Redemption; or 30 days from final judgment on the
4. Legal redemption basis that contract was a sale with
pacto de retro:
B. REDEMPTION
Rationale: no redemption due to
Q: What is redemption? erroneous belief that it is equitable
mortgage which can be extinguished by
A: It is a mode of extinguishment wherein the paying the loan.
seller has the right to redeem or repurchase the
thing sold upon return of the price paid. 4. When period has expired & seller
allowed the period of redemption to
Q: What are the kinds of redemption? expire – seller is at fault for not having
exercised his rights so should not be
A: granted a new period
1. Legal
2. Conventional Note: Tender of payment is sufficient but it is not in
itself a payment that relieves the seller from his
Q: Should the right to redeem be incorporated in liability to pay the redemption price.
every contract of sale?
Q: When does period of redemption begin to
A: The right of the vendor to redeem/ repurchase run?
must appear in the same instrument. However,
parties may stipulate on the right of repurchase in A:
a separate document but in this case, it is valid 1. Right of legal pre‐emption or
only between the parties and not against third redemption shall be exercised within 30
persons. (Pineda, p. 333) days from written notice by the buyer –
deed of sale not to be recorded in
Registry of Property unless
accompanied by affidavit that buyer has
given notice to redemptioners

2. When there is actual knowledge, no
need to give written notice; period of
redemption begins to run from actual
knowledge

CIVIL LAW TEAM:

SALES
D. EXERCISE OF THE RIGHT TO REDEEM property which he ought not, in equity and good
conscience, hold and enjoy. It has been broadly
Q: Is written notice mandatory for the right of ruled that a breach of confidence, although in
redemption to commence? business or social relations, rendering an
acquisition or retention of property by one
A: Yes, the notice must be in writing stating the person unconscionable against another, raises a
execution of the sale and its particulars. It may be constructive trust. It is raised by equity in respect
made in a private or public document. (Pineda, p. of property, which has been acquired by fraud, or
400) where, although acquired originally without
fraud, it is against equity that it should be
Q: Is there a prescribed form for an offer to retained by the person holding it. (Arlegui v. CA
redeem? G.R. No. 126437, Mar. 6, 2002)

A: There is no prescribed form for an offer to Note: "A constructive trust is substantially an
redeem to be properly effected. Hence, it can appropriate remedy against unjust enrichment. It is
either be through a formal tender with raised by equity in respect of property, which has
consignation of the redemption price within the been acquired by fraud, or where, although acquired
prescribed period. What is paramount is the originally without fraud, it is against equity that it
availment of the fixed and definite period within should be retained by the person holding it." (76 Am.
which to exercise the right of legal redemption. Jur. 2d, Sec. 222, p. 447 cited in Arlegui v. CA G.R. No.
126437, Mar. 6, 2002)

Note: Art. 1623 does not prescribe any distinctive

method for notifying the redemptioner. D. CONVENTIONAL REDEMPTION

Q: Is tender of payment necessary for Q: What is conventional redemption?
redemption to take effect?
A: Seller reserved the right to repurchase thing
A: Tender of payment is not necessary; offer to sold coupled with obligation to return price of the
redeem is enough. sale, expenses of contract & other legitimate
payments and the necessary & useful expenses
Q: What is the effect of failure to redeem? made on the thing sold

A: There must be judicial order before ownership Note: Right to repurchase must be reserved at the
time of perfection of sale. (Pineda, p. 333)
of real property is consolidated to the buyer a

retro.
E. LEGAL REDEMPTION

TRUST DE SON TORT
Q: What is legal redemption?

Q: What is a trust de son tort?
A: Also referred to as “retracto legal”, it is the

right to be subrogated upon the same terms and
A: It is a trust created by the purchase or
conditions stipulated in the contract, in the place
redemption of property by one other than the
of one who acquires the thing by purchase or by
person lawfully entitled to do so and in fraud of
dation in payment or by other transaction
the other.
whereby ownership is transmitted by onerous

title.
Q: Do constructive trusts arise only out of fraud

or duress?
Q: What are the instances of legal redemption?

A: No. A constructive trust, otherwise known as a
A:
trust ex maleficio, a trust ex delicto, a trust de son
1. Sale of a co‐owner of his share to a
tort, an involuntary trust, or an implied trust, is a
stranger (Art. 1620)
trust by operation of law which arises contrary to
2. When a credit or other incorporeal right
intention and in invitum, against one who, by
in litigation is sold (Art. 1634)
fraud, actual or constructive, by duress or abuse
3. Sale of an heir of his hereditary rights to
of confidence, by commission of wrong, or by any
a stranger (Art. 1088)
form of unconscionable conduct, artifice,
4. Sale of adjacent rural lands not
concealment, or questionable means, or who in
exceeding 1 hectare (Art. 1621)
any way against equity and good conscience,
either has obtained or holds the legal right to

5. Sale of adjacent small urban lands extending the period of redemption or
bought merely for speculation (Art. granting a new period is executed
1622) 4. Purchaser Retains for himself a part of
the purchase price
Q: Are there other instances when the right of 5. Seller binds himself to pay the Taxes on
legal redemption is also granted? the thing sold
6. In any other case where the real
A: intention of the parties is that the
1. Redemption of homesteads transaction shall Secure the payment of
2. Redemption in tax sales a debt or the performance of any other
3. Redemption by judgment debtor obligation.
4. Redemption in extrajudicial foreclosure 7. Art. 1602 shall also apply to a contract
5. Redemption in judicial foreclosure of purporting to be an Absolute sale. (Art.
mortgage 1604)

Q: When does legal redemption period begin to Note: In case of doubt in determining whether it is
run? equitable mortgage or sale a retro (with right of
repurchase); it shall be construed as equitable
A: The right of legal redemption shall not be mortgage.
exercised except within 30 days from the notice
in writing by the prospective seller, or seller, as Remedy is reformation.
the case may be. The deed of sale shall not be An equitable mortgage is one which although lacking
in some formality, or form or words, or other
recorded in the Registry of Property unless
requisites demanded by a statute, nevertheless
accompanied by an affidavit of the seller that he
reveals the intention of the parties to charge real
has given written notice thereof to all possible property as security for a debt, and contains nothing
redemptioners. (Art. 1623, NCC) impossible or contrary to law.

C. EQUITABLE MORTGAGE Q: Does inadequacy of price constitute proof
sufficient to declare a contract as one of
Q: What is an equitable mortgage? equitable mortgage?

A: One which lacks the proper formalities, form or A: Mere inadequacy of the price is not sufficient.
words or other requisites prescribed by law for a The price must be grossly inadequate, or purely
mortgage, but shows the intention of the parties shocking to the conscience. (Diaz, p. 186)
to make the property subject of the contract as
security for a debt and contains nothing Q: X transferred three parcels of land in favor of
impossible or contrary to law Y. The transaction was embodied in two Deeds
of Absolute Sale for the price of P240, 000. The
Q: What are the essential requisites of equitable titles of said lots were transferred to Y.
mortgage? However, X failed to vacate and turn over the
purchased lots. This prompted Y to file an
A: ejectment suit against X. X claimed that the
1. Parties entered into a contract of sale transactions entered between them were not
2. Their intention was to secure an actually sales, but an equitable mortgage. Does
existing debt by way of a mortgage. the transaction involve an absolute sale or an
equitable mortgage of real property?
Q: What is the rule on the presumption of an
equitable mortgage? A: It is an absolute sale. Decisive for the proper
determination of the true nature of the
A: A sale with conventional redemption is transaction between the parties is the intent of
deemed to be an equitable mortgage in any of the parties. There is no conclusive test to
the following cases: (Art. 1602) AIR‐STAR determine whether a deed absolute on its face is
1. Price of the sale with right to really a simple loan accommodation secured by a
repurchase is unusually Inadequate mortgage. To determine whether a deed absolute
2. Seller Remains in possession as lessee in form is a mortgage in reality, the court is not
or otherwise limited to the written memorials of the
3. Upon or after the expiration of the right transaction. This is so because the decisive factor
to repurchase Another instrument in evaluating such agreement is the intention of

CIVIL LAW TEAM:

SALES
the parties, as shown not necessarily by the operation, he was required to execute a deed of

terminology used in the contract but by all the sale over a parcel of land in favor of Eulalia. She
surrounding circumstances, such as the relative sold the property to her grandniece Jocelyn who
situations of the parties at that time; the thereafter instituted an action for ejectment
attitudes, acts, conduct, and declarations of the against the Spouses Bandong. To assert their
parties; the negotiations between them leading right, Spouses Bandong filed an action for
to the deed; and generally, all pertinent facts annulment of sale against Eulalia and Jocelyn
having a tendency to fix and determine the real alleging that there was no sale intended but only
nature of their design and understanding. As equitable mortgage for the purpose of securing
such, documentary and parol evidence may be the shortage incurred by Domeng in the amount
submitted and admitted to prove the intention of of P70, 000.00 while employed as “biyahero” by
the parties. (Sps Austria v. Sps Gonzales, G.R. No. Eulalia. Was the deed of sale between Domeng
147321, Jan. 21, 2004) and Eulalia a contract of sale or an equitable
mortgage?
Q: Ceballos was able to borrow from Mercado
certain sum of money and as security, she A: It is an equitable mortgage. In executing the
executed a Deed of Real Estate Mortgage over said deed of sale, Domeng and Eulalia never
the subject property. The said mortgage was not intended the transfer of ownership of the subject
registered. Ceballos defaulted. Thereafter, a property but to burden the same with an
Deed of Absolute Sale was executed by Ceballos encumbrance to secure the indebtedness
and her husband whereby the mortgaged incurred by Domeng on the occasion of his
property was sold to Mercado for the price of employment with Eulalia. The agreement
P16, 500.00. Ceballos offered to redeem the between Dominador and Eulalia was not avoided
property from Mercado for the price of P30, in its entirety so as to prevent it from producing
000.00 but the latter's wife refused since the any legal effect at all. Instead, the said transaction
same was already transferred in their names by is an equitable mortgage, thereby merely altering
virtue of the Deed of Absolute Sale. As a the relationship of the parties from seller and
consequence, Ceballos filed the case contending buyer, to mortgagor and mortgagee, while the
that the Contract should be declared as an subject property is not transferred but subjected
equitable mortgage. Is the contention of to a lien in favor of the latter. (Sps. Raymundo, et
Ceballos correct? al. v. Sps. Bandong, G.R. No. 171250, Jul. 4, 2007)

A: No. The instances when a contract, regardless G. DISTINGUISHED FROM
of its nomenclature, may be presumed to be an OPTION TO BUY
equitable mortgage are enumerated in Art. 1602
of the Civil Code. Here, none of those Q: On May 19, 1951, the spouses‐sellers
circumstances were present. The original executed a public instrument of absolute sale in
transaction was a loan. Ceballos failed to pay the favor of the buyer for a consideration which is
loan; consequently, the parties entered into sufficiently adequate. A few days thereafter, the
another agreement — the assailed, duly notarized buyers executed in favor of the sellers an option
Deed of Absolute Sale, which superseded the loan to buy within one year, the property subject of
document. Ceballos had the burden of proving the absolute sale, which option was extended
that she did not intend to sell the property and for a month. Prior to the expiration of said one‐
that Mercado did not intend to buy it; and that year period, the buyer sold said property to a
the new agreement did not embody the true third person.
intention of the parties. (Ceballos v. Intestate
Estate of the Late Emigdio Mercado, G.R. No. If the spouses‐sellers would file an action for
155856, May 28, 2004) reformation of instrument where they seek
reformation of the absolute sale into one of
Q: Eulalia was engaged in the business of buying equitable mortgage, will said action prosper?
and selling large cattle. In order to secure the
financial capital she advanced for her employees A: No, it will not prosper. If a seller has been
(biyaheros) she required them to surrender TCT granted merely an option to buy (not a right to
of their properties and to execute the repurchase) within a certain period, and the price
corresponding Deeds of Sale in her favor. paid by the buyer is adequate, the sale is absolute
Domeng Bandong was not required to post any and cannot be construed nor presumed to be one
security but when Eulalia discovered that he of equitable mortgage, even if the period within
incurred shortage in cattle procurement which to exercise the option has been extended.

(Villarica, et. al. v. CA, G.R. L‐19196, Nov. 29, 7. solicitation of a sale;
1968) 8. offer to sell, directly or by an agent, or
by a circular, letter, advertisement or
Note: SC held that in this case, there was no sale otherwise; and
a retro and that the right of repurchase is not a 9. a. privilege given to a member of a
right granted the seller by the buyer in a separate cooperative, corporation, partnership,
instrument. Such right is reserved by the vendor or any association and/or
in the same instrument of the sale as one of the b. the issuance of a certificate or receipt
stipulations in the contract. evidencing or giving the right of
participation in, or right to, any land in
Also, once the instrument of absolute sale is consideration of payment of the
executed, the seller can no longer reserve the membership fee or dues. (Deemed sale)
right of repurchase and any right thereafter
granted the seller by the buyer cannot be a right Q: How are the terms “buy” and “purchase”
of repurchase but some other rights, like that of defined under the Decree?
an option to buy.
A: Shall include any contract to buy, purchase, or
XV. LAW ON SALE OF SUBDIVISION AND otherwise acquire for a valuable consideration a
CONDOMINIUM (PD 957) subdivision lot, including the building and other
improvements, if any, in a subdivision project or a
SCOPE OF APPLICATION condominium unit in a condominium project.
Q: Are sales or dispositions of subdivision lots or Q: What is a subdivision project?
condominium units prior to the effectivity of the
decree exempt from compliance with the A: A tract or a parcel of land registered under Act
requirements stated therein? No. 496 which is partitioned primarily for
residential purposes into individual lots with or
A: No. It shall be incumbent upon the owner or without improvements thereon, and offered to
developer of the subdivision or condominium the public for sale, in cash or in installment terms.
project to complete compliance with his or its
obligations as provided in the decree within two Note: It shall include all residential, commercial,
years from the date of effectivity of the Decree, industrial and recreational areas as well as open
spaces and other community and public areas in the
unless otherwise extended by the Authority or
project.
unless an adequate performance bond is filed.
Q: What is a subdivision lot?
Note: Failure of the owner or developer to comply
with the obligations under this and the preceding
A: Any of the lots, whether residential,
provisions shall constitute a violation punishable
under Sections 38 and 39 of the Decree. commercial, industrial, or recreational, in a
subdivision project.
DEFINITION OF TERMS
Q: What is a complex subdivision plan?
Q: How is “sale” or “sell” defined under the
Decree? A: A subdivision plan of a registered land wherein
a street, passageway or open space is delineated
A: Shall include: on the plan.
1. Every disposition, or attempt to Q: What is a condominium project?

dispose, for a valuable consideration, of
a subdivision lot, including the building A: The entire parcel of real property divided or to
and other improvements thereof, if any, be divided primarily for residential purposes into
in a subdivision project or a condominium units, including all structures
condominium unit in a condominium thereon.
project;
Q: What is a condominium unit?
2. contract to sell;
3. contract of purchase and sale;
A: A part of the condominium project intended
4. exchange;
for any type of independent use or ownership,
5. attempt to sell;
including one or more rooms or spaces located in
6. option of sale or purchase;
one or more floors (or part of parts of floors) in a

CIVIL LAW TEAM:

SALES
building or buildings and such accessories as may the building or buildings included in the
be appended thereto. condominium project in accordance
with the National Building Code (R.A.
Q: Define the following terms: No. 6541).
3. The subdivision plan, as so approved,
1. Owner. shall then be submitted to the Director
A: Registered owner of the land subject of Lands for approval.
of a subdivision or a condominium 4. In case of complex subdivision plans,
project. court approval shall no longer be
required.
2. Developer. 5. The condominium plan as likewise so
A: person who develops or improves approved, shall be submitted to the
the subdivision project or condominium Register of Deeds of the province or city
project for and in behalf of the owner in which the property lies and the same
thereof. shall be acted upon subject to the
conditions and in accordance with the
3. Dealer. procedure prescribed in Section 4 of the
A: any person directly engaged as Condominium Act (R.A. No. 4726).
principal in the business of buying,
selling or exchanging real estate Q: Part of the required documentary
whether on a full‐time or part‐time attachments to the application is a certificate of
basis. title to the property which is free from all liens
and encumbrances. Does this bar an owner of
4. Broker. mortgaged property from engaging in
A: any person who, for commission or subdivision or condominium project while the
other compensation, undertakes to sell mortgage is in force?
or negotiate the sale of a real estate
belonging to another. A: No. In case any subdivision lot or condominium
unit is mortgaged, it is sufficient if the instrument
5. Salesman. of mortgage contains a stipulation that the
A: person regularly employed by a mortgagee shall release the mortgage on any
broker to perform, for and in his behalf, subdivision lot or condominium unit as soon as
any or all functions of a real estate the full purchase price for the same is paid by the
broker. buyer.
REGISTRATION AND LICENSE TO SELL Q: When is a subdivision or condominium

project deemed to be registered?
Q: Upon what agency is exclusive jurisdiction to
regulate real estate trade and business vested? A: Upon completion of the publication
requirement
A: National Housing Authority
Note: The fact of such registration shall be
Q: What must a registered owner of a parcel of evidenced by a registration certificate to be issued to
land do if he wishes to convert said property into the applicant‐owner or dealer.
a subdivision or condominium project?
Re: Publication requirement: This is complied with
A: He shall: when the NHA has caused to be published a notice
of the filing of the registration statement, at the
1. Submit his subdivision plan to the expense of the applicant‐owner or dealer, in two
Authority which shall act upon and newspapers general circulation, one published in
approve the same, upon a finding that English and another in Pilipino, once a week for two
the plan complies with the Subdivision consecutive weeks, reciting that a registration
statement for the sale of subdivision lots or
Standards' and Regulations enforceable
condominium units has been filed in the National
at the time the plan is submitted.
Housing Authority;
2. If the conversion desired involves a
condominium project, the same
procedure shall be followed except
that, in addition, the NHA shall act upon
and approve the plan with respect to

Q: After issuance of the registration certificate, to work a fraud upon prospective
may the owner or dealer already sell subdivision buyers.
lots or condominium units?
Q: When may a license to sell or registration of a
A: No. He must first obtain a license to sell the subdivision or condominium project be revoked?
project within two weeks from the registration of
such project. A: The Authority may, motu proprio or upon
verified complaint filed by a buyer of a
Q: What is the purpose of the requirement of subdivision lot or condominium unit, revoke the
posting of a performance bonds before a license registration of any subdivision project or
to sell may be issued? condominium project and the license to sell any
subdivision lot or condominium unit in said
A: It is to guarantee the construction and project by issuing an order to this effect, with his
maintenance of the roads, gutters, drainage, findings in respect thereto, if upon examination
sewerage, water system, lighting systems, and full into the affairs of the owner or dealer during a
development of the subdivision project or the hearing, it shall appear there is satisfactory
condominium project and the compliance by the evidence that the said owner or dealer:
owner or dealer with the applicable laws and
rules and regulations. 1. is insolvent; or
2. has violated any of the provisions of this
Q: Is a license to sell and performance bond Decree or any applicable rule or
required in all subdivision and condominium regulation of the Authority, or any
projects? undertaking of his/its performance
bond; or
A: No. The following transactions are exempt 3. has been or is engaged or is about to
from said requirements: engage in fraudulent transactions; or
4. has made any misrepresentation in any
1. Sale of a subdivision lot resulting from prospectus, brochure, circular or other
the partition of land among co‐owners literature about the subdivision project
and co‐heirs. or condominium project that has been
2. Sale or transfer of a subdivision lot by distributed to prospective buyers; or
the original purchaser thereof and any 5. is of bad business repute; or
subsequent sale of the same lot. 6. does not conduct his business in
3. Sale of a subdivision lot or a accordance with law or sound business
condominium unit by or for the account principles.
of a mortgagee in the ordinary course
of business when necessary to liquidate Note: Where the owner or dealer is a partnership
a bona fide debt. or corporation or an unincorporated association,
it shall be sufficient cause for cancellation of its
Q: When may a license to sell be suspended? registration certificate and its license to sell, if any
member of such partnership or any officer or
A: director of such corporation or association has
been guilty of any act or omission which would be
1. Upon verified complaint by a buyer of a
cause for refusing or revoking the registration of
subdivision lot or a condominium unit in
an individual dealer, broker or salesman.
any interested party, the Authority may,
in its discretion, immediately suspend DEALERS, BROKERS AMD SALESMEN
the owner's or dealer's license to sell
pending investigation and hearing of Q: What is the duration of the registration of
the case. dealers, brokers and salesmen?
2. The NHA may motu proprio suspend the
license to sell if, in its opinion, any A: On the thirty‐first day of December of each
information in the registration year.
statement filed by the owner or dealer
is or has become misleading, incorrect, However, in the case of salesmen, their
inadequate or incomplete or the sale or registration shall also cease upon termination of
offering for a sale of the subdivision or their employment with a dealer or broker.
condominium project may work or tend

CIVIL LAW TEAM:

SALES
Note: Renewal of registration for the succeeding must be presented in such manner that

year shall be granted upon written application will not tend to mislead or deceive the
therefore made not less than thirty nor more than public.
sixty days before the first day of the ensuing year 2. The owner or developer shall
and upon payment of the prescribed fee, without answerable and liable for the facilities,
the necessity of filing further statements or improvements, infrastructures or other
information, unless specifically required by the forms of development represented or
Authority.
promised in brochures, advertisements
and other sales propaganda
All applications filed beyond said period shall be
treated as original applications. disseminated by the owner or
developer or his agents and the same
Q: When can there be refusal or revocation of shall form part of the sales warranties
registration as dealers, brokers or salesmen? enforceable against said owner or
developer, jointly and severally.
A: Such registration may be refused or revoked by
the NHA if, after reasonable notice and hearing, it Note: Failure to comply with these warranties
shall determine that such applicant or registrant shall also be punishable in accordance with the
has: penalties provided for in this Decree.
1. violated any provision of this Decree or Q: Within what period must the owner or

any rule or regulation made hereunder; developer construct and provide the facilities,
or improvements, infrastructures and other forms
2. made a material false statement in his of development, including water supply and
application for registration; or lighting facilities, which are offered and
3. been guilty of a fraudulent act in indicated in the approved subdivision or
connection with any sale of a condominium plans, brochures, prospectus,
subdivision lot or condominium unit; or printed matters, letters or in any form of
4. demonstrated his unworthiness to advertisement?
transact the business of dealer, broker,
or salesman, as the case may be. A:
Note: In case of charges against a salesman, GR: Within one year from the date of the
notice thereof shall also be given the broker or issuance of the license for the subdivision or
dealer employing such salesman. condominium project
Pending hearing of the case, the Authority shall XPN: Such other period of time as may be
have the power to order the suspension of the fixed by the Authority.
dealer's, broker's, of salesman's registration;
ALTERATION IN APPROVED SUBDIVISION PLAN
provided, that such order shall state the cause for
the suspension.
Q: What is the rule if the owner desires to make
alterations in the approved subdivision plan?
The suspension or revocation of the registration
of a dealer or broker shall carry with it all the
A:
suspension or revocation of the registration of all
his salesmen. GR: No owner or developer shall change or
alter the roads, open spaces, infrastructures,
WARRANTIES OF THE OWNER OR DEVELOPER
facilities for public use and/or other form of
subdivision development as contained in the
Q: In making advertisements, does the owner or
approved subdivision plan and/or
developer make warranties relative to such?
represented in its advertisements
A: Yes.
XPN: If he has obtained the permission of
1. Advertisements that may be made the Authority and the written conformity or
through newspaper, radio, television, consent of the duly organized homeowners
leaflets, circulars or any other form association, or in the absence of the latter,
about the subdivision or the by the majority of the lot buyers in the
condominium or its operations or subdivision.
activities must reflect the real facts and

RIGHTS AND REMEDIES OF A BUYER TAKE OVER DEVELOPMENT
Q: May payment made by a buyer be forfeited in Q: When can there be a Take‐Over

favor of the owner or developer in case the Development?
buyer desists from further payment due to the
failure of the owner or developer to develop the A: The NHA may take over or cause the
subdivision or condominium project according to development and completion of the subdivision
the approved plan within the time limit provided or condominium project at the expenses of the
for such? What is the buyer’s remedy in this owner or developer, jointly and severally, in cases
case? where the owner or developer has refused or
failed to develop or complete the development of
A: No, such forfeiture is not allowed. Such buyer the project as provided for in the Decree.
may, at his option, be reimbursed the total
amount paid including amortization interests but Note: The Authority may, after such take‐over,
excluding delinquency interests, with interest demand, collect and receive from the buyers the
thereon at the legal rate. installment payments due on the lots, which shall be
utilized for the development of the subdivision.
Q: Does a defaulting buyer have any right under
the Decree?
XVI. THE CONDOMINIUM ACT (RA 4726)
A: Yes. The rights of the buyer in the event of this
failure to pay the installments due for reasons PRELIMINARIES
other than the failure of the owner or developer
to develop the project shall be governed by Q: What is a condominium?
Republic Act No. 6552.
A: It is an interest in real property consisting of
Where the transaction or contract was entered separate interest in a unit in a residential,
into prior to the effectivity of Republic Act No. industrial or commercial building and an
6552 on August 26, 1972, the defaulting buyer undivided interest in common, directly or
shall be entitled to the corresponding refund indirectly, in the land on which it is located and in
based on the installments paid after the other common areas of the building.
effectivity of the law in the absence of any
provision in the contract to the contrary. Note: It may include, in addition, a separate interest
in other portions of such real property.
Q: What is the owner or developer’s obligation
in case the lot bought and fully‐paid by the Q: What comprises a real right in condominium?
buyer is mortgaged?
A: The real right in condominium may be
A: In the event a mortgage over the lot or unit is ownership or any other interest in real property
outstanding at the time of the issuance of the recognized by law, on property in the Civil Code
title to the buyer, the owner or developer shall and other pertinent laws.
redeem the mortgage or the corresponding
portion thereof within six months from such Q: What is a condominium unit?
issuance in order that the title over any fully paid
lot or unit may be secured and delivered to the A: It is a part of the condominium project
buyer in accordance herewith. intended for any type of independent use or
ownership, including one or more rooms or
Q: May the parties waive compliance with the spaces located in one or more floors (or part or
decree? parts of floors) in a building or buildings and such
accessories as may be appended thereto.
A: No. Any condition, stipulation, or provision in
contract of sale whereby any person waives Q: What is a condominium project?
compliance with any provision of the Decree or of
any rule or regulation issued thereunder shall be A: It is the entire parcel of real property divided
void. or to be divided in condominiums, including all
structures thereon,

CIVIL LAW TEAM:

