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eSan Beda College of Law Course Outline Atty. Maria Zarah R.

Villanueva-Castro

SALES & LEASE

I.

CONTRACT OF SALE, CONCEPTS (NCC 1458) A. B. C. Characteristics (consensual, bilateral, onerous, commutative, nominate, principal) Essential requisites (CASE: Leabres vs. Court of Appeals, December 12, 1986) Sale as distinguished from other contracts 1. Barter (NCC, 1638 & 1468) 2. Donation 3. Contract for piece of work (NCC, 1467; CASES: Co vs. CIR, 99 Phil 841; CIR vs. Arnoldus Carpentry, 159 SCRA 199) 4. Agency to Sell (NCC 1466; CASES: Quiroga vs. Parsons, 38 Phil 501; Gonzalo Puyat & Sons, Inc. vs. Arco Amusement, 72 Phil 402) 5. Lease Kinds of sale 1. Absolute 2. Conditional - Contract to sell as distinguished from contract of sale (NCC 1466; CASES: Dignos vs. CA, 158 SCRA 375; Rayos vs. CA, 434 SCRA 365; Clemeno, Jr. vs. Lobregat, 09 September 2004)

D.

II.

OBJECT OF SALE (NCC 1306) A. B. C. D. Subject matter must be licit (NCC 1459) Subject matter must be determinate (NCC 1460; Melliza vs. City of Iloilo, 23 SCRA 477) Sale of things having potential existence (NCC 1461) Sale of hope or expectancy (NCC 1461) 1. emptio rei speratae 2. emptio spei Sale of existing and future goods (NCC 1462) Sale of undivided interest (NCC 1463; CASE: Almendra vs. IAC, November 21, 1991) Sale of fungible goods (NCC 1464) Sale of things subject to resolutory condition (NCC 1465)

E. F. G. H.

III.

PRICE A. B. C. D. E. F. G. Certainty of price (NCC 1469) Who may determine price (NCC 1469, 1473-74) Effect of gross inadequacy of price (NCC 1470) Effect where price is simulated (NCC 147; CASE: Bayongayong vs. CA, 430 SCRA 210) Certainty of price of securities, grains, liquids, etc. (NCC 1472) Effect of failure to determine price (NCC 1474) Meeting of minds as to price (CASES: Mapalo vs. Mapalo, 17 SCRA 114; Velasco vs. Court of Appeals, 51 SCRA 439; Co vs. CA, 286 SCRA 76; Villanueva vs. CA, 267 SCRA 89; Swedish Match vs. Court of Appeals, 20 October 2004)

IV.

FORMATION/PERFECTION OF CONTRACT OF SALE (NCC 1475) A. Option contract (NCC 1479; CASES: Adelfa Properties vs. CA, January 25, 1995; Atkins, Kroll & Co. vs. Cua Hian Tek, 102 Phil 948; Sanchez vs. Rigos, 45 SCRA 368; Ang Yu Asuncion vs. CA, December 2, 1994; Abalos vs. Macatangay, Jr. 30 September 2004; Riviera Filipina Inc. vs. CA, 380 SCRA 245; Equatorial Realty Development vs. Mayfair Theater Inc. 264 SCRA 483; Buot vs. CA, 357 SCRA 846; Bible Baptist Church vs. CA, 26 November 2004) - Option contract distinguished from contract of sale B. C. D. E. F. Mutual promise to buy and sell (NCC, 1479) Status of advertisements (NCC 1325 & 1326) Acceptance by letter or telegram (NCC 1319) Perfection of sale by auction (NCC 1476) Earnest money (NCC 1482); distinguished from option money (CASES: Limson vs. CA, 357 SCRA 209; San Miguel Properties vs. Huang, 336 SCRA 2000) Form of Sales (NCC 1483, 1874, 1581, 1403[2,a,d,e])

G.

V.

PARTIES TO A CONTRACT OF SALE (NCC 1327, 1489) A. B. C. Sale by a minor (NCC 1489) Sale between spouses (NCC 1490; CASE: Matabuena vs. Cervantes, 38 SCRA 284) Special incapacity 1. Guardians, agents, and administrators 2. Judges 3. Lawyers 4. Public officers and employees (NCC 1491-92; CASES: Rubias vs. Batiller, 51 SCRA 120; Distajo vs. CA, 339 SCRA 52; Valencia vs. Cabanteng, 196 SCRA 302; Ramos vs. Ngaseo, 445 SCRA 529; Pabugais vs. CA, G.R. No. 156846, 23 February 2004)

VI.

