SALES

Contract of Sale By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional
(Art. 1458)
WHEN CONTRACT OF SALE CONDITIONAL
Where the sale contemplates a contingency, and in general, where the contract is subject to certain conditions, usually the full payment
of the purchase price. The delivery of the thing sold does not transfer ownership until the condition is fulfilled.
WHEN CONTRACT OF SALE ABSOLUTE
Where the sale is not subject to any condition and where title or ownership passes to the buyer upon delivery of the thing sold.

Characteristics of a Contract of Sale:

1. Consensual it is perfected by mere consent
2. Bilateral both contracting parties are bound to fulfil obligations reciprocally towards each other the seller, to deliver and transfer
ownership of the thing sold and the buyer, to pay the price
3. Onerous the thing sold is conveyed in consideration of price or money
4. Commutative the thing sold is considered the equivalent of the price paid and vice versa
5. Nominate it has a particular/special name or designation in the Civil Code
6. Principal it can stand alone. It does not depend for its existence and validity upon another contract
Elements of a Contract of Sale
1. Consent (Meeting of the Minds)
Consent on the part of the seller or vendor to transfer and deliver and on the part of the buyer or vendee to pay
Parties must have legal capacity to give consent and to obligate themselves
Acceptance must be absolute
2. Object (Subject Matter)
Determinate thing which is the object of the contract
Can be a thing or a right
3. Cause (Consideration)
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 Price certain in money or its equivalent

Equivalent checks or promissory notes; does not include goods or merchandise
Thing as an Object of Sale
REQUISITES:
1. IT MUST BE DETERMINATE it is particularly designated or physically segregated from all others of the same class.
Examples:
As only Toyota car, Model 1990 with Motor No. 123123 and Serial No. 456456
The house located at the corner of 1st and 45th Streets
However, it is sufficient that the thing is determinable or capable of being made determinate without the necessity of a new or further
agreement between the parties to ascertain its identity, quantity or quality.
Examples:
All the cavans of rice in As bodega in Bacolod City
One of As cars (thing becomes determinate once delivered)
2. IT MUST BE LICIT must not be contrary to law, morals, good custom, public order or public policy, must not be outside the commerce
of man and must not be impossible.
3. THE VENDOR MUST HAVE THE RIGHT TO TRANSFER OWNERSHIP AT THE TIME IT IS DELIVERED he must be the owner of or at least
must be authorized by the owner of the things sold.
However, it is not required that the vendor must have the right to transfer ownership of the property sold at the time of the perfection of
the contract, provided that he has the ownership at the time the thing is to be delivered. Ownership is transferred by delivery and not by
the mere perfection of the contract.
SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei Speratae)
Sale of a thing not existing at the time the contract is entered into, provided that it has the potential or possible existence, that is, it is
reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the
seller, and the title will vest in the buyer the moment the thing comes into existence.
Examples:
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Wine the vine is expected to produce

Milk a cow may yield
Grain a field may grow in a given time

SALE OF HOPE OR EXPECTANCY (Emptio pei)

Efficacy of which is deemed subject to the condition that the thing will come into existence
Failure of the expected event does not invalidate the sale
The hope existed at the time the sale was entered
Example:

Sale of undrawn sweepstakes tickets

SALE OF VAIN HOPE OR EXPECTANCY IS VOID

Example: Sale of falsified or drawn sweepstakes tickets
SALE OF FUTURE GOODS
A sale of future goods is valid only as an executor contract to be fulfilled by the acquisition and delivery of the goods specified.
Future Goods
Things which the seller does not have in possession, but which he intends to acquire by producing, manufacturing, or purchasing before
the day of delivery
Example:
A contract of sale between B, manufacturer of shoes and C whereby, B is to manufacture 100 pairs of shoes for C within two weeks
CONTRACT FOR A PIECE OF WORK
Goods are to be manufactured especially for the buyer and not readily saleable to others in the manufacturers regular course of
business
SALE SUBJECT TO A CONTINGENCY OR RESOLUTORY CONDITION

There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (Art. 1462)
Example:
Kath enters into a contract with Moises whereby she sells to Moises a Cadillac car she should receive is she wins the Miss Universe title. The
contingency here is Kaths winning of the Miss Universe title.
Resolutory Condition
An uncertain event upon the happening of which the obligation subject to it is extinguished
Example:
A sold a purchase of land to B with a right to repurchase within 3 years. After 1 year, B sold the land to C. If after 1 year, A exercises his right to
repurchase, C loses ownership. The right to repurchase is the resolutory condition.
Right as an Object of Sale
A right may only be a valid object of sale if it is transmissible.
Rights are transmissible by:
a. Provision of law
b. Stipulation of the parties
c. Personal in character
Rights which are transmissible:

Right of Usufruct
Right of Redemption

Rights which are intransmissible:

Right of Suffrage
Right to public office

Rights which are personal in character:

Right to be a partner in a partnership

Right to act as an agent

SALE OF AN UNDIVIDED INTEREST

BY SOLE OWNER
He can sell the entire portion, a specific portion, or an undivided interest of the thing
As legal effect, the buyer becomes co-owner of the thing
The buyer acquires full ownership of his part, therefore, he can sell it
BY CO-OWNER
The co-owner can dispose of his share even without the consent of the other co-owner/s
In both cases, sales are limited to the portion which may be allotted to the buyer in the divison of the thing upon termination of the coownership

SALE OF FUNGIBLE GOODS

FUNGIBLE GOODS goods of which any unit is, from its nature or by mercantile usage, treated as the equivalent of any other unit
The owner of a mass of goods may sell only an undivided share, provided the mass is specific or capable of being made determinate
EFFECTS OF THE SALE
1. The buyer becomes a co-owner of the whole mass in the proportion in which the definite share bought bears to the mass.
2. If the mass of the fungible goods is less than what was sold, the buyer becomes the owner of the whole mass.
The seller shall supply whatever is lacking of the same king and quality of the goods, subject to any stipulation to the
contrary
All the parties interested bear the risk of the loss of the whole mass of thing in proportion to their various holdings
WHEN PRICE CONSIDERED CERTAIN
1. If the parties have fixed or agreed upon a definite amount
Fixing of the price can never be left to the discretion of one of the party
If only either party fixed the price and the other accepted, the sale is perfected
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2. If it be certain with reference to another thing certain