SALES
Q: What are common areas? corporation shall constitute the

management body of the project.
A: The entire project excepting all units
separately granted or held or reserved. Q: What are the incidents of a condominium
grant?
Q: What is meant by “to divide” real property?
A: Unless otherwise expressly provided in the
A: To divide the ownership thereof or other enabling or master deed or the declaration of
interest therein by conveying one or more restrictions, the incidents of a condominium grant
condominiums therein but less than the whole are as follows:
thereof.
1. The boundary of the unit granted are
Q: What is the rule as regards acquisition of the interior surfaces of the perimeter
ownership over common areas? walls, floors, ceilings, windows and
doors thereof.
A: Transfer or conveyance of a unit or apartment,
office or store or other space therein shall include Note: The following are not part of
the transfer or conveyance of the undivided the unit bearing walls, columns,
interests in the common areas or, in a proper floors, roofs, foundations and
case, the membership or shareholdings in the other common structural
condominium corporation elements of the building:

a. lobbies, stairways, hallways,
Q: Are there any restrictions as regards
and other areas of common
ownership of condominium units provided under use,
the Condominium Act? b. elevator equipment and shafts,
central heating,
A: c. central refrigeration and central
1. As regards individuals: air‐conditioning equipment,
GR: None. d. reservoirs, tanks, pumps and
other central services and
XPN: where the common areas in the facilities,
condominium project are owned by the e. pipes, ducts, flues, chutes,
owners of separate units as co‐owners conduits, wires and other utility
thereof, no condominium unit therein installations, wherever located,
shall be conveyed or transferred to except the outlets thereof when
persons other than: located within the unit.
1. Filipino citizens, or
2. Corporations at least sixty 2. There shall pass with the unit, as an
percent of the capital stock of appurtenance thereof, an exclusive
which belong to Filipino citizens easement for the use of the air space
encompassed by the boundaries of the
XPN to the XPN: in cases of hereditary unit as it exists at any particular time
succession. and as the unit may lawfully be altered
or reconstructed from time to time.
2. As regards corporations:
Where the common areas in a Note: Such easement shall be
automatically terminated in any air
condominium project are held by a
space upon destruction of the unit as
corporation, no transfer or conveyance
to render it untenantable.
of a unit shall be valid if the
concomitant transfer of the 3. Common areas are held in common by
appurtenant membership or the holders of units, in equal shares,
stockholding in the corporation will one for each unit, unless otherwise
cause the alien interest in such provided.
corporation to exceed the limits
imposed by existing laws. 4. A non‐exclusive easement for ingress,
egress and support through the
Note: Whenever the common areas in a
common areas is appurtenant to each
condominium project are held by a
condominium corporation, such

unit and the common areas are subject
to such easements. 2. damage or destruction to the
project has rendered one‐half or
5. Each condominium owner shall have more of the units therein
the exclusive right to paint, repaint, tile, untenantable and that
wax, paper or otherwise refinish and condominium owners holding in
decorate the inner surfaces of the walls, aggregate more than thirty percent
ceilings, floors, windows and doors interest in the common areas are
bounding his own unit. opposed to repair or restoration of
the project; or
6. Each condominium owner shall have
the exclusive right to mortgage, pledge 3. the project has been in existence in
or encumber his condominium and to excess of fifty years, that it is
have the same appraised independently obsolete and uneconomic, and
of the other condominiums but any that condominium owners holding
obligation incurred by such in aggregate more than fifty
condominium owner is personal to him. percent interest in the common
areas are opposed to repair or
7. GR: Each condominium owner has also restoration or remodeling or
the absolute right to sell or dispose of modernizing of the project; or
his condominium.
XPN: If the master deed contains a 4. the project or a material part
requirement that the property be first thereof has been condemned or
offered to the condominium owners expropriated and that the project
within a reasonable period of time is no longer viable, or that the
before the same is offered to outside condominium owners holding in
parties; aggregate more than seventy
percent interest in the common
Q: May common areas be divided through areas are opposed to continuation
judicial partition? of the condominium regime after
expropriation or condemnation of
A: a material portion thereof; or
GR: Common areas shall remain
undivided, and there shall be no judicial 5. the conditions for such partition by
partition thereof. sale set forth in the declaration of
restrictions, duly registered in
XPN: Where several persons own accordance with the terms of the
condominiums in a condominium Act, have been met.
project, an action may be brought by
one or more such persons for partition Q: What is the rule regarding issuance of
thereof by sale of the entire project, as certificate of title where the enabling or master
if the owners of all of the deed provides that the land included within a
condominiums in such project were co‐ condominium project are to be owned in
owners of the entire project in the same common by the condominium owners therein?
proportion as their interests in the
common areas: A: The Register of Deeds may, at the request of all
the condominium owners and upon surrender of
Note: However, a partition shall be all their "condominium owner's" copies, cancel
made only upon a showing that: the certificates of title of the property and issue a
new one in the name of said condominium
1. three years after damage or owners as pro‐indiviso co‐owners thereof.
destruction to the project which
renders material part thereof unit Q: How are deeds, declarations or plans for a
for its use prior thereto, the condominium project construed?
project has not been rebuilt or
repaired substantially to its state A:
prior to its damage or destruction, 1. Liberally, to facilitate the operation of
or the project

CIVIL LAW TEAM:

SALES
2. Provisions shall be presumed to be risks, and for bonding of the
independent and severable. members of any management
body;
DECLARATION OF RESTRICTIONS c. Provisions for maintenance, utility,
gardening and other services
Q: When should a declaration of restrictions be benefiting the common areas, for
registered and what is the effect of such? the employment of personnel
necessary for the operation of the
A: The owner of a project shall, prior to the building, and legal, accounting and
conveyance of any condominium therein, register other professional and technical
a declaration of restrictions relating to such services;
project. d. For purchase of materials, supplies
and the like needed by the
Such restrictions shall constitute a lien upon each common areas;
condominium in the project, and shall insure to e. For payment of taxes and special
and bind all condominium owners in the project. assessments which would be a lien
upon the entire project or common
Note: Such liens, unless otherwise provided, areas, and for discharge of any lien
may be enforced by any condominium or encumbrance levied against the
owner in the project or by the management entire project or the common
body of such project. areas;
f. For reconstruction of any portion
Q: What should a declaration of restrictions or portions of any damage to or
provide? destruction of the project;
g. The manner for delegation of its
A: The declaration of restrictions shall provide for powers;
the management of the project by anyone of the h. For entry by its officers and agents
following management bodies: into any unit when necessary in
1. a condominium corporation, connection with the maintenance
2. an association of the condominium or construction for which such
owners, body is responsible;
3. a board of governors elected by i. For a power of attorney to the
condominium owners, or management body to sell the
4. a management agent elected by the entire project for the benefit of all
owners or by the board named in the of the owners thereof when
declaration. partition of the project may be
5. voting majorities, authorized under Section 8 of the
6. quorums, Condominium Act, which said
7. notices, power shall be binding upon all of
8. meeting date, and the condominium owners
9. other rules governing such body or regardless of whether they assume
bodies. the obligations of the restrictions
or not.
Q: What may a declaration of restrictions
provide? 2. The manner and procedure for
amending such restrictions: Provided,
A: Such declaration of restrictions, among other That the vote of not less than a majority
things, may also provide: in interest of the owners is obtained.
3. For independent audit of the accounts
1. As to any such management body; of the management body;
a. For the powers thereof, including 4. For reasonable assessments to meet
power to enforce the provisions of authorized expenditures, each
the declarations of restrictions; condominium unit to be assessed
b. For maintenance of insurance separately for its share of such
policies, insuring condominium expenses in proportion (unless
owners against loss by fire, otherwise provided) to its owners
casualty, liability, workmen's fractional interest in any common
compensation and other insurable areas;

5. For the subordination of the liens Q: May the management body may acquire and
securing such assessments to other hold, for the benefit of the condominium
liens either generally or specifically owners, tangible and intangible personal
described; property and dispose of the same by sale or
6. For conditions, other than those otherwise?
provided for in Sections 8 and 13 of the
Act, upon which partition of the project A: Yes, unless otherwise provided for by the
and dissolution of the condominium declaration of restrictions.
corporation may be made. Note: The beneficial interest in such personal
property shall be owned by the condominium
Note: Such right to partition or dissolution owners in the same proportion as their respective
may be conditioned upon: interests in the common areas.
a. failure of the condominium owners
to rebuild within a certain period; A transfer of a condominium shall transfer to the
b. specified inadequacy of insurance transferee ownership of the transferor's beneficial
proceeds; interest in such personal property.
c. specified percentage of damage to
the building; CONDOMINIUM CORPORATIONS
d. a decision of an arbitrator; or
e. upon any other reasonable Q: What is a condominium corporation?
condition.
A: A corporation specially formed for the
Q: What is the duty of the Register of Deeds as purpose, in which the holders of separate interest
regards this declaration of restrictions? shall automatically be members or shareholders,
to the exclusion of others, in proportion to the
A: The Register of Deeds shall enter and annotate appurtenant interest of their respective units in
the declaration of restrictions upon the certificate the common areas.
of title covering the land included within the
project, if the land is patented or registered under Note: As regards title to the common areas,
the Land Registration or Cadastral Acts. including the land, or the appurtenant interests in
such areas, these may be held by a condominium
POWERS OF AND RESTRICTIONS UPON corporation.
MANAGEMENT BODY
Q: What is the term of a condominium
Q: What are the restrictions imposed by the law corporation?
upon corporations which is also the
management body of the condominium project? A: Co‐terminus with the duration of the
condominium project, the provisions of the
A: The restrictions are as follows: Corporation Law to the contrary notwithstanding.

1. The corporate purposes of such a
corporation shall be limited to the: Membership
a. holding of the common areas,
either in ownership or any other Q: What are the rules regarding membership in a
interest in real property recognized condominium corporation?
by law,
b. management of the project, and A: Membership in a condominium corporation,
c. to such other purposes as may be regardless of whether it is a stock or non‐stock
necessary, incidental or convenient corporation, shall not be transferable separately
to the accomplishment of said from the condominium unit of which it is an
purposes. appurtenance.
2. The articles of incorporation or by‐laws
of the corporation shall not contain any Note: When a member or stockholder ceases to own
provision contrary to or inconsistent a unit in the project in which the condominium
with the: corporation owns or holds the common areas, he
a. provisions of the Act; shall automatically cease to be a member or
b. enabling or master deed; or stockholder of the condominium corporation.
c. declaration of restrictions of the
project.

CIVIL LAW TEAM:

SALES
Q: May a condominium corporation sell, superior rights of the corporation
exchange, lease or otherwise dispose of the creditors.
common areas owned or held by it in the
condominium project? Note: Such transfer or conveyance shall
be deemed to be a full liquidation of the
A: interest of such members or stockholders
GR: During its existence, it cannot do so. in the corporation.

XPN: If authorized by the affirmative vote of 2. After such transfer or conveyance, the
all the stockholders or members. provisions of this Act governing
undivided co‐ownership of, or
Q: Is the so called appraisal right under the undivided interest in, the common
Corporation Code available to stockholders or areas in condominium projects shall
members of a condominium corporation? fully apply.

A: Q: When may voluntary dissolution of a
GR: Not available. The law provides that “the condominium corporation be allowed?
by‐laws of a condominium corporation shall
provide that a stockholder or member shall A: A condominium corporation may be voluntarily
not be entitled to demand payment of his dissolved only:
shares or interest in those cases where such 1. when the enabling or the master deed
right is granted under the Corporation Law of the project in which the
xxx” condominium corporation owns or
holds the common area is revoked; and
XPN: If said stockholder or member consents 2. upon a showing that:
to sell his separate interest in the project to a. three years after damage or
the corporation or to any purchaser of the destruction to the project in which
corporation's choice who shall also buy from the corporation owns or holds the
the corporation the dissenting member or common areas, which damage or
stockholder's interest. destruction renders a material part
thereof unfit for its use prior
Note: In case of disagreement as to price, the thereto, the project has not been
procedure set forth in the appropriate rebuilt or repaired substantially to
provision of the Corporation Law for valuation its state prior to its damage or
of shares shall be followed. destruction; or

The corporation shall have two years within b. damage or destruction to the
which to pay for the shares or furnish a project has rendered one‐half or
purchaser of its choice from the time of award. more of the units therein
untenantable and that more than
All expenses incurred in the liquidation of the thirty percent of the members of
interest of the dissenting member or the corporation, if non‐stock, or
stockholder shall be borne by him.
the shareholders representing

more than thirty percent of the

capital stock entitled to vote, if a
Dissolution and Liquidation
stock corporation, are opposed to

the repair or reconstruction of the
Q: What is the effect of involuntary dissolution
project, or
of a condominium corporation for any of the

causes provided by law?
c. the project has been in existence in

excess of fifty years, that it is
A:
obsolete and uneconomical, and
1. The common areas owned or held by
that more than fifty percent of the
the corporation shall, by way of
members of the corporation, if
liquidation, be transferred pro‐indiviso
non‐stock, or the stockholders
and in proportion to their interest in the
representing more than fifty
corporation to the members or
percent of the capital stock
stockholders thereof, subject to the
entitled to vote, if a stock
corporation, are opposed to the

repair or restoration or remodeling the corporate and of individual condominium
or modernizing of the project; or creditors.

d. the project or a material part Q: What should the Court do if, in an action for
thereof has been condemned or partition of a condominium project or for the
expropriated and that the project dissolution of condominium corporation on the
is no longer viable, or that the ground that the project or a material part
members holding in aggregate thereof has been condemned or expropriated,
more than seventy percent the Court finds that the conditions provided for
interest in the corporation, if non‐ in the Condominium Act or in the declaration of
stock, or the stockholders restrictions have not been met?
representing more than seventy
percent of the capital stock A: The Court may decree a reorganization of the
entitled to vote, if a stock project, declaring which portion or portions of the
corporation, are opposed to the project shall continue as a condominium project,
continuation of the condominium the owners thereof, and the respective rights of
regime after expropriation or said remaining owners and the just
condemnation of a material compensation, if any, that a condominium owner
portion thereof; or may be entitled to due to deprivation of his
property.
e. the conditions for such a
dissolution set forth in the Note: Upon receipt of a copy of the decree, the
declaration of restrictions of the Register of Deeds shall enter and annotate the same
project in which the corporation on the pertinent certificate of title.
owns or holds the common areas,
have been met. Assessment, Notice thereof and Lien Created

Note: action for voluntary dissolution is that under Q: If real property has been divided into
Rule 104 of the Rules of Court. condominiums, how will it be assessed for
taxation purposes?
Q: May the members or stockholders of a
condominium corporation dissolve such A: Each condominium separately owned shall be
corporation? separately assessed, for purposes of real property
taxation and other tax purposes to the owners
A: Yes, by the affirmative vote of all the thereof and the tax on each such condominium
stockholders or members thereof at a general or shall constitute a lien solely thereon.
special meeting duly called for the
purpose: Provided, that all the requirements of Q: Who should pay for an assessment upon any
Section 62 of the Corporation Law are complied condominium made in accordance with a duly
with. registered declaration of restrictions?

Q: What is the consequence of voluntary A: It is an obligation of the owner thereof at the
dissolution of a condominium corporation? time the assessment is made.

A: Q: What are the rules as regards the notice of
GR: The corporation shall be deemed to hold assessment?
a power of attorney from all the members or
stockholders to sell and dispose of their A: The notice:
separate interests in the project. 1. is to be registered with the Register of
XPN: Unless otherwise provided for in the Deeds of the city or province where
declaration of restrictions such condominium project is located.
2. shall state the following:
Q: How is a condominium corporation a. amount of such assessment and
liquidated? such other charges thereon as may
be authorized by the declaration of
A: Liquidation of the corporation shall be effected restrictions,
by a sale of the entire project as if the corporation b. a description of the condominium
owned the whole thereof, subject to the rights of unit against which same has been
assessed, and

CIVIL LAW TEAM:

SALES
c. the name of the registered owner Q: What are the rules as regards labor
thereof. performed or services or materials furnished?
3. Such notice shall be signed by an
authorized representative of the A:
management body or as otherwise 1. If with the consent of or at the request
provided in the declaration of of a condominium owner or his agent or
restrictions. his contractor or subcontractor:
GR: it shall not be the basis of a lien
Q: What is the effect if the management body against the condominium of any other
causes a notice of assessment to be registered condominium owner
with the register of deeds? XPN: such other owners have expressly
consented to or requested the
A: The amount of any such assessment plus any performance of such labor or furnishing
other charges thereon, such as interest, costs of such materials or services.
(including attorney's fees) and penalties, as such
may be provided for in the declaration of Note: Such express consent shall be
restrictions, shall be and become a lien upon the deemed to have been given by the
condominium assessed. owner of any condominium in the
case of emergency repairs of his
Note: Effect of payment: Upon payment of said condominium unit.
assessment and charges or other satisfaction
thereof, the management body shall cause to be 2. If performed or furnished for the
registered a release of the lien. common areas and if duly authorized by
the management body provided for in a
Q: What are the rules as regards the lien created declaration of restrictions governing the
in case of unpaid assessments, etc? property: shall be deemed to be
performed or furnished with the
A: express consent of each condominium
GR: Such lien shall be superior to all other owner.
liens registered subsequent to the
registration of said notice of assessment Q: How may an owner of any condominium
XPNs: remove his condominium from a lien against two
1. real property tax liens are superior; or more condominiums or any part thereof?
2. when declaration of restrictions provide
for the subordination thereof to any A: By payment to the holder of the lien of the
other liens and encumbrances. fraction of the total sum secured by such lien
which is attributable to his condominium unit.
Q: What is the rule as regards enforcement of
the lien?

A: Such liens may be enforced in the same
manner provided for by law for the judicial or
extra‐judicial foreclosure of mortgages of real
property.

Q: Can the management body bid in the
foreclosure sale based on the lien for unpaid
assessments?

A:
GR: No, the management body shall have
power to bid at foreclosure sale.

XPN: Unless otherwise provided for in the
declaration of restrictions,

Note: The condominium owner shall have the
same right of redemption as in cases of judicial or
extra‐judicial foreclosure of mortgages.

INTELLECTUAL PROPERTY LAWS C. TECHNOLOGY TRANSFER ARRANGEMENTS

I. INTELLECTUAL PROPERTY RIGHTS IN GENERAL Q: What is a technology transfer arrangement?

A. INTELLECTUAL PROPERTY RIGHTS A: Contracts or arrangements involving the
transfer of systematic knowledge for the
Q: What are covered by intellectual property manufacture of a product, the application of the
rights? process, or rendering a service including
management contracts, and transfer, assignment
A: or licensing of all forms of intellectual property
1. Copyright and Related Rights rights, including licensing of computer software
2. Mark (trade, service and collective) except computer software developed for mass
3. Geographic indications market. (Sec. 4.2, IPC)
4. Industrial designs
5. Patents Q: What is undisclosed information?
6. Layout designs (Topographies) of
Integrated Circuits A: It is an information which:
7. Protection of Undisclosed Information.
(Sec. 4.1, Intellectual Property Code 1. Is a secret in the sense that it is not, as a
[IPC]) body or in precise configuration and
assembly of components, generally
B. DIFFERENCES BETWEEN COPYRIGHTS known among, or readily accessible to
TRADEMARKS AND PATENT persons within the circles that normally
deal with the kind of information in
Q: What are the distinctions among trademark, question.
patent and copyright?
2. Has commercial value because it is a
A: secret
INTELLECTUAL
DEFINITION
PROPERTIES 3. Has been subjected to reasonable steps
Any visible sign capable of under the circumstances, by the person
distinguishing the goods lawfully in control of the information, to
(trademark) or services (service keep it a secret. (Article 39, TRIPS
Trademark
mark) of an enterprise and shall Agreement)
include a stamped or marked
container of goods. Q: What is the nature of undisclosed
The name or designation information/trade secret?
Tradename identifying or distinguishing an
enterprise.
A: Those trade secrets are of a privileged nature.
Literary and artistic works which The protection of industrial property encourages
are original intellectual creations
investments in new ideas and inventions and
Copyright in the literary and artistic domain
stimulates creative efforts for the satisfaction of
protected from the moment of
human needs. It speeds up transfer of technology
their creation.
Any technical solution of a
and industrialization, and thereby bring about
problem in any field of human social and economic progress. Verily, the
Patentable activity which is new, involves an protection of industrial secrets is inextricably
Inventions inventive step and is industrially linked to the advancement of our economy and
applicable. (Kho v. CA, G.R. No. fosters healthy competition in trade. (Air
115758, Mar. 11, 2002). Philippines Corporation v. Pennswell, Inc., G.R. No.
172835, Dec. 13, 2007)
Q: What is a geographic indication?
II. PATENTS
A: It’s an indication which identifies a good as
originating in the territory, where a given quality, Q: What is a patent?
reputation or other characteristic of the good is
essentially attributable to its geographical origin. A: A statutory grant which confers to an inventor
(Art. 22, Trade‐Related Aspects of Intellectual or his legal successor, in return for the disclosure
Property Rights) of the invention to the public, the right for a
MERCANTILE LAW TEAM:
ADVISER: ATTY. AMADO E. TAYAG; SUBJECT HEAD: EARL M. LOUIE MASACAYAN;
ASST. SUBJECT HEADS: KIMVERLY A. ONG & JOANNA MAY D.G. PEÑADA; MEMBERS: MA. ELISA JONALYN A. BARQUEZ, ANGELI R. CARPIO,
ANTONETTE T. COMIA, ALBAN ROBERT LORENZO F. DE ALBAN, JOEBEN T. DE JESUS, CHRIS JARK ACE M. MAÑO, ANNA MARIE P. OBIETA,
RUBY ANNE B. PASCUA, FLOR ANGELA T. SABAUPAN, GIAN FRANCES NICOLE C. VILCHES
INTELLECTUAL PROPERTY LAW
limited period of time to exclude others from Q: What is meant by “made available to the
making, using, selling or importing the invention public” and what are its effects?
within the territory of the country that grants the
patent. A: To be “made available to the public” means at
least one member of the public has been able to
A. PATENTABLE INVENTIONS access knowledge of the invention without any
restriction on passing that knowledge on to
Q: What are the patentable inventions? others.

A: Any technical solution of a problem in any field GR: When a work has already been made
of human activity which is new, involves an available to the public, it shall be non‐
inventive step and is industrially applicable. It may patentable for absence of novelty.
be, or may relate to, a product, or process, or an
improvement of any of the foregoing. (Sec. 21) XPN: Non‐prejudicial disclosure – the
disclosure of information contained in the
Q: What are the conditions for patentability? application during the 12‐month period before
the filing date or the priority date of the
A: NIA application if such disclosure was made by:
1. Novelty – An invention shall not be
considered new if it forms part of a 1. The inventor;
prior art. (Sec. 23, IPC)
2. A patent office and the information was
2. Involves an inventive step – if, having contained:
regard to prior art, it is not obvious to a a. In another application filed by the
person skilled in the art at the time of inventor and should have not have
the filing date or priority date of the been disclosed by the office, or
application claiming the invention. b. In an application filed without the
knowledge or consent of the
3. Industrially Applicable – An invention inventor by a third party which
that can be produced and used in any obtained the information directly
industry, shall be industrially applicable or indirectly from the inventor;
(Sec. 27, IPC).
3. A third party which obtained the
Q: What is prior art? information directly or indirectly from the
inventor. (Sec. 25, IPC)
A:
1. Everything which has been made Q: Who has the burden of proving want of
available to the public anywhere in the novelty of an invention?
world, before the filing date or the
priority date of the application claiming A: The burden of proving want of novelty is on
the invention him who avers it and the burden is a heavy one
which is met only by clear and satisfactory proof
2. The whole contents of a published which overcomes every reasonable doubt.
application, filed or effective in the (Manzano v. CA, G.R. No. 113388. Sept. 5, 1997)
Philippines, with a filing or priority date
that is earlier than the filing or priority Q: What is inventive step?
date of the application. Provided, that
the application which has validly A:
claimed the filing date of an earlier GR: An invention involves an inventive step if,
application under Section 31 of the IPC, having regard to prior art, it is not obvious to
there shall be a prior art with effect as a person skilled in the art at the time of the
of the filing date of such earlier filing date or priority date of the application
application: Provided further, that the claiming the invention. (Sec. 26, IPC)
applicant or the inventor identified in
both applications are not one and the XPN: In the case of drugs and medicines, there
same. (Sec. 24, IPC) is no inventive step if the invention results
from the mere discovery of a new form or new
property of a known substance which does not

V ICE CHAIR FOR ADMINISTRATION AND FINANCE: JEANELLE C. LEE Facultad de Derecho Civil

result in the enhancement of the known some or all of the interconnections of
efficacy of that substance. (Sec. 26.2, as an integrated circuit, or such a three‐
amended by R.A. 9502) dimensional disposition prepared for an
integrated circuit intended for
Q: What is the test of non‐obviousness? manufacture. Registration is valid for
10 years without renewal counted from
A: If any person possessing ordinary skill in the art date of commencement of protection.
was able to draw the inferences and he
constructs that the supposed inventor drew from 4. Utility model – A name given to
prior art, then the latter did not really invent. inventions in the mechanical field

Q: Who is considered a person of ordinary skill? Q: When does an invention qualify as a utility
model?
A: A person who is presumed to:
1. Be an ordinary practitioner aware of A: If it is new and industrially applicable. A model
what was common general knowledge of implement or tools of any industrial product
in the art at the relevant date. even if not possessed of the quality of invention
2. Have knowledge of all references that but which is of practical utility. (Sec. 109.1, IPC)
are sufficiently related to one another
and to the pertinent art and to have Q: What is the term of a utility model?
knowledge of all arts reasonably
pertinent to the particular problems A: 7 years from date of filing of the application
with which the inventor was involved. (Sec. 109.3, IPC).
3. Have had at his disposal the normal
means and capacity for routine work B. NON‐PATENTABLE INVENTIONS
and experimentation. (Rules and
Regulations on Inventions, Rule 207) Q: What are not patentable inventions?

Q: What are other forms of patentable A: PAD‐SCAD
inventions?
1. Discoveries, scientific theories and
A: mathematical methods
1. Industrial design – Any composition of
lines or colors or any three‐dimensional 2. In the case of Drugs and medicines,
form, whether or not associated with mere discovery of a new form or new
lines or colors. Provided that such property of a known substance which
composition or form gives a special does not result in the enhancement of
appearance to and can serve as pattern the efficacy of that substance
for an industrial product or handicraft.
(Sec. 112, IPC) 3. Schemes, rules and methods of
performing mental acts, playing games
Note: Generally speaking, an industrial design is the or doing business, and programs for
ornamental or aesthetic aspect of a useful article. computers
(Vicente Amador, Intellectual Property
Fundamentals, 2007) 4. Methods for treatment of the human or
Animal body
2. Integrated circuit – A product, in its final
form, or an intermediate form, in which 5. Plant varieties or animal breeds or
the elements, at least one of which is an essentially biological process for the
active elements and some of all of the production of plants or animals. This
interconnections are integrally formed provision shall not apply to micro‐
in and or on a piece of material, and in organisms and non‐biological and
which is intended to perform an microbiological processes
electronic function.
6. Aesthetic creations
3. Layout design/topography – The three
dimensional disposition, however
expressed, of the elements, at least one
of which is an active element, and of
7. Anything which is Contrary to public to the patent shall belong to the person

order or morality. (Sec. 22, IPC as who filed an application for such
amended by R.A. 9502) invention, or
2. Where two or more applications are
Q: Are computer programs patentable? filed for the same invention, to the
applicant whi has the earliest filing
A: date. (Sec. 29, IPC)
GR: Computer programs are not patentable
but are copyrightable. Q: Cheche invented a device that can convert
rainwater into automobile fuel. She asked
XPN: They can be patentable if they are part Macon, a lawyer, to assist in getting her
of a process (e.g. business process with a step invention patented. Macon suggested that they
involving the use of a computer program). form a corporation with other friends and have
the corporation apply for the patent, 80% of the
C. OWNERSHIP OF A PATENT shares of stock thereof to be subscribed by
Cheche and 5% by Macon. The corporation was
Q: Who is entitled to a patent? formed and the patent application was filed.
However, Cheche died 3 months later of a heart
A: attack. Franco, the estranged husband of
1. Inventor, his heirs, or assigns. Cheche, contested the application of the
corporation and filed his own patent application
2. Joint invention – Jointly by the as the sole surviving heir of Cheche. Decide the
inventors. (Sec. 28, IPC) issue with reasons.