OBLIGATIONS OF THE SELLER A. B. Preservation of the object of sale (NCC 1163) Transfer of ownership and delivery of the object 1. Concept of delivery or tradition a. Ways of effecting delivery (NCC 1496-1501) (1) actual or real (NCC 1497) (2) constructive or legal (NCC 1498-1501; CASES: Sabio vs. International Corporate Bank, 364 SCRA 385; Phil. Suburban Development Corp. vs. Auditor General, 63 SCRA 397)
(i) public instrument (ii) traditio longa manu (iii) tradition brevi manu (iv) traditio constitutum possessorium (v) quasi-traditio

(3) special rules on:

(i) Contract of sale or return (NCC 1502) (ii) Contract of sale on trial or approval (NCC 1502) (iii) Sale of specific goods with reserved title (NCC 1503) (iv) Delivery to carrier on behalf of the buyer (NCC 1503) (Shipping terms: [C.O.D; F.O.B.; C.I.F.]) (v) When person selling is not the owner (NCC 1505) (vi) Sellers title is voidable (NCC 1506)

(CASES: Edu vs.Gomez, 129 SCRA 601; Duran vs. IAC, 138 SCRA 489)

b. When obligation to deliver arises (NCC 1524) (CASES: Addison vs. Felix, 38 Phil 404; Pasagui vs. Villablana, 68 SCRA 18; Amigo vs. Teves, 96 Phil 252; Banzon vs. Cruz, 45 SCRA 475; EDCA Publishing vs. 184 SCRA 614; Alliance Tobacco Corporation vs. Philippine Virginia Tobacco, 179 SCRA 336) c. Other rules on delivery: (1) Sale of real property by unit of measure or number (NCC 1539-41; Sta. Ana Jr. vs. Hernandez, 18 SCRA 973) (2) Sale of real estate made for a lump sum (NCC 1542; Semira vs. CA, 230 SCRA 577; Balantakbo vs. CA, 249 SCRA 323; Roble vs. Arbasa, 362 SCRA 362 SCRA 69) (3) Rules in case of double sale (NCC, 1544; CASES: Paylago vs. Jarabe 22 SCRA 1247; Hanopol vs. Pilapil, 7 SCRA 452; Agricultural & Home Extension Development Group vs. CA, 213 SCRA 563; Balatbat vs. CA, August 28, 1996; Caram vs. Laureta 103 SCRA 7; Taedo vs. CA, January 22, 1996; Tanongon vs. Samson, 382 SCRA 130; Consolidated Rural Bank vs. CA, 17 January 2005; Dela Merced vs. GSIS, 365 SCRA 1; San Lorenzo Development Corp. vs. CA, 449 SCRA 99; Carumba vs. CA, 31 SCRA 558) C. D. E. Delivery of fruits and accessories (NCC 1537) Payment of expenses for execution and registration (NCC 1487) Conditions and Warranties 1. Condition; concept (NCC 1545) 2. Warranty (1) express warranty (NCC 1546) (2) implied warranties (NCC 1547)
(i) warranty on sellers title; liability in case of eviction (NCC, 1548-1559; CASES: JM Tuazon & Co., Inc. vs. CA, 94 SCRA 413; Escaler vs. CA, 138 SCRA 1) (ii) warranty against hidden defects of, or encumbrances upon the thing sold; vendors responsibility in case of breach (NCC 1560 1561, 1566;CASES: Moles vs.IAC, 169 SCRA 777; Philippine Manufacturing Co. vs. Jucro, 48 Phil 621; Nutrimix Feeds Corporation

vs. CA, 25 October 2004; Tan Chun Suy vs. CA, 229 SCRA 151) (iii) quality or fitness of goods (NCC 1562) --merchantability and fitness distinguished --rule in case of sale under a patent or trade name (NCC 1563) --effect of usage of trade (NCC 1564) --rule in case of goods sold by sample (NCC 1565) (vi) alternative remedies of buyer to enforce the warranties under 1561, 1562, 1564, 1565 & 1566; prescriptive period (NCC 1567 & 1571) (vii) loss of thing sold due to hidden defects (NCC 1568- 69) (viii) applicability of warranty on judicial sales (NCC 1570) (ix) prescriptive period of action (NCC 1571) (x) rule on sale of animals (NCC 1572-1581)

VII.

