BA 166 REVIEWER OUTLINE

A. Sale
1) Definition (ARTICLE 1458)
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.
2) Essential Requisites C, O, C
Consent
- legal capacity to give consent
- acceptance of payment is an indication of
consent
Object
- object must be a determinate/determinable thing
Cause (Price)
- price certain in money or its equivalent
- absence of price =/= failure to pay the price
3) Natural vs Accidental Elements
Natural
- deemed to exist in the absence of contrary
stipulations (e.g. warranties)
Accidental
- requires stipulation of the parties
4) Stages of a Contract of Sale P, P, C
Preparation/Negotiation
- policitacion
Perfection/Birth
- meeting of the minds (1475)
Consummation/Term
- performed obligation/delivery
5) Characteristics of a Contract of Sale PBONCC
Principal (not Accessory)
- existence and validity does not rely on another
contract
Bilateral
- reciprocal obligations
Onerous (not Gratuitous)
- consideration of a price
Nominate
- special name or designation in the Civil Code
Consensual
- perfected by mere consent
Commutative
- thing sold is equivalent of the price paid
(exemption: aleatory contract)
6) Sale Distinguished From
a) Donation
Donation
Sale
Gratuitous
Onerous
Formal
Solemn
Unilateral
Bilateral
Law on Donation
Law on Sales
b) Barter

Barter
Sale
Consideration is the
Consideration is the Price
Thing
Governed by Law on Sales
General Rule: Manifest Intention
If intention is not clear:
Value of Thing > Money Barter
Value of Thing =/<
Sale
Money
c) Piece of Work
Piece of Work
Object is manufactured
specially for the
customer, upon his
special order (Sale of
Service)
Risk of loss before
delivery borne by
contractor
Not governed by Statute
of Frauds
Damages, Rescission

Sale
Object is
produced/manufactured
in the ordinary course of
business for the general
market (Sale of Object)
Risk of loss before
delivery borne by buyer

Governed by Statute of
Frauds
Fulfillment, Rescission,
Damages
*Fulfillment is not allowed for Piece of Work because
the law protects its people against involuntary
servitude.
Tests According to Jurisprudence:
Timing Test
- Would it have never existed but for the order?
Habituality Test
- Is there a need to employ extraordinary
skills/equipment?
Nature of the Object Test
- Is the products nature of execution different from
products normally manufactured?
d) Agency to Buy or Sell
1466: Essential clauses of whole instrument
Contract of Agency: Person binds himself to render
some service or do something in representation or
on behalf of another, with the consent/acceptance of
the latter
Agency to Sell
Object is delivered to
agent, but ownership is not
transferred
Price is delivered by agent,
paid by buyer
Agent assumes no liability
for warranty
Unilaterally revocable
(even if revocation is w/o
ground, or just cause)
Agent is bound to

Sale
Delivery and ownership
to buyer
Price delivered and
paid by buyer
Seller warrants object
Not unilaterally
revocable
Buyer can deal with the

principals instructions
Not governed by statute of
frauds
Personal Contract
Damages

e) Dacion en Pago
Dacion en Pago
Consideration:
Extinguishment of
Obligation
Novation of a prior
contract (Presupposes
existence of debt)
Special kind of payment;
Perfection of contract of
debt
f) Lease
Lease
Use of thing for a
specified period with
obligation to return
Consideration: Rent
Lessor does not have to
be the owner to sublease
g) Contract to Sell
Contract to Sell
Title: Reserved to vendor
until full payment of price
Payment: Positive
suspensive condition
Risk of Loss: Seller

thing sold as he
pleases
Governed by Statute of
Frauds
Real Contract
Rescission, Fulfillment,
Damages

Sale
Consideration: Price

No prior contract is
necessary

Sale
Absolute transfer of
ownership
Consideration: Price
Seller must be owner to
sell

Sale
Title: Passes to vendee
upon delivery
Non-payment: Negative
resolutory condition
Risk of Loss: Buyer

7) Capacity to Buy and Sell

General Rule: Anyone who can obligate himself
can enter into a contract of sale.
Exemption: Sale of necessaries
Necessaries
- needed for sustenance, dwelling, clothing and
medical attendance, in keeping with the financial
capacity of the family of the incapacitated person
Kinds of Incapacity:
Absolute Incapacity
- Persons who cannot bind themselves
- Status of Contract: Voidable
- Minors, Deaf/Mute persons who cannot
write, Insane/Demented persons
- Remedy: Action for annulment (Partial
restitution in so far as the minor is benefited)
- Minors who passed legal age: Sale is valid
Relative Incapacity

Persons cannot bind themselves with

reference to certain persons or a certain class
of property

a) Incapacity of Husband and Wife

General Rule: Void
Exemptions: (PN, JSP)
- Ante-nuptial Agreement: Separation of
property
- Decreed by Court: Judicial separation of
property
- Contract with 3rd parties
Rationale: (P3, UI, IV)
- Protection for 3rd Persons: Prevent defraudation
of creditors
- Undue Influence: Avoid situation where
dominant spouse takes advantage of the other
- Indirect Violation: Avoid circumvention of law on
prohibition of donation between spouses
Persons Permitted to Question Sale:
- Persons with prejudiced interests
o Heirs of either spouse/creditors at time of
transfer
- Government
o Prevention of tax evasion
b) Expressly Disqualified by Law
Agents
Principal
Guardians
Ward
Executors and
Estate
Administrators
Public officers and
State
employees
Justices, judges,
Subject to litigation
prosecuting attorneys,
within its jurisdiction or
clerks (Officers of
territory
court)
Rationale:
Prevent frauds on the part of the persons
enumerated
Legal Status of Contract:
Agents, Guardians, Executors and Administrators:
VOIDABLE
o RATIFIABLE: Only private wrong is
involved
o Agent obtains consent of principal: VALID
No prejudice on the part of the
precedent
Public officers and Officers of Court: VOID
o NOT RATIFIABLE: Public wrong is
concerned
Brokers are not included because they do not act on
behalf of the seller.

Other Persons Specially Disqualified:

Aliens
Private agricultural lands
Seller
Goods for resale
Officer Conducting
Object of execution sale
Execution Sale
Prohibitions for persons with relative incapacity
are applicable to sales in legal redemption,
compromises and renunciations.
Legal Redemption: Buying back property as allowed
by law
Compromises: Amicable settlement of controversy
Renunciation: Gratuitous abandonment of right
against creditor
8) Subject Matter/Object
a) Requisites of a Valid Subject Matter
- Licit
- Determinate/Determinable
- Possible
LICIT
- Must be within the commerce of men
ILLICIT: VOID
o Per se of its nature
o Per accidens illegal by provision of law
Rights: All rights, which are not transmissible or
personal, may be the object of the contract of sale.
DETERMINATE
- particularly designated/physically segregated
from all others of the same class
- Rule: Object must be determinate as to its kind.
DETERMINABLE
- capable of being made determinate without the
necessity of a new or further agreement between
parties
Rationale: There can be no meeting of minds. It
cannot be known what may have been sold.
Sufficient if: Object is determinate/determinable
at time of perfection of contract.
b) Things having potential existence
EXISTING, FUTURE, CONTINGENT
- subject matter must exist or has potential or
possible
existence
(pursuant
to
present/technology)
- Sufficient if: Characteristic exists at time of
the perfection of the contract
EXISTING
- goods owned or possessed by the seller
CONTINGENT
- acquisition of goods depends upon a contingency
which may or may not happen

c) Emption Rei Speratae and Emptio Spei

EMPTIO REI SPERATAE
Sale of Things With Potential Existence
- reasonably certain to come into existence as a
natural increment or usual incident of something
in existence already belonging to the seller
- title vests to buyer at moment the thing comes
into existence
- standard of reasonable certainty considers
technology
- Specific and identified; Owned by the vendor at
the time
EMPTIO SPEI
Sale of Hope
- Object of the contract: Hope itself
- Exemptions: Vain hope/expectancy
- Aleatory character
EMPTIO SPEI
Present thing
Non-happening: VALID

EMPTIO REI SPERATAE

Future thing
Non-happening:
EXTINGUISHMENT

d) Sale of Hope or Expectancy

Sale of Contingent Goods
Goods are subject to the condition that the thing will
come into existence
Non-happening of condition: EXTINGUISHMENT OF
CONTRACT; Resolutory
Remedy: Recovery of price paid
Sale of Hope/Expectancy
Non-happening of condition: VALID; No recovery of
payment

e) Sale of Future Goods

FUTURE
- goods to be manufactured or acquired
- executory contract of sale
f) Sale of Undivided Interest or Share
Sale by Sole Owner
Legal Effect: Buyer is a co-owner of the thing sold
Object: Incorporeal right to goods/land
Sale by Co-Owner
Consent of other co-owner: Not required
Limitation: Portion allotted in the termination of coownership
FUNGIBLE GOODS
- Inter-changeable goods
- Goods of which any unit is treated as the
equivalent of any other unit

Sale of Undivided Share of Specific Mass

Seller purports to sell a definite number, weight or
measure of the goods in the mass.
Legal Effect: Buyer becomes co-owner
Mass is less than quantity agreed upon: Seller is
bound to make good the deficiency from goods of the
same kind/quality, unless a contrary intent appears
(Sale of share of mass)
g) Things Subject to a Resolutory Condition
Resolutory condition
- Uncertain event the happening of which the
obligation or right subject to it is extinguished
- Examples: Right to repurchase
- Rationale: Buyer acquires no better title than
the seller had
LEGAL EFFECT: Extinguishes contract of sale
9) Obligation of Seller to Transfer Ownership
Principal Obligations of the Vendor:
- Transfer ownership
- Deliver the determinate thing
- Warrant against eviction and hidden defects
- Take care of the thing, pending delivery
- Pay for the expenses of the execution of sale
General Rule: Right of seller to transfer ownership
must exist at the time it is delivered.
Rationale: Nobody can dispose of that which he does
not have.
Sufficient if: Right exists at time of delivery
(future or contingent goods)
a) Sale by a Person Not the Owner at the Time
of Delivery
Rationale: No one can give what he has not.
Exemptions:
Owner by his conduct, precluded from
denying the sellers authority to sell
(Estoppel)
Rationale: Not lawful nor permissible for said owner
to deny or retract his former sworn statement
Law gives the apparent owner the right to
dispose of the goods as though it were his
own (Provisions on Agency)
Recording Laws:
P.D. No. 1529
R.A. No. 4136
Sec. 529
Sec. 1171
Statutory or Judicial Sales
General Rule:
Possession of Movable Property = Title

Exemption: Possessor acquires it in good faith in a

public sale, owner cannot obtain it without
reimbursing the price
Purchases in a Merchants Store/Fairs or
Markets
Rationale: Facilitate commercial sales on movables
and to give stability to business transactions
Sale with a Voidable Title Which Has Not Been
Avoided At Time of Sale
Seller Subsequently Acquires Title
Rationale: Subsequent acquisition of title validates
his previous conveyance
b) Sale by a Person Having a Voidable Title
Buyer acquires a good title to the goods if
(Requisites): (TBA, GFFV, DOT)
INNOCENT PURCHASER FOR VALUE
Buyer acquires title before the title of the seller
has been avoided
In good faith for value
Without notice of sellers defect of title
Rationale: Where loss has happened which must fall
on one of two innocent persons, it should be borne by
him who is the occasion of the loss.
10) Price
a) Requisites for a Valid Price C, ME
Certain
Money or its equivalent
PRICE IS CERTAIN IF: DA, TC, JSP
Definite amount
Reference to another thing certain*
Left to judgment of a specified person*
*The last two cases are applicable only when no
specific amount has been stipulated by parties.
b) How Price is Determined
Price is in Reference to Another Thing Certain
Amount is fixed above or below the price on a
given day (amount must be certain)
o Applicable to fungible things which are
subject to fluctuations of the market
Price Fixed by One of the Contracting Parties
General rule: Price must be determined impartially by
both parties
Rationale: It cannot be said that the other consented
to a price he did not and could not previously know.
Validity or compliance cannot be made to depend
on the will of one party.
Exemption: Price fixed by one party is accepted by
the other. Acceptance is the evidence of consent
Owner has the right to quote his own price. It is up to
the buyer to accept or reject it.

Price is Fixed by Third Person Designated

General rule: Price fixed is binding upon parties
Exemption:
Fixed in bad faith or by mistake: Courts may fix
price
o Object in mind is not the thing which is the
object of the sale
o Mere error in judgment is not a basis for
disregarding price fixed: Courts must
decide if its a mere error
Disregards specific instructions or procedure,
fixed an arbitrary price
Price Not Fixed by Third Person: INEFFICACIOUS
Exemption:
Subsequent agreement to price: VALID
Prevented by seller or buyer: PARTY NOT IN
FAULT MAY SEEK REDRESS (Rescission or
Fulfillment, with damages)
o Fulfillment: Courts will fix price
c) When Price is Simulated
Simulation may be absolute or relative.

Effect of Failure to Determine Price:

INEFFICACIOUS
Contract Executory: Contract is without effect
Delivery has been made: Buyer must pay a
reasonable price for the goods
o Reasonable: Market price at the time and
place fixed by the contract or law
Failure to Pay Price
Valid
Remedies available to
vendor

Failure to Stipulate
Price
Void and non-existent

f) Earnest Money vs Option Money

Earnest Money
- part of the price and proof of the perfection of the
contract
Earnest Money
Option Money
Part of purchase price
Consideration is distinct
from purchase price
Bound to pay the balance Not required to buy land
Existence of sale
Sale is not yet perfected

Absolute Simulation
- parties do not intend to be bound at all
- Legal Effect: VOID

11) Formation of a Contract of Sale

a) Preparatory
i) Offer
Policitacion: Unilateral promise to sell not accepted
Legal effect: None

Relative Simulation
- parties conceal their true agreement
- Legal Effect: VOIDABLE; Parties are bound to
their real agreement

Art. 1479 (Promise to Buy or Sell)

- Accepted unilateral promise to sell
- Accepted unilateral promise to buy
- Bilateral promise to buy or sell

d) Inadequacy of Price
General rule: Mere inadequacy of price does not
affect validity of sale when both parties are in a
position to form an independent judgment
concerning the transaction

ii) Option Contract

Option Contract: Privilege to buy/sell secured by
payment of a consideration

Exemption: Low price is an indication of defect in

consent (fraud, mistake, or undue influence)
Contract is annulled not due to inadequacy of
price but due to vitiation of consent
Effect on Judicial Sales:
Judicial Sale sale made by court with respect to
property of debtor for the satisfaction of his unpaid
indebtedness
General rule: Mere inadequacy of price not a ground
for cancellation
Right to repurchase: Easier for the owner to
buy back property
Exemption: Price is so low as to be shocking to the
conscience property will be set aside
e) When No Price Agreed

b) Perfection
Art. 1475
The contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is
the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of the
law governing the form of contracts.
General Rule: Contracts are perfected by mere
consent.
Conduct of the parties may indicate consent
Ownership is not transferred until delivery
c) Formalities of a Contract of Sale
General Rule: Contract may be entered into in any
form provided the essential requisites are present.
Exemption:
Enforceability (Statute of Frauds)
Form required: Writing
Scope: Executory contracts only

Rationale: Partial performance establishes

reliable evidence of the intention of the parties
or the existence of the contract

Personal Property: Not less than P500

Real Property: Regardless of price
Sale of property not to be performed within a
year from the date thereof; Regardless of
property or price
Validity
Form is a requirement for its validity.
Exempted by specific provision of law.
Convenience
Form is for the convenience of parties.
e.g. Purchase of land
- Form: Public instrument
- Requisite for registration in Registry of Deeds
- Right as to third persons: Not binding unless
instrument is registered
- Right as to contracting parties: Valid and binding
- Agents authority to sell land: Writing
Scenario: (Land for sale)
- Orally: Unenforceable
- Private Instrument: Valid and binding as to
contracting parties
- Public Instrument after registration: Valid and
binding as to 3rd persons
12) Kinds of Sale
a) Absolute or Conditional
Absolute
- title or ownership passes upon delivery
Conditional
- delivery of the thing sold does not transfer
ownership until condition is fulfilled
b) Sale by Auction
Sale by lot: Each lot is the subject of a separate
contract of sale
Perfection of the sale: Fall of the hammer or in other
customary manner
- Right to withdraw goods/bid: Allowed anytime
before the hammer falls, unless auction has been
announced to be without reserve
Right of seller to bid
By who: By the seller or on his behalf
In what manner: Expressly reserved
Requisites:
- Expressly reserved
- Notice was given to the buyer
o No notice: Unlawful

Rationale: Employment of puffer to

enhance or inflate the price is fraud upon
the purchaser. Secrecy of puffing which
renders it a fraud.
Not prohibited by law or stipulation
o

c) Sale by Sample; Description; Sample and

Description
General Rule: Rescission is available if goods do
not comply with sample or description. Buyer has
a reasonable opportunity to inspect bulk of the
goods.
Bulk of the goods: Goods distinguished from the
sample and/or description
Sale by Sample:
- The exhibition of the sample by the seller was
an inducement of the sale.
- Parties contracted solely with reference to the
sample, with the understanding that the bulk
was like it.
- Implied warranty
Sale by Description:
- Buyer relies on sellers description.
Sale by Sample and Description:
- Goods must satisfy both warranties
appropriate to either kind of sale
d) Sale or Return
Sale or Return
- Option to return the goods instead of paying
the price
- Option to revest ownership by returning or
tendering goods within the time fixed/a
reasonable time
- Option to purchase or return rests entirely on
the buyer without reference to quality of goods
- Transfer of ownership: Upon delivery
e) Sale on Trial, Satisfaction and Approval
Sale on Trial, Satisfaction and Approval
- Option to purchase if goods prove satisfactory
- Approval of buyer: Condition precedent to
sale
- Transfer of ownership:
o Buyer signifies his approval or
acceptance (Express)
o Retains the goods without giving
notice of rejection (Implied)
o Time fixed for return of goods expires
Sale or Return
Sale subject to resolutory

Sale on Trial or
Approval
Sale subject to

condition (choice of
buyer to revest
ownership)
Will of the buyer
Ownership passes upon
deliver
Risk of loss: Buyer

suspensive condition
(acceptance of the buyer)

Character/quality of the
goods
Transfer of ownership
pending buyers approval
Risk of loss: Seller

13) Kinds of Delivery

Delivery occurs when the thing is placed in the
control and possession of the vendee.
Tradition
- mode of acquiring ownership
- transmission of right and intention to
alienate a corporeal thing by virtue of a
just title
- delivery of a possession with the intention to
transfer the property to the receiver
- Consummation of the contract of sale
- Necessary for vendee to enjoy and make use
of the property purchased
Ways of Effecting Delivery
- Actual/Real
- Constructive/Legal
- Any other manner signifying an agreement that
possession is transferred to the vendee
Delivery
- An indispensable requisite for the transfer of
ownership
- To transfer ownership, it must be done with the
intention of delivering the thing sold.
- Consummation of contract of sale
- Enables vendee to enjoy and make use of the
property purchased
a) Real Delivery
Real/Actual Delivery
- Determinate thing is under the control and
possession of the vendee
- Physical delivery
- Not always essential to passing of title:
contrary may be stipulated
b) Constructive Delivery
Constructive/Legal Delivery
- Equivalent to actual delivery
- Contrary may be stipulated: Full payment of
purchase price
i)

Symbolic Delivery

Symbolic Delivery
- Traditio Symbolica

Equivalent to actual delivery if thing is

subject to the control of the vendor
Rationale: A seller cannot deliver
constructively, if he cannot deliver actually
even if he wants to.

Means of Execution
- Use of token
- Execution of public instrument
Public instrument
- acknowledged before a notary public or any
official authorized to administer oath
- Manner of delivery for movable and
immovable property
- Symbolic delivery, if object of the contract is a
corporeal thing
- Execution is equivalent to delivery if
contrary does not appear or cannot be
clearly inferred
Notarization
- acknowledgment of the due execution and
authenticity of the process
- proves the authenticity
Due execution: personal appearance to prove
willingness
Use of Token:
- representation of thing delivered
o Delivery of keys to storage, and delivery
orders
ii) Traditio Longa Manu
Traditio Longa Manu
- Delivery by long hand
- Seller points to thing
- Delivery by mere consent
- Object of the contract cannot be transferred to the
vendees possession at the time of sale
iii) Traditio Brevi Manu
Traditio Brevi Manu
- Delivery by short hand
- Buyer is already in possession by virtue of
another title (lease)
- Scenario: Lease with option to purchase
iv) Tradition Constitutum Possessorium
Traditio Constitutum Possessorium
- Seller continues to be in possession of the thing
sold not as owner but in some other capacity
- Sale and leaseback
v) Quasi-Traditio

Quasi-Traditio
- Mode of delivery with regards to incorporeal
property or rights
- Intention of parties to deliver and to accept
must be present to give legal effect to the act
Tradition is only a mode of acquiring ownership for
corporeal property.
Means of Execution
- Execution of a public instrument
- Placing titles of ownership in the possession
of the vendee
- Allowing the vendee to use his rights as new
owner
14) Double Sale
Movable
Possession in Good
Faith

Immovable Property
Register title in Good
Faith
Possession in Good
Faith
Older title

Rationale: The law rewards the diligent.

Prior tempure, potior jure
- first in time, stronger in right
TITLE FOR MOVABLE PROPERTY
General rule: Possession is equivalent to title.
Possession
In good faith
o Mistake from a difficult question of law:
Conflicting SC decisions
Scenario:
1: S sells cash register to B. S retains possession
and sells it to C.
C is owner of property sold.
2: S sells land to B. S also sells the same land to C.
C registers the title, in good faith.
C is owner of property sold.
2a: B is in actual possession of the land.
B is entitled to sue S for warranty against
eviction.
Knowledge of the first sale by the second buyer
is equivalent to registration of the first buyer.
Qualification of Purchaser in Bad Faith
Knowledge of facts which should put him upon
inquiry and investigation as to possible defects
in title
3: S sells land to B. Then sells the land to C. B learns
about the sale to C. B registers title.
B is owner of property sold.

First vendee has better right.

3a: C registered the sale after acquiring knowledge of
sale to B.
Rationale: Caveat emptor
Second vendees good faith at time of purchase is
not sufficient.
Second vendees good faith must subsist in
recording the sale.
15) Risk of Loss
General Rule: Res perit domino (The thing
perishes with the owner)
Before Perfection
Seller
At Perfection
Seller; Contract is VOID
After
Whole
Buyer
Perfection
Part
Withdrawing from the
before
contract or accion quanti
Delivery
minoris
After Delivery
Buyer
Fungible goods not yet weighed, counted, or
measure and delivered: Seller
Seller retains goods to secure performance:
Buyer
Actual delivery has been delayed: Party in fault
16) Documents of Title
Nature:
Receipts or orders, upon a bailee, of goods.
Evidence of transfer of title and possession of goods,
and contract between parties
- Important: Involvement of third party rights
Most common forms:
a) Bill of Lading
- transport of goods and their delivery to the
person named therein
b) Dock Warrant
- recognition of importers title of goods
warehoused on the doc
c) Warehouse Receipt
- receipt for goods deposited with a
warehouseman containing the latter's
undertaking to hold and deliver the said goods
to a specified person
Negotiable document of title
- goods referred to therein will be delivered to
the bearer, or to order of any person named in
such document
Non-negotiable document of title
- goods referred to therein are deliverable to a
specified person
17) Performance of the Contract

a) Place, Time, Manner of Delivery

i) Place:
General Rule: Agreement
Usage of Trade
Sellers Place of Business
Sellers Residence
Specific Goods (At Some Other Place): Other Place
(done for purposes of convenience)
ii) Time:
A manifestation that time is of the essence when time
is fixed.
No time fixed: Reasonable time
Reasonable depends on character of goods, purpose
intended, ability of seller to produce, facilities
available for transportation and the distance the
goods must be carried, and the usual course of
business.
Fixed time: Was correct performance offered?
iii) Manner:
Delivery that is necessary to protect the buyer
against third persons: Person holding the goods must
acknowledge being bailee for the buyer
Obligations of the Vendee (1582)
- Accept delivery
- Pay the price
- Bear expenses for execution and registration if
stipulated
3RD Obligation: vendor usually
Most important pay the price
Delivery should be simultaneous with payment.
Follow stipulation.
No stipulation: Follow time and place of delivery.
(Payment follows delivery)
Time fixed in the contract: The buyer is required to
pay.
(Similar to delivery on credit, time of payment has
been set, but delivery can be performed anytime)
b) Sale of Movables (1583)
- Delivery by Installment:
General Rule: Buyer not bound to receive delivery in
installments or pay for installments
Separate Price for Installment: Terms of contract and
circumstances of case
Only consider the breach of those stated
installments
Seller is not willing to perform obligations:
Breach of the entire contract, even if severable
o Purpose of breaching even if it hasnt
happened yet

Breach Affects Whole Contract: Defective

deliveries/wrongful refusal
Remedy: Damages for grounds on breach of
entire contract
Breach Divisible:
Remedy: Compensation for particular breach
Delivery of Wrong Quantity (1522)
Applies to fungible goods
Quantity delivered vs Quantity agreed upon in the
contract
Smaller Quantity
- Reject the whole thing
- Accept the contract for a proportional reduction in
price
- Seller will not perform the contact in full.

Aware: Pay for quantity at contract rate

o Buyer gives his assent to the discrepancy
in quantity. Seller cannot be faulted.
Not aware of subsequent breach:
o Liability is not more than the fair value
o Only dictates the range.
o Seller should not be rewarded for not
fulfilling his obligation.
o If FV is higher than contract rate, follow
contract rate.
Greater Quantity
- Accept the quantity stipulated, reject the rest
- Accept the whole thing and pay the proportional
price
Buyer assented to the extra quantity
Mixture of Goods
- Accept goods in accordance with the contract
- Accept the entirety of goods
Indivisible (Greater Quantity/Mixture of Goods):
Reject the whole thing (Physically indivisible,
indivisible by purpose)
- Option only available if subject matter is
indivisible
Subject to the usage of trade, special agreement
or course of dealing between the two parties.
c) Sale of Immovables
PRICE PER UNIT OF MEASURE (1539)
General Rule: The area stated in the contract must
be delivered.
- He entered into the contract considering the
number of units. The number of units is the
cause of the contract.
Limitations for Rescission:
-Lack in area is at least 1/10 than that stated or
stipulated.

-Deficiency in quality must exceed 1/10 of the price

agreed upon
Classification of land indicates the quality and
the price. Commercial and industrial lands are
more expensive.
Different classification, same price?
Would not have bought the immovable if
smaller area or inferior quality was known
Look at the purpose of the buyer
Difference in Thresholds for Area and Quality:
Which scenario is more favorable to the buyer?
- The law gives a premium to lack in area vs
deficiency in quality. The law tries to prevent
further disputes.
- Quality is subjective. Depends on the purpose
of the buyer.
- Lack in area is a more significant discrepancy.
Hidden defects: Presumed to have existed before
A deficiency in quality is not always a hidden defect.
SALE FOR A LUMP SUM (1542)
General Rule: No increase/decrease in price for
the lump sum.
- Lack of area is immaterial, the consideration for the
contract is the thing itself. The law has ascertained
the area and quality before buying it.
Two or more immovable property (same boundary)
for a single price: Deliver everything within the
boundary
Failure to deliver:
- Proportional reduction in the price
- Rescission of contract
Inspections and Acceptance (