3. 2 or more persons invented separately A: The estranged husband of Cheche cannot
and independently of each other – To successfully contest the application. The right
the person who filed an application; over inventions accrue from the moment of
creation and as a right it can lawfully be assigned.
4. 2 or more applications are filed – the Once the title thereto is vested in the transferee,
applicant who has the earliest filing the latter has the right to apply for its
date or, the earliest priority date. First registration. The estranged husband of Cheche, if
to file rule. (Sec. 29, IPC) not disqualified to inherit, merely would succeed
to the interest of Cheche. (1990 Bar Question)
5. Inventions created pursuant to a
commission – Person who commissions Q: Who may apply for a patent?
the work, unless otherwise provided in
the contract. (Sec. 30.1, IPC) A: Any person who is a national or who is
domiciled or has a real and effective industrial
6. Employee made the invention in the establishment in a country which is a party to any
course of his employment contract: convention, treaty or agreement relating to
a. The employee, if the inventive intellectual property rights or the repression of
activity is not a part of his regular unfair competition, to which the Philippines is
duties even if the employee uses also a party, or extends reciprocal rights to
the time, facilities and materials of nationals of the Philippines by law. (Sec. 3, IPC)
the employer.
b. The employer, if the invention is Q: What are the steps in the registration of a
the result of the performance of patent?
his regularly‐assigned duties,
unless there is an A: The procedure for the grant of patent may be
agreement, express or implied, to summarized as follows:
the contrary. (Sec. 30.2, IPC) 1. Filing of the application
2. Accordance of the filing date
Q: What is the “first to file” rule? 3. Formality examination
4. Classification and Search
A: 5. Publication of application
1. If two (2) or more persons have made 6. Substantive examination
the invention separately and 7. Grant of Patent
independently of each other, the right 8. Publication upon grant


9. Issuance of certificate (Salao, Essentials Q: What are the conditions in availing of priority
of Intellectual Property Law: a date?
Guidebook on Republic Act No. 8293
and Related Laws., 2008) A:
1. The local application expressly claims
Q: How is disclosure made? priority;

A: The application shall disclose the invention in a 2. It is filed within 12 months from the
manner sufficiently clear and complete for it to be date the earliest foreign application was
carried out by a person skilled in the art. filed; and

Q: What is a claim? 3. A certified copy of the foreign
application together with an English
A: Defines the matter for which protection is translation is filed within 6 months from
sought. Each claim shall be clear and concise, and the date of filing in the Philippines. (Sec.
shall be supported by the description. 31, IPC)

Q: What is an abstract? Q: Leonard and Marvin applied for Letters
Patent claiming the right of priority granted to
A: A concise summary of the disclosure of the foreign applicants. Receipt of petitioners’
invention as contained in the description, claims application was acknowledged by respondent
and merely serves as technical information. Director on March 6, 1954. Their Application for
Letters Patent in the US for the same invention
Q: What is unity of invention? indicated that the application in the US was filed
on March 16, 1953. They were advised that the
A: The application shall relate to one invention "Specification" they had submitted was
only or to a group of inventions forming a single "incomplete" and that responsive action should
general inventive concept. (Sec. 38.1) If several be filed with them four months from date of
independent inventions which do not form a mailing, which was August 5, 1959. On July 3,
single general inventive concept are claimed in 1962, petitioners submitted two complete
one application, the application must be restricted copies of the Specification. Director of patents
to a single invention. (Sec. 38.2, IPC) held that petitioners' application may not be
treated as filed. Is the director correct?
Q: What is the concept of divisional
applications? A: Yes, it is imperative that the application be
complete in order that it may be accepted. It is
A: Divisional applications come into play when essential to the validity of Letters Patent that the
two or more inventions are claimed in a single specifications be full, definite, and specific. The
application but are of such a nature that a single purpose of requiring a definite and accurate
patent may not be issued for them. The applicant, description of the process is to apprise the public
is thus required to “divide”, that is, to limit the of what the patentee claims as his invention, to
claims to whichever invention he may elect, inform the Courts as to what they are called upon
whereas those inventions not elected may be to construe, and to convey to competing
made the subject of separate applications which manufacturers and dealers information of exactly
are called “divisional applications”. (Smith‐Kline what they are bound to avoid. To be entitled to
Beckman Corp. v. CA, GR No. 126627, Aug. the filing date of the patent application, an
14,2003) invention disclosed in a previously filed
application must be described within the instant
Q: What is priority date? application in such a manner as to enable one
skilled in the art to use the same for a legally
A: An application for patent filed by any person adequate utility. (Boothe v. Director of Patents,
who has previously applied for the same G.R. No. L‐24919, Jan. 28, 1980)
invention in another country which by treaty,
convention, or law affords similar privileges to Q: What are the rights conferred by a patent
Filipino citizens, shall be considered as filed as of application after the first publication?
the date of filing the foreign application. (Sec. 31,
IPC) A: The applicant shall have all the rights of a
patentee against any person who, without his
authorization, exercised any of the rights Q: What if the ground/s for cancellation relate to

conferred under Section 71 in relation to the some of the claims or parts of the claim only?
invention claimed in the published patent
application, as if a patent had been granted for A: Cancellation may be effected to such extent
that invention, provided that the said person had: only. (Sec. 61.2, IPC)
1. Actual knowledge that the invention
that he was using was the subject Q: What are the grounds for cancellation of a
matter of a published application; or utility model?
2. Received written notice that the
invention was the subject matter of a A:
published application being identified in 1. The invention does not qualify for
the said notice by its serial number registration as a utility model
2. That the description and the claims do
Note: That the action may not be filed until after the not comply with the prescribed
grant of a patent on the published application and requirements
within four (4) years from the commission of the acts
3. Any drawing which is necessary for the
complained of (Sec. 46, IPC).
understanding of the invention has not

been furnished
Q: When shall the patent take effect?
4. That the owner of the utility model

registration is not the inventor or his
A: A patent shall take effect on the date of the
successor in title. (Sec. 109.4, IPC)
publication of the grant of the patent in the IPO

Gazette. (Sec. 50.3, IPC)
Q: What are the grounds for cancellation of an

industrial design?
Q: What is the duration of a patent, utility model

and industrial design?
A:

1. The subject matter of the industrial
A:
design is not registrable;
1. Patent – 20 years from date of filing of
2. The subject matter is not new; or
application without renewal. (Sec. 54,
3. The subject matter of the industrial
IPC)
design extends beyond the content of

the application as originally filed (Sec.
2. Utility Model – 7 years from the filing
120IPC).
date of the application without

renewal. (Sec. 109.3, IPC)
E. REMEDY OF THE TRUE AND ACTUAL OWNER

3. Industrial Design – 5 years from the
Q: What are the remedies of persons not having
filing date of the application, renewable
the right to a patent?
for not more than two (2) consecutive

periods of five (5) years each. (Sec.
A: If a person other than the applicant is declared
118.2, IPC)
by final court order or decision as having the right

to a patent, he may within 3 months after such
D. GROUNDS FOR CANCELATION OF A PATENT
decision has become final:

Q: What are the grounds for the cancellation of
1. Prosecute the application as his own
patents?
2. File a new patent application

3. Request the application to be refused;
A: NDCI
or
1. The invention is Not new or patentable;
4. Seek cancellation of the patent.
2. The patent does not Disclose the

invention in a manner sufficiently clear
Q: What is the remedy of a true inventor?
and complete for it to be carried out by

any person skilled in the art; or
A: He may only ask the court to substitute him as
3. Contrary to public order or
a patentee or to cancel the patent and ask for
morality.(Sec. 61.1, IPC)
damages when the application of the false
4. Patent is found Invalid in an action for
inventor is granted. He may not the IPO of
infringement (Sec. 82, IPC)
processing the false application.


F. RIGHTS CONFERED BY A PATENT act includes testing, using, making
or selling the invention including
Q: What are the rights conferred by a patent? any data related thereto, solely for
purposes reasonably related to the
A: development and submission of
1. Subject matter is a product – Right to information and issuance of
restrain, prohibit and prevent any approvals by government
unauthorized person or entity from regulatory agencies required under
making, using, offering for sale, selling any law of the Philippines or of
or importing the product. another country that regulates the
manufacture, construction, use or
2. Subject matter is a process – Right to sale of any product.(Sec. 72.4, IPC)
restrain prohibit and prevent any
unauthorized person or entity from e. Where the act consists of the
manufacturing, dealing in, using, preparation for individual cases, in
offering for sale, selling or importing a pharmacy or by a medical
any product obtained directly or professional, of a medicine in
indirectly from such process (Sec. 71, accordance with a medical
IPC). prescription. (Sec. 72.5, IPC)

3. Right to assign the patent, to transfer f. Where the invention is used in any
by succession, and to conclude licensing ship, vessel, aircraft, or land
contracts. (Sec. 71.2, IPC) vehicle of any other country
entering the territory of the
G. LIMITATION OF PATENT RIGHTS Philippines temporarily or
accidentally. (Sec. 72.5, IPC)
Q: What are the exceptions to the rights
conferred by a patent? 2. Prior user – Person other than the
applicant, who in good faith, started
A: using the invention in the Philippines, or
1. In general undertaken serious preparations to use
the same, before the filing date or
a. GR: If put on the market in the priority date of the application shall
Philippines by the owner of the have the right to continue the use
product, or with his express thereof, but this right shall only be
consent. transferred or assigned further with his
enterprise or business. (Sec. 73, IPC)
XPN: Drugs and medicines ‐ .
introduced in the Philippines or 3. Use by Government – A government
anywhere else in the world by the agency or third person authorized by
patent owner, or by any party the government may exploit invention
authorized to use the invention even without agreement of a patent
(Sec. 72.1, as amended by R.A. owner where:
9502)
a. Public interest, as determined by
b. Where the act is done privately the appropriate agency of the
and on a non‐commercial scale or government, so requires; or
for a non‐commercial purpose. b. A judicial or administrative body
(Sec. 72.2, IPC) has determined that the manner of
exploitation by owner of patent is
c. Exclusively for experimental use of anti‐competitive. (Sec. 74, IPC)
the invention for scientific
purposes or educational purposes 4. Reverse reciprocity of foreign law – Any
(experimental use provision). (Sec. condition, restriction, limitation,
72.3, IPC) diminution, requirement, penalty or any
similar burden imposed by the law of a
d. Bolar Provision ‐ In the case of foreign country on a Philippine national
drugs and medicines, where the seeking protection of intellectual
property rights in that country, shall 2. Regional exhaustion – allows the
reciprocally be enforceable upon possibility of importing into the national
nationals of said country, within territory a patented product originating
Philippine jurisdiction. (Sec. 231, IPC) from any other member state of a
regional trade agreement.
Q: Who is a parallel importer?
3. National exhaustion – limits the
A: One which imports, distributes, and sells circulation of products covered by
genuine products in the market, independently of patent in one country to only those put
an exclusive distributorship or agency agreement on the market by the patent owner or
with the manufacturer. its authorized agents in that same
country. In this case, there can be no
Note: Such acts of “underground sales and parallel importation.
marketing” of genuine goods, undermines the
property rights and goodwill of the rightful exclusive 4. Modified exhaustion – all respect
distributor. Such goodwill is protected by the law identical to the International exhaustion
on unfair competition. (Solid Triangle v. Sheriff, G.R. except for the allowance of the
No. 144309, Nov. 23, 2001) restriction of the extent of exhaustion
through explicit contractual terms.
Q: What is the doctrine of exhaustion? (Carlos Correa,. “Internationalization of
the Patent System and New
A: Also known as the doctrine of first sale, it Technologies”. International Law
provides that the patent holder has control of the Journal, Vol. 20. No.3 , 2002)
first sale of his invention. He has the opportunity
to receive the full consideration for his invention H. PATENT INFRINGEMENT
from his sale. Hence, he exhausts his rights in the
future control of his invention. Q: What constitutes infringement of patent?

It espouses that the patentee who has already A:
sold his invention and has received all the royalty 1. Making, using, offering for sale, selling
and consideration for the same will be deemed to or importing a patented product or a
have released the invention from his monopoly. product obtained directly or indirectly
The invention thus becomes open to the use of from a patented process; or
the purchaser without further restriction. (Adams 2. Use of a patented process without
v. Burke, 84 U.S. 17, 1873) authorization of the owner of the
patent (Sec. 76, IPC)
Q: How does the Doctrine Exhaustion of apply in
Philippine jurisdiction? Q: What are the tests in patent infringement?

A: A:
GR: Patent rights are Exhausted by first sale in 1. Literal infringement Test – Resort must
the Philippines (Domestic exhaustion). be had, in the first instance, to words of
the claim. If the accused matter clearly
XPN: Except however on drugs and medicines: falls within the claim, infringement is
first sale in any jurisdiction exhausts committed.
(International exhaustion) (R.A. 9502).
Minor modifications are sufficient to
Q: What are the different kinds of exhaustion? put the item beyond literal
infringement. (Godines v. CA, G.R. No. L‐
A: 97343, Sept. 13, 1993)
1. International exhaustion – allows any
party to import into the national 2. Doctrine of Equivalents – There is
territory a patented product from any infringement where a device
other country in which the product was appropriates a prior invention by
placed on the market by the patent incorporating its innovative concept
holder or any authorized party. and, although with some modification
and change, performs substantially the
same function in substantially the same


way to achieve substantially the same contributory infringer. It must be proven that the
result. (Ibid.) product can only be used for infringement
purposes. If it can be used for legitimate
3. Economic interest test – when the purposes, the action shall not prosper.
process‐discoverer’s economic interest
are compromised, i.e., when others can Q: What are the remedies of the owner of the
import the products that result from patent against infringers?
the process, such an act is said to be
prohibited. A:
1. Civil action for infringement – The
Q: Does the use of a patented process by a third owner may bring a civil action with the
person constitute an infringement when the appropriate Regional Trial Court to
alleged infringer has substituted, in lieu of some recover from infringer the damages
unessential part of the patented process, a well‐ sustained by the former, plus attorney’s
known mechanical equivalent." fees and other litigation expenses, and
to secure an injunction for the
A: Yes, under the doctrine of mechanical protection of his rights.
equivalents, the patentee is protected from
colorable invasions of his patent under the guise 2. Criminal action for infringement – If the
of substitution of some part of his invention by infringement is repeated, the infringer
some well known mechanical equivalent. It is an shall be criminally liable and upon
infringement of the patent, if the substitute conviction, shall suffer imprisonment of
performs the same function and was well known not less than six (6) months but not
at the date of the patent as a proper substitute more than three (3) years and/or a fine
for the omitted ingredient. (Gsell v. Yap‐Jue, G.R. not less than P100,000.00 but not more
No. L‐4720, Jan. 19, 1909) than P300,000.00

Q: What is meant by “equivalent device”? 3. Administrative remedy – Where the
amount of damages claimed is not less
A: It is such as a mechanic of ordinary skill in than P200,000.00, the patentee may
construction of similar machinery, having the choose to file an administrative action
forms, specifications and machine before him, against the infringer with the Bureau of
could substitute in the place of the mechanism Legal Affairs (BLA). The BLA can issue
described without the exercise of the inventive injunctions, direct infringer to pay
faculty. patentee damages, but unlike regular
courts, the BLA may not issue search
Q: What is the “doctrine of file wrapper and seizure warrants or warrants of
estoppel”? arrest.

A: This doctrine balances the doctrine of Q: What are the limitations to the civil/criminal
equivalents. Patentee is precluded from claiming action?
as part of patented product that which he had to
excise or modify in order to avoid patent office A:
rejection, and he may omit any additions that he 1. No damages can be recovered for acts
was compelled to add by patent office of infringement committed more than
regulations. four (4) years before the filing of the
action for infringement. (Sec. 79, IPC)
Q: What is the “doctrine of contributory
infringement”? 2. The criminal action prescribes in three
(3) years from the commission of the
A: Aside from the infringer, anyone who actively crime. (Sec. 84, IPC)
induces the infringement of a patent or provides
the infringer with a component of a patented Q: Who can file an action for infringement?
product or of a product produced because of a
patented process knowing it to be especially A:
adapted for infringing the patented invention and 1. The patentee or his successors‐in‐
not suitable for substantial non‐infringing use is interest may file an action for
liable jointly and severally with the infringer as a infringement. (Creser Precision Systems,
Inc. v. CA, G.R. No. 118708, Feb. 2, 1. The Director of Legal Affairs may grant a

1998) license to exploit a patented invention,
even without the agreement of the
2. Any foreign national or juridical entity patent owner, in favor of any person
who meets the requirements of Sec. 3 who has shown his capability to exploit
and not engaged in business in the the invention (Sec. 93, IPC).
Philippines, to which a patent has been
granted or assigned, whether or not it is 2. R.A. 9502 (Universally Accessible
licensed to do business in the Cheaper and Quality Medicines Act of
Philippines. (Sec. 77, IPC) 2008) however amended Sec. 93 so that
it is the Director General of the IPO who
Q: What are the defenses in an action for may grant a license to exploit patented
infringement? invention under the grounds
enumerated therein.
A:
1. Invalidity of the patent; (Sec. 81, IPC); Note: Clarification either by legislation of
2. Any of the grounds for cancellation of judicial interpretation as to who has
patents: jurisdiction should be made to avoid
a. That what is claimed as the confusion. (Salao, Essential of Intellectual
invention is not new or patentable Property Law: a Guidebook on Republic
b. That the patent does not disclose Act No. 8293 and Related Laws, 2008)
the invention in a manner
sufficiently clear and complete for Q: What are the grounds for compulsory
it to be carried out by any person licensing and the period for filing a petition?
skilled in the art; or
c. That the patent is contrary to A:
public order or morality. (Sec. 61, 1. National emergency
IPC)
2. Where the public interest, at any time
I. LICENSING after the grant of the patent

Q: What are the modes of obtaining license to 3. Where a judicial or administrative body
exploit patent rights? has determined that the manner of
exploitation by the owner of the patent
A: or his licensee is anti‐competitive at any
1. Voluntary licensing (Sec. 85, IPC) and time after the grant of the patent
2. Compulsory licensing (Sec. 93, IPC)
4. In case of public non‐commercial use of
Q: What is voluntary licensing? the patent by the patentee, without
satisfactory reason at any time after the
A: The grant by the patent owner to a third grant of the patent
person of the right to exploit a patented
invention. 5. If the patented invention is not being
worked in the Philippines on a
Q: What are the rights of a licensor in voluntary commercial scale, although capable of
licensing? being worked, without satisfactory
reason after the expiration of 4 years
A: In the absence of any provision to the contrary from the date of filing of the application
in the technology transfer arrangement, the grant or 3 years from the date of the patent
of a license shall not prevent the licensor from whichever is later. (Sec. 93 in relation to
granting further licenses to third person nor from Sec. 94)
exploiting the subject matter of the technology
transfer arrangement himself (Sec. 89, IPC). 6. Where the demand for patented drugs
and medicines is not being met to an
Q: Who can grant a compulsory license? adequate extent and on reasonable
terms, as determined by the Secretary
A: of the Department of Health (Sec. 10,
R.A. 9502)


Q: Grounds for cancellation of the compulsory J. ASSIGNMENT AND TRANSMISSION OF RIGHTS
license?
A: Q: What are the forms of assignment?
1. Ground for the grant of the compulsory
license no longer exists and is unlikely A:
to recur; 1. Total – assignment of entire right, title
or interest in and to the patent and the
2. Licensee has neither begun to supply invention covered thereby.
the domestic market nor made serious 2. Partial
preparation therefore; a. Separate rights – assignment of a
specific right (ex: right to sell)b.
3. Licensee has not complied with the b. Pro Indiviso – assignment of an
prescribed terms of the license. aliquot part which results in co‐
ownership
Q: Cezar works in a car manufacturing company
owned by Joab. Cezar is quite innovative and Q: How is the transfer of rights effected?
loves to tinker with things. With the materials
and parts of the car, he was able to invent a gas‐ A:
saving device that will enable cars to consume 1. By inheritance or bequest
less gas. Francis, a co‐worker, saw how Cezar 2. License contract
created the device and likewise, came up with a
similar gadget, also using scrap materials and Q: What is the effect of an assignment of a
spare parts of the company. Thereafter, Francis patent?
filed an application for registration of his device
with the Bureau of Patents. Eighteen months A: The assignment works as an estoppels by deed,
later, Cezar filed his application for the preventing the assignor from denying the novelty
registration of his device with the Bureau of and utility of the patented invention when sued y
Patents. the assignee for infringement.

Q: Is the gas‐saving device patentable? Explain. Q What should be the form of an assignment?

A: Yes because it is new, it involves an inventive A:
step and it is industrially applicable. 1. In writing
2. Acknowledged and certified before a
Q: Assuming that it is patentable, who is entitled notary public or other officer authorized
to the patent? What, if any, is the remedy of the to perform notarial acts
losing party? 3. Recorded in the IPO

A: Francis is entitled to the patent, because he Q: What is the effect if the assignment was not
had the earlier filing date. The remedy of Cezar is recorded in the IPO?
to file a petition in court for the cancellation of
the patent of Francis on the ground that he is the A: A deed of assignment affecting title shall be
true and actual inventor, and ask for his void as against any subsequent purchaser or
substitution as patentee. (2005 Bar Question) mortgagee for valuable consideration and
without notice unless, it is so recorded in the
Q: Supposing Albert Einstein were alive today Office, within three (3) months from the date of
and he filed with the Intellectual Property Office said instrument, or prior to the subsequent
(IPO) an application for patent for his theory of purchase or mortgage. Even without recordal, the
relativity expressed in the formula E=mc2. The instruments are binding upon the parties.
IPO disapproved Einstein's application on the
ground that his theory of relativity is not Q: May a licensee maintain a suit for
patentable. Is the IPO's action correct? infringement?

A: Yes, the IPO’s action is correct. Section 22 of A:
the Intellectual Property Law expressly states that GR: Only the patentees, his heirs, assignee,
discoveries, scientific theories and mathematical grantee or personal representatives may bring
methods are among those matters which are not an action for infringement.
patentable. (2006 Bar Question)
XPN: If the licensing agreement provides that tradename in the Philippines and that it had
the licensee may bring an action for been using the same in its restaurant business.
infringement or if he was authorized to do so Shangrila Corporation counters that it is an
by the patentee through a special power of affiliate of an international organization which
attorney. has been using such logo and tradename
"Shangrila" for over 20 years. However,
III. TRADEMARKS Shangrila Corporation registered the tradename
and logo in the Philippines only after the suit
A. DEFINITION OF MARKS, COLLECTIVE MARKS, was filed.
TRADENAMES
Which of the two corporations has a better right
Q: What is a trademark and how does it differ to use the logo and the tradename? Explain.
from a trade name?
A: S Development Corporation has a better right
A: Any visible sign capable of distinguishing the to use the logo and tradename, since it was the
goods (trademark) or services (service mark) of an first to register the logo and tradename.
enterprise. A trade name is a name or designation
identifying or distinguishing an enterprise. Alternative Answer:
S Development Corporation has a better right to
TRADEMARK TRADE NAME use the logo and tradename, because its
A natural or artificial certificate of registration upon which the
Goods or services
offered by a proprietor
person who does infringement case is based remains valid and
business and produces subsisting for as long as it has not been cancelled.
or enterprise are
or performs the goods (Shangrila International Hotel Management v. CA,
designated by
or services designated G.R. No. 111580, June 21, 2001) (2005 Bar
trademark (goods) or
by trademark or service Question)
service marks (services).
mark.
Refers to business and Q: How does the international affiliation of
Refers to the goods.
its goodwill.
Shangrila Corporation affect the outcome of the
Acquired only by
Need not be registered. dispute? Explain.
registration.

A: Since Shangrila Corporation is not the owner of
Q: What is a collective mark?
the logo and tradename but is merely an affiliate

of the international organization which has been
A: A "collective mark" or collective trade‐name" is
using them it is not the owner and does not have
a mark or trade‐name used by the members of a
the rights of an owner. (Sec. 147, IPC)
cooperative, an association or other collective

group or organization. (Sec. 40, R.A. 166)
Alternative Answer:

The international affiliation of Shangrila
Q: What are the functions of trademark?
Corporation shall have no effect on the outcome

of the dispute. Section 8 of the Paris Convention
A:
provides that "there is no automatic protection
1. To point out distinctly the origin or
afforded an entity whose tradename is alleged to
ownership of the articles to which it is
be infringed through the use of that name as a
affixed.
trademark by a local entity." (Kabushi Kaisha

Isetan v. IAC, G.R. No. 75420, Nov. 15, 1991)
2. To secure to him who has been
(2005 Bar Question)
instrumental in bringing into market a

superior article or merchandise the fruit
Q: What are the salient features of the Paris
of his industry and skill
convention of trademarks?

3. To prevent fraud and imposition.
A:
(Etepha v. Director of Patents, G.R. No.
1. National Treatment Principle – foreign
L‐20635, Mar. 31, 1966)
nationals are to be given the same

treatment in each of the member
Q: S Development Corporation sued Shangrila
countries as that country makes
Corporation for using the "S" logo and the
available in its own citizens.
tradename "Shangrila". The former claims that it

was the first to register the logo and the


2. Right of Priority – any person who has Pilsen in Czechoslovakia. Pilsen is a primarily
duly filed registration for trademark geographically descriptive word, hence, non‐
shall enjoy a right of priority of 6 registrable and not appropriable by any beer
months (Rule 203, Trademark Rules) manufacturer (Asia Brewery, Inc. v. CA, G.R. No.
103543, July 5, 1993).
3. Protection against Unfair Competition
Q: Who may file an opposition to trademark
4. Protection of Tradenames – protected registration and on what ground?
in all countries without obligation of
filing or registration. A: Any person who believes that he would be
damaged by the registration of a mark may, upon
5. Protection of Well‐Known Marks payment of the required fee and within thirty (30)
days after the publication referred to in
B. ACQUISITION OF OWNERSHIP OF MARK Subsection 133.2, file with the Office an
opposition to the application. (Sec. 134, IPC)
Q: How are marks acquired?
Q: Laberge, Inc., manufactures and markets
A: Marks are acquired solely through registration. after‐shave lotion, shaving cream, deodorant,
(Sec. 122, IPC) talcum powder and toilet soap, using the
trademark “PRUT”, which is registered with the
Q: What marks may be registered? Phil. Patent Office. Laberge does not
manufacture briefs and underwear and these
A: Any word, name, symbol, emblem, device, items are not specified in the certificate of
figure, sign, phrase, or any combination thereof registration. JG who manufactures briefs and
except those enumerated under Section 123, IPC. underwear, wants to know whether, under our
laws, he can use and register the trademark
Q: What are the requirements for a mark to be “PRUTE” for his merchandise. What is your
registered? advice?