DOCUMENTS OF TITLE A. B. Concept & functions Common forms of documents of title 1. dock warrant 2. bill of lading 3. warehouse receipt 4. quedan Classes of documents of title 1. Negotiable documents of title (NCC 1508-11) a. how negotiation is made b. who may negotiate (NCC 1512) c. rights of person to whom document has been negotiated (NCC 1513; 1519) d. transfer of order document without indorsement (NCC 1515) 2. Indorser not a guarantor (NCC 1517) 3. Negotiation not impaired by fraud, mistake, etc (NCC 1518) 4. Non-negotiable documents of title (NCC 1510) - rights of person to whom document has been transferred (NCC 1514) 5. Warranties of a person negotiating or transferring document (NCC 1516) 6. Rules on levy/garnishment of documents of title

C.

VIII. RIGHTS AND OBLIGATIONS OF THE VENDEE A. Principal obligations of the vendee: (NCC 1582) 1. 2. 3. 4. B. No obligation to accept delivery by installments (NCC 1583) Modes of manifesting acceptance (NCC 1585) Effect of a wrongful refusal to accept (NCC 1588) Liability for interest (NCC 1589)

Rights of the vendee: 1. Right to examine the goods before delivery (NCC 1584) 2. Acceptance not a bar to action for damages (NCC 1586) 3. No obligation to return goods wrongfully delivered (NCC 1587) 4. Right to suspension of payment of price (NCC 1590) 5. When rescission of sale of real property may be made (NCC 1591-92) 6. Rescission in case of sale of movable thing (NCC 1593)

(CASES: Arra Realty Corporation vs. Spouse Arguelles, 20 September 2004; Irigan vs. CA, 366 SCRA 41; Laforteza vs. Machuca, 333 SCRA 643; Vda. De Mistica vs. Naguiat, 418 SCRA 73; Gomez vs. CA, 340 SCRA 720; Odyssey Park vs. CA, 280 SCRA 253; See also pertinent provisions of RA 6552)

IX.

ACTIONS FOR BREACH OF CONTRACT OF SALE OF GOODS A. Available remedies on the part of the seller: 1. Action for payment of price (NCC 1595) 2. Action for damages in case of non-acceptance of goods (NCC 1596) 3. Action for rescission of contract (NCC 1597) 4. Unpaid Seller a. Concept (NCC 1525) b. Remedies of an unpaid seller (NCC 1526-1535) (1) Lien on the goods (2) Right of stoppage in transitu (3) Right of resale (4) Right to rescind Available remedies on the part of the buyer: 5. Action by buyer for specific performance (NCC 1598) 6. Action by buyer for rescission or damages for breach of warranty (NCC 1599) 7. Rule in case of sale by description or by sample (NCC Article 1481) Recto Law (Sale of Movables on Installments) (NCC 1484-86; CASES: Levi Hermanos, Inc. vs. Gervacio, 69 Phil 52; Zayas vs. Luneta Motor Company, 117 SCRA 726; Borbon II vs.

B.

C.

Servicewide Specialists, Inc., July 11, 1996; Bachrach Motor Co. vs. Millan, 61 Phil 409; Tajanlangit vs. Southern Motors, Inc. 101 Phil 606; Cruz vs. Filipinas Investment & Finance Corp., 23 SCRA 791; PNB vs. Office of the President, January 18, 1996; Layug vs. IAC, 167 SCRA 627; See also pertinent provisions of RA 6552) X. XI. RISK OF LOSS (NCC 1174, 1493-94; 1504, 1538, 1189) EXTINGUISHMENT OF SALE (NCC 1600) A. B. C. Common Causes Special Causes Extra-special Causes 1. Conventional redemption (NCC 1601 to 1616; CASES: Catangcatang vs. Legayada, 84 SCRA 51; Villarica vs. Court of Appeals, 26 SCRA 189; Diamante vs. CA, 206 SCRA 52; Vda. De Urbano vs. GSIS, 367 SCRA 672; Legaspi vs. CA, 142 SCRA 82) a. b. c. d. e. Definition Distinguished from option to purchase Period of redemption (NCC 1606) Effect when no redemption is made Equitable mortgage (NCC, 1602-06; CASES: San Pedro vs. Lee, et al. 28 May 2004; Ceballos vs. Intestate Estate of the late Emigdio Mercado, 28 May 2004; Cruz vs. Court of Appeals, 06 October 2003; Balatero vs. IAC, 154 SCRA 530; Bundalian vs. CA, 129 SCRA 645; Lacorte vs. CA, 286 SCRA 24; Camus vs. CA, 222 SCRA 612; Dapiton vs. CA, 272 SCRA 95)