3. If the determination of the price is left to the judgment of a specified person or persons
If the third person acted in bad faith or by mistake, the court may fix the price
Mere error in the judgment cant serve as a basis for disregarding the price fixed
If the third person refuses or cant fix the price, the contract of sale shall be ineffective, unless the parties subsequently agree upon
the price
If the person is prevented from fixing the price by either the seller or buyer, the innocent party may rescind the contract OR ask for
the fulfilment, in w/c case, the court will fix the price. The innocent party is entitled to damages.
GROSS INADEQUACY OF PRICE
Does not affect the validity of the contract
Indicates a defect in the consent
Parties may intend to execute a contract of donation instead of contract of sale
SIMULATED PRICE (feigned or pretended price)
The sale is void but the contract shall be valid as donation
PRICE OF SECURITIES, GRAINS & LIQUID
The price of the contract of sale shall be considered certain when:
1. The price fixed is that w/c the thing sold would have on a definite day
2. The price fixed is that w/c the thing sold would have in a particular exchange or market
3. The amount is fixed above or below the price on such day or in such exchange or market
WHERE NO PRICE IS FIXED
The contract is not perfected and is w/o effect
If the thing is wholly/partly delivered, the buyer must pay a reasonable price (value of the goods in the market)
CAPACITY TO BUY OR SELL
GENERAL RULE: All persons, natural or juridical, who can bind themselves by contract, have also legal capacity to buy and sell.
EXCEPTIONS: Parties suffering from either absolute or relative incapacity
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ABSOLUTE INCAPACITY - Person involved cannot bind himself, who may be:
a. UNEMANCIPATED MINORS
b. INSANE OR DEMENTED PERSONS
c. DEAF-MUTES WHO DO NOT KNOW HOW TO WRITE
Contracts entered into by minors and other incapacitated persons are valid if the thing sold and delivered to him is a necessary. He must pay the
reasonable price but has the right to recover any excess paid by him.
NECESSARY things which are needed for sustenance, dwelling, clothing, or medical attendance or education
CONTRACTS ENTERED INTO BY PARTIES WHERE ONE IS ABSOLUTELEY INCAPACITATED ARE NOT VOID BUT ONLY VOIDABLE. ON THE OTHER
HAND, CONTRACT ENTERED INTO BY PARTIES WHO ARE BOTH INCAPACITATED IS UNENFORCEABLE.
RELATIVE INCAPACITY - Person involved cannot enter into a contract with reference to certain persons or certain properties
a. Husband and Wife
Expressly prohibited by law to sell property to each other EXCEPT when (1) a separation of property was agreed upon in the
marriage settlements or (2) there has been a judicial separation
Moderate gifts on the occasion of any family rejoicing are allowed
The illegality of the contract entered into by husband and wife can only be assailed by their heirs and creditors not by third
person who has no interest on the subject matter
b. Persons by reason of their relation to property
They cannot acquire by purchase, directly or indirectly, property even at a public or judicial auction:
i.
GUARDIANS with respect to the property of person/s under his guardianship. Sale is voidable.
ii.
AGENTS when the administration of sale was entrusted to him, except when given consent by the principal. Sales is
voidable
iii.
EXECUTORS AND ADMINISTRATORS property of the estate under administration. Sale is voidable.
iv.
PUBLIC OFFICERS AND EMPLOYEES when administration of the States property or of any government controlled or
owned corporation or institution. Sale is void.
v.
JUSTICES, JUDGES PROSECUTING ATTORNEYS, LAWYERS, CLERKS OF COURTSM OFFICERS AND EMPLOYEES CONNECTED
WITH THE ADMINISTRATION OF JUSTICE with respect to property under litigation in which they may take part by virtue
of their profession. Sale is void.
vi.
ALIENS with respect to agricultural lands. Sale is void.
vii.
UNPAID SELLER with respect to goods stopped in transit. Sale is void
viii.
OFFICER CONDUCTING AN EXECUTION SALE OF PROPERTY to enforce a court judgment. Sale is void.
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Relative Incapacity extends to sales in legal redemption, compromise and renunciation

COMPROMISE
Contract whereby the parties, by reciprocal concessions, avoid a litigation or put an end to one already commenced
RENUNCIATION
Creditor gratuitously abandons his right against his creditor
FORM OF CONTRACT OF SALE
Need not be in writing; Contract may orally, in writing, partly orally and partly in writing, or may be inferred from the conducts of
both parties
Contract is perfected upon meeting of the minds
Reciprocal obligations arise upon the meeting of the minds
Ownership is not transferred until delivery of the thing. However, the parties may stipulate that despite the delivery, the ownership
isnt transferred until the buyer has fully paid the price
In case either party failed to comply w/ what is incumbent upon him, the injured party is entitled to payment of damages whether he
chooses rescission or fulfilment
CONTRACTS REQUIRED IN WRITING
1. Sale of goods, chattels, or things in action, at a price not less than P500
However, even if the price of the contract is more than P500 and is not in writing, it is still valid if:
a. The part or whole of the goods has been delivered and received by the buyer
b. The buyer has paid part or whole of the price, though the seller has not yet delivered the goods
c. It was sold in an auction Auctioners sales book is sufficient memorandum
2. Sale of real property or any interest therein; irrespective of price
3. Contract of sale w/c by it terms is not to be performed w/in a year from the making, regardless of the property and the price involved
4. Sale of real property by an agent; the authority of the agent must also be in writing

SALE BY AUCTION
Perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner
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 Where goods are put up in lots, each lot is the subject of separate contract of sale
Until each announcement, bidder may retract his bid
Auctioneer may withdraw the goods from the sale unless the auction has been announced to be w/o reserve
THE SELLER MAY BID IN AN AUCTION SALE IF:
1. A right to bid has been reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation
2. Notice has been given that the sale by auction is subject to a right to bid on behalf of the seller
If there is no notice given, it shall be unlawful:
a. For the seller to bid for himself or to employ or induce any person to bid at such sale on his behalf
b. For the auctioneer to (1) employ or induce any person to bid at such sale on behalf of the seller or (2) knowingly take any bid
from the seller or any person employed by him
*The buyer may treat the sale as fraudulent if the unlawful acts are present
PROMISE TO BUY OR SELL
A promise to buy and sell a determinate thing for a price certain is reciprocally demandable
KINDS OF PROMISE
1. An accepted unilateral promise to sell in w/c the promisee(acceptor) elects to buy
2. An accepted unilateral promise to buy in w/c the promisee elects to sell
3. A bilateral promise to buy and sell reciprocally accepted in w/c the parties choose to exact fulfilment
POLICITACION
A unilateral promise or offer to sell or buy a thing is not accepted
Has no juridical effect or legal bond
OPTION
Privilege existing in one person for w/c he has paid a consideration w/c gives him the right to buy or sell a thing from/to another person
- The act of buying or selling must be done w/in the agreed period at a fixed price, or under, or in compliance w/ certain terms and
conditions
Offer may withdrawn at any time before acceptance by communicating such withdrawal

ACCEPTANCE OF UNILATERAL PROMISE

Does not bind the promisor and may be withdrawn at any time
Binds the promisor IF the promise is supported by a consideration distinct and separate from the price that its acceptance will give rise
to a perfected contract. The promisee has the burden of proving the existence of such consideration
HOWEVER, even though it is not supported by a consideration distinct from the purchase price, the offer can no longer be withdraw if
accepted already.
ACCEPTANCE OF BILATERAL PROMISE
Contract of sale is perfected and both parties are bound by their contract
EARNEST MONEY

Money given by the buyer to the seller to bind the bargain

Part of the purchase price
Given only when there is already a sale
Proof of the perfection of the contract

OPTION MONEY
Proof of the perfection of the option contract
Separate and distinct from the purchase price
BARTER
One of the parties binds himself to give one thing in consideration of the others promise to give another thing
If the consideration consists partly in money and partly in another thing, it shall be considered to be a barter if the value of the thing
given exceeds the amount of the money or its equivalent
If the value of the thing given is less than or equal the amount of the money or its equivalent, it shall be considered as sale
SALE BY DESCRIPTION
A seller sells things as being of a particular kind where the buyer relies on the sellers representations
If bulk of the goods delivered do not correspond to the description, contract may be rescinded

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SALE BY SAMPLE
The parties contracted solely w/ reference to the sample
The exhibition of the sample was an inducement of the sale or formed the sole basis
The thing sold and to be delivered shall conform w/ the sample in kind, character, and quality
SALE BY SAMPLE AND DESCRIPTION
Goods must satisfy all the warranties appropriate to either kind of sale
EFFECTS WHEN THE THING IS LOST
TIME OF LOSS
Before Perfection - Whole
Before Perfection - Partially

At the time of Perfection - Whole

After Perfection and after delivery to the
buyer
After Perfection and before delivery to the
buyer

EFFECT
Contract is void
The vendor may withdraw from the
contract or he may demand the remaining
part and pay its price in proportion to the
total sum agreed upon
Contract is void
Contract is valid; the risk of loss is shifted
to the buyer

WHO BEARS THE LOSS

Seller-Owner

Seller-Owner
Buyer
Buyer

*A thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered
LOSS IN A SALE OF SPECIFIC GOODS
If the goods, w/o knowledge of the seller, have perished in part or wholly, or deteriorated in quality, the buyer may treat the sale as:
a. AVOIDED; or
b. As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price
for the goods in w/c the ownership will pass, if the sale was divisible. IF it is indivisible, the buyer should be made to pay only the
proportionate price of the remaining goods

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LOSS OF A NON-FUNGIBLE GOODS

If the loss occurs after the perfection of the contract but before the delivery, the obligation of the deliver the thing is extinguished but
the obligation to pay the purchase prices remains

LOSS OF A FUNGIBLE GOODS SOLD INDEPENDENTLY FOR A SINGLE PRICE W/O CONSIDERATION AS TO WEIGHT, NUMEBR OR MEASURE

If the loss occurs after the perfection of the contract but before the delivery, the obligation of the deliver the thing is extinguished but
the obligation to pay the purchase prices remains

LOSS OF A FUNGIBLE GOODS SOLD FOR A FIXED PRICE ACCORDING TO THEIR WEIGHT, NUMBER OR MEASURE

If the loss occurs after the perfection of the contract but before the delivery, the risk of loss is borne by the seller, EXCEPT when the
buyer incurs delay

OBLIGATIONS OF THE VENDOR

PRINCIPAL OBLIGATIONS OF THE VENDOR
1. Transfer the ownership of the determinate thing sold
2. Deliver the thing; It shall be understood that the thing is considered to be delivered when it is placed in the control and possession of the
vendee
3. Warrant against eviction and hidden defects
4. Take care of the thing, pending delivery, w/ proper diligence
5. Pay for the expenses for the execution and registration of the deed of sale, unless there is a stipulation to the contrary
TRANSFER OF OWNERSHIP
General Rule: Only the owner of property can pass ownership to it
However, ownership is not required at the time of the perfection of sale. It is sufficient that the vendor has the ownership at the time of
the delivery
If the goods are sold by a person who is not the owner, or does not sell them under authority or w/ the consent of the owner, the buyer
acquires no better title to the goods, UNLESS the owner precluded from denying the sellers authority to sell.
Exceptions:
1. Where the owner by his conduct is precluded from denying the sellers authority or where he is under estoppels
2. Where the sale is made under the provision of any factors act, recording laws, or any other provision of law enabling apparent
owner of goods to dispose of them as if he were the true owner thereof
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3. Where the sale is made under a statutory power of sale or under the order of a court of competent jurisdiction
4. Where the purchase is made in a merchants store, fairs, or markets, in accordance w/ the Code of Commerce and special laws
5. Where the seller of the goods has a voidable title, but his title has not been avoided at the time of the sale, the buyer acquires a
good title to the goods, provided he buys them in good faith, for value, and w/o notice of the sellers defect of title
*For an establishment to be a merchants store, it is indispensable that there be goods or wares stored or on display; and that the
person maintaining said establishment be actually engaged in the business of buying and selling
DELIVERY OF THE THING SOLD
TRADITION (DELIVERY)
Derivative mode of acquiring ownership by virtue of w/c one who has the right and intention to alienate a corporeal thing, transmits it
by virtue of a just title to one who accepts the same
WAYS OF EFFECTING DELIVERY
1. ACTUAL DELIVERY (REAL TRADITION)
Takes place by the delivery or transfer of a thing from hand to hand, if it is movable
If it is immovable, by certain material or possessory acts by the vendee done in the presence and w/ the consent of the vendor
2. LEGAL OR CONSTRUCTIVE DELIVERY
The delivery of the movable and immovable things is not actual or material but represented by other signs or acts
*The execution of a public instrument shall be equivalent to the delivery of the thing
a. SYMBOLIC TRADITION
The parties make use of a token symbol to represent the thing delivered
The delivery of the key where the thing sold is stored or kept is equivalent to the delivery of the thing
b. TRADITIO LONGA MANU
Effected by the vendor pointing out to the vendee the thing w/c is being transferred, and w/c at the time must be in sight
c. TRADITIO BREVI MANU
When a person in possession under a title that is not of ownership continues after the transfer to possess the thing but under
title of ownership. E.g. Rent to own
d. TRADITIO CONSTITUTUM POSSESSORIUM
Seller remains in possession of the thing sold after the sale but in concept other than owner
Opposite of traditio brevi manu
e. QUASI-TRADITIO
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 Mode of delivery of incorporeal things or rights

Delivery is effected:
a. By the execution of public instrument
b. If (a.) is not applicable, by the placing of the titles of ownership in the possession of the vendee; or
c. By allowing the vendee to use his rights as new owner w/ consent of the vendor
3. TRADITION BY OPERATION OF LAW
Covers all other cases not already enumerated and in w/c the delivery is effected solely by virtue of an express provision of law
CASES WHERE OWNERSHIP DOES NOT PASS TO THE VENDEE
1. ON SALE OR RETURN
A contract by w/c property is sold but the buyer, who becomes the owner of the property on delivery, has the option to return
the same to the seller instead of paying the price
Option to purchase or return the goods rests entirely on the buyer w/o reference to the quality of the goods
Subject to a resolutory condition
Risk of loss or injury rests upon the buyer
2. SALE ON TRIAL OR APPROVAL
Contract in the nature of an option to purchase if the goods prove satisfactory, the approval of the buyer being a condition
precedent
Approval depends on the character or quality of the goods
Subject to a suspensive condition
Title continues to be w/ the seller until the sale has become absolute either by the buyers approval of the goods, or by his
failing to comply w/ the express or implied conditions of the contract
Ownership passes to the buyer if he did not give notice of rejection (a) after the expiration of the time fixed for the return of the
goods or (b) if no time has been fixed, on the expiration of a reasonable time
3. If the parties stipulated that the ownership shall not be passed until the purchaser has fully paid the price
DELIVERY OF GOODS TO A COMMON CARRIER
General Rule: When the seller is authorized or required to send the goods to the buyer, the delivery of such goods to the carrier
constitutes delivery to the buyer, whether the carrier is named by the buyer or not
Exceptions:
1. If the seller reserve the right of possession or ownership in the goods until certain conditions have been fulfilled
2. Where the seller ships the goods and takes a bill of lading deliverable to:
a. The seller
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b. The agent of the seller

c. To the order of the seller
d. To the order of the agent of the seller
*In this case the carrier becomes the bailee for seller even if the vessel is owned by the buyer
3. Where the seller of the goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer
to secure acceptance or payment of the bill of exchange, and the buyer does not honor the bill of exchange
If the buyer wrongfully retains the bill of lading, he acquires no additional rightss
*The seller may retain the goods until the buyer performs his obligation. He may even dispose it but he will be liable for damages to the first
buyer. The second buyer, however, acquires a better right
*The purpose of the bill of lading is to secure the performance of the buyers obligations, therefore, the buyer bears the risk of loss or
deterioration
*If the goods are shipped and by the bill of lading are deliverable to the buyer or his agent but the seller retained the bill of lading, the latter
retains the right to the possession of the goods
*A purchaser in good faith, of the bill of lading deliverable to the buyer, his order, his agent, or his agents order, will obtain the ownership of the
goods even though the bill of exchange has not been honored
*If the actual delivery has been delayed through the fault of either party, the party in fault bears the risk
DUTY OF THE SELLER AFTER DELIVERY TO CARRIER
1.
2.

To enter on behalf of the buyer into such contract reasonable under the circumstances
To give notice to buyer regarding necessity to insure goods
If the seller fails to do so, the risk will be borne by him
If the buyer had all the information necessary to insure, the seller will not be liable for the loss

C.O.D. Collect on Delivery

Carrier acts for the seller in collecting the purchase price
Buyer must pay for the goods before he can obtain possession
F.O.B. Free on Board
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 Goods are to be delivered free of expense to the buyer to the point where they are F.O.B.
F.O.B. PLACE OF SHIPMENT seller must at that place ship the goods and bear the expense and risk of putting them into the possession
of the carrier; delivery to the carrier is delivery to the buyer
F.O.B. PLACE OF DESTINATION seller must at his own expense and risk transport the goods to that place and there tender the delivery
of them; ownership transfers to the buyer if the goods reached the place of destination
F.A.S. Freight Along Side
Seller must at his expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and
provided by the buyer
Seller must obtain and tender a receipt for the goods in exchange for w/c the carrier is under a duty to issue a bill of lading
C.I.F. Cost Insurance and Freight
Signifies that the price fixed covers not only the cost of the goods, but the expenses of freight and insurance to be paid by the seller up
to the point especially named
DELIVERY EX-SHIP
Delivery of goods is not restricted to a particular ship and requires delivery from a ship w/c has reached place at the named port of
destination where goods of the kind are usually discharged
Seller must discharge all liens arising out of the carriage, furnish the buyer w/ a direction w/c puts the carrier under a duty to deliver the
goods and bears the risk of loss until the goods leave the ships tackle or are otherwise properly unloaded, UNLESS AGREED OTHERWISE
BILL OF LADING
Contract or receipt for the transport of goods and their delivery to the person named therein, to order, or to bearer
DOCK WARRANT
Instrument given by dock owners to an importer of goods warehoused on the dock recognizing the importers title to the said goods
WAREHOUS RECEIPT
Contract or receipt for goods deposited w/ a warehouseman containing the latters undertaking to hold and deliver the said goods to a
specified person, to order, or to bearer.
QUEDAN
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 Warehouse receipt usually for sugar received by a warehouseman

NEGOTIABLE DOCUMENTS OF TITLE
Bailee undertakes to deliver the goods to the bearer and those by the terms of w/c the bailee undertakes to deliver the goods to the
order of a specified person
NON-NEGOTIABLE DOCUMENTS OF TITLE
Goods covered are deliverable to a specified person

PLACE OF DELIVERY
RULES (EXERCISED SUCCESSIVELY):
1.
2.
3.
4.
5.

Where there is an express or implied agreement, the place of delivery is that agreed upon
Where there is no agreement, the place of delivery is that determined by usage of trade
Where there is no agreement and no prevalent usage, the place of delivery is the sellers place if business
In any other case, the place of delivery is the sellers residence
In case of specific goods and in the absence of agreement or usage of trade, the place of delivery is that some other place where the
contract was made

TIME OF DELIVERY
1. The time stipulated by the parties
2. If there is no stipulation, delivery should be made w/in a reasonable time
SELLER DELIVERS LESS THAN THE QUANTITY SOLD
1. As a rule, the buyer may refuse to accept the goods; OR
2. He may accept it, in w/c case he must pay:
a. The price at the contract rate if he knew that no more were to be delivered OR
b. The fair value of the goods, if he did not know that the seller is going to be guilty of a breach of contract
SELLER DELIVERS MORE THAN THE QUANTITY SOLD
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1. The buyer may accept the quantity contracted for and reject the excess
2. The buyer may accept the whole of the goods delivered and pay for them at the contract rate
SELLER DELIVERS GOODS MIXED WITH OTHERS
1. IF DIVISIBLE, the buyer may accept the goods w/c are in accordance with the contract and reject the rest, but he has to pay at the
contract rate
2. IF INDIVISIBLE, the buyer may reject the whole
SELLER DELIVERED THE GOODS TO THIRD PERSON
The seller is not deemed to have delivered until the third person acknowledges that he holds the goods on behalf of the buyer
CONDITION OF THE THING TO BE DELIVERED
The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in w/c they were upon the perfection of
the contract
WHEN SELLER NOT BOUND TO DELIVER THE GOODS
1. If the vendee has not paid him the price or if there is no period for payment fixed in the contract
If a period is fixed in the contract, the seller is bound to deliver the goods on the fixed time
2. The buyer becomes insolvent, unless he gives a guaranty or security for the price
3. The buyer does not furnish to the seller the guaranties or securities w/c he promised
4. By the own acts of the buyer, he has impaired said guaranties or securities after establishment, and when through a fortuitous event
they disappear, unless he immediately gives new ones equally satisfactory
5. The buyer attempts to abscond
RULES IN CASE OF LOSS, DETERIORATION OR IMPROVEMENT OF THE THING BEFORE DELIVERY
1.
2.
3.
4.

If the thing is lost w/o the fault of the seller, obligation shall be extinguished
If the thing is lost through the fault of the seller, he shall be liable for damages
If the thing deteriorates w/o the fault of the seller, impairment shall be borne by the buyer
If the thing deteriorates through the fault of the seller, the buyer may choose to rescind the contract or demand exact fulfillment, in
either case will include indemnification for damages
5. If the thing is improved by its nature or time, improvement shall inure to the benefit of the buyer
6. If the thing is improved at the expense of the seller, he shall have no other right that that granted to a usufructuary
18

DELIVERY IN SALE OF REAL ESTATE

The following rule shall apply:
1. The seller is bound to deliver all that is mentioned in the contract
2. If the sale is made w/ a statement of its area, at the rate of a certain price per unit of measure or number, and the seller cannot
deliver all the area stated in the contract, the vendee may choose:
a. For a proportional reduction of price; or
b. To rescind the contract, PROVIDED, that the lack in area is at least 1/10 of the area contracted
3. If the sale is made w/ a statement of its area, at the rate of a certain price per unit of measure or number, and a portion of the land
delivered is of an inferior quality though the land measures exactly the area agreed upon, the vendee may choose:
a. For a proportional reduction of price; or
b. To rescind the contract, PROVIDED, the value of the inferior land sold exceeds 1/10 of the price agreed upon
4. If the vendee would not have bought the immovable had he known of its smaller area or inferior quality, he can still rescind the
contract, IRRESPECTIVE of the extent of the lack in area or quality
5. If the sale is made w/ a statement of its area, at the rate of a certain price per unit of measure or number, and the land delivered
was greater in area or number than that stated in the contract, the buyer may:
a. Accept the area included in the contract and reject the excess; or
b. Accept the whole land pa pay for the same at the contract rate
SALE OF REAL ESTATE MADE FOR A LUMP SUM (POR PRECIO ALZADO / CUERPO CIERTO)

There shall be no increase or decrease in the price although there be a greater or lesser area or number than that stated in the contract
The buyer cannot ask for a proportionate reduction in price
The seller cannot ask for a proportionate increase in price
The law presumes that the purchase had in mind a determinate price for the real estate and that he ascertained to its area and quality
before the contract was perfected

SALE OF TWO OR MORE IMMOVABLES IN A SINGLE PRICE

There shall be no increase or decrease in the price although there be a greater or lesser area or number than that stated in the contract
The vendor is bound to deliver all that is included within the said boundaries even when it exceeds the area or number specified in the
contract
If the vendor should fail to deliver all that is included w/in the boundaries, the vendee has the option to:
a. Reduce the price in proportion to the deficiency; or
b. Rescind the contract
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PRESCRIPTION OF ACTIONS
The action for rescission of the contract or proportionate reduction of the price must be brought w/in 6 months counted from the day of
delivery
CONDITION
Uncertain event or contingency on the happening of w/c the obligation of the contract depends
EFFECTS OF CONDITION
If the condition is not fulfilled, either party may refuse to proceed w/ the contract, OR waive the performance of the condition and
proceed w/ the contract
If the nature of the condition is a promise, non-performance of such would result to a breach of warranty
WARRANTY
Any representation made by the seller of thing w/ respect to its character, quality, or ownership, by w/c he induces the buyer to
purchase the same relying on said representation
Part of the contract of sale
Immaterial whether the seller did not know that it was false or true
EXPRESS WARRANTY
Any affirmation of fact or any promise by the seller relating to the thing, which induces the buyer to purchase the thing
EXPRESSION OF OPINION
Does not import a warranty unless the seller is an expert and the opinion was relied upon by the buyer
*Usual exaggerations in trade are not fraudulent
*Misrepresentation made in good faith is not fraudulent but may constitute error
IMPLIED WARRANTY
That w/c the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the
parties irrespective of any intention of the seller to create it
20

IMPLIED WARRANTIES IN A CONTRACT OF SALE:

1. I.W. AS TO SELLERS TITLE
Seller guarantees that he has a right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his
legal and peaceful possession
2. I.W. AGAINST HIDDEN DEFECTS OF UNKNOWN ENCUMBRANCES
Seller guarantees that the thing sold is free from any hidden faults, defects, charge, or encumbrance undeclared to the buyer
3. I.W. AS TO FITNESS OR MERCHANTIBILITY
Seller guarantees that the thing sold is reasonably fir for the known particular purpose for w/c it was acquired
WHEN IMPLIED WARRANTIES NOT APPLICABLE:
1. As is and where is sale
2. Sale of second-hand articles
3. Sale by virtue of authority in fact or law
EVICTION
Judicial process whereby the vendee is deprived of the whole or part of the thing purchased by virtue of a final judgment based on a
right prior to the sale or an act imputable to the vendor
WARRANTY AGAINST EVICTION
ESSENTIAL ELEMENTS:
1.
2.
3.
4.
5.

Vendee is deprived in whole or in part of the thing purchased

He was deprived by virtue of a final judgment
Judgment is based on a right prior to the sale or an act imputable to the vendor
Vendor was summoned in the suit for eviction
There is no waiver on the part of the vendee

*Vendor shall answer for the eviction even though nothing has been said about it in the contract
*Legal obligation may be increased, diminished, or suppressed by the parties. Stipulation to exempt the vendor from obligation to answer for
eviction shall be void if he acted in bad faith
CONSCIENTE buyer waives the warranty voluntarily; if made, the vendor shall only pay the value w/c the thing sold had at the time of eviction
21

INTENCIONDA waiver was made by the buyer w/ knowledge of the risks of eviction; if made, vendor is exempted from obligation to answer for
eviction provided he did not act in bad faith
*Vendee need not appeal the case to avail the warranty
TRESPASS IN FACT
Trespasser claims no right whatever
DISTURBANCE IN LAW
A person goes to the court claiming the thing sold

PRESCRIPTION
One acquires ownership and other real rights through the lapse of time in the manner and under the conditions prescribed by law
ACQUISITIVE PRESCRIPTION
When rights are acquired
EXTINCTIVE PRESCRIPTION
When rights are lost
EFFECT OF PRESCRIPTION
1. COMPLETED BEFORE SALE
Vendee can enforce the warranty against eviction
2. COMPLETED AFTER SALE
Vendor is not liable for eviction
LIABILITY OF VENDOR IN CASE OF EVICTION:
1. The return of the value w/c the thing sold had at the time of the eviction, be it greater or less than the price of the sale
2. The income or fruits, if he has been ordered to deliver them to the party who won the suit against him
22

3. The costs of the suit w/c caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty
4. The expenses of the contract, if the vendee has paid them
5. The damages and interests, and ornamental expenses, if the sale was made in bad faith
IN CASE OF PARTIAL EVICTION, THE VENDEE INSTEAD OF ENFORCING THE WARRANTY MAY RESCIND THE CONTRACT WHEN:
1. The vendee is deprived of a part of the thing sold if such part is of such importance to the whole that he would not have bought the
thing w/o said part
2. When 2 or more things are jointly sold whether for a lump sum or for a separate price for each, and the vendee would not have
purchased one w/o the other
*If the buyer elects to rescind, he is obliged to return the thing w/o encumbrance
EASEMENT OR SERVITUDE
Encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner
APPARENT EASEMENTS
Made known and continually kept in view by external signs that reveals the use and enjoyment of the same. Easement of right of way
NON-APPARENT EASEMENTS
Shows no external indication of their existence. Easement of party wall
*In case the immovable is encumbered by a non-apparent servitude, not mentioned in the agreement, that the vendee would not have acquired
it had he been aware, vendee may (1) rescind the contract, or (2) recover indemnity for damages. Either must be exercise w/in 1YEAR from the
execution of the contract
WHEN RIGHTS OF VENDEE CANNOT BE EXERCISED
1. If the burden or servitude is apparent
2. If the non-apparent burden or servitude is not registered
3. If the vendee had knowledge of the encumbrance whether it is registered or not
HIDDEN DEFECTS

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 Those w/c are not visible to a vendee who is not an expert and to a vendee who is an expert but even w/ the use of his trade or
profession could not detect such defect
It is important if:
1. It renders the thing sold unfit for the use for w/c it was intended
2. If it diminishes its fitness for such use
REQUISITES:
1.
2.
3.
4.
5.
6.

Defect must be important and serious

It must be hidden
It must exist at the time of sale
Vendee must give notice of the defect to the vendor w/in a reasonable time
There must be no waiver of warranty on the part of the vendee
Action for rescission or reduction must be made w/in 6 months from the delivery of the thing sold or 40 days from the date of the
delivery of animals

*In a sale under a patent or trade name, there is no warranty for fitness for a particular purpose, unless otherwise stipulated
CAVEAT VENDITOR vendor is liable to the vendee for any hidden defaults or defects of the thing sold, even though he was not aware thereof
CAVEAT EMPTOR (BUYER BEWARE) buyer has the duty to examine the goods before he buys it
ACCION REDHIBITORIA withdrawal from the contract with damages
ACCION QUANTI MINORIS demand for a proportionate reduction of the price with damages
LOSS OF THE THING SOLD WHICH HAS HIDDEN DEFECTS
If the vendor is aware of the hidden defects, he shall bear the loss, and it gives rise to the right of the vendee to recover:
a. The price paid
b. Expenses of the contract
c. Damages
If the vendor is not aware of the hidden defects, he shall be obliged to return:
a. The price
b. Interest
c. Expenses of the contract, if paid by the vendee
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 If the loss is due to fortuitous events or fault of the vendee, the vendor shall only be liable for the price paid less the value w/c the thing
had when it was lost. If the vendor acted in bad faith, he shall be liable for damages
*These implied warranties are also applicable to judicial sales, except that the judgment debtor shall not be liable for damages
REDHIBITORY VICE
Defect in the article sold against w/c defect the seller is bound to warrant
SALE OF TWO OR MORE ANIMAL TOGETHER
When two or more animals have been sold at the same time and the redhibitory defect is in one or some of them but not in all, the
GENERAL RULE is that the redhibition will not affect those w/o
Exception: If it can be shown by the vendee that he would not have purchased the sound ones w/o those w/c are defective
WHEN IMPLIED WARRANTY IS NOT APPLICABLE
Animals sold at fairs or public auctions, or of livestock sold as condemned
*Presumption is that the buyer already knows the defect
WHEN SALE OF ANIMAL IS VOID
1. The animal is suffering from contagious disease
2. When the use or purpose for w/c the animal is acquired is stated in the contract and the animal is found to be unfit for said purpose
LIABILTY OF VENDOR IN SALE OF ANIMALS WITH REDHIBITORY DEFECTS:
1. In case the animal sold dies :
a. Within 3 days from purchase
b. Because of the disease existing at the time of the contract
2. In case of redhibitory action based on the faults or defects of the animal, the action must be brought w/in 40 days from the date of
delivery to the vendee
*If the sale is rescinded, the animal shall be returned in the condition in w/c it was sold and delivered, and the vendee shall be liable for any
injury caused by his negligence and not of those arising from the defect
DOUBLE SALE
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 One single thing is sold by one seller to two or more buyers

PREFERENCE OF OWNERSHIP IN DOUBLE SALE
1. If the property sold is movable, ownership shall be acquired by the vendee who first takes possession in good faith
2. If the property sold is immovable, ownership shall be acquired by:
a. The vendee who first registers the sale in good in faith in the Registry of Deeds
b. In the absence of registration, vendee who first takes possession of the property in good faith
c. In the absence of both registration and possession, vendee who presents the oldest title in good faith
PRINCIPAL OBLIGATIONS OF THE VENDEE
1. To accept the delivery of the thing sold
2. To pay the purchase price
ACCEPTANCE BY THE BUYER
The buyer is deemed to have accepted the goods in any of the following cases:
1. When he intimates to the seller that he has accepted the goods
2. When after the goods are delivered to him, he does an act in relation to them w/c is inconsistent w/ the ownership of the seller
3. When after the lapse of reasonable time, he retains the goods w/o notifying the seller that he is rejecting them
EFFECT OF ACCPETANCE BY THE BUYER
General Rule: Seller remains liable for breach of warranty despite the acceptance, the seller is discharged of liability:
1. When there is an express stipulation that acceptance by the buyer shall discharge the seller from liability in damages, breach in
warranty or promise
2. Where the buyer after acceptance fails to give notice to the seller of the breach of warranty w/in a reasonable time after the buyer
knew or ought to know of such breach
BUYERS RIGHT OF INSPECTION
Upon the request of the buyer, he must be given a reasonable opportunity to examine the goods for the purpose of ascertaining
whether they are in conformity w/ the contract
This right is waivable
WHERE BUYER CAN REFUSE TO ACCEPT DELIVERY
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1.
2.
3.
4.
5.

Where the seller delivers a quantity of goods less than he contracted to sell
When the seller delivers a quantity of goods more than he contracted to sell; the buyer has the right to refuse the delivery fo the excess
When the seller deliver goods mixed w/ different description not included in the contract.
Where delivery is made by installments, and no stipulation to that effect has been agreed upon
Where the delivery is defective

*If the buyers refusal is justified, he is not bound to return the goods to the seller. His only obligation is to notify the seller of such refusal, as
such, he becomes depositary of the seller
*if the buyers refusal is w/o just cause, ownership passes to him from the moment they are placed at his disposal
OBLIGATION TO PAY THE PRICE
The buyer is bound to pay the purchase price unless and until the seller has delivered the thing sold. However, the buyer is also liable for
interest for the period between the delivery of the thing and the payment of the price, should:
1. It have been stipulated
2. The thing sold and delivered produce fruits or income
3. He be in default, from the time of judicial or extra-judicial demand for the payment of the price
WHEN VENDEE CAN SUSPEND THE PAYMENT OF THE PRICE
1. If he is disturbed in the possession or ownership of the thing bought
2. If he has a well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of chattel
mortgage
WHEN VENDEE CANNOT SUSPEND THE PAYMENT OF THE PRICE
1.
2.
3.
4.
5.

If the vendor gives security for the return of the price in a proper case
If it has been stipulated that notwithstanding any such contingency the vendee must make payment
If the vendor has caused the disturbance or danger to cease
If the disturbance is a mere act of trespass
If the vendee has fully paid the price

RESCISSION OF SALE OF IMMOVABLE PROPERTY

The rescission shall only take place when the seller has demanded its rescission either judicially or by notarial act.
The buyer may still pay the price so long as the seller has not demanded the rescission of the contract of sale
27

 The court may extend the period for payment but not after a demand for rescission by suit or notarial act is made
RESCISSION OF SALE OF MOVABLE PROPERTY
The vendor must make a demand for rescission before he can have the right to rescind the contract
In case of personal property, as a matter of right, the vendor can rescind the contract, if the vendee w/o valid cause:
1. Does not accept the delivery
2. Does not pay the price unless a credit period for its payment has been stipulated

UNPAID SELLER
One who has not been paid or tendered the whole of the purchase
One who has received a bill of exchange or other negotiable instrument as conditional payment, but the condition on w/c it was
received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise
An agent of the seller to whom the bill of lading has been indorsed
A consignor or agent who has himself paid , or is directly responsible for the price
Any person who is in the position of a seller
REMEDIES OF UNPAID SELLER
1.
2.
3.
4.

A lien on the goods or right to retain them for the price while he is in possession of them
In case of insolvency of the buyer, a right of stopping the goods in transit after he has parted w/ the possession of them
A right of resale as limited
A right to rescind as limited

WHEN THE UNPAID SELLER LOSES THE RIGHT TO LIEN:

1. When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer w/o reserving the ownership in
the goods or the right to the possession
2. When the buyer or his agent lawfully obtains possession of the goods
3. By waiver
WHEN GOODS ARE IN TRANSIT
1. After delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them
28

2. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them
WHEN GOODS ARE NO LONGER IN TRANSIT
1.
2.
3.
4.

After delivery to the buyer or his agent in that behalf

If the buyer or his agent obtains possession of the goods at a point before the destination originally fixed
If the carrier or bailee acknowledges to hold the goods on behalf of the buyer
If the carrier or bailee wrongfully refuses to deliver the goods to the buyer

*Delivery through a vessel/carrier chartered by the buyer does not make a delivery to the buyer
*Delivery through a vessel/carrier owned by the buyer makes is delivery to the buyer
REQUISITES FOR THE EXERCISE OF THE RIGHT TO STOPPAGE IN TRANSITU
1.
2.
3.
4.
5.
6.

The seller must be unpaid

The buyer must be insolvent
The goods must be in transit
The seller must either actually take possession of the goods sold or give notice of his claim to the carrier or other person in possession
Seller must surrender the negotiable instrument
Seller must bear the expense of delivery of the goods after the exercise of the right

*Debtors insolvency need not be judicially declared

*The basis of the right is to allow rescission and restitution where there is actual or prospective failure of consideration
WAYS OF EXERCISING THE RIGHT TO STOP
1. Taking actual possession of the goods
2. Giving notice of his claim to the carrier or bailee
WHERE THE UNPAID SELLER MAY MAKE A RESALE
1. Where the goods sold are perishable in character
2. Where the seller expressly reserves his right of resale should the buyer be in default
3. Where the buyer is in default for the payment of the price for an unreasonable length of time
*Seller is not liable for any profit made by resale, but he can sue for the balance if it was sold for less than the price
29

*Notice of sale is not essential but it is prudent to issue one

*Unpaid seller cannot directly or indirectly buy the goods himself
WHERE UNPAID SELLER CAN EXERCISE THE RIGHT TO RESCISSION
1. Where the seller has reserved such right
2. Where the buyer has defaulted in the payment of the purchase price for an unreasonable length of time
WAYS TO EXERCISE THE RIGHT TO RESCISSION
1. Serving notice of such rescission on the buyer
2. By performing some other overt act showing the intention to rescind
REMEDY OF SELLER IN SALE OF IMMOVABLE PROPERTY
Should he have reasonable grounds to fear the loss immovable property sold and its price, he may immediately sue for the rescission of
the sale
The power to rescind is implied, in case the obligor should not comply w/ what is incumbent to him
The injured party may choose between exact fulfillment or rescission, in either case, damage should be indemnified
REMEDIES OF SELLER IN SALE OF PERSONAL PROPERTY BY INSTALLMENTS
ART 1484 (RECTO LAW) The seller may exercise the following remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay
2. Cancel the sale, should the vendees failure to pay cover 2 or more installments
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover 2 or more
installments. He shall have no further action against the purchaser to recover any unpaid balance. Any agreement to the contrary shall
be void
*The remedies are alternative not cumulative or successive
LEASE OF PERSONAL PROPERTY WITH OPTION TO BUY
With the express stipulation, should the lessee exercise his option to buy, all the rentals paid shall be considered as part of the purchase
price
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REMEDIES OF SELLER WHEN BUYER BREAKS HIS CONTRACT

1. Buyers failure to pay the price
When he wrongfully neglects or refuses to pay when the ownership has been passed to him
When he wrongfully neglects or refuses to pay when the price is payable
The seller may maintain action for the price
2. Buyer wrongfully neglects or refuses to accept the goods sold
Seller may maintain action against the buyer for damages for non-acceptance
The amount of the damage will be the difference between the contract price or the market price at the time the goods should have
been accepted
The buyer shall be liable to the seller for the labor performed and expenses made before the repudiation should the former decides
to repudiate the contract
3. Buyers repudiation of the contract
The seller may totally rescind the contract of sale by giving notice of his election to do so to the buyer
REMEDIES OF BUYER WHEN SELLER BREAKS HIS CONTRACT
1. When the seller failed to deliver the goods, upon application of the buyer, the court may direct that the contract be performed. The
judgment or decree may be unconditional
2. In case of breach of warranty of the seller the buyer can:
a. Accept or keep the goods and set up against the seller the breach of warranty by way of recoupment of diminution or extinction of
the price
b. Accept or keep the goods and maintain an action against the seller for damages
c. Refuse to accept the goods and maintain an action against the seller for damages
d. Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to
return them to the seller, and recover the price or any part thereof w/c has been paid
WHERE BUYER ELECTS TO RESCIND
1. He shall cease to be liable for the price upon returning or offering to return the goods
2. He can recover the price he paid or so much thereof as has been paid
3. He shall hold the goods as bailee for the seller should the latter refuse to accept them
WHEN BUYER CANNOT RESCIND
1. When the buyer accepts the goods w/o protest w/ knowledge of the breach of warranty
31

2. When the buyer fails to notify the seller of his election to rescind
3. When he fails to return or offer to return the goods to the seller in good condition as they were in at the time the ownership was
transferred
If the deterioration was caused by the breach of warranty, the buyer can still return or offer to return the goods
*Remedies of the buyer are alternative

CAUSES OF EXTINGUISHING CONTRACT OF SALE

1. COMMON also the means of extinguishing all other contracts
2. SPECIAL causes recognized by the law of sales
3. EXTRA-SPECIAL causes given special discussion by the Civil Code: Conventional and Legal Redemption
CONVENTIONAL REDEMPTION
Vendor reserves the right to repurchase the thing sold
Vendor shall reimburse the vendee of the: (1) price, (2) expenses of the contract, (3) legitimate payments, and (4) necessary and useful
expenses made on the thing sold
Vendor shall fulfill other stipulations agreed upon
Must be agreed upon at the time of the contract of sale (express agreement)
PACTO DE RETRO SALE
Contract of sale w/c contains an express reservation on the part of the vendor to repurchase the thing
VENDEE A RETRO vendee
VENDOR A RETRO vendor
EQUITABLE MORTGAGE
Lacks the proper formalities of a mortgage
Intention of the parties is to make the property subject of the contract as a security for the fulfillment of an obligation
CONTRACTS WHICH ARE PRESUMED TO BE EQUITABLE MORTGAGE
1. When the price of sale with right to repurchase is unusually inadequate
32

2. When the vendor remains possession as lessee or otherwise

3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new
period is executed
4. When the purchaser retains for himself a part of the purchase price
5. When the vendor binds himself to pay the taxes on the thing sold
6. Cases where it may be inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation
*MONEY, FRUITS OR OTHER BENEFITS received by the vendee shall be considered as interest and subject to usury laws
*Whether the contract is a Pacto de Retro or Absolute sale, if any of the above circumstances is present it shall be presumed to be an
equitable mortgage
*The parties can REFORM the contract with a right to repurchase if their real intention is to have a contract of loan with mortgage
PERIOD OF REDEMPTION
1.
2.
3.
4.
5.

Parties agree only on the right to redeem but no express stipulation to the time = 4 YEARS FROM THE DATE OF CONTRACT
Parties agree on a definite period of redemption = WITHIN THE PERIOD FIXED which must not exceed 10 years
Parties agree on a right to redeem but the period is not specified = 10 YEARS FROM THE DATE OF THE CONTRACT
If the agreed period exceeds 10 years, vendor a retro has 10 years to redeem from the time of the execution of the contract
30 DAYS FROM THE TIME FINAL JUDGMENT WAS RENDERED IN A CIVIL ACTION on the basis that the contract was a true sale with a right
to repurchase

CONSOLIDATION OF OWNERSHIP
Absolute ownership is consolidated in the vendee after the lapse of the period of redemption and the vendor has not repurchased the
thing.
Consolidation of ownership of real property must be recorded in the Registry of Property provided that the vendor has been duly heard
and there is a judicial order
In pacto de retro sale, vendee is subrogated to all the rights and actions of the vendor
RIGHT TO REPURCHASE
A real right
Attached to the land whoever the possessor may be
33

 Vendor a retro may still exercise the right to repurchase even if the vendee a retro sold the land to third persons even if there was no
mention of said right
Vendor a retro cannot exercise his right to repurchase against third persons who acquired the property in food faith if his right is not
properly registered or annotated
*Vendor a retros creditors can exercise the right to repurchase only after the vendor a retros properties are exhausted
PACTO DE RETRO SALE OF A PART OF AN UNDIVIDED IMMOVABLE
If an immovable is co-owned by several co-owners, each co-owner may sell his interest in the undivided immovable w/o the consent of
the other co-owners; he alone can exercise the right to repurchase
If it happens that the vendee a retro acquires the whole property, he may compel the vendor a retro to redeem the whole property,
should the latter wished to exercise the right of redemption

IF SEVERAL PERSONS, JOINTLY AND IN THE SAME CONTRACT, SHOULD SELL AN IMMOVABLE PROPERTY
Co-owners can exercise the right of redemption only as regards their respective shares
Co-heirs of the vendor, can exercise the right of redemption only for the respective portions they have inherited
The vendee may demand all the vendors or co-heirs to come to an agreement upon the repurchase of the whole thing sold; should
they fail to do so, the latter cannot compel the vendee to consent to a partial redemption
*A co-owner cannot redeem more than his share in the co-ownership. Should it happen that he redeem the entire property,
shouldering the expenses, he still doesnt make himself the owner of the property
IF EACH OF THE CO-OWNERS HAS SOLD HIS SHARE SEPARATELY
Each of the co-owner may independently exercise the right to repurchase as regards his own share
The vendee cannot compel the vendors to redeem the whole property
IF THE VENDEE SHOULD LEAVE SEVERAL HEIRS
The vendee a retro can exercise the right to redeem against the heirs of the vendee a retro w/ respect only to their respective
shares, whether the thing has been partitioned or be undivided
If by partition, the entire property has been adjudicated to one of the heirs, the vendor a retro can exercise the right to redeem
against said heir for the whole

34

OBLIGATIONS OF VENDOR A RETRO IN CASE OF REDEMPTION

He must return to the vendee the price of sale including the:
1. Expenses of the contract, and any other legitimate payments made by reason of the sale
2. Necessary and useful expenses made on the thing sold
*The offer to redeem must be bona fide and accompanied by a tender of the price agreed upon for repurchase
PRORATING OF FRUITS AT TIME OF REDEMPTION
If there were fruits at the time of the sale and the vendee paid for them, he must be reimbursed at the time of redemption as the
payment forms part of the purchase price
If no indemnity was paid by the vendee for the fruits, there shall be no reimbursement for those existing at the time of redemption
If the property had no fruits at the time of the sale and some exist at the time of redemption, they shall be apportioned proportionately
between the redemptioner and the vendee, giving the latter a share in proportion to the time he possessed the property during the last
year counted from the anniversary of the date of the sale to compensate the vendees expenses
*Should the vendee a retro alienates, encumbers, or performs other acts of ownership over the thing sold, he shall redeem it should the vendor
a retro decides to exercise the right to repurchase
*The vendor has the right to receive the property in the same condition in w/c it was at the time of the sale
*HOWEVER, w/ regards to leases entered into good faith by the vendee, the vendor a retro must respect such leases. This, however, must be in
accordance w/ the custom of the place where the land is situated
LEGAL REDEMPTION
Right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title
Exists by operation of law
PARTIES WHO CAN EXERCISE LEGAL REDEMPTION
1. Co-owners
2. Owners of adjoining land
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REQUISITES OF LEGAL REDEMPTION OF CO-OWNER

1.
2.
3.
4.
5.
6.

There must be co-ownership

There must be alienation of all or any of the shares of the co-owners
The sale must be before partition
The right must be exercised w/in 30 days from the notice in writing by the prospective vendor
The sale must be to a third person or stranger
The vendee must be reimbursed for the price of the sale

WHEN TWO OR MORE CO-OWNERS DEISRE TO REDEEM

They may do so in proportion to the share they respectively have in the thing owned in common
The kind and size of the property co-owned has no bearing the redemption
*The purpose of the grant of right to redemption to co-owners is to reduce the number of participants until the community is done away with,
as being hindrance to the development and better administration of the property
LEGAL REDEMPTION BY ADJACENT OWNERS OF RURAL LANDS
The following requisites must be present before the adjacent owners can exercise the right of legal redemption:
1. The land must be a rural land
2. Area must not exceed 1 hectare
3. Rural land must not be separated by brooks, drains, ravines, roads, and other apparent servitudes
4. Alienation must be by onerous title
5. Third person must already own a rural land
*The purpose of the grant of right of legal redemption to owners of adjoining rural lands is to encourage maximum development and utilization
of agricultural lands
LEGAL REDEMPTION BY ADJACENT OWNERS OF URBAN LAND
The following requisites must be present before the adjacent owners can exercise the right of legal redemption:
1. Urban land is so small, and so situated that a major portion cannot be used for any practical purpose w/in a reasonable time
2. It was bought merely for speculation
RIGHTS GRANTED TO ADJACENT OWNERS OF RURAL LAND

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1. RIGHT OF PRE-EMPTION preferential right to buy the land before the same is sold to third persons
2. RIGHT OF REDEMPTION
*The purpose of the grant of right of legal redemption to owners of adjoining urban lands is to discourage speculation in real estate and the
consequent aggravation of the housing problems in centers of population
PERIOD FOR LEGAL REDEMPTION
Shall be exercised w/in 30 days from the notice in writing by the prospective vendor or vendor
The deed of sale shall be recorded in the registry of property accompanied by an affidavit of the vendor that he has given written notice
thereof to all possible redemptioners
*The right of redemption of co-owners is preferred over that of the adjoining owners

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