A: A: Yes, he can use and register the trademark
1. A visible sign (not sounds or scents); “PRUTE” for his merchandise. The trademark
and registered in the name of Laberge Inc. covers only
2. Capable of distinguishing one’s goods after‐shave lotion, shaving cream, deodorant,
and services from another. talcum powder and toilet soap. It does not cover
briefs and underwear. The limit of the trademark
Q: What is the doctrine of secondary meaning? is stated in the certificate issued to Laberge Inc. It
does not include briefs and underwear which are
A: This doctrine is to the effect that a word or different products protected by Laberge’s
phrase originally incapable of exclusive trademark. JG can register the trademark
appropriation with reference to an article on the “PRUTE” to cover its briefs and underwear
market, because it is geographical or otherwise (Faberge Inc. v. IAC, G.R. No. 71189, Nov. 4, 1992)
descriptive, may nevertheless be used exclusively (1994 Bar Question)
by one producer with reference to his article so
long as in that trade and to that branch of the C. ACQUISITION AND OWNERSHIP OF TRADE
purchasing public, the word or phrase has come NAME
to mean that the article was his product. (G. and
C. Merriam Co. v. Saalfield, 198 F. 369, 373, cited Q: How are trade names acquired?
in Ang v. Teodoro, G.R. No. L‐48226, Dec. 14,
1942) A: Trade names or business names are acquired
through adoption and use. Registration is not
Q: Is there an infringement of trademark when required. (Sec. 165, IPC)
two similar goods use the same words, “PALE
PILSEN”?

A: No, because “pale pilsen” are generic words
descriptive of the color (pale) and of a type of
beer (pilsen), which is a light bohemian beer with
strong hops flavor that originated in the City of
D. NON‐REGISTRABLE MARKS designate the goods or services in

everyday language and established
Q: What marks may not be registered? trade practice

A: 10. Consists exclusively that may serve in
1. Consists of immoral, deceptive or trade to designate the kind, quality,
scandalous matter or falsely suggest a quantity, intended purpose, value,
connection with persons, institutions, geographical origin, time or production
beliefs, or national symbols of the goods or rendering of the
services, or other characteristics of the
2. Consists of the flag or coat of arms or goods or services
other insignia of the Philippines or any
of its political subdivisions, or of any 11. Consists of shapes that may be
foreign nation necessitated by technical factors or by
the nature of the goods themselves or
3. Consists of a name, portrait or signature factors that affect their intrinsic value
identifying a particular living individual
except by his written consent, or the 12. Consists of color alone, unless defined
name, signature, or portrait of a by a given form; or
deceased President of the Philippines,
during the life of his widow except by 13. Is contrary to public order or morality.
written consent of the widow (Sec. 123)

4. Identical with a registered mark E. PRIOR USE OF MARK AS A REQUIREMENT
belonging to a different proprietor or a
mark with an earlier filing or priority Q: Is the prior use of the mark still a requirement
date, in respect of: for registration?
1. The same goods or services, or
2. Closely related goods or services, A: No. Actual prior use in commerce in the
or Philippines has been abolished as a condition for
3. If it nearly resembles such a mark the registration of a trademark. (RA 8293)
as to be likely to deceive or cause
confusion; Q: When is non‐use excused?

5. Is identical with an internationally well‐ A:
known mark, whether or not it is 1. If caused by circumstances arising
registered here, used for identical or independently of the will of the owner.
similar goods or services Lack of funds is not an excuse.
2. A use which does not alter its distinctive
6. Is identical with an internationally well‐ character though the use is different
known mark which is registered in the from the form in which it is registered.
Philippines with respect to non‐similar 3. Use of mark in connection with one or
goods or services. Provided, that the more of the goods/services belonging
interests of the owner of the registered to the class in which the mark is
mark are likely to be damaged by such registered.
use 4. The use of a mark by a company related
to the applicant/registrant.
7. Is likely to mislead the public as to the 5. The use of a mark by a person
nature, quality, characteristics or controlled by the registrant. (Section
geographical origin of the goods or 152, IPC)
services

8. Consists exclusively of signs that are
generic for the goods or services that
they seek to identify

9. Consists exclusively of signs that have
become customary or usual to


F. TEST TO DETERMINE CONFUSING SIMILARITY misleading similarity in general appearance, not
BETWEEN MARKS similarity of trademarks. (Converse Rubber Co. v.
Jacinto Rubber & Plastics Co., G.R. Nos. 27425,
Q: What are the tests in determining whether 30505, Apr. 28, 1980) (1996 Bar Question)
there is a trademark infringement?
Q: What is the so‐called “related goods
A: principle”?
1. Dominancy test – Focuses on the
similarity of the prevalent features of A: Goods are related when they; 1) belong to the
the competing marks. If the competing same class or have the same descriptive
trademark contains the main or properties; 2) when they possess the same
essential or dominant features of physical attributes or essential characteristics
another, and confusion is likely to with reference to their form, composition, texture
result, infringement takes place. (Asia or quality.
Brewery v. CA, G.R. No. 103543, 5 July
1993) Q: What is the rule of idem sonans?

2. Totality or holistic test – Confusing A: Two names are said to be "idem sonantes" if
similarity is to be determined on the the attentive ear finds difficulty in distinguishing
basis of visual, aural, connotative them when pronounced. (Martin v. State, 541
comparisons and overall impressions S.W. 2d 605)
engendered by the marks in
controversy as they are encountered in Note: Similarity of sound is sufficient to rule that the
the marketplace. two marks are confusingly similar when applied to
merchandise of the same descriptive properties.
Note: The dominancy test only relies on visual (Marvex Commercial v. Director of Patent, G.R. No.
comparisons between two trademarks whereas the L‐19297, Dec. 22, 1966)
totality or holistic test relies not only on the visual
but also on the aural and connotative comparisons Q: What are the types of confusion that arise
and overall impressions between the two from the use of similar or colorable imitation
trademarks. (Societe Des Produits Nestl, S.A. v. CA, marks?
G.R. No. 112012, Apr. 4, 2001)
A:
Q: N Corporation manufactures rubber shoes 1. Confusion of goods (product confusion);
under the trademark “Jordann” which hit the and
Philippine market in 1985, and registered its 2. Confusion of business (source or origin
trademark with the Bureau of Patents, confusion). (McDonald’s Corporation v.
Trademarks and Technology in 1990. PK L.C. Big Mak Burger, Inc., et al., G.R. No.
Company also manufactures rubber shoes with 143993, Aug. 18, 2004)
the trademark “Javorski” which it registered
with BPTTT in 1978. In 1992, PK Co adopted and Note: While there is confusion of goods when the
copied the design of N Corporation’s “Jordann” products are competing, confusion of business exists
rubber shoes, both as to shape and color, but when the products are non‐competing but related
retained the trademark “Javorski” on its enough to produce confusion of affiliation.
products. May PK Company be held liable to N
Co? Explain. Q: What is colorable imitation?

A: PK Co may be liable for unfairly competing A: Such a close or ingenious imitation as to be
against N Co. By copying the design, shape and calculated to deceive ordinary persons, or such a
color of N Corporation’s “Jordann” rubber shoes resemblance to the original as to deceive an
and using the same in its rubber shoes ordinary purchaser giving such attention as a
trademarked “Javorski,” PK is obviously trying to purchaser usually gives, as to cause him to
pass off its shoes for those of N. It is of no purchase the one supposing it to be the other.
moment that the trademark “Javorski” was (Societe des Produits Nestlé, S.A. v. CA, G.R. No.
registered ahead of the trademark “Jordann.” 112012, Apr. 4, 2001)
Priority in registration is not material in an action
for unfair competition as distinguished from an
action for infringement of trademark. The basis of
an action for unfair competition is confusing and
G. WELL‐KNOWN MARKS Q: What are the rights of a registered mark

owner?
Q: What constitutes an internationally well‐
known mark? A:
1. Protection against reproduction, or
A: imitation or unauthorized use of the
1. Considered by the competent authority mark (infringement of mark)
of the Philippines to be “well‐known” 2. To stop entry of imported merchandise
international and in the Philippines as into the country containing a mark
the mark of a person other than the identical or similar to the registered
applicant or registrant mark

2. Need not be used or registered in the 3. To transfer or license out the mark.
Philippines

3. Need not be known by the public at I. USE BY THIRD PARTIES OF NAMES, ETC.
large but only by relevant sector of the SIMILAR TO REGISTERED MARK
public.
Q: What is the effect of use of Indications by
Q: What does the law provide as regards third parties for purposes other than those for
internationally‐well known marks? which the mark is used?

A: A: Registration of the mark shall not confer on the
GR: Prohibition on subsequent registration registered owner the right to preclude third
does not include services and goods of parties from using bona fide their names,
different nature or kind. addresses, pseudonyms, a geographical name, or
exact indications concerning the kind, quality,
XPN: quantity, destination, value, place of origin, or
1. If the internationally well‐known mark is time of production or of supply, of their goods or
not registered in the Philippines, the services.
application for registration of a
subsequent or similar mark can be J. INFRINGEMENT AND REMEDIES
rejected only if the goods or services
specified in the application are similar Q: What is trademark infringement?
to those of the internationally well‐
known mark A: The use without consent of the trademark
owner of any a) reproduction, b) counterfeit, c)
2. If the internationally well‐known mark copy or d) colorable imitation of any registered
is registered in the Philippines, the mark or tradename in connection with the sale,
application for registration of a offering for sale, or advertising of any goods,
subsequent or similar mark can be business or services on or in connection with
refused even if the goods or services which such use is likely to cause confusion or
specified in the application are not mistake or to deceive purchasers or others as to
identical or similar to those of the the source or origin of such goods or services, or
internationally well‐known mark identity of such business; or reproduce,
counterfeit, copy or colorably imitate any such
H. RIGHTS CONFERRED BY REGISTRATION mark or tradename and apply such reproduction,
counterfeit, copy or colorable limitation to labels,
Q: What is the duration of a certificate of signs, prints, packages, wrappers, receptacles or
trademark registration? advertisements intended to be used upon or in
connection with such goods, business or services
A: 10 years, renewable for a period of another 10 (Esso Standard Eastern v. CA, G.R. No. L‐29971,
years. Each request for renewal must be made Aug. 31, 1982)
within 6 months before or after the expiration of
the registration.


Q: What are the elements to be established in presumed if a letter R within a circle is
trademark infringement? appended) and stop him permanently
from using the mark.
A:
1. The validity of the mark 2. Criminal — the owner of the trademark
2. The plaintiff’s ownership of the mark may ask the court to issue a search
3. The use of the mark or its colorable warrant and in appropriate cases,
imitation by the alleged infringer results remedies available shall also include the
in “likelihood of confusion.” seizure, forfeiture and destruction of
(McDonald’s Corporation v. L.C. Big Mak the infringing goods and of any
Burger, Inc., G.R. No. 143993, Aug 18, materials and implements the
2004) predominant use of which has been in
the commission of the offense.
Q: What is meant by non‐competing goods?
3. Administrative — This remedy is the
A: Those which, though they are not in actual same as in patent infringement cases. If
competition, are so related to each other that it the amount of damages claimed is not
might reasonably be assumed that they originate less than P200,000.00, the registrant
from one manufacturer. may choose to seek redress against the
Non‐competing goods may also be those which, infringer by filing an administrative
being entirely unrelated, could not reasonably be action against the infringer with the
assumed to have a common source. In the case of Bureau of Legal Affairs.
related goods, confusion of business could arise
out of the use of similar marks; in the latter case Q: How is the amount of damages in a civil
of non‐related goods, it could not. The vast action for infringement ascertained?
majority of courts today follow the modern
theory or concept of "related goods" which the A: The owner of a trademark which has been
court has likewise adopted and uniformly infringed is entitled to actual damages:
recognized and applied. (Esso Standard Eastern,
Inc. v. CA, G.R. No. L‐29971, Aug. 31, 1982) 1. The reasonable profit which the
complaining party would have made,
Q: Is there infringement even if the goods are had the defendant not infringed his said
non‐competing? rights; or
2. The profit which the defendant actually
A: made out of infringement; or
GR: No. 3. The court may award as damages a
reasonable percentage based upon the
XPN: If it prevents the natural expansion of his amount of gross sales of the defendant
business and, second, by having his business of the value of the services in
reputation confused with and put at the connection with which the mark or
mercy of the second user. (Ang v. Teodoro, trade name was issued.
G.R. No. L‐48226, Dec. 14, 1942)
Q: What court has jurisdiction over violations of
Q: What are the remedies of the owner of the intellectual property rights?
trademark against infringers?
A: It is properly lodged with the Regional Trial
A: Court even if the penalty therefore is
1. Civil — both civil and criminal actions imprisonment of less than six years, or from 2 to
may be filed with the Regional Trial 5 years and a fine ranging from P50,000 to
Courts. The owner of the registered P200,000.
mark may ask the court to issue a
preliminary injunction to quickly Note: R.A. 8293 and R.A. 166 are special laws
prevent infringer from causing damage conferring jurisdiction over violations of intellectual
to his business. Furthermore, the court property rights to the Regional Trial Court. They
will require infringer to pay damages to should therefore prevail over R.A. No. 7691, which is
the owner of the mark provided a general law. (Samson v. Daway, G.R. No. 160054‐
defendant is shown to have had notice 55, July 21, 2004)
of the registration of the mark (which is
Q: What are the limitations on the actions for Q: Who are guilty of unfair competition?
infringement?
A:
A: 1. Any person, who is selling his goods and
1. Right of prior user – registered mark gives them the general appearance of
shall be without affect against any goods of another manufacturer or
person who, in good faith, before filing dealer, either as to the goods
or priority date, was using the mark for themselves or in the wrapping of the
purposes of his business. (Sec 159.1, packages in which they are contained,
IPC) or the devices or words thereon, or in
any other feature of their appearance,
2. Relief against publisher – injunction which would be likely to influence
against future printing against an purchasers to believe that the goods
innocent infringer who is engaged solely offered are those of a manufacturer or
in the business of printing the mark. dealer, other than the actual
(Sec. 159.2, IPC) manufacturer or dealer, or who
otherwise clothes the goods with such
3. Relief against newspaper – injunction appearance as shall deceive the public
against the presentation of advertising and defraud another of his legitimate
matter in future issues of the trade, or any subsequent vendor of
newspaper, magazine or in electronic such goods or any agent of any vendor
communications in case the engaged in selling such goods with a like
infringement complained of is purpose;
contained in or is part of paid
advertisement in such materials. (Sec. 2. Any person who by any artifice, or
159.3, IPC) device, or who employs any other
means calculated to induce the false
K. UNFAIR COMPETITION belief that such person is offering the
services of another who has identified
Q: What distinguishes infringement of such services in the mind of the public;
trademark from unfair competition? or

A: 3. Any person who shall make any false
INFRINGEMENT OF UNFAIR statement in the course of trade or who
TRADEMARK COMPETITION shall commit any other act contrary to
The passing off of one’s good faith of a nature calculated to
Unauthorized use of a
goods as those of discredit the goods, business or services
trademark.
another. of another. (Sec. 168.3)
Fraudulent intent is Fraudulent intent is
unnecessary. essential. Q: Is the law on unfair competition broader than
Prior registration of the Registration is not the law on trademark?
trademark is a necessary. (Del Monte
prerequisite to the Corp. v. CA, G.R. No. A: Yes. For the latter (trademark infringement) is
action. 78325, Jan. 23, 1990)
more limited but it recognizes a more exclusive
right derived from the trademark adoption and
Q: What is the right protected under unfair registration by the person whose goods or
competition? business is first associated with it. Hence, even if
one fails to establish his exclusive property right
A: A person who has identified in the mind of the to a trademark, he may still obtain relief on the
public the goods he manufactures or deals in, his ground of his competitor’s unfairness or fraud.
business or services from those of others, Conduct constitutes unfair competition if the
whether or not a registered mark is employed, has effect is to pass off on the public the goods of one
a property right in the goodwill of the said goods, man as the goods of another. (Mighty
business or services so identified, which will be Corporation v. E. & J. Gallo Winery, G.R. No.
protected in the same manner as other property 154342, July 14, 2004)
rights. (Sec. 168.1, IPC)


Q: What are the elements of an action for unfair Q: What are the limitations on use of trade
competition? name or business name?

A: A: A person may not:
1. Confusing similarity in the general
appearance of the goods; and 1. Use any name or designation contrary
to public order or morals
Note: The confusing similarity may or may
not result from similarity in the marks, but 2. Use a name if it is liable to deceive
may result from other external factors in trade circles or the public as to the
the packaging or presentation of the nature of the enterprise identified by
goods. that name. (Sec. 165.1, IPC)

2. Intent to deceive the public and defraud 3. Subsequently use a trade name likely to
a competitor. mislead the public as a third party. (Sec.
165.2, b, IPC)
Note: The intent to deceive and defraud
may be inferred from the similarity in 4. Copy or simulate the name of any
appearance of the goods as offered for domestic product (for imported
sale to the public. Actual fraudulent intent
products).
need not be shown. (McDonald’s

Corporation v. L.C. Big Mak Burger, Inc., et
5. Copy or simulate a mark registered in
al., G.R. No. 143993, Aug. 18, 2004)
accordance with the provisions of IPC

(for imported products).
Q: The NBI found that SG Inc. is engaged in the

reproduction and distribution of counterfeit
6. Use mark or trade name calculated to
"playstation games" and thus applied with the
induce the public to believe that the
Manila RTC warrants to search respondent's
article is manufactured in the
premises in Cavite. RTC granted such warrants
Philippines, or that it is manufactured in
and thus, the NBI served the search warrants on
any foreign country or locality other
the subject premises. SG Inc. questioned the
than the country or locality where it is
validity of the warrants due to wrong venue
in fact manufactured.
since the RTC of Manila had no jurisdiction to

issue a search warrant enforceable in Cavite. Is
Note: Items 4, 5 and 6 only applies to
the contention of SG Inc. correct?
imported products and those imported

articles shall not be admitted to entry at
A: No, unfair competition is a transitory or any customhouse of the Philippines (Sec.
continuing offense under Section 168 of Republic 166, IPC).
Act No. 8293. As such, petitioner may apply for a

search warrant in any court where any element of
Q: How is the change in the ownership of a trade
the alleged offense was committed, including any
name made?
of the courts within Metro Manila and may be
validly enforced in Cavite. (Sony Computer
Entertainment Inc. v. Supergreen Inc. G.R. No. A: It shall be made with the transfer of the
161823, Mar. 22, 2007) enterprise or part thereof identified by that
name. (Sec. 165.4, IPC)
L. TRADE NAMES OR BUSSINESS NAMES
M. COLLECTIVE MARKS
Q: What is a trade name or business name?
Q: What is a collective mark?
A: Any individual name or surname, firm name,
device nor word used by manufacturers, A: A "collective mark" or “collective trade‐name"
industrialists, merchants, and others to identify is a mark or trade‐name used by the members of
their businesses, vocations or occupants a cooperative, an association or other collective
(Converse rubber Corp. vs. Universal Rubber group or organization. (Sec. 40, R.A. 166)
Products, GR No. L‐27425, L‐30505, April 28,
1980).

Q: What should an application for registration of c. If its registration was obtained

a collective mark contain? fraudulently or contrary to the
provisions of the IPC;
A: d. If the registered mark is being used
1. The application shall designate the mark by, or with the permission of, the
as a collective mark registrant so as to misrepresent
2. Accompanied by a copy of the the source of the goods or services
agreement, if any, governing the use of on or in connection with which the
the collective mark (Sec. 167.2, IPC) mark is used;
e. Non‐use of the mark within the
Q: What are the grounds for the cancellation of Philippines, without legitimate
collective marks? reason, for an uninterrupted
period of 3 years.
A:
1. The Court shall cancel the registration IV. COPYRIGHTS
of a collective mark if the person
requesting the cancellation proves that Q: What is copyright?
only the registered owner uses the
mark, A: A right over literary and artistic works which
are original intellectual creations in the literary
2. Or that he uses or permits its use in and artistic domain protected from the moment
contravention of the agreements of creation. (Sec. 171.1, IPC)
referred to in Subsection 166.2,
A. BASIC PRINCIPLES
3. Or that he uses or permits its use in a
manner liable to deceive trade circles or Q: What are the elements of copyrightability?
the public as to the origin or any other
common characteristics of the goods or
services concerned (Sec 167.3). A:
1. Originality – Must have been created by
Note: The registration of a collective mark, or an the author’s own skill, labor, and
application therefor shall not be the subject of a judgment without directly copying or
license contract. evasively imitating the work of another.
(Ching Kian Chuan v. CA, G.R. No.
N. CRIMINAL PENALTIES 130360, Aug. 15, 2001)

Q: What are the criminal penalties for unfair
2. Expression – Must be embodied in a
competition, infringement, false designation of
medium sufficiently permanent or
origin and false representations?
stable to permit it to be perceived,

reproduced or communicated for a
A: A penalty of imprisonment from 2 years to
period more than a transitory duration.
5and a fine ranging from P50,000 to P200,000

(Sec. 170, IPC.)
Q: What are the elements of originality?

Q: Can trademark registration be cancelled?
A:

1. It is independently created by the
A: Yes, by any person who believes that he will be
author, and
damaged by the registration of the mark:
2. It possesses some minimal degree of

creativity
1. Within 5 years, from the date of the

registration of the mark; or
Q: When does copyright vest?

2. At any time;
A: Works are protected from the time of their
a. If the registered mark becomes the
creation, irrespective of their mode or form of
generic name for the goods or
expression, as well as of their content, quality and
services, or a portion thereof, for
purpose.
which it is registered;

b. If the mark has been abandoned;


B. COPYRIGHTABLE WORKS Q: P&D was granted a copyright on the technical
drawings of light boxes as "advertising display
Q: What are copyrightable works? units". SMI, however, manufactured similar or
identical to the light box illustrated in the
A: technical drawings copyrighted by P&D for
1. Literary and Artistic Works leasing out to different advertisers. Was this an
BOLD‐MAN‐GAS‐PAP‐CO infringement of P&D’s copyright over the
technical drawings?
a. Books, pamphlets, articles and
other writings A: No, P&D’s copyright protection extended only
b. Lectures, sermons, addresses, to the technical drawings and not to the light box
dissertations prepared for Oral itself. The light box was not a literary or artistic
delivery, whether or not reduced piece which could be copyrighted under the
in writing or other material form copyright law. If SMI reprinted P&D’s technical
c. Letters drawings for sale to the public without license
d. Dramatic, choreographic works from P&D, then no doubt they would have been
e. Musical compositions guilty of copyright infringement. Only the
f. Works of Art expression of an idea is protected by copyright,
g. Periodicals and Newspapers not the idea itself. If what P&D sought was
h. Works relative to Geography, exclusivity over the light boxes, it should have
topography, architecture or instead procured a patent over the light boxes
science itself. (Pearl and Dean Inc. v. Shoe Mart Inc., GR
i. Works of Applied art No. 148222, Aug. 15, 2003)
j. Works of a Scientific or technical
character Q: What is the difference between collection of
k. Photographic works work and collective work?
l. Audiovisual works and
cinematographic works A:
m. Pictorial illustrations and COLLECTION OF WORK COLLECTIVE WORK
advertisements
n. Computer programs; and It is not necessary that There is an agreement
o. Other literary, scholarly, scientific there is an agreement. whereby the authors
Individual contribution bound themselves not to
and artistic works. (Sec. 172.1, IPC)
is capable of copyright be identified with the

protection. work.
2. Derivative Works

Q: Juan Xavier wrote and published a story
a. Dramatizations, translations,
similar to an unpublished copyrighted story of
adaptations, abridgements,
Manoling Santiago. It was, however, conclusively
arrangements, and other
proven that Juan Xavier was not aware that the
alterations of literary or artistic
story of Manoling Santiago was protected by
works;
copyright. Manoling Santiago sued Juan Xavier

for infringement of copyright. Is Juan Xavier
b. Collections of literary, scholarly, or
liable?
artistic works and compilations of

data and other materials which are
A: Yes. Juan Xavier is liable for infringement of
original by reason of the selection
copyright. It is not necessary that Juan Xavier is
or coordination or arrangement of
aware that the story of Manoling Santiago was
their contents. (Sec. 173)
protected by copyright. The work of Manoling

Santiago is protected from the time of its
Note: Derivative Works shall be protected
as new works, provided that such new creation. (1998 Bar Question)
work shall not affect the force of any
subsisting copyright upon the original Note: There will still be originality sufficient to
works employed or any part thereof, or be warrant copyright protection if “the author, through
construed to imply any right to such use of his skill and effort, has contributed a distinguishable
the original works, or to secure or extend variation from the older works.” In such a case, of
copyright in such original works. (Sec. course, only those parts which are new are
173.2, IPC) protected by the new copyright. Hence, in such a
case, there is no case of infringement. Juan Xavier is
no less an “author” because others have preceded prosecutor to dismiss the case for lack of
him. probable cause. Was the decision of the DOJ
Secretary correct?
C. NON‐COPYRIGHTABLE WORKS
A: Yes, the format of a show is not copyrightable.
Q: What are the subjects not protected? The copyright law enumerates the classes of work
entitled to copyright protection.The format or
A: mechanics of a television show is not included in
1. Idea, procedure, system, method or the list of protected works. For this reason, the
operation, concept, principle, discovery protection afforded by the law cannot be
or mere data as such extended to cover them. Copyright, in the strict
2. News of the day and other items of sense of the term, is purely a statutory right. It is
press information a new or independent right granted by the
3. Any official text of a legislative, statute, and not simply a pre‐existing right
administrative or legal nature, as well as regulated by the statute. Being a statutory grant,
any official translation thereof the rights are only such as the statute confers,
4. Pleadings and may be obtained and enjoyed only with
5. Decisions of courts and tribunals – this respect to the subjects and by the persons, and
refers to original decisions and not to on terms and conditions specified in the statute.
annotated decisions such as the SCRA The copyright does not extend to the general
or SCAD as these already fall under the concept or format of its dating game show.
classification of derivative works, hence (Joaquin v. Drilon, G.R. No. 108946, Jan. 28, 1999)
copyrightable
6. Any work of the Government of the Q: Rural is a certified public utility providing
Philippines telephone service to several communities in
Manila. It obtains data for the directory from
GR: Conditions imposed prior the subscribers, who must provide their names and
approval of the government agency or addresses to obtain telephone service. Feist
office wherein the work is created shall Publications, Inc., is a publishing company that
be necessary for exploitation of such specializes in area‐wide telephone directories
work for profit. Such agency or office, covering a much larger geographic range than
may, among other things, impose as directories such as Rural's. Feist extracted the
condition the payment of royalties. listings it needed from Rurals’s directory without
its consent. Are directories copyrightable?
XPN: No prior approval or conditions
shall be required for the use of any A: No, directories are not copyrightable and
purpose of statutes, rules and therefore the use of them does not constitute
regulations, and speeches, lectures, infringement. The Intellectual Property Code
sermons, addresses, and dissertations, mandates originality as a prerequisite for
pronounced, read, or rendered in courts copyright protection. This requirement
of justice, before administration necessitates independent creation plus a
agencies, in deliberative assemblies and modicum of creativity. Since facts do not owe
in meetings of public character. (Section their origin to an act of authorship, they are not
176, IPC) original, and thus are not copyrightable. A
compilation is not copyrightable per se, but is
7. TV programs, format of TV programs copyrightable only if its facts have been "selected,
(Joaquin v. Drilon, G.R. No. 108946, Jan. coordinated, or arranged in such a way that the
28, 1999) resulting work as a whole constitutes an original
8. Systems of bookkeeping; and work of authorship." Thus, the statute envisions
9. Statutes. that some ways of selecting, coordinating, and
arranging data are not sufficiently original to
Q: BJ Productions, Inc. (BJPI) is the trigger copyright protection. Even a compilation
holder/grantee of a copyright of “Rhoda and that is copyrightable receives only limited
Me”, a dating game show aired from 1970 to protection, for the copyright does not extend to
1977. Subsequently, however, RPN aired the facts contained in the compilation. (Feist
game show “It’s a Date”, which was produced by Publications, Inc. v. Rural Telephone Service Co.,
IXL Productions, Inc. (IXL). As such, an 499 U.S. 340)
information for copyright infringement was filed
against RPN. The DOJ Secretary directed the


D. RIGHTS OF A COPYRIGHT OWNER own creation or in a distorted
version of his work. (Sec.193, IPC)
Q: What is the presumption of authorship?
3. Droit de suite (Right to proceeds in
A: The natural person whose name is indicated on subsequent transfers or follow up
a work in the usual manner as the author shall, in rights) – This is an inalienable right of
the absence of proof to the contrary, presumed the author or his heirs to receive to the
to be the author of the work. This is applicable extent of 5% of the gross proceeds of
even if the name is a pseudonym, where the the sale or lease of a work of painting or
pseudonym leaves no doubt as to identity of the sculpture or of the original manuscript
author. (Sec. 219.1, IPC) of a writer or composer, subsequent to
its first disposition by the author.
The person or body corporate, whose name
appears on the audio‐visual work in the usual The following works are not covered:
manner shall, in the absence of proof to the a. Prints
contrary, be presumed to be the maker of said b. Etchings
work. (Sec. 219.2, IPC) c. Engravings
d. Works of applied art
Q: What are the rights of an author? e. Similar works wherein the author
primarily derives gain from the
A: proceeds of reproductions. (Sec.
1. Economic rights – The right to carry out, 201, IPC)
authorize or prevent the following acts:
Q: ABC is the owner of certain musical
a. Reproduction of the work or compositions among which are the songs
substantial portion thereof entitled: "Dahil Sa Iyo", "Sapagkat Ikaw Ay
b. Carry‐out derivative work Akin," "Sapagkat Kami Ay Tao Lamang" and "The
(dramatization, translation, Nearness Of You.” Soda Fountain Restaurant
adaptation, abridgement, hired a combo with professional singers to play
arrangement or other and sing musical compositions to entertain and
transformation of the work) amuse customers. They performed the above‐
c. First distribution of the original mentioned compositions without any license or
and each copy of the work by sale permission from ABC to play or sing the same.
or other forms of transfer of Accordingly, ABC demanded from Soda Fountain
ownership payment of the necessary license fee for the
d. Rental right playing and singing of aforesaid compositions
e. Public display but the demand was ignored. ABC filed an
f. Public performance infringement case against Soda Fountain. Does
g. Other communications to the the playing and singing of musical compositions
public. inside an establishment constitute public
performance for profit?
2. Moral rights – For reasons of
professionalism and propriety, the A: Yes. The patrons of the Soda Fountain pay only
author has the right: for the food and drinks and apparently not for
a. To require that the authorship of listening to the music, but the music provided is
the works be attributed to him for the purpose of entertaining and amusing the
(attribution right) customers in order to make the establishment
b. To make any alterations of his more attractive and desirable. For the playing and
work prior to, or to withhold it singing the musical compositions involved, the
from publication combo was paid as independent contractors by
c. Right to preserve integrity of work, Soda Fountain. It is therefore obvious that the
object to any distortion, mutilation expenses entailed thereby are added to the
or other modification which would overhead of the restaurant which are either
be prejudicial to his honor or eventually charged in the price of the food and
reputation; and drinks or to the overall total of additional income
d. To restrain the use of his name produced by the bigger volume of business which
with respect to any work not of his the entertainment was programmed to attract.
Consequently, it is beyond question that the
playing and singing of the combo in defendant‐ Note: The person/s to be charged with the
appellee's restaurant constituted performance for posthumous enforcement of moral rights shall be
profit. (FILSCAP v. Tan, G.R., No. L‐36402, Mar. named in writing to be filed with the National
16, 1987) Library. In default of such person or persons, such
enforcement shall devolve upon either the author's
Q: Malang Santos designed for Ambassador Neri heirs, and in default of the heirs, the Director of the
for his personal christmas greetings for the year National Library. (ibid.)
1959 a christmas card depicting a Philippine
rural Christmas time scene. The following year Q: What are the exceptions to moral rights?
McCullough Printing Company, without the
knowledge and authority of Santos, displayed A:
the very design in its album of Christmas cards a. Absent any special contract at the time
and offered it for sale. Santos filed for copyright creator licenses/permits another to use
infringement contending that the publication of his work, the following are deemed not
his design was limited as it was intended only for to contravene creator’s moral rights,
Ambassador Neri’s use, hence, it could not be provided they are done in accordance
used for public consumption. Is there copyright with reasonable customary standards or
infringement? requisites of the medium:
a. Editing
A: No. If there were a condition that the cards are b. Arranging
to be limitedly published, then Ambassador Neri c. Adaptation
would be the aggrieved party, and not Santos. d. Dramatization
And even if there was such a limited publication e. Mechanical and electric
or prohibition, the same was not shown on the reproduction
face of the design. When the purpose is a limited
publication, but the effect is general publication, b. Complete destruction of work
irrevocable rights thereupon become vested in unconditionally transferred by creators.
the public, in consequence of which enforcement (Sec. 197, IPC)
of the rights under a copyright becomes
impossible. (Malang v. McCullough Printing Q: Can moral rights be waived?
Company, G.R. No. L‐19439, Oct. 31, 1964)
A:
Q: May an author be compelled to perform his GR: Moral rights can be waived in writing,
contract? expressly so stating such waiver.

A: An author cannot be compelled to perform his XPN: Even in writing, waiver is not valid if:
contract to create a work or for the publication of 1. Use the name of the author, title of his
his work already in existence. However, he may work, or his reputation with respect to
be held liable for damages for breach of such any version/adaptation of his work,
contract. (Sec. 195, IPC) which because of alterations,
substantially tend to injure
Q: What is the nature of moral rights? literary/artistic reputation of another
author
A: These are personal rights independent from
the economic rights. Being a personal right, it can 2. Use name of author in a work that he
only be given to a natural person. Hence, even if did not create
he has licensed or assigned his economic rights,
he continues to enjoy the above‐mentioned Q: What are the neighboring rights?
moral rights. (Amador, Intellectual Property
Fundamentals, 2007) A: These are the rights of performers, producers
of sound recording and broadcasting
Q: What is the term of moral rights? organizations.

A: It shall last during the lifetime of the author
and for fifty (50) years after his death and shall
not be assignable or subject to license. (Sec. 198,
IPC)


Q: What is the scope of a performer’s rights? Q: When are performers entitled to additional
remuneration on their performance?
A: Performers shall enjoy the following exclusive
rights: A: The performer shall be entitled to an
additional remuneration equivalent to at least 5%
1. As regards their performances, the right of the original compensation he received for the
of authorizing: first communication or broadcast in every
a. The broadcasting and other communication to the public or broadcast of a
communication to the public of performance subsequent to the first
their performance; and communication or broadcast, unless otherwise
b. The fixation of their unfixed provided in the contract. (Sec. 206, IPC)
performance.
Q: What is the scope of the rights of producers
2. The right of authorizing the direct or on sound recordings?
indirect reproduction of their
performances fixed in sound recordings, A: Producers of sound recordings shall enjoy the
in any manner or form; following exclusive rights:
1. The right to authorize the direct or
3. The right of authorizing the first public indirect reproduction of their sound
distribution of the original and copies of recordings, in any manner or form; the
their performance fixed in the sound placing of these reproductions in the
recording through sale or rental or market and the right of rental or lending
other forms of transfer of ownership;
2. The right to authorize the first public
4. The right of authorizing the commercial distribution of the original and copies of
rental to the public of the original and their sound recordings through sale or
copies of their performances fixed in rental or other forms of transferring
sound recordings, even after ownership; and
distribution of them by, or pursuant to
the authorization by the performer; and 3. The right to authorize the commercial
rental to the public of the original and
5. The right of authorizing the making copies of their sound recordings, even
available to the public of their after distribution by them by or
performances fixed in sound recordings, pursuant to authorization by the
by wire or wireless means, in such a way producer. (Sec. 208, IPC)
that members of the public may access
them from a place and time individually Note: Fair use and limitations to copyrights shall
chosen by them. (Sec. 203, IPC) apply mutatis mutandis to performers. (Sec. 210,
IPC)
Q: What are the moral rights of performers?
Q: What is the scope of the rights of
A: The performer, shall, as regards his live aural broadcasting organizations?
performances or performances fixed in sound
recordings, have the right to claim to be identified A: Broadcasting organizations shall enjoy the
as the performer of his performances, except exclusive right to carry out, authorize or prevent
where the omission is dictated by the manner of any of the following acts:
the use of the performance, and to object to any 1. The rebroadcasting of their broadcasts
distortion, mutilation or other modification of his 2. The recording in any manner, including
performances that would be prejudicial to his the making of films or the use of video
reputation. tape, of their broadcasts for the
purpose of communication to the public
Q: When are performer’s rights lost? of television broadcasts of the same
3. The use of such records for fresh
A: Once a performer has authorized broadcasting transmissions or for fresh recording.
or fixation of his performance. (Sec 205, IPC) (Sec. 211, IPC)

Note: Fair use and limitations to copyrights shall
apply mutatis mutandis to performers. (Ibid.)

Q: When are neighboring rights not applicable? irrespective of the nationality or

residence of the authors. (Sec. 221,
A: IPC)
1. Exclusive use of a natural person for
own personal purposes 2. For perfomers
2. Short excerpts for reporting current a. Performers who are nationals of
events the Philippines;
3. Sole use for the purpose of teaching or b. Performers who are not nationals
for scientific research of the Philippines but whose
4. Fair use of the broadcast performances:
i. Take place in the Philippines;
Q: What are the term of protection given to or
performers, producers and broadcasting ii. Are incorporated in sound
organizations? recordings that are protected
under IPC; or
A: iii. Which has not been fixed in
1. For performances not incorporated in sound recording but are
recordings, 50 years from the end of the carried by broadcast
year in which the performance took qualifying for protection
place; and under IPC. (Sec. 222, IPC)

2. For sound or image and sound 3. Of sound recordings
recordings and for performances a. Sound recordings the producers of
incorporated therein, 50 years from the which are nationals of the
end of the year in which the recording Philippines; and
took place. b. Sound recordings that were first
published in the Philippines. (Sec.
3. In case of broadcasts, the term shall be 223, IPC)
20 years from the date the broadcast
took place. The extended term shall be 4. For broadcast
applied only to old works with a. Broadcasts of broadcasting
subsisting protection under the prior organizations the headquarters of
law. (Sec. 215, IPC) which are situated in the
Philippines; and
Q: To whom are the rights granted to b. Broadcasts transmitted from
copyrightable works applicable (points of transmitters situated in the
attachment)? Philippines. (Sec. 224, IPC)

A: Note: The provisions of IPC shall also apply to
1. For literary and artistic works and works, performers, producers of sound
derivative works recordings and broadcasting organizatins that
a. Works of authors who are are to be protected by virtue of and in
nationals of, or have their habitual accordance with any international convention
residence in, the Philippines; or other international agreement to which the
Philippines is a party. (Sec. 221.2 and 224.2,
b. Audio‐visual works the producer of
IPC)
which has his headquarters or

habitual residence in the
E. RULES ON OWNERSHIP OF COPYRIGHT
Philippines;

c. Works of architecture erected in
Q: Who owns copyright?
the Philippines or other artistic

works incorporated in a building or
A:
other structure located in the
1. Author – Original literary and artistic
Philippines;
works. (Sec. 178.1, IPC)
d. Works first published in the

Philippines; and
2. Co‐authors – Works of joint authorship;
e. Works first published in another
in the absence of agreement, their
country but also published in the
rights shall be governed by the rules on
Philippines within thirty days,
co‐ownership.


Q: Distinguish collective work from joint work.
Note: If work of joint authorship consists
of parts that can be used separately, then A:
the author of each part shall be the
COLLECTIVE WORK JOINT WORK
original owner of the copyright in the part
that he has created. (Sec. 178.2, IPC) Elements remain
Separate elements merge
unintegrated and
into a unified whole.
3. In the course of employment, the disparate.
copyright shall belong to: Work created by 2 or
more persons at the
a. The employee, if not a part of his initiative and under the
Work prepared by 2 or
regular duties even if the direction of another
more authors with the
employee uses the time, facilities with
intention that their
and materials of the employer. the understanding that
contributions be merged
(Sec. 178.3, IPC) it will be disclosed by
into inseparable or
the latter under his
b. The employer, if the work is the independent parts of the
own name and that of
result of the performance of his unitary whole.
the contributions of
regularly‐assigned duties, unless natural persons will
there is an agreement, express or NOT be identified
implied, to the contrary. (ibid.) Each author shall enjoy Joint authors shall be co‐
copyright to his own owners. Co‐ownership
4. The person who commissioned the contribution shall apply.
work shall own the work but the The work will be
copyright thereto shall remain with the attributed to the
creator – In cases of work pursuant to person under whose Joint authors shall be
commission, unless there is a written initiative and direction both entitled to the
stipulation to the contrary. (Sec. 178.4, it was created unless acknowledgment as
IPC) the contributor authors of the work.
expressly reserves his
5. GR: Producer, the author of the right.
scenario, the composer of the music,
the film director, and the author of the Q: BR and CT are noted artists whose paintings
work so adapted – audiovisual work. are highly prized by collectors. Dr. DL
commissioned them to paint a mural at the main
XPN: The producers shall exercise the lobby of his new hospital for children. Both
copyright to an extent required for the agreed to collaborate on the project for a total
exhibition of the work in any manner. fee of two million pesos to be equally divided
(Sec. 178.5, IPC) between them. It was also agreed that Dr. DL
had to provide all the materials for the painting
6. Writer – in respect of letters subject to and pay for the wages of technicians and
the provisions of Article 723, Civil Code. laborers needed for the work on the project.
(Sec. 178.6, IPC) Assume that the project is completed and both
BR and CT are fully paid the amount of P2M as
7. GR: Publishers – deemed artists' fee by DL. Under the law on intellectual
representatives of the author in case of property, who will own the mural? Who will
anonymous and pseudonymous works. own the copyright in the mural? Why? Explain.

XPN: When the contrary appears or A: Under Sec. 178.4 of the Intellectual Property
where the pseudonym or adopted name Code, in case of commissioned work, the creator
leaves no doubt as to the author’s (in the absence of a written stipulation to the
identity; or author discloses his identity. contrary) owns the copyright, but the work itself
belongs to the person who commissioned the
8. In case of collective works – contributor creation. Accordingly, the mural belongs to DL.
is deemed to have waived his right However, BR and CT own the copyright, since
unless he expressly reserves it. (Sec. there is no stipulation to the contrary. (1995 Bar
196, IPC) Question)

Q: What is the principle of “automatic 1. Performance of a work, once it has
protection”? been lawfully made accessible to the
public, if done privately and free of
A: Works are protected by the sole fact of their charge or for a charitable or religious
creation irrespective of their content, quality or institution or society.
purpose. Such rights are conferred from the
moment of creation. 2. The making of quotations from a
published work if they are compatible
Q: What is the term of protection of copyright? with fair use and only to the extent
justified for the purpose.
A:
3. Communication to the public by mass
media of articles on current political,
TYPE of WORK DURATION social, economic, scientific or religious
Lifetime of the creator topic, lectures, addresses and other
Single creation and for 50 years after works of the same nature
his death
Lifetime of the last 4. As part of reports of current events (e.g.
surviving co‐creator and music played or tunes on the occasion
Joint creation of a sporting event and such tunes were
for 50 years after his
death. picked up during a new coverage of the
50 years after the date event).
of their first publication;
except where before 5. For teaching purposes, provided that
the expiration of said the source and of the name of the
period, the author’s author, if appearing in the work, are
Anonymous or
identity is revealed or is mentioned.
pseudonymous work
no longer in doubt, the
1st two mentioned rules 6. Recording made in educational
shall apply; or if
institutions of a work included in a
unpublished, 50 years
broadcast for the use of such
from their making.
educational institutions, provided that
Work of an applied art
such recording must be deleted within a
of an artistic creation
reasonable period after they were first
with utilitarian functions
broadcast.
or incorporated in a

useful article whether
25 years from the time 7. The making of ephemeral recordings by
made by hand or
of the making. a broadcasting organization by means
produced on an
industrial scale of its own facilities and for use in its
Audio‐visual works own broadcast.

including those

produced by process 8. The use made of a work by or under the
50 years from date of
analogous to
publication and, if
direction or control of the government,
photography or any by the National Library or by
unpublished, from the
process for making educational, scientific or professional
date of making.
audio‐visual recordings institutions where such use is in the
Lifetime of the author public interest and is compatible with
Newspaper Article and 50 years after. (Sec. fair use.
213, IPC)
9. The public performance of a work, in a
F. LIMITATIONS ON COPYRIGHT place where no admission fee is
charged.
Q: What are the general limitations on
copyright? 10. Public display of the original or a copy
of the work not made by means of a
A: The following acts shall not constitute film, slide, television image or otherwise
infringement of copyright: on screen or by means of any other
device or process (e.g. Public display


using posters mounted on walls and materials;
display boards). d. A computer program except as
provided in Section 189; and
11. Any use made of a work for the purpose e. Any work in cases where
of any judicial proceedings or for the reproduction would unreasonably
giving of professional advice by a legal conflict with a normal exploitation
practitioner. of the work or would otherwise
unreasonably prejudice the
Q: What are the other limitations on copyright? legitimate interests of the author.
(Sec. 187, IPC)
A:
1. The fair use of a copyrighted work for 4. Any library or archive whose activities
criticism, comment, news reporting, are not for profit may, without the
teaching including multiple copies for authorization of the author of copyright
classroom use, scholarship, research, owner, make a single copy of the work
and similar purposes is not an by reprographic reproduction:
infringement of copyright. (Sec. 185, a. Where the work by reason of its
IPC) fragile character or rarity cannot
be lent to user in its original form;
Note: Decompilation, which is the b. Where the works are isolated
reproduction of the code and translation articles contained in composite
of the forms of the computer program to works or brief portions of other
achieve the inter‐operability of an published works and the
independently created computer program reproduction is necessary to supply
with other programs, may also constitute them, when this is considered
fair use (e.g. the software program for expedient, to persons requesting
Windows 7 will be disassembled by a
their loan for purposes of research
skilled programmer in order to
or study instead of lending the
understand much of the structure and
operation of the program).
volumes or booklets which contain
them; and
2. Copyright in a work of architecture shall c. Where the making of such a copy is
include the right to control the erection in order to preserve and, if
of any building which reproduces the necessary in the event that it is
whole or a substantial part of the work lost, destroyed or rendered
either in its original form or in any form unusable, replace a copy, or to
recognizably derived from the original, replace, in the permanent
provided, that the copyright in any such collection of another similar library
work shall not include the right to or archive, a copy which has been
control the reconstruction or lost, destroyed or rendered
rehabilitation in the same style as the unusable and copies are not
original of a building to which that available with the publisher.
copyright relates. (Sec. 186, IPC)
But it shall not be permissible to
3. The private reproduction of a published produce a volume of a work published
work in a single copy, where the in several volumes or to produce
reproduction is made by a natural missing tomes or pages of magazines or
person exclusively for research and similar works, unless the volume, tome
private study, shall be permitted, or part is out of stock. (Sec. 188, IPC)
without the authorization of the owner
of copyright in the work but shall not 5. The reproduction in one back‐up copy
extend to the reproduction of: or adaptation of a computer program
a. A work of architecture in the form shall be permitted, without the
of building or other construction; authorization of the author of, or other
b. An entire book, or a substantial owner of copyright in, a computer
part thereof, or of a musical work program, by the lawful owner of that
in graphic form by reprographic computer program, provided, the copy
means; or adaptation is necessary for:
c. A compilation of data and other
a. The use of the computer program Q: What are the factors that should be
in conjunction with a computer for considered in order to determine “fair use”?
the purpose, and to the extent, for
which the computer program has A:
been obtained; and 1. The purpose and character of the use,
b. Archival purposes, and, for the including whether such use is of a
replacement of the lawfully owned commercial nature or is for non‐profit
copy of the computer program in educational purpose;
the event that the lawfully 2. The nature of the copyrighted work;
obtained copy of the computer 3. The amount and substantiality of the
program is lost, destroyed or portion used in relation to the
rendered unusable. (Sec. 187, IPC) copyrighted work as a whole; and
4. The effect of the use upon the potential
6. The importation of a copy of a work by market for or value of the copyrighted
an individual for his personal purposes work.
shall be permitted without the
authorization of the author of, or other Note: The fact that a work is unpublished shall
owner of copyright in, the work under not by itself bar a finding of fair use if such
the following circumstances: finding is made upon consideration of all the
a. When copies of the work are not above factors. (Sec. 182.2, IPC)
available in the Philippines and:
i. Not more than one copy at one Q: What is the “must carry rule”?
time is imported for strictly
individual use only; or A: Must‐carry rule is another limitation on
ii. The importation is by authority copyright. It obligates operators to carry the
of and for the use of the signals of local channels within their respective
Philippine Government; or systems. This is to give the people wider access to
iii. The importation, consisting of more sources of news, information, education,
not more than three such copies sports event and entertainment programs other
or likenesses in any one invoice, than those provided for by mass media and
is not for sale but for the use afforded television programs to attain a well
only of any religious, charitable, informed, well‐versed and culturally refined
or educational society or citizenry and enhance their socio‐economic
institution duly incorporated or growth. (ABS‐CBN Broadcasting Corporation v.
registered, or is for the Philippine Multimedia System, G.R. No. 175769‐
encouragement of the fine arts, 70, Jan. 19, 2009)
or for any state school, college,
university, or free public library Q: Ford contracted with H&R Publishing to
in the Philippines. publish his unwritten memoirs. The agreement
gave H&R the exclusive first serial right to
b. When such copies form parts of license prepublication excerpts. As the memoirs
libraries and personal baggage were nearing completion, H&R, as the copyright
belonging to persons or families holders, negotiated a prepublication licensing
arriving from foreign countries and agreement with Time Magazine. Shortly before
are not intended for sale, provided, the Time article's scheduled release, an
that such copies do not exceed unauthorized source provided The Nation
three. (Sec. 190, IPC) Magazine with the unpublished Ford manuscript.
An editor of The Nation produced an article
Q: What is the doctrine of “fair use”? which consisted of verbatim quotes of
copyrighted expression taken from the
A: “Fair use” permits a secondary use that “serves manuscript which were the gist of the memoirs.
the copyright objective of stimulating productive As a result, Time refused to pay H&R as agreed
thought and public instruction without upon in the prepublication agreement. H&R
excessively diminishing the incentives for brought an action for infringement against
creativity”. Nation Magazine. Nation magazine contended
that the article it published constitutes fair use
and thus it cannot be held liable for
infringement. Is the contention correct?


A: No, the article does not constitute fair use.
Taking into account the factors as especially A: It may be assigned in whole or in part. Within
relevant in determining fair use, leads to the the scope of the assignment, the assignee is
conclusion that the use in question here was not entitled to all the rights and remedies which the
fair. First of all, the purpose or character of the assignor had with respect to the copyright. (Sec.
use was commercial (to scoop a competitor), 180.1, IPC)
meaning that The Nation's use was not a good
faith use of fair use in simply reporting news. Q: Is copyright similar with the material object?
Also, although the verbatim quotes in question
were an insubstantial portion of the Ford A: No, the copyright is distinct from the property
manuscript, they qualitatively embodied Mr. in the material object subject to it. Consequently,
Ford's distinctive expression, and played a key the transfer or assignment of the copyright shall
role in the infringing article. And lastly, the effect not itself constitute a transfer of the material
of the use on the potential market for the value object. Nor shall a transfer or assignment of the
of the copyrighted work was also great, because sole copy or of one or several copies of the work
the Nation's liberal use of verbatim excerpts imply transfer or assignment of the copyright.
posed substantial potential for damage to the (Sec. 181, IPC)
marketability of first serialization rights in the
copyrighted work. (Harper & Row v. Nation Q: What are the requisites for a transfer of
Enterprises, 471 U.S. 539, 1985) copyright to take effect?

Q: What are published works? A:
1. If inter vivos, must be in writing; and
A: Those works which, with the consent of the 2. Filed in National Library upon payment
authors, are made available to the public by wire of prescribed fees. (Sec. 182, IPC)
or wireless means in such a way that members of
the public may access these works from a place Q: Is filing of the assignment or license of
and time individually chosen by them: provided, copyright a mandatory requirement?
that availability of such copies has been such, as
to satisfy the reasonable requirement of the A: No, Section 182 uses the permissive word
public, having regard to the nature of the work. “may” in reference to the filing of the deed of
(Sec. 171.7, IPC) assignment or transfer of copyright, this filing
should not be understood as mandatory for
Q: What is the difference between public validity and enforceability. The filing is entirely
performance and communication to the public optional for the parties and may be useful only
of a performance? for evidentiary and notification purposes.
(Amador, Intellectual Property Fundamentals,
A: 2007)

COMMUNICATIONS TO Q: What is the limitation regarding submission of
PUBLIC
THE PUBLIC OF A a literary, photographic or artistic work to a
PERFORMANCE
PERFORMANCE newspaper, magazine or periodical for
Performance at a publication?
The transmission to the
place or at places
public, by any medium,
where persons A: Unless a greater right is expressly granted,
otherwise than by
outside the normal such submission shall constitute only a license to
broadcasting, of sounds of
circle of a family and make a single publication. (Sec. 180.3, IPC)
a performance or the
that family’s closest
representations of sounds
social acquaintances Note: If two or more persons jointly own a copyright
fixed in a sound recording.
are or can be present. or any part thereof, neither of the owners shall be
The communication can be entitled to grant licenses without the prior written
It is performed at a
accessed through wired or consent of the other owner or owners. (Ibid.)
specific time and
wireless means at a time
place. (e.g. The
and place convenient to Q: What is copyright infringement?
Pacquiao‐Clottey
the viewer (e.g. The
Match in Dallas Texas
Pacquiao‐Clottey Match
Stadium) A: It is the doing by any person, without the
watched via YouTube)
consent of the owner of the copyright, of

anything the sole right to do which is conferred
Q: May a copyright be transferred/assigned?
by statute on the owner of the copyright. The act
of lifting from another’s book substantial portions
of discussions and examples and the failure to Q: What are the available remedies in case of
acknowledge the same is an infringement of copyright infringement?
copyright. (Habana v. Robles, G.R.
No. 131522, July 19, 1999) A:
1. Injunction
Q: What does substantial reproduction mean? 2. Damages, including legal costs and
other expenses, as he may have
A: It is not necessarily required that the entire incurred due to the infringement as well
copyrighted work, or even a large portion of it, be as the profits the infringer may have
copied. If so much is taken that the value of the made due to such infringement
original work is substantially diminished, there is 3. Impounding during the pendency of the
an infringement of copyright and to an injurious action sales invoices and other
extent, the work is appropriated. It is no defense documents evidencing sales
that the pirate did not know whether or not he 4. Destruction without any compensation
was infringing any copyright; he at least knew all infringing copies
that what he was copying was not his, and he 5. Moral and exemplary damages (Sec.
copied at his peril. In cases of infringement, 216.1); or
copying alone is not what is prohibited. The 6. Seizure and impounding of any article,
copying must produce an “injurious effect”. which may serve as evidence in the
(Habana v. Robles, G.R. No. 131522, July 19, court proceedings. (Sec. 216.2)
1999)
Q: What are the criminal penalties in case of
Q: What is plagiarism? copyright infringement?

A: It is the practice of claiming or implying original A:
authorship of (or incorporating material from) 1. Imprisonment of one (1) year to three
someone else’s written or creative work, in whole (3) years plus a fine ranging from Fifty
or in part, into one’s own without adequate thousand pesos (P50,000) to One
acknowledgment. hundred fifty thousand pesos
(P150,000) for the first offense.
Q: What is the difference between copyright 2. Imprisonment of three (3) years and
infringement and plagiarism? one (1) day to six (6) years plus a fine
A: ranging from One hundred fifty
COPYRIGHT thousand pesos to Five hundred
PLAGIARISM
INFRINGEMENT thousand (P500,000) for the second
The unauthorized use of offense.
copyrighted material in a 3. Imprisonment of six (6) years and one
The use of another’s
manner that violates one of day to nine (9) years plus a fine ranging
information, language,
the copyright owner’s from Five hundred thousand pesos
or writing, when done
exclusive rights, such as the (P500,000) to P1,500,000 for the third
without proper
right to reproduce or offense.
acknowledgment of
perform the copyrighted
the original source.
work, or to make derivative
4. In all cases, subsidiary imprisonment in
works that build upon it.
cases of insolvency.
Copyright infringement is a

very broad term that
describes a variety of acts. Q: What is affidavit evidence?
Plagiarism is specific as
It may be duplication of a
it refers only to using A: An affidavit made before the notary public in
work, rewriting a piece,
someone else’s work actions for infringement, reciting the facts
performing a written work
without proper required to be stated under the IPC. (Sec. 216.1)
or doing anything that is
acknowledgement.
normally considered to be
the exclusive right of the Note: As a prima facie proof, the affidavit shifts the
copyright holder. burden of proof to the defendant, to prove the
ownership of the copyrighted work.
Public documents can
There is no copyright
be plagiarized so long
infringement on public
as it is not
documents.
acknowledged.

Legal Primer on the Bouncing Checks Law
by adminin Uncategorizedon Posted onJanuary 7, 2023
Bouncing Checks Law (B.P. 22)
“An Act Penalizing the Making or Drawing and Issuance of a Check Without Sufficient
Funds or Credit and For Other Purposes”
What acts are penalized under the law?
A. Drawing a Check Without Sufficient Funds (Sec. 1)
1. A person makes or draws and issues any check

2. The check is made or drawn and issued to apply on account or for value
3. The person who makes or draws and issues the check knows at the time of issue that he
does not have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment
4. The check is subsequently dishonored by the drawee bank for insufficiency of funds or
credit, or would have been dishonored for the same reason had not the drawer, without
valid reason, ordered the bank to stop payment
B. Failing to Keep Sufficient to Cover a Check Issued (Sec. 1, par. 2)
1. A person has sufficient funds in or credit with the drawee bank when he makes or draws
and issues a check
2. He fails to keep sufficient funds or maintain a credit to cover the full amount of the check
if presented within 90 days from the date appearing
3. The check is dishonored by the drawee bank
What are the essential elements to be liable for violation of B.P. 22?
To be liable for violation of B.P. 22, the following essential elements must be present:
▪ The making, drawing, and issuance of any check to apply for account or for value;
▪ The knowledge of the maker, drawer, or issuer that at the time of issue he does not have
sufficient funds in or credit with the drawee bank for the payment of the check in full
upon its presentment; and
▪ The subsequent dishonor of the check by the drawee bank for insufficiency of funds or
credit or dishonor for the same reason had not the drawer, without any valid cause,
ordered the bank to stop payment.
Who is liable for violating the bouncing checks law?

Any person who makes, draws or issues a worthless check is liable. This includes an
“accommodation party,” or one who signed the check without receiving value in exchange or who
issues said check for the purpose of lending his name to some other person. The accommodation
party is liable even though the holder of the check knew him to be a mere accommodation party
who did not receive any value therefor.
When the check is issued in behalf of the corporation or other legal entity, the person whose
signature appears on the check is liable.
When is the drawer of the check presumed to know there is insufficient funds in or credit
with the drawee bank?
The making, drawing and issuance of a check payment of which is refused by the drawee because
of insufficient funds in or credit with such bank, when presented within ninety (90) days from the
date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or
credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes
arrangements for payment in full by the drawee of such check within five (5) banking days after
receiving notice that such check has not bee paid by the drawee.
What should the drawee do once the check bounces? (Sec. 3)
It shall be the duty of the drawee of any check, when refusing to pay the same to the holder thereof
upon presentment, to cause to be thereon, or attached thereto, the written, printed, or stamped in
plane language reason for drawee’s dishonor or refusal to pay the same: Provided, That where
there are no insufficient funds in or credit with such drawee bank, such fact shall always be
explicitly stated in the notice of dishonor or refusal. In all prosecutions under this Act, the
introduction in evidence of any unpaid and dishonored check, having the drawee’s refusal to pay
stamped or written therefor or attached thereto, with the reason therefor as aforesaid, shall be prima
facie evidence of the making or issuance of said check, and the due presentment to the drawee for
payment and the dishonor thereof, and that the same was properly dishonored for the reason
written, stamped or attached by the drawee on such dishonored check.
Notwithstanding receipt of an order to stop payment, the drawee shall state in the notice that there
were no sufficient funds in or credit with such bank for the payment in full of such check, if such
be the fact.
Is a notice of dishonor an indispensable requirement in a prosecution for violation of B.P.

22?
A notice of dishonor is not indispensable as it is not an element of the offense. However, evidence
that a notice of dishonor has been sent to and received by the accused is actually sought as a means
to prove the second element, such that the absence of sufficient proof of receipt thereof can be
fatal in the prosecution’s case. (Jesusa T. Dela Cruz v. People, G.R. No. 163494, August 3, 2016)
Based on Section 2 of B.P. 22, the presumption that the issuer had knowledge of the insufficiency
of funds is brought into existence only after it is proved that the issuer had received a notice of
dishonor and that within five days from receipt thereof, he failed to pay the amount of the check
or to make arrangements for its payment. The presumption or prima facie evidence as provided in
this section cannot arise, if such notice of non-payment by the drawee bank is not sent to the maker
or drawer, or if there is no proof as to when such notice was received by the drawer, since there
would simply be no way of reckoning the crucial 5-day period. (Yu Oh v. CA, 451 Phil. 380 (2003)
This requirement cannot be taken lightly because Section 2 provides for an opportunity for the
drawer to effect full payment of the amount appearing on the check, within five banking days from
notice of dishonor. The absence of said notice therefore deprives an accused of an opportunity to
preclude criminal prosecution. In other words, procedural due process demands that a notice of
dishonor be actually served on petitioner. (Yu Oh v. CA, 451 Phil. 380 (2003)
How should a notice of dishonor be served on the drawer?
This may be done personally or by mail. However, note that when the notice of dishonor is served
by mail, it is not enough to simply present the letter with a registry receipt or return card as
evidence that a notice of dishonor has been served.
What evidence is needed to prove receipt of notice of dishonor?
It is not enough for the prosecution to prove that a notice of dishonor was sent to the petitioner. It
is also incumbent upon the prosecution to show “that the drawer of the check received the said
notice because the fact of service provided for in the law is reckoned from receipt of such notice
of dishonor by the drawee of the check.” (Alferez v. People, et al., 656 Phil. 116 (2011)
Registry return cards must be authenticated to serve as proof of receipt of letters sent through
registered mail. Mere presentation of a copy of the demand letter, together with the registry receipt
and the return card, allegedly sent to petitioner, when no attempt was made to authenticate or
identify the signature on the registry return card, is not enough. Receipts for registered letters and
return receipts do not by themselves prove receipt; they must be properly authenticated to serve as
proof of receipt of the letter, claimed to be a notice of dishonor. To be sure, the presentation of the
registry card with an unauthenticated signature, does not meet the required proof beyond
reasonable doubt that petitioner received such notice. (Alferez v. People, et al., 656 Phil. 116
(2011)
If the prosecution failed to authenticate the signature on the return card but the drawer of
the check nevertheless made efforts to settle the payment subsequent to the dishonor, is
knowledge of the insufficiency of funds in or credit with the drawee nevertheless established?
Yes. In Ma. Rosario P. Campos v. People, et al., G.R. No. 187401, September 17, 2014, the
accused maintained that her personal receipt of the notice was not sufficiently established,
considering that only a written copy of the letter and the registry return receipt covering it were
presented by the prosecution.
The Court, however, considers Campos’ defense that she exerted efforts to reach an amicable
settlement with her creditor after the checks which she issued were dishonored by the drawee bank,
BPI Family Bank. Campos categorically declared in her petition that, “[she] has in her favor
evidence to show that she was in good faith and indeed made arrangements for the payment of her
obligations subsequently after the dishonor of the checks.” Clearly, this statement was a
confirmation that she actually received the required notice of dishonor from FWCC. The evidence
referred to in her statements were receipts dated January 13, 1996, February 29, 1996, April 22,
1998 and May 26, 1998 issued by FWCC to Campos for payments in various amounts ranging
from P2,500.00 to P15,700.00. Campos would not have entered into the alleged arrangements
beginning January 1996 until May 1998 if she had not received a notice of dishonor from her
creditor, and had no knowledge of the insufficiency of her funds with the bank and the dishonor
of her checks.
When should a complaint for violation of B.P. 22 be filed?
The criminal complaint for violation of B.P. 22 must be filed within four (4) years from the time
the checks have been dishonored.
What is the penalty for violation of B.P. 22?
The penalty for violation of B.P. 22 is imprisonment of at least 30 days but not more than one (1)
year, or a fine of at least double the amount of the check but not to exceed PHP 200,000.00.
However, under Supreme Court Administrative Circular No. 12-2000, the Supreme Court
recommended that fines be imposed instead of a prison sentence for verdicts involving B.P. 22.
This was later clarified in Supreme Court Administrative Circular No. 13-2001 that imprisonment
is still possible under B.P. 22 verdicts and that if the accused is unable to pay the fine imposed,
subsidiary imprisonment may still attach.
Source: Dela Calzada Legal, https://www.delacalzadalegal.com/uncategorized/legal-primer-on-

the-bouncing-checks-
law/#:~:text=Who%20is%20liable%20for%20violating,name%20to%20some%20other%20pers
on., Last accessed on June 01, 2023.
www.admprivacy.com
Data Privacy Act (RA 10173)

Bar Review Notes (2019)
Prepared by: Atty. Arnel D. Mateo
The Data Privacy Act (Act) protects the right to privacy of an individual with regard
to his personal data. It imposes upon any person processing personal data the
obligation to implement security measures aimed at ensuring the confidentiality,
integrity, and availability of an individual’s personal data.
A. Personal Information vs. Sensitive Personal Information
Personal information
- refers to any information whether recorded in a material form or not, from
which the identity of an individual is apparent or can be reasonably and
directly ascertained by the entity holding the information, or
(Ex. Name, photo, signature, biometric data)
- when put together with other information would directly and certainly identify
an individual.
(Ex. username, password, IP address, location, cookies, birthday)
Sensitive personal information refers to personal information:
(1) About an individual’s race, ethnic origin, marital status, age, color, and
religious, philosophical or political affiliations;
(2) About an individual’s health, education, genetic or sexual life of a person,

or to any proceeding for any offense committed or alleged to have been
committed by such person, the disposal of such proceedings, or the sentence
of any court in such proceedings;
(3) Issued by government agencies peculiar to an individual which includes,

but not limited to, social security numbers, previous or current health records,
licenses or its denials, suspension or revocation, and tax returns; and
(4) Specifically established by an executive order or an act of Congress to be

kept classified.
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Other important terms to remember:
Privileged information refers to any and all forms of data which under the Rules of
Court and other pertinent laws constitute privileged communication.
Consent of the data subject refers to any freely given, specific, informed indication
of will, whereby the data subject agrees to the collection and processing of his or her
personal, sensitive personal, or privileged information. Consent shall be evidenced
by written, electronic or recorded means. It may also be given on behalf of a data
subject by a lawful representative or an agent specifically authorized by the data
subject to do so;
Data subject refers to an individual whose personal, sensitive personal, or privileged

information is processed;
Data sharing is the disclosure or transfer to a third party of personal data under the
custody of a personal information controller or personal information processor. In the
case of the latter, such disclosure or transfer must have been upon the instructions
of the personal information controller concerned. The term excludes outsourcing, or
the disclosure or transfer of personal data by a personal information controller to a
personal information processor;
Personal information controller refers to a person or organization who controls the

collection, holding, processing or use of personal information, including a person or
organization who instructs another person or organization to collect, hold, process,
use, transfer or disclose personal information on his or her behalf. The term
excludes:
(1) A person or organization who performs such functions as instructed by

another person or organization; and
(2) An individual who collects, holds, processes or uses personal information

in connection with the individual’s personal, family or household affairs.
Personal information processor refers to any natural or juridical person qualified to

act as such under this Act to whom a personal information controller may outsource
the processing of personal data pertaining to a data subject.
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Processing refers to any operation or any set of operations performed upon

personal information including, but not limited to, the collection, recording,
organization, storage, updating or modification, retrieval, consultation, use,
consolidation, blocking, erasure or destruction of data.
B. Scope
Application:
The Act and these Rules apply to the processing of personal data by any natural and
juridical person in the government or private sector. They apply to an act done or
practice engaged in and outside of the Philippines if:
a. The natural or juridical person involved in the processing of personal data is

found or established in the Philippines;
b. The act, practice or processing relates to personal data about a Philippine

citizen or Philippine resident;
c. The processing of personal data is being done in the Philippines; or
d. The act, practice or processing of personal data is done or engaged in by

an entity with links to the Philippines, with due consideration to international
law and comity, such as, but not limited to, the following:
1. Use of equipment located in the country, or maintains an office,

branch or agency in the Philippines for processing of personal data;
2. A contract is entered in the Philippines;
3. A juridical entity unincorporated in the Philippines but has central

management and control in the country;
4. An entity that has a branch, agency, office or subsidiary in the

Philippines and the parent or affiliate of the Philippine entity has access
to personal data;
5. An entity that carries on business in the Philippines;
6. An entity that collects or holds personal data in the Philippines.
This Act does not apply to the following:
(a) Information about any individual who is or was an officer or employee of a

government institution that relates to the position or functions of the individual,
including:
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(1) The fact that the individual is or was an officer or employee of the
government institution;
(2) The title, business address and office telephone number of the
individual;
(3) The classification, salary range and responsibilities of the position

held by the individual; and
(4) The name of the individual on a document prepared by the

individual in the course of employment with the government;
(b) Information about an individual who is or was performing service under

contract for a government institution that relates to the services performed,
including the terms of the contract, and the name of the individual given in the
course of the performance of those services;
(c) Information relating to any discretionary benefit of a financial nature such

as the granting of a license or permit given by the government to an
individual, including the name of the individual and the exact nature of the
benefit;
(d) Personal information processed for journalistic, artistic, literary or research

purposes;
(e) Information necessary in order to carry out the functions of public authority
which includes the processing of personal data for the performance by the
independent, central monetary authority and law enforcement and regulatory
agencies of their constitutionally and statutorily mandated functions. Nothing
in this Act shall be construed as to have amended or repealed Republic Act
No. 1405, otherwise known as the Secrecy of Bank Deposits Act; Republic
Act No. 6426, otherwise known as the Foreign Currency Deposit Act; and
Republic Act No. 9510, otherwise known as the Credit Information System Act
(CISA);
(f) Information necessary for banks and other financial institutions under the
jurisdiction of the independent, central monetary authority or Bangko Sentral
ng Pilipinas to comply with Republic Act No. 9510, and Republic Act No.
9160, as amended, otherwise known as the Anti-Money Laundering Act and
other applicable laws; and
(g) Personal information originally collected from residents of foreign

jurisdictions in accordance with the laws of those foreign jurisdictions,
including any applicable data privacy laws, which is being processed in the
Philippines.
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Protection afforded to Data Subjects.
a. Unless directly incompatible or inconsistent with the preceding sections in

relation to the purpose, function, or activities the non-applicability concerns,
the personal information controller or personal information processor shall
uphold the rights of data subjects, and adhere to general data privacy
principles and the requirements of lawful processing.
b. The burden of proving that the Act and these Rules are not applicable to a
particular information falls on those involved in the processing of personal
data or the party claiming the non-applicability.
c. In all cases, the determination of any exemption shall be liberally

interpreted in favor of the rights and interests of the data subject.
Protection Afforded to Journalists and Their Sources. – Nothing in this Act shall
be construed as to have amended or repealed the provisions of Republic Act No. 53,
which affords the publishers, editors or duly accredited reporters of any newspaper,
magazine or periodical of general circulation protection from being compelled to
reveal the source of any news report or information appearing in said publication
which was related in any confidence to such publisher, editor, or reporter.
Extraterritorial Application. – This Act applies to an act done or practice engaged

in and outside of the Philippines by an entity if:
(a) The act, practice or processing relates to personal information about a

Philippine citizen or a resident;
(b) The entity has a link with the Philippines, and the entity is processing
personal information in the Philippines or even if the processing is outside the
Philippines as long as it is about Philippine citizens or residents such as, but
not limited to, the following:
(1) A contract is entered in the Philippines;
(2) A juridical entity unincorporated in the Philippines but has central

management and control in the country; and
(3) An entity that has a branch, agency, office or subsidiary in the

Philippines and the parent or affiliate of the Philippine entity has access
to personal information; and
(c) The entity has other links in the Philippines such as, but not limited to:
(1) The entity carries on business in the Philippines; and

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(2) The personal information was collected or held by an entity in the

Philippines.
C. Processing of Personal Information
General Data Privacy Principles. – The processing of personal information shall be

allowed, subject to compliance with the requirements of this Act and other laws
allowing disclosure of information to the public and adherence to the principles of
transparency, legitimate purpose and proportionality.
a. Transparency. The data subject must be aware of the nature, purpose,

and extent of the processing of his or her personal data, including the risks
and safeguards involved, the identity of personal information controller, his or
her rights as a data subject, and how these can be exercised. Any information
and communication relating to the processing of personal data should be easy
to access and understand, using clear and plain language.
b. Legitimate purpose. The processing of information shall be compatible

with a declared and specified purpose which must not be contrary to law,
morals, or public policy.
c. Proportionality. The processing of information shall be adequate, relevant,

suitable, necessary, and not excessive in relation to a declared and specified
purpose. Personal data shall be processed only if the purpose of the
processing could not reasonably be fulfilled by other means.
General principles in collection, processing and retention.
a. Collection must be for a declared, specified, and legitimate purpose.
1. Consent is required prior to the collection and processing of personal

data, subject to exemptions provided by the Act and other applicable
laws and regulations. When consent is required, it must be time-bound
in relation to the declared, specified and legitimate purpose. Consent
given may be withdrawn.
2. The data subject must be provided specific information regarding the

purpose and extent of processing, including, where applicable, the
automated processing of his or her personal data for profiling, or
processing for direct marketing, and data sharing.
3. Purpose should be determined and declared before, or as soon as

reasonably practicable, after collection.
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4. Only personal data that is necessary and compatible with declared,

specified, and legitimate purpose shall be collected.
b. Personal data shall be processed fairly and lawfully.
1. Processing shall uphold the rights of the data subject, including the
right to refuse, withdraw consent, or object. It shall likewise be
transparent, and allow the data subject sufficient information to know
the nature and extent of processing.
2. Information provided to a data subject must always be in clear and

plain language to ensure that they are easy to understand and access.
3. Processing must be in a manner compatible with declared, specified,

and legitimate purpose.
4. Processed personal data should be adequate, relevant, and limited

to what is necessary in relation to the purposes for which they are
processed.
5. Processing shall be undertaken in a manner that ensures

appropriate privacy and security safeguards.
c. Processing should ensure data quality.
1. Personal data should be accurate and where necessary for

declared, specified and legitimate purpose, kept up to date.
2. Inaccurate or incomplete data must be rectified, supplemented,

destroyed or their further processing restricted.
d. Personal Data shall not be retained longer than necessary.
1. Retention of personal data shall only for as long as necessary:
(a) for the fulfillment of the declared, specified, and legitimate

purpose, or when the processing relevant to the purpose has
been terminated;
(b) for the establishment, exercise or defense of legal claims; or
(c) for legitimate business purposes, which must be consistent

with standards followed by the applicable industry or approved
by appropriate government agency.
2. Retention of personal data shall be allowed in cases provided by

law.
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3. Personal data shall be disposed or discarded in a secure manner

that would prevent further processing, unauthorized access, or
disclosure to any other party or the public, or prejudice the interests of
the data subjects.
e. Any authorized further processing shall have adequate safeguards.
1. Personal data originally collected for a declared, specified, or

legitimate purpose may be processed further for historical, statistical, or
scientific purposes, and, in cases laid down in law, may be stored for
longer periods, subject to implementation of the appropriate
organizational, physical, and technical security measures required by
the Act in order to safeguard the rights and freedoms of the data
subject.
2. Personal data which is aggregated or kept in a form which does not

permit identification of data subjects may be kept longer than
necessary for the declared, specified, and legitimate purpose.
3. Personal data shall not be retained in perpetuity in contemplation of

a possible future use yet to be determined.
General Principles for Data Sharing. Further Processing of Personal Data

collected from a party other than the Data Subject shall be allowed under any of the
following conditions:
a. Data sharing shall be allowed when it is expressly authorized by

law: Provided, that there are adequate safeguards for data privacy and
security, and processing adheres to principle of transparency, legitimate
purpose and proportionality.
b. Data Sharing shall be allowed in the private sector if the data subject
consents to data sharing, and the following conditions are complied with:
1. Consent for data sharing shall be required even when the data is to
be shared with an affiliate or mother company, or similar relationships;
2. Data sharing for commercial purposes, including direct marketing,

shall be covered by a data sharing agreement.
(a) The data sharing agreement shall establish adequate

safeguards for data privacy and security, and uphold rights of
data subjects.
(b) The data sharing agreement shall be subject to review by the

Commission, on its own initiative or upon complaint of data
subject;
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3. The data subject shall be provided with the following information

prior to collection or before data is shared:
(a) Identity of the personal information controllers or personal

information processors that will be given access to the personal
data;
(b) Purpose of data sharing;
(c) Categories of personal data concerned;
(d) Intended recipients or categories of recipients of the personal

data;
(e) Existence of the rights of data subjects, including the right to

access and correction, and the right to object;
(f) Other information that would sufficiently notify the data

subject of the nature and extent of data sharing and the manner
of processing.
4. Further processing of shared data shall adhere to the data privacy

principles laid down in the Act, these Rules, and other issuances of the
Commission.
c. Data collected from parties other than the data subject for purpose of
research shall be allowed when the personal data is publicly available, or has
the consent of the data subject for purpose of research: Provided, that
adequate safeguards are in place, and no decision directly affecting the data
subject shall be made on the basis of the data collected or processed. The
rights of the data subject shall be upheld without compromising research
integrity.
d. Data sharing between government agencies for the purpose of a public

function or provision of a public service shall be covered a data sharing
agreement.
1. Any or all government agencies party to the agreement shall comply

with the Act, these Rules, and all other issuances of the Commission,
including putting in place adequate safeguards for data privacy and
security.
2. The data sharing agreement shall be subject to review of the

Commission, on its own initiative or upon complaint of data subject.
Criteria for Lawful Processing of Personal Information. – The processing of

personal information shall be permitted only if not otherwise prohibited by law, and
when at least one of the following conditions exists:
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(a) The data subject has given his or her consent;
(b) The processing of personal information is necessary and is related to the

fulfillment of a contract with the data subject or in order to take steps at the
request of the data subject prior to entering into a contract;
(c) The processing is necessary for compliance with a legal obligation to

which the personal information controller is subject;
(d) The processing is necessary to protect vitally important interests of the

data subject, including life and health;
(e) The processing is necessary in order to respond to national emergency, to

comply with the requirements of public order and safety, or to fulfill functions
of public authority which necessarily includes the processing of personal data
for the fulfillment of its mandate; or
(f) The processing is necessary for the purposes of the legitimate interests
pursued by the personal information controller or by a third party or parties to
whom the data is disclosed, except where such interests are overridden by
fundamental rights and freedoms of the data subject which require protection
under the Philippine Constitution.
Sensitive Personal Information and Privileged Information. – The processing of

sensitive personal information and privileged information shall be prohibited, except
in the following cases:
(a) The data subject has given his or her consent, specific to the purpose prior
to the processing, or in the case of privileged information, all parties to the
exchange have given their consent prior to processing;
(b) The processing of the same is provided for by existing laws and
regulations: Provided, That such regulatory enactments guarantee the
protection of the sensitive personal information and the privileged
information: Provided, further, That the consent of the data subjects are not
required by law or regulation permitting the processing of the sensitive
personal information or the privileged information;
(c) The processing is necessary to protect the life and health of the data
subject or another person, and the data subject is not legally or physically
able to express his or her consent prior to the processing;
(d) The processing is necessary to achieve the lawful and noncommercial

objectives of public organizations and their associations: Provided, That such
processing is only confined and related to the bona fide members of these
organizations or their associations: Provided, further, That the sensitive
personal information are not transferred to third parties: Provided, finally, That
consent of the data subject was obtained prior to processing;
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(e) The processing is necessary for purposes of medical treatment, is carried

out by a medical practitioner or a medical treatment institution, and an
adequate level of protection of personal information is ensured; or
(f) The processing concerns such personal information as is necessary for the
protection of lawful rights and interests of natural or legal persons in court
proceedings, or the establishment, exercise or defense of legal claims, or
when provided to government or public authority.
Subcontract of Personal Information. – A personal information controller may

subcontract the processing of personal information: Provided, That the personal
information controller shall be responsible for ensuring that proper safeguards are in
place to ensure the confidentiality of the personal information processed, prevent its
use for unauthorized purposes, and generally, comply with the requirements of this
Act and other laws for processing of personal information. The personal information
processor shall comply with all the requirements of this Act and other applicable
laws.
Extension of Privileged Communication. – Personal information controllers may

invoke the principle of privileged communication over privileged information that they
lawfully control or process.
Surveillance of Suspects and Interception of Recording of Communications.

The processing of personal data for the purpose of surveillance, interception, or
recording of communications shall comply with the Data Privacy Act, including
adherence to the principles of transparency, proportionality, and legitimate purpose.
D. Rights of data Subject
Rights of the Data Subject. – The data subject is entitled to:
a. Right to be informed.
1. The data subject has a right to be informed whether personal data

pertaining to him or her shall be, are being, or have been processed,
including the existence of automated decision-making and profiling.
2. The data subject shall be notified and furnished with information

indicated hereunder before the entry of his or her personal data into the
processing system of the personal information controller, or at the next
practical opportunity:
(a) Description of the personal data to be entered into the

system;
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(b) Purposes for which they are being or will be processed,

including processing for direct marketing, profiling or historical,
statistical or scientific purpose;
(c) Basis of processing, when processing is not based on the

consent of the data subject;
(d) Scope and method of the personal data processing;
(e) The recipients or classes of recipients to whom the personal

data are or may be disclosed;
(f) Methods utilized for automated access, if the same is allowed

by the data subject, and the extent to which such access is
authorized, including meaningful information about the logic
involved, as well as the significance and the envisaged
consequences of such processing for the data subject;
(g) The identity and contact details of the personal data

controller or its representative;
(h) The period for which the information will be stored; and
(i) The existence of their rights as data subjects, including the

right to access, correction, and object to the processing, as well
as the right to lodge a complaint before the Commission.
b. Right to object. The data subject shall have the right to object to the
processing of his or her personal data, including processing for direct
marketing, automated processing or profiling. The data subject shall also be
notified and given an opportunity to withhold consent to the processing in
case of changes or any amendment to the information supplied or declared to
the data subject in the preceding paragraph.
When a data subject objects or withholds consent, the personal information

controller shall no longer process the personal data, unless:
1. The personal data is needed pursuant to a subpoena;
2. The collection and processing are for obvious purposes, including,

when it is necessary for the performance of or in relation to a contract
or service to which the data subject is a party, or when necessary or
desirable in the context of an employer-employee relationship between
the collector and the data subject; or
3. The information is being collected and processed as a result of a

legal obligation.
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c. Right to Access. The data subject has the right to reasonable access to,
upon demand, the following:
1. Contents of his or her personal data that were processed;
2. Sources from which personal data were obtained;
3. Names and addresses of recipients of the personal data;
4. Manner by which such data were processed;
5. Reasons for the disclosure of the personal data to recipients, if any;
6. Information on automated processes where the data will, or is likely

to, be made as the sole basis for any decision that significantly affects
or will affect the data subject;
7. Date when his or her personal data concerning the data subject
were last accessed and modified; and
8. The designation, name or identity, and address of the personal

information controller.
d. Right to rectification. The data subject has the right to dispute the
inaccuracy or error in the personal data and have the personal information
controller correct it immediately and accordingly, unless the request is
vexatious or otherwise unreasonable. If the personal data has been corrected,
the personal information controller shall ensure the accessibility of both the
new and the retracted information and the simultaneous receipt of the new
and the retracted information by the intended recipients thereof: Provided,
That recipients or third parties who have previously received such processed
personal data shall be informed of its inaccuracy and its rectification, upon
reasonable request of the data subject.
e. Right to Erasure or Blocking. The data subject shall have the right to
suspend, withdraw or order the blocking, removal or destruction of his or her
personal data from the personal information controller’s filing system.
1. This right may be exercised upon discovery and substantial proof of

any of the following:
(a) The personal data is incomplete, outdated, false, or

unlawfully obtained;
(b) The personal data is being used for purpose not authorized
by the data subject;
(c) The personal data is no longer necessary for the purposes

for which they were collected;
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(d) The data subject withdraws consent or objects to the

processing, and there is no other legal ground or overriding
legitimate interest for the processing;
(e) The personal data concerns private information that is

prejudicial to data subject, unless justified by freedom of speech,
of expression, or of the press or otherwise authorized;
(f) The processing is unlawful;
(g) The personal information controller or personal information

processor violated the rights of the data subject.
2. The personal information controller may notify third parties who have
previously received such processed personal information.
f. Right to damages. The data subject shall be indemnified for any damages
sustained due to such inaccurate, incomplete, outdated, false, unlawfully
obtained or unauthorized use of personal data, taking into account any
violation of his or her rights and freedoms as data subject.
Transmissibility of Rights of the Data Subject. – The lawful heirs and assigns of
the data subject may invoke the rights of the data subject for, which he or she is an
heir or assignee at any time after the death of the data subject or when the data
subject is incapacitated or incapable of exercising the rights as enumerated in the
immediately preceding section.
Right to Data Portability. – The data subject shall have the right, where personal
information is processed by electronic means and in a structured and commonly
used format, to obtain from the personal information controller a copy of data
undergoing processing in an electronic or structured format, which is commonly used
and allows for further use by the data subject. The Commission may specify the
electronic format referred to above, as well as the technical standards, modalities
and procedures for their transfer.
Non-Applicability. – The immediately preceding sections are not applicable if the

processed personal information are used only for the needs of scientific and
statistical research and, on the basis of such, no activities are carried out and no
decisions are taken regarding the data subject: Provided, That the personal
information shall be held under strict confidentiality and shall be used only for the
declared purpose. Likewise, the immediately preceding sections are not applicable to
processing of personal information gathered for the purpose of investigations in
relation to any criminal, administrative or tax liabilities of a data subject.
LABOR AND
SOCIAL
SECURITY LAWS
Atty. Michelle G. Bernardo, LL.M. &

Atty. Jessa G. Bernardo
LABOR LAW
1. Basic pay
2. Overtime premium
3. Night shift differential
4. Holiday premium
5. 13th month pay
6. Leaves
7. Service incentive leave
8. Maternity leave
9. Paternity leave
10. Parental leave for solo parent
SOCIAL
SECURITY LAW
1. Definitions
2. Scope and coverage
3. Pension, retirement, and other benefits
4. Exemptions from tax, legal process, and lien
5. Employee’s and employer’s contributions
6. Contributions from self-employed member
7. Remittance of contributions
8. Method of collection and payment
9. Employment records and reports
10. Penal clauses
Presentation title 4
LABOR LAW
From the Labor Code of the Philippines and its Implementing Rules and
Regulations
BASIC PAY
Wage paid to any employee shall mean the
remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is
payable by an employer to an employee under a written
or unwritten contract of employment for work done or
WAGE to be done, or for services rendered or to be rendered
and includes the fair and reasonable value, as
determined by the Secretary of Labor and Employment,
of board, lodging, or other facilities customarily
furnished by the employer to the employee. “Fair and
reasonable value” shall not include any profit to the
employer, or to any person affiliated with the employer.
(Article 97[f], LC)
• Wage paid to any employee shall mean the
remuneration or earnings and includes the fair and
reasonable value of board, lodging, or other facilities
customarily furnished by the employer to the
employee.
• payable by an employer to an employee under a
written or unwritten contract of employment for
work done or to be done, or for services rendered
or to be rendered
• Remuneration or earnings
• However designated
• Capable of being expressed in terms of
money
• whether fixed or ascertained on a time, task,
piece, or commission basis, or other method
of calculating the same
• Fair and reasonable value of board, lodging, and

facilities
• Customarily furnished by the employer to the
employee
• What is fair and reasonable is determined by
the DOLE Secretary. It shall not include any
profit to the employer or to any person
affiliated with the employer
Includes articles or services for the benefit of the
employee or his family
FACILITIES To form part of wage, facilities must be:
1. Customarily furnished by the employer and

2. For the benefit of the employee or his family
Granted and paid to an employee for his industry and
loyalty which contributed to the success of the
BONUS employer’s business and made possible the realization
of profits.
• Generally, not part of wages. Hence, not demandable
as a matter of right.
• Exceptions:
1. when it has ripened into a company practice
2. by agreement of the parties
BONUS 3. by CBA
4. when made part of the wage or salary or
compensation
→ if the amount would be a contingent one dependent
upon realization of profits, the bonus is not demandable
and enforceable and cannot be considered part of the
wages.
WAGES VS. SALARIES
Wages Salaries
Compensation for skilled or unskilled manual Paid to white collar workers and denote a
labor paid at stated daily, weekly, monthly or higher grade of employment, a superior grade
seasonal periods. of services and a position of office.
OVERTIME PAY
• The normal hours of work of any employee shall not
exceed eight (8) hours a day for six (6) days.
• Exceptions:
1. Health personnel who hold regular office hours for
HOURS OF eight (8) hours a day, for five (5) days a week, and
2. Where the exigencies of service require that health
WORK personnel work for six days (6) or forty-eight hours
(48), then such health personnel shall be entitled to
an additional compensation
3. Compressed Work Week Scheme
(a) All time during which an employee is required to be
on duty or to be at a prescribed workplace; and
HOURS (b) All time during which an employee is suffered or
permitted to work.
WORKED
***Rest periods of short duration during working hours
shall be counted as hours worked.
➢ When the country is at war or when any other
national or local emergency has been declared by the
National Assembly or the Chief Executive;
EMERGENCY ➢ When it is necessary to prevent loss of life or property

OVERTIME or in case of imminent danger to public safety due to
WORK an actual or impending emergency in the locality
caused by serious accidents, fire, flood, typhoon,
earthquake, epidemic, or other disaster or calamity;
➢ When there is urgent work to be performed or
machines, installations, or equipment, in order to
avoid serious loss or damage to the employer or some
other cause of similar nature;
EMERGENCY
OVERTIME ➢ When the work is necessary to prevent loss or damage
WORK to perishable goods; and
➢ Where the completion or continuation of the work

started before the eighth hour is necessary to prevent
serious obstruction or prejudice to the business or
operation of the employer.
➢ OVERTIME PAY. Work may be performed beyond
eight (8) hours a day provided that the employee is
paid for the overtime work, an additional
compensation equivalent to his regular wage plus at
least twenty-five percent (25%) thereof.
OVERTIME
➢ OVERTIME PREMIUM. Work performed beyond
WORK eight hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate of the
first eight hours on a holiday or rest day plus at least
thirty percent (30%) thereof.
EXAMPLE
PHP 700 = DAILY WAGE
PHP 87.50 = HOURLY RATE
PHP 87.50 X 125% X 2 HRS (OT) = PHP218.75

REGULAR Shall include cash wage only,
without deduction on account of facilities provided by
WAGE the employer.
REST DAY Rest period of not less than 24 consecutive hours after
every 6 consecutive normal work days.
WHEN ➢ In case of actual or impending emergencies caused by
EMPLOYER serious accident, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity to prevent loss
MAY of life and property, or imminent danger to public
safety;
REQUIRE
WORK ON ➢ In cases of urgent work to be performed on the
machinery, equipment, or installation, to avoid
A REST serious loss which the employer would otherwise
suffer;
DAY
➢ In the event of abnormal pressure of work due to
WHEN special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
EMPLOYER
MAY ➢ To prevent loss or damage to perishable goods;
REQUIRE ➢ Where the nature of the work requires continuous
WORK ON operations and the stoppage of work may result in

irreparable injury or loss o the employer; and
A REST
➢ Under other circumstances analogous or similar to
DAY the foregoing as determined by the Secretary of Labor
and Employment.
➢ Where an employee is made or permitted to work on
COMPENSA- his scheduled rest day, he shall be paid an additional
compensation of at least thirty percent (30%) of his
TION FOR regular wage. An employee shall be entitled to such
REST DAY, additional compensation for work performed on

Sunday only when it is his established rest day.
SUNDAY OR
➢ When the nature of the work of the employee is such
HOLIDAY that he has no regular workdays and no regular rest
days can be scheduled, he shall be paid an additional
WORK compensation of at least thirty percent (30%) of his
regular wage for work performed on Sundays and
holidays.
➢ Work performed on any special holiday shall be paid
COMPENSA- an additional compensation of at least thirty percent
(30%) of the regular wage of the employee. Where
TION FOR such holiday work falls on the employee’s scheduled
REST DAY, rest day, he shall be entitled to an additional

compensation of at least fifty per cent (50%) of his
SUNDAY OR regular wage.
HOLIDAY ➢ Where the collective bargaining agreement or other

applicable employment contract stipulates the
WORK payment of a higher premium pay than that
prescribed under this Article, the employer shall pay
such higher rate.
HOLIDAY PAY
➢ Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service
establishments regularly employing less than ten (10)
RIGHT TO workers;
HOLIDAY ➢ The employer may require an employee to work on

PAY any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate
HOLIDAYS
Regular Special NOTE
New Year’s Day – January 1 Ninoy Aquino Day – Monday nearest In the event the holiday falls on a
Maundy Thursday – Movable Date (MD) August 21 Wednesday, the holiday will be observed
Good Friday – MD All Saints Day – November 1 on a Monday of the week. If the holiday
Eidul Fitr – MD Last Day of the Year – December 31 falls on a Sunday, the holiday will be
Eidul Adha – MD observed on Monday that follows:
Araw and Kagitingan – Monday nearest Provided, that for movable holidays, the
April 9 President shall issue a specific date shall
Labor Day – Monday nearest May 1 be declared as a nonworking holiday.
Independence Day – Monday nearest June
12
National Heroes Day- Last Monday of
August
Bonifacio Day – Monday nearest
November 30
Christmas Day – December 25
Rizal Day – Monday nearest December 30
HOW TO COMPUTE
REGULAR HOLIDAY
• If an employee did not work, he/she shall be paid the 100% of his/her salary for that day, subject to
certain conditions under the implementing rules and regulations [(Daily rate + COLA) x 100%];
Eg: PhP 700 daily wage x 100% = PhP700
• For work done during the regular holiday, the employee shall be paid 200% of his/her regular salary
for that day for the first eight hours [(Daily rate + COLA) x 200%];
Eg: PhP 700 x 200% = PhP1,400

HOW TO COMPUTE
REGULAR HOLIDAY
• For work done in excess of eight hours (overtime work), he/she shall be paid an additional 30% of
his/her hourly rate on said day [Hourly rate of the basic daily wage x 200% x 130% x number of
hours worked] Eg: PhP87.50 x 200% x 130% x 2hrs(OT) = PhP455 (for the excess hours)
• For work done during a regular holiday that also falls on his/her rest day, he/she shall be paid an
additional 30% of his/her daily rate of 200% [(Daily rate + COLA) x 200%] + [30% (Daily rate x
200%)]; Eg: [PhP700 x 200%] + [30%x (PhP700 x 200%)] = PhP1,820
• For work done in excess of eight (8) hours (overtime work) during a regular holiday that also falls on
the workers’ rest day, they shall be paid an additional 30 percent of their hourly rate on said day
(Hourly rate of the basic daily wage x 200 % x 130% x 130% x number of hours worked).
Eg: PhP87.50 x 200% x 130% x 130% x 2hrs = PhP591.50
HOW TO COMPUTE
SPECIAL HOLIDAY
• For work done during the special day, the workers shall be paid an additional 30 percent of their
daily rate on the first eight (8) hours of work. The Daily Rate x 130 percent plus COLA scheme will
be observed.
Eg. 700 x 130% = 910
• For work done in excess of eight (8) hours (overtime work), the workers will be paid an additional 30
percent of their hourly rate on said day. The computation will be: hourly rate of the basic daily wage
x 130 percent x 130 percent x number of hours worked.
Eg. 87.50 x 130% x 130% x 2 = 295.75
HOW TO COMPUTE
SPECIAL HOLIDAY
• For work done during a special day that also falls on the workers’ rest day, they shall be paid an
additional 50 percent of their daily rate on the first eight (8) hours of work, thus, the ‘Daily Rate x 150
percent + COLA’ computation will apply.
Eg. 700 x 150% = 1,050
• For work done in excess of eight (8) hours (overtime work) during a special day that also falls on the
workers’ rest day, they shall be paid an additional 30 percent of their hourly rate on said day, or a
computation of hourly rate of the basic daily wage x 150 percent x 130 percent x number of hours
worked.
Eg. 87.50 x 150% x 130% x 2 = 341.25
NIGHT SHIFT
DIFFERENTIAL
NIGHT- ➢ Every employee shall be paid a night shift differential
SHIFT of not less than 10% of his regular wage for each hour
of work performed between 10PM and 6AM.
DIFFERENT
IAL
EXAMPLE
Ordinary day Night Differential Pay
Night Differential Pay per hour = Hourly rate x 110%
= PHP87.50 x 110%
= PHP 96.25
Ordinary day Night Differential Overtime Pay

Night Differential Overtime Pay per hour = Hourly rate x 125% x 110%
= PHP87.50 x 125% x 110%
= PHP120.3125
Rest day OR Special non-working Holiday Night Differential Pay

Night Differential Pay per Rest day hour = Hourly rate x 130% x 110%
= PHP87.50 x 130% x 110%
= PHP125.125
Special non-working Holiday AND at the same time Rest day Night Differential
Pay
ND Pay per Special non-working Holiday Rest day hour = Hourly rate x 150% x
110%
= PHP 87.50 x 150% x 110%
= PHP144.375
Regular Holiday Night Differential Pay

Night Differential Pay per Regular Holiday hour = Hourly rate x 200% x 110%
= PHP87.50 x 200% x 110%
= PHP192.50
Regular Holiday and at the same time Rest day Night Differential Pay
ND Pay per Regular Holiday Rest day hour = Hourly rate x 260% x 110%
= PHP87.50 x 260% x 110%
= PHP250.25
Double Holiday Night Differential Pay

Night Differential Pay per Double Holiday hour = Hourly rate x 330% x 110%
= PHP87.50 x 330% x 110%
= PHP 317.625
Double Holiday and at the same time Rest day Night Differential Pay
ND Pay per Double Holiday Rest day hour = Hourly rate x 390% x 110%
= PHP87.50 x 390% x 110%
= PHP375.375
13TH MONTH PAY
LEAVES
➢ Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.
➢ This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at least
SERVICE
five days and those employed in establishments regularly employing less
than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the
INCENTIVE viability or financial condition of such establishment.
LEAVE ➢ The grant of benefit in excess of that provided herein shall not be made a
subject of arbitration or any court or administrative action.
SOLO PARENT
SOLO PARENT
OTHER LEAVES
MATERNITY PATERNITY SOLO PARENT
1. The worker must have at 1. The worker is an employee at the 1. He/she rendered at least one
least 3 monthly time of the delivery (1) year of service, whether
contributions in the 12- 2. He is cohabiting with his spouse at continuous or broken
month period immediately the time that she gives birth or 2. He/she has notified his/her
preceding the semester of suffers a miscarriage employer that he/she will avail
childbirth, miscarriage, or himself/herself of it, within a
3. He has applied for paternity leave
emergency termination of reasonable period of time; and
with his employer within a
pregnancy. 3. He/she has presented to his/her
reasonable period of time from
the expected date of delivery by his employer a Solo Parent
2. She shall have notified her pregnant spouse, or within such Identification Card, which may
employer of her pregnancy period as may be provided by be obtained from the DSWD
and the probable date of company rules and regulations, or office of the city or
her childbirth by CBA municipality where he/she
4. His wife has given birth or suffered resides.
a miscarriage.
OTHER LEAVES
MATERNITY PATERNITY SOLO PARENT
• 105 days with full pay and • 7 days of leave credits with • 7 Working days of leave
option to extend for full pay credits with full pay
additional 30 days without
pay
• Qualified solo parent,

female employee is granted
an additional 15 days with
full pay
SOCIAL SECURITY LAW

Republic Act No. 11199
• EMPLOYER
Any person, natural or juridical, domestic or foreign,

who carries on in the Philippines any trade, business,
industry, undertaking, or activity of any kind and uses
the services of another person who is under his orders as
DEFINITIONS regards the employment.
Does not include the government
Self-employed person shall be both employee and

employer at the same time.
• EMPLOYEE
Any person who performs services for an employer in

which either or both mental or physical efforts are used
and who receives compensation for such services, where
there is an employer-employee relationship.
DEFINITIONS
A self-employed shall be both employee and employer
at the same time.
• DEPENDENTS
1. The legal spouse entitled by law to receive support

from the member;
2. The legitimate, legitimated or legally adopted, and
illegitimate child who is unmarried, not gainfully
DEFINITIONS employed, and has not reached 21 years of age, or if
over 21 years of age, he is congenitally or while still a
minor has been permanently incapacitated and
incapable of self-support, physically or mentally; and
3. The parent who is receiving regular support from
the member
• COMPENSATION
All actual remuneration for employment, including the

mandated cost-of-living allowance, as well as the cash
value of any remuneration paid in any medium other
than cash except that part of the remuneration received
DEFINITIONS during the month in excess of the maximum salary
credit.
• MONTHLY SALARY CREDIT
The compensation base for contributions and benefits.
The maximum monthly salary credit to be considered

DEFINITIONS shall be PhP20,000.
• MONTHLY SALARY CREDIT
DEFINITIONS
• BENEFICIARIES
PRIMARY:
1. The dependent spouse until he or she remarries,
2. the dependent legitimate, legitimated or legally
adopted, and illegitimate children, who shall be the
primary beneficiaries of the member
DEFINITIONS
SECONDARY:
1. In their absence, the dependent parents
2. In the absence of all the foregoing, any other person
designated by the member as his/her secondary
beneficiary.
• ENTITLEMENT OF ILLEGITIMATE CHILDREN
→Dependent illegitimate children = 50% of the share of

DEFINITIONS the legitimate, legitimated or legally adopted children
→ If No dependent legitimate, legitimated or legally

adopted children of the member, illegitimate
children = 100% of the benefits
• CONTINGENCY
DEFINITIONS Retirement, death, disability, injury or sickness and

maternity of the member
• AVERAGE MONTHLY SALARY CREDIT (AMSC)
1. The result obtained by dividing the sum of the last
sixty (60) monthly salary credits immediately
preceding the semester of contingency by sixty (60),
OR
2. the result obtained by dividing the sum of all the
monthly salary credits paid prior to the semester of
DEFINITIONS contingency by the number of monthly
contributions paid in the same period,
→ Whichever is GREATER
→ Injury or sickness which caused the disability shall be
deemed as the permanent disability for the purpose
of computing the AMSC.
• AVERAGE DAILY SALARY CREDIT (ADSC)
The result obtained by dividing the sum of the 6 highest

monthly salary credits in the 12-month period
immediately preceding the semester of contingency by
180.
• SEMESTER
DEFINITIONS
A period of 2 consecutive quarters ending in the quarter
of contingency.
• QUARTER
A period of 3 consecutive calendar months ending on

the last day of March, June, September and December
• CREDITED YEARS OF SERVICE
For a member covered prior to January 1985

→ minus the calendar year for coverage plus the number of calendar
years in which 6 or more contributions have been paid from
January 1985 up to the calendar year containing the semester prior
to the contingency.
For a member covered in or after January 1985

DEFINITIONS → the number of calendar years in which 6 or more contributions
have been paid from the year of coverage up to the calendar year
containing the semester prior to the contingency
• NET EARNINGS
Net income before income taxes plus non-cash charges

such as depreciation and depletion appearing in the
regular financial statement of the issuing or assuming
institution.
DEFINITIONS
• FIXED CHARGES
Recurring expense such as amortization of debt

discount and rentals for leased properties, including
interest on funded and unfunded debt.
COMPULSORY
All employees including kasambahays or

domestic workers not over sixty (60) years
of age and their employers:
COVERAGE VOLUNTARY
Spouses who devote full time to managing

the household and family affairs, unless
they are also engaged in other vocation or
employment which is subject to mandatory
coverage
COMPULSORY
All employees including kasambahays or domestic

workers not over sixty (60) years of age and their
employers, self-employed and OFWs
COVERAGE
VOLUNTARY
Spouses who devote full time to managing the

household and family affairs, unless they are also
engaged in other vocation or employment which is
subject to mandatory coverage
Compulsory coverage of the employer shall take effect
on the first day of his operation
Compulsory coverage of the employee shall be on the

COVERAGE day of his employment
Compulsory coverage of self-employed person shall take

effect upon his registration with the SSS
Effect of Separation from Employment
The employer’s contribution on account of the

employee and the employee’s obligation to pay
contributions arising from that employment shall cease
COVERAGE at the end of the month of separation, but said
employee shall be credited with all contributions paid
on his behalf and entitled to benefits under SSS Law.
He may, however, continue to pay the total

contributions to maintain his right to full benefit.
Effect of Interruption of Business or Professional
Income
If the self-employed member realizes no income in any

given month, he shall not be required to pay
COVERAGE contributions for that month.
He may, however, be allowed to continue paying

contributions under the same rules and regulations
applicable to a separated employee member
BENEFITS
• Refer to the Law

THANK YOU
LAW ON SALES bidders the same are nearly invitations to
make proposals.
Sale by Auction Article 1476. In the case of a sale by
Is generally exercised by the auction:
sheriff in case of judicial sales arising Where goods are put up for sale by
from execution of foreclosure of auction in lots, each lot is the subject of a
mortgages. separate contract of sale.
Notaries public are also authorized A sale by auction is perfected when
to sell mortgage property foreclosed extra the auctioneer announces its perfection by the
judicially under article 3135 as amended. fall of the hammer, or in other customary
The sale by auction is perfected manner. Until such an announcement is made,
when the auctioneer announces its any bidder may retract his bid; and the
perfection by the fall of the hammer or auctioneer may withdraw the goods from the
any other customary manner. sale unless the auction has been announced to
As observed in a sale by auction be without reserve.
there are bids. the highest the bid is with A right to bid may be reserved
a smaller quantity, then it will win the expressly by or on behalf of the seller, unless
sale by auction. otherwise provided by law or by stipulation.
And if you are a bidder before the Where notice has not been given that
fall of the hammer, the bidder who made a sale by auction is subject to a right to bid on
the winning bid may retract his bid, behalf of the seller, it shall not be lawful for
Why? because there is no perfection yet. the seller to bid himself or to employ or induce
The Withdrawal is allowed because before any person to bid at such sale on his behalf or
the bid has been accepted, it is merely an for the auctioneer, to employ or induce any
offer to buy. The acceptance or ascent on person to bid at such sale on behalf of the
the part of the seller is signified by the seller or knowingly to take any bid from the
knocking of the hammer. seller or any person employed by him.
In the same token, The auctioneer Any sale contravening this rule may be
may withdraw the goods from the sale. treated as fraudulent by the buyer. (n)
The auctioneer cannot reject the winning

bid if the option has been announced to be Mode of acquiring ownership
without reserve which measures a As part of the obligations of the vendor,
reservation to withdraw the goods from The vendor must necessarily deliver and
sale with regard to advertisements for transfer ownership, delivery or tradition.
The term delivery here stands for the actual 3. Even if a period for payment
delivery. has been fixed, if the vendee has
Delivery - The thing sold shall be lost the right to make use of the
understood as delivered, when it is placed same
in the control and possession of the
vendee or buyer. This is found under Kinds of delivery:
article 1497. The article also refers to real 1. Actual delivery – involves physical
and actual delivery whereby the object of delivery of the thing like the
the sale is placed in the control and passing of a personal thing of a
possession of the vendee or his agent. personal property from one hand
- Ownership, as a consequence of to another. – actual physical
certain contracts such as sale, shall transfer of control and possession
be transferred to the vendee to the vendee-buyer. – A
upon actual or constructive stipulation designating the place
delivery and manner of delivery is
- Delivery in general is found in controlling on the contracting
article 1495. The vendor is bound parties because it is subjected to
to transfer the ownership of and stipulation.
deliver, as well as warrant the 2. Legal or constructive delivery
thing which is the object of the (under tradition) - delivery is
sale. This summarizes the represented by other signs or acts
obligations of the vendor. indicated thereof.
Intention to Transfer Ownership 3. Quasi-tradition - delivery of
In all forms of delivery, the act of delivery rights, credits or incorporeal
shall be coupled with the intention of property, made by: art 1501
delivering the thing. The act without (i) placing titles of ownership in
the intention is insufficient. the hands of the buyer, or
Requisites of Delivery (ii) allowing the buyer to make use
1. Identity of rights
2. Integrity 4. Traditions by operations of law
3. Intentional
Kinds of Constructive or Legal
When vendor is not bound to deliver Delivery
1. Vendee has not paid the price a) By legal formalities - sale is made
2. No period for payment has been through a public instrument. Gives
fixed rise only to a prima facie
presumption of delivery. (prima movable is kept or stored. – thru a
facie: sufficient to establish a fact public instrument and general. –
or raise a presumption unless delivering of keys for the purposes
disproved or rebutted). Art. 1498, of repairs, does not transfer
“When the sale is made through a ownership, so there must be a clear
public instrument, the execution intent on the part of the vendor to
thereof shall be equivalent to the deliver the object of the sale for the
delivery of the thing which is the purpose of transferring ownership
object of the contract, if from the deed to the vendee. Art 1498
the contrary does not appear or c) Traditio Longa Manu - delivery of
cannot clearly be inferred.” – a movable by mere consent or
ownership is deemed transferred agreement. Pointing at the thing.
through the execution of such a Art 1499
document. What makes it a public d) Traditio Brevi Manu - buyer
instrument is the Notarization Act simply continues in possession of
or Act of Notarization of the the thing but under ownership.
notary public Applies to movables only. Happens
Exception: If the parties have when the buyer already has
agreed that ownership shall not possession of the thing sold before
pass until certain acts shall have the sale. Art 1499 – can be applied
been fulfilled by the buyer. If the to immovables, when a lessee of
contrary intention appears from the land continues to possess the
the document, The execution of land after purchasing it from the
the public instrument will not owner.
tantamount to delivery. e) Traditio Constitutum
– the legal section that the Possessorium - seller continues to
execution of a public instrument in be in possession of the property
the case of immovables is sold but not as an owner but in
equivalent to delivery holds true some other capacity. Art 1500
only when there is no impediment
that may prevent the passing of the
property from the hands of the Article 1498 covers two kinds of
vendor into the hands of the constructive deliveries as delivery by legal
vendee. fiction: First paragraph speaks of delivery
b) Traditio Symbolica - delivery of thru public instrument, Second paragraph
keys or depository where the speaks of traditio symbolica, it requires
some requisites before it can affect the hands of third persons and he
transfer of ownership. agreed to take the necessary steps
Note: to take material possession of the
➔ Transfer of ownership and delivery thing.
are not essential elements . They ➔ The vendor does not have actual
are not piercing into the validity of possession of the thing he cannot
perfection of the contract of sale. transfer ownership by constructive
What is important is that at the delivery.
appointed time of delivery, the
seller has the right to transfer the In the case of Bucton versus Gabar, It was held
ownership of the thing which must that when the vendor sells something he does
be elicit or not prohibited by the not own yet, he is bound by the sale when he
law. acquires it later. However, these two acts are
➔ Symbolic delivery by public essential to consummate the sale. That’s why
instrument is just presumptive not it is very important to also know the phases or
conclusive. It can still be rebutted stages of the sale.
by strong evidence. It is equivalent
to actual delivery ONLY when the
object is subject to the control of
the vendor and there is no
impediment that prevents the
passing of the object from the
hands of the vendor into those of
the vendee. If the vendee cannot
enjoy the possession of the thing
because of the opposition of a third
person who is in actual possession,
legal fiction of symbolic delivery is
equivalent to actual delivery must
be sealed to reality?? Ndi q narinig.
In other words it is not enough for
the vendor to vest onto the vendee
ownership and rate of possession
over the property but it is
controlled unless the vendee is
aware of that possession in the
RA.NO. 6552: An Act to Provide the life of the contract and its
Protection to Buyers of Real Estate extensions, if any.
on Installment Payments. (b) If the contract is canceled, the
➔ "Realty Installment Buyer Act." seller shall refund to the buyer the
or the “Maceda Law.” cash surrender value of the
➔ It is hereby declared a public payments on the property equivalent
policy to protect buyers of real to fifty per cent of the total
estate on installment payments payments made, and, after five years
against onerous and oppressive of installments, an additional five
conditions. per cent every year but not to exceed
➔ In all transactions or contracts ninety per cent of the total payments
involving the sale or financing of made: Provided, That the actual
real estate on installment cancellation of the contract shall
payments, including residential take place after thirty days from
condominium apartments but receipt by the buyer of the notice
excluding industrial lots, commercial of cancellation or the demand for
buildings and sales to tenants under rescission of the contract by a
RA. 3844, as amended by RA. 6399, notarial act and upon full
[agrarian reform laws, the sale is made payment of the cash surrender
in a straight payment or one payment value to the buyer. [Why is that
only], where the buyer has paid at important? Bc in the case of Liano
least two years of installments versus court of appeals , if the buyer
[two years worth of installment], the was not given the cash surrender
buyer is entitled to the following value, then the contract is not yet
rights in case he defaults in the canceled, and since the contract is noy
payment of succeeding yet canceled, the buyer may reinstate
installments: the contract, meaning, he can pay the
(a) To pay, without additional unpaid installments within the grace
interest, the unpaid installments due period and the contract will still
within the total grace period earned continue to be effective. – as long as
by him which is hereby fixed at the the payment is done before the actual
rate of one month grace period for cancellation, 30 days from receipt of
every one year of installment the notice and full payment of the
payments made: Provided, That cash surrender value to the buyer]
this right shall be exercised by the Down payments, deposits
buyer only once in every five years of or options on the contract shall be
included in the computation of the ➔ This Act shall take effect upon its
total number of installment approval.
payments made.
➔ In cases where less than two years Note: the buyer has the right to pay in
of installments were paid, the advance, and this is the exception to the
seller shall give the buyer a grace rule of oblicon that the period should be
period of not less than sixty days respected because it is for the benefit of
from the date the installment the creditor and the debtor.
became due. - The buyer is allowed to pay in
If the buyer fails to pay the advance without any additional
installments due at the expiration interest
of the grace period, the seller may - The buyer is allowed to annotate or
cancel the contract after thirty have the repayments annotated on
days from receipt by the buyer of the certificate of title whether it is
the notice of cancellation or the of a condominium certificate,
demand for rescission of the transfer of certificate of title or
contract by a notarial act. original certificate of title, no
➔ Under Section 3 and 4, the buyer matter what kind of title he can
shall have the right to sell his have his payment annotated.
rights or assign the same to
another person or to reinstate the
contract by updating the account Rights of the Buyer and the
during the grace period and Remedies of the seller in case of a
before actual cancellation of the purchase of Personal Property (Cars,
contract. The deed of sale or
Watches, Shoes, etc.) on Installment
assignment shall be done by
Basis
notarial act.
- “RECTO LAW”
➔ Any stipulation in any contract
Art. 1484. In a contract of sale of
hereafter entered into contrary to
personal property, the price of which is
the provisions of Sections 3, 4, 5
payable in installments, the vendor may
and 6, shall be null and void.
exercise any of the following remedies:
➔ If any provision of this Act is held
[remedies of a vendor who is not paid for the
invalid or unconstitutional, no
purchase of that personal property]
other provision shall be affected
thereby.
(1) Exact fulfillment or specific rescission and it is granted
performance of the obligation, then the effect is the duty
should the vendee fail to pay; of mutual restitution,
➔ Specific Performance – a meaning, the parties now
remedy on the part of the have to return to each other
seller or creditor. whatever they may have
➔ The seller will now ask the received by virtue of the
court to compel the buyer contract. For example if
or the mortgagor to the buyer received the
specifically perform his thing like a car, he will now
obligation. The seller can have to return that car and
recover any deficiency the seller if he has received
because specific some installment payments,
performance is asking for he has to return those
the full payment. installment payments
(2) Rescission or cancel the sale or EXCEPT if there is a
contract, should the vendee's stipulation in the contract
failure to pay cover two or more stating that the installment
installments; payments previously paid
➔ Rescission. Rescission or before rescission shall be
cancellation of the contract forfeited. In case of
can only be availed of in forfeiture, then only the
case the buyer failed to pay buyer will have to return
two or more installments. the car and the installments
The creditor or seller or will be forfeited in favor of
mortgagee will be deemed the seller. The only time
to have chosen rescission when the clause on
or cancellation when he rescission is invalid if it is
either sends notice of unconscionable under
rescission to the buyer or if certain circumstances.
he takes possession of the (3) Foreclose the chattel mortgage on
thing which is sold or he the thing sold, if one has been
files an action for constituted, should the vendee's
rescission before the court. failure to pay cover two or more
In case the creditor or installments. In this case, he shall
seller or mortgagee asks for have no further action against
the purchaser to recover any ➔ is a conditional sale of personal
unpaid balance of the price. property as security for the
Any agreement to the contrary payment of a debt, or the
shall be void. (1454-A-a) performance of some other
Note: These remedies are obligation specified therein, the
ALTERNATIVE, meaning, the seller or condition being that the sale shall
the creditor can only pick one and he/she be void upon the seller paying to
cannot choose both remedies at the same the purchaser a sum of money or
time, if there are deficiency or balance left doing some other act named.
to be paid after he/she has chosen the ➔ a contract where personal
remedy wala na finish na. properties or moveables are
Exception to the rule that the remedies recorded in the chattel mortgage
are alternative: In case the seller or the register as security for
creditor or the mortgagee has chosen performance of an obligation,
specific performance and then specific meaning, it’s an accessory
performance becomes impossible, then contract of security. In other
the seller or the creditor or the mortgagee words, the creditor can go after
can still choose rescission. that contract when the principal
➔ Foreclose of the chattel mortgage, contract has been breached by the
in case the buyer has failed to pay debtor.
two or more installments. ➔ remember that there can be no
● Before foreclosure or public sale pactum commisorium or an
➔ The buyer has the right to make automatic appropriation by the
additional payments or pay in full , creditor of the thing pledged or
so he can still get back the mortgaged upon the failure of the
personal property, this is known as debtor to pay the principal
the equity redemption. The period obligation.
to exercise this is until the GENERAL RULE: There has to be
foreclosure sale because when the a public auction or a private one in
chattel mortgage has been foreclosed case the parties have to agree. The
and the property has been sold then property will be sold to the highest
the seller cannot recover any bidder in which case the creditor
balance or deficiency. can also bid and that is the only
time when he can legally become
● chattel mortgage the owner.
Note: If the creditor or seller or 2. Rescission in case the buyer fails to
mortgagee chooses to foreclose on the pay two or more installments
chattel mortgage right away, he can no 3. Or foreclosure of the chattel
longer foreclose on the real estate mortgage in case the buyer fails to
market, he can no longer go after any pay two or more installments
other guarantee, etc. note:
➔ This is the worst remedy of the ● These are ALTERNATIVE, so the
creditor and this is the last one creditor/seler/mortgagee can only
that he should choose because he PICK ONE.
will not be entitled to the ● As for the rights of the buyer, he is
deficiency and he cannot go after PROTECTED from the greedy
the other securities. creditor who after trying to
➔ If the seller assigns his credit to foreclose on the chattel mortgage
another person and that person will try to claim the deficiency .
now becomes the new creditor The buyer has a right to complain
then he is also bound by the same and not pay the deficiency because
law. that chattel mortgage answers for
➔ EXCEPTION: the full amount of his debt, even if
perverse buyer-mortgagor – If the there is a deficiency.
buyer refuses to surrender the
items to the seller. In case the This law is to prevent this practice
buyer hides the property or the (before): To remedy the abuses which are
chattel to prevent the seller from connected in connection with the
foreclosing it, then if the seller has foreclosure of chattel mortgages and to
to file extra actions to recover the prevent a creditor or mortgagee from
property like replevin or any other seizing the mortgage property. [they’ll get it
action, then the Supreme Court and then they’ll buy it at the foreclosure sale at
has held that the creditor may a very low price and then they’ll still file a suit
recover the expenses which he a case against the debtor or the mortgagor for
incurred in order to recover that the deficiency or the balance in what he has
property in order to foreclose it. failed to pay] – [where the debtor or the
mortgagor or the buyer will be unduly
TO SUM UP! These are the remedies of oppressed after he has lost the property which
the creditor: he/she has already made payments for where
1. specific performance he/she will still gonna pay for it… so, this is
what this law guards against.]
➔ applies only to a sale on Art. 1485. The preceding article shall be
installments because the buyer applied to contracts purporting to be
must have defaulted or failed to leases of personal property with option
pay at least two or more to buy, when the lessor has
installments in order for the deprived the lessee of the possession
creditor to be able to avail of the or enjoyment of the thing. (1454-A-a)
remedies of rescission or Art. 1486. In the case referred to in two
foreclosure preceding articles, a stipulation that the
➔ also applies to lease of personal installments or rents paid shall not be
property with the option to buy returned to the vendee or lessee shall be
such as the case where a car was valid insofar as the same may not be
allowed to be leased to a certain unconscionable under the circumstances.
person and then he was also given (n)
the option to buy that car after a
certain number of years. SALES: Nature, Kinds, &
➔ this law will NOT apply in the Distinctions Between Sales and other
following instances: similar contracts
(1) if the payment plan is
straight payment or one
Contract of Sale
payment. [Because it
● one of the contracting parties,
should also apply only to
namely the seller, obligates or
installment payments
binds himself to transfer the
where there are at least two
ownership and to deliver a
installments.
determinate thing and the other,
(2) Sales or mortgages of real
known as the buyer, to pay
property, meaning,
therefore a price certain in money
immovable properties
or its equivalent.
(houses, land) [the law will
● You see here that there is two
only apply to personal or
parties involved:
moveable property.]
1. One who is obligated to
(3) Replevin or an action to
transfer the ownership and
recover personal property
deliver a determinate thing
in the possession of
we refer to this person as
another.
the vendor or seller and;
2. The other who is to pay a
price certain in money or
its equivalent is the buyer or ➔ Goods or merchandise cannot
the vendee. be the equivalent of money
because that will constitute
Essential Elements of Contract of barter
Sale: ➔ Mere estimates do not fix the
● We have essential elements, natural price
elements, and accidental elements. Note: Absent any of the above elements
● Those which are necessary for the the intended sale is VOID!!
validity of the sale, if they are absent

no valid sale can be generated. Sale is a TITLE not a MODE because
1. Consent or meeting of the the mode is the tradition or delivery
minds, that is consent to ➔ Title — legal basis by which
transfer ownership in ownership is affected, the sale by
exchange for the price; itself does not transfer ownership.
➔ Are the meeting of the minds What a sale does is to create the
of the seller and the buyer that obligation to transfer ownership. It
is the seller will deliver and is not a mode because a mode is the
transfer ownership and the legal means by which ownership is
buyer will pay the purchase either created, transferred, or
price therefore. destroyed.
2. Determinate subject ➔ Under the law there are seven
matter; and modes of acquisition of
➔ Is the object which is certain ownership:
and determinate so we are 1. Occupation
talking about the determinate 2. Law
subject matter. 3. Donation
3. Price certain in money or 4. Tradition or delivery
its equivalent. 5. Intellectual creation
➔ Is the price the which must be 6. Prescription
certain in money or its 7. Succession
equivalent Mode of transferring ownership: is the
➔ This is the cause of tradition or delivery.
consideration
➔ it need not be in money Characteristics:
➔ it can be in money or its The characteristics or features of the
equivalent contract of sale include by being
● Bilateral or Reciprocal - both of minds upon the thing which is
parties are obliged to fulfill the object of the contract to upon
reciprocal obligations to one the price. – This is usually seen in the
another. The seller will deliver and second phase of the contract of sale.
transfer a determinate thing to the
buyer and the latter will be at a Two Kinds of Sales
certain price or equivalent 1. Absolute Sale — is not subject to
therefore. - both parties may any condition and follows the
reciprocally demand performance GENERAL RULE: that ownership
subject to the provisions of the law or title is transferred or passed
governing the form of contracts. upon delivery. Whether actual or
● Consensual - it is perfected by mere constructive delivery. – [even if the
consent. contract of sale is perfected by mere
“mere consent” - consent as to the consent, ownership is transferred only
price and the manner of payment upon delivery.]
and object. 2. Conditional Sale — is one where
● Commutative - the thing sold is ownership is not transferred until
considered equivalent to the price the condition is fulfilled.
paid and the price paid is the
equivalent of the thing sold. How will we know if a sale is an
● Onerous - The thing sold is absolute sale or conditional sale?
conveyed in consideration of ➔ If the condition is imposed upon
purchase price and the purchase the obligation of the seller to
price is paid in consideration of transfer ownership then it is a
the conveyance of a thing conditional sale, meaning,
delivered. - the price is the valuable ownership will not be transferred until
consideration for the delivery and the happening of the condition. But if
transfer of ownership of the thing sold. the condition is simply imposed
● Principal - its existence does not upon the payment of the price
depend upon the existence and then that’s an absolute sale and the
validity of another contract. contract of sale is already
● Nominate - It has a specific or perfected, why? Because payment
particular name given by law. and any condition imposed upon
Consensual payment is part of the consummation
➔ Perfected by mere consent, that is, stage of the contract of sale. Since it's
at the moment there is a meeting in the consummation or
performance there is already a rise to the remedies of
perfected contract. The contract of either specific performance
sale already exists. or rescission with damages
➔ The LAW allows the parties to in either case.
stipulate that ownership shall not ● In a contract to sell, the perfection
pass to the buyer until the price is of the contract only results in a
fully paid. This is what leads to the reciprocal suspensive condition
contract to sell. which creates the obligation to
deliver on the part of the seller
Contract to Sell only if the buyer fully pays the
● It is a specie of conditional sales, price or if other conditions are
it is subject to the conditions that fulfilled.
must be fulfilled in order for it to ➔ The thing may be in the
give rise to an absolute contract of possession of the buyer but
sale. the title and the ownership
● It is a bilateral contract where the is reserved with the seller
ownership or title to the thing is and will only pass to the
retained with the seller despite buyer full payment by the
delivery to the buyer until buyer or fulfillment of
fulfillment of positive suspensive whatever else condition.
condition, usually the full payment ➔ The effect of failure to pay
of the purchase price. the full payment is not it
just prevents the obligation
Distinguishment of absolute sale of the seller to deliver from
from a contract to sell coming into existence. In
● In an absolute sale the perfection other words, the obligation
of the contract results in the of the seller does not exist ,
reciprocal obligations of the seller it does not have to deliver
having to deliver the thing and the ownership anymore.
buyer having to pay the price. ➔ The remedy of the seller in
➔ the title passes right away this case is merely an
upon delivery. action to recover
➔ In case there is failure to possession of the property.
pay the purchase price this

only results in the breach of
the obligations which give
Distinguishing contract of sale from ➔ In a contract of sale the
other different but similar seller warrants the thing, in
arrangements: an agency to sell there is no
1. Agency to Sell — a contract of sale warranty on the part of the
is different from an agency to sell. agent.
By the contract of agency, one ➔ In a contract of sale it
person binds himself to do cannot generally be
something or render some service unilaterally revoked, in an
on behalf of or in representation of agency to sell the principal
another with the consent or may unilaterally revoke the
authority of the latter. It means arrangement because it is a
that the agent is the extension of fiduciary relationship
the principal and he can perform which is founded upon
acts which bind the principal in trust.
case he acts within the scope of his ➔ In a contract of sale, at the
authority. effect of paying the
➔ It is different from a purchase price is that the
contract of sale because if buyer becomes the owner
the buyer pays the price and he can exercise the
then he becomes the owner, attributes of ownership
but in the agency to sell, such as the right to destroy,
the agent receives the price dispose, fruits, etc., but in
and he has to give it to the an agency to sell, the agent
principal, the principal still must act according to the
remains to be the owner instructions of the
and ownership does not go principal.
to the agent. 2. Donation — a contract of sale is
➔ In a contract of sale the different from donation. Sale is an
buyer cannot generally onerous contract and involves a
return the thing after valuable consideration while
consummation of the donation does not. The
contract. In an agency to consideration in donation is the
sell, if the agent is unable pure liberality of the donor
to sell the things he may because this is a gratuitous
return the things to the contract.
principal.
3. Dation in Payment (Dacion en
Pago)
➔ Sales is the law that governs dacion
en pago but there are some
differences. Even though dacion en
pago is governed by a the law on
sales, a contract of sale does not Natural Elements
involve any pre-existing obligation, These are those which are inherent in the
but a dation in payment involves a contract and are deemed to exist together
pre-existing obligation which will in the contract of sale in the absence of
be extinguished by virtue of the clear contrary agreement. So apparently
dation the natural elements are WAIVABLE!!
➔ In a contract of sale obligations are ● Waivable – It is an act of voluntarily
created [obligation of the seller to giving up a right, and can apply to a
deliver and obligation of the buyer to variety of legal situations including
pay]. In dation obligations are knowingly giving up a legal right such
extinguished as a speedy trial, a jury trial, giving up
➔ In a contract of sale the cost for some rights in a settlement talk, or not
the buyer is to achieve or acquire enforcing a term of contract
the thing and the cost for the seller
is to obtain the price. The cost in The New Civil Code enumerates Two
dation is simply for the Natural Elements:
extinguishment of the obligation Those under WARRANTIES:
on the part of the debtor. 1. Warranty against eviction (found
➔ In a contract of sale there is much in article 1548) and;
more freedom to determine the 2. Warranty against hidden defects
price, while in dation there is less (found under article 1561).
freedom because it serves the thing
paid. It is meant to extinguish the
Accidental Elements
pre-existing obligation of the
These are those which are not essential or
debtor.
natural, they may or may not exist, they
depend on the stipulations of the parties
4. Contract of Lease
just like conditions, payment of interest,
➔ 12;36
place and time of payment and the like..
The Phases that a contract goes longer unilaterally withdraw from
through may be summarized as the contract – if there is a change
follows: of heart of one of the parties, can
1. Preparation, conception, or he or she just simply withdraw
generation from the contract? NO, he cannot.
- which is the period of Unilateral withdrawal is not
negotiation and bargaining, allowed. If there is already a
ending at the moment of meeting of the minds, it has
the agreement of the already passed the meeting of the
parties. minds or perfection stage, and
2. Perfection or birth of a contract neither party can’t withdraw.
- This is where we will be EXEMPTION: only if they both
determining the existence consented to that.
of the essential elements, ➔ In a sale by auction, perfection is
and the consummation or when the auctioneer announces its
death, which is the perfection by the fall of the
fulfillment or performance hammer or in another customary
of the terms agreed upon in manner. – Sale by auction is found
the contract. in article 1476 of the New Civil

Code.
If you are asked, what if there is non

delivery of the item? Will that tantamount
to avoid a contract of sale? NO, it will not
because the fulfillment or performance of
the terms agreed upon in the contract is
found in the consummation stage. The
determination of the validity of the
contract is at the perfection stage.
Note: Delivery or non delivery or mistaken

delivery is NOT!! an essential element of a
contract of sale. (meeting of the mind, object,
price certain)
➔ If there is already a meeting of the Obligations of the Vendor includes:

minds, either of the parties can no ➔ To transfer ownership
➔ To deliver the thing and its parties can agree by stipulation,
accessories and accessions that ownership will be reserved
➔ To make warranties until payment of the price.
➔ To take care of the thing with the 2. The contracts to sell. Are
proper diligence pending the bilateral contracts which are
delivery of the object subject to suspensive conditions.
➔ Pay the expenses for execution The obligation to deliver and to
➔ Registration of the sale except of enter into a contract of sale, it is
course of there is stipulation to the subject to a suspensive condition
contrary usually full payment of the
➔ To give the buyer the right to purchase price.
examine the goods 3. The case of sales upon acceptance
➔ To enter into a contract with a trial approval or satisfaction,
carrier on the buyers behalf if a because in these kinds of sales the
reasonable under the ownership passes to the buyer only
circumstances when the buyer signifies his
➔ To notify the buyer of the necessity acceptance or approval or he
to ensure the goods if it is usual to performs an act adopting the
ensure such goods. transaction or if he does not
signify his acceptance or approval
Transfer of Ownership but he retains the goods without
Rule: ownership is transferred upon giving notice of his rejection and
delivery whether actual or constructive. then there is a period to set for
- payment does not affect ownership which he must give a notice then
because payment goes into the period expires or if there is no
consummation in failure to pay period fixed then upon expiration
and it's simply a breach, which of a reasonable time.
gives rise to the actions of specific Note: Sales on Acceptance are different
performance or a rescission. from Sales on Returns,
Exceptions: when ownership does not pass
on delivery
1. If there is a contractual
stipulation reserving ownership,
also called as “Pactum Reservati
Dominii” or the contractual
reservation of title. – So, the

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CPA in Transit Reviewer: Law on Sales 1

2017-2018 ed. RFBT

1. Preparation/Conception- the time By contract of barter or exchange, one of the

Sale or Return Goods Delivered Through Carrier

Common forms of document of title Who may negotiate negotiable document

NOTE: Vendor may ask for reformation, or

3. Debtor must pay the assignee:

Q: Are there instances where the Statute of B. OPTION CONTRACT

No. 109125, Dec. 2, 1994). The court Note: It is applicable only to executory contracts and

Q: Andres leased his house to Iris for a period of Q: Differentiate an option contract from a right

G. CONTRACT TO SELL document entitled "Receipt of Down Payment"

Q : What is the status of the following contracts XPN: Even when the property

who did not acted in bad A. SALE BY A PERSON WHO DOES NOT OWN THE

2. When not examined by the buyer – it is c. when the seller of the

But if she was wrong in her speculation then she 2. FOB (Free On Board) – when goods are

Was Dehlma a purchaser in good faith? Knowledge gained by the second buyer of the

and thereby to acquire the direct X. REMEDIES OF AN UNPAID SELLER

Q: What are the alternative remedies in case of payable on installments. The law declares as

the parties, as shown not necessarily by the operation, he was required to execute a deed of

1. Every disposition, or attempt to Q: What is a condominium project?

REGISTRATION AND LICENSE TO SELL Q: When is a subdivision or condominium

Note: Renewal of registration for the succeeding must be presented in such manner that

1. violated any provision of this Decree or Q: Within what period must the owner or

Q: May payment made by a buyer be forfeited in Q: When can there be a Take‐Over

Q: What are common areas? corporation shall constitute the

7. Anything which is Contrary to public to the patent shall belong to the person

authorization, exercised any of the rights Q: What if the ground/s for cancellation relate to

Inc. v. CA, G.R. No. 118708, Feb. 2, 1. The Director of Legal Affairs may grant a

D. NON‐REGISTRABLE MARKS designate the goods or services in

G. WELL‐KNOWN MARKS Q: What are the rights of a registered mark

Q: What should an application for registration of c. If its registration was obtained

Q: When are neighboring rights not applicable? irrespective of the nationality or

by adminin Uncategorizedon Posted onJanuary 7, 2023

Bouncing Checks Law (B.P. 22)

What acts are penalized under the law?

A. Drawing a Check Without Sufficient Funds (Sec. 1)

1. A person makes or draws and issues any check

B. Failing to Keep Sufficient to Cover a Check Issued (Sec. 1, par. 2)

Who is liable for violating the bouncing checks law?

What should the drawee do once the check bounces? (Sec. 3)

Is a notice of dishonor an indispensable requirement in a prosecution for violation of B.P.

How should a notice of dishonor be served on the drawer?

What evidence is needed to prove receipt of notice of dishonor?

When should a complaint for violation of B.P. 22 be filed?

What is the penalty for violation of B.P. 22?

Source: Dela Calzada Legal, https://www.delacalzadalegal.com/uncategorized/legal-primer-on-

Data Privacy Act (RA 10173)

A. Personal Information vs. Sensitive Personal Information

(Ex. Name, photo, signature, biometric data)

(Ex. username, password, IP address, location, cookies, birthday)

Sensitive personal information refers to personal information:

(2) About an individual’s health, education, genetic or sexual life of a person,

(3) Issued by government agencies peculiar to an individual which includes,

(4) Specifically established by an executive order or an act of Congress to be

Other important terms to remember:

Data subject refers to an individual whose personal, sensitive personal, or privileged

Personal information controller refers to a person or organization who controls the

(1) A person or organization who performs such functions as instructed by

(2) An individual who collects, holds, processes or uses personal information

Personal information processor refers to any natural or juridical person qualified to