f. Right of the parties to the fruits of the land (NCC 1617) g. Right of vendor a retro as to charges/encumbrances (NCC 1618) 2. Legal Redemption; concept and instances (NCC 1619-1623; CASES: Legaspi vs. CA, 142 SCRA 82; Alonzo vs. IAC,150 SCRA 259; Reyes vs. Concepcion 190 SCRA 171; Uy vs. CA, 246 SCRA 703; Primary Structures Corporation vs. Sps. Valencia (GR No. 150060, August 19, 2003); Lee Chuy Realty Corporation vs. Court of Appeals, December 4, 1995; Francisco vs. Boiser, 332 SCRA 792) XII. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS (NCC 1624 to 1635) A. Concept B. Excluded Cases of Assignment (NCC, 1635) C. Perfection (NCC, 1624-25; CASE: C&C Commercial Corporation vs. PNB, 175 SCRA 1) D. Effects of Assignment (NCC, 1626-27) E. Warranties of Assignor (NCC, 1628-29)

F. 1 2 G.

Special Rules 1. Assignment/Sale of Inheritance (NCC, 1630-33) 2. Assignment of Incorporeal Right under Litigation (NCC, 1634) Right of Repurchase (NCC, 1634-35)

XIII. LEASE A. Concept and Scope (NCC, 1642-44) 1. Distinctions: a. lease and sale b. lease of things and lease of services c. lease of services and contract for piece of work d. lease of services and agency 2. Lease of consumable goods (NCC, 1645) B. Lease of Rural and Urban Lands 1. 2. 3. 4. Disqualifications of lessee (NCC, 1646 in relation to 1490-91) Recording of lease (NCC, 1647-48) Assignment of lease (NCC, 1649) Sublease (CASE: Malasarte vs. CA, 178 SCRA 310) a. distinguished from assignment of lease b. right of lessee to sublease (NCC, 1650) c. obligations of sublessee (NCC, 1651-52)

5. Obligations of the Lessor a. General obligations (NCC, 1654) b. Warranties of lessor (NCC, 1653) c. Alteration of the thing leased (NCC, 1661) d. Useful improvements and ornamental expenses (NCC 1678) (CASES: Chua Tee Dee vs. CA, GR 135721, 27 May 2004; Tagbilaran Integrated Sellers Association vs. CA, 444 SCRA 193) 6. Obligations of the Lessee a. General Obligations (NCC, 1657) b. Urgent Repairs (NCC, 1662) c. Trespass made by a third person (NCC, 1663-64) 7. Remedies of a party in case of failure of the other to comply with his obligation/s a. Rescission (NCC, 1659) b. Remedies of lessee (1) when the thing leased is totally or partially destroyed (NCC, 1655) (2) when the lessor fails to make repairs (NCC, 1658) (3) dangerous condition of the thing leased for habitation (NCC, 1660) (4) Return of the thing leased (NCC 1665-66) (5) Liability for loss or deterioration of the thing leased (NCC 1667-68)

c. Remedies of the Lessor (1) Ejectment; grounds (NCC 1673) d. Termination of lease by the purchaser of the leased land (NCC 1676-77) e. See also RA 9161 (Rental Reform Act of 2001) 8. Expiration of lease (NCC 1669) a. Implied new lease (NCC 1670 & 1672) b. Rule in case of continued possession over lessors objection (NCC 1671) c. Duration of rural lease (NCC 1682) 9. Obligation of outgoing/incoming lessee or lessor (NCC 1683)

XIV. BULK SALES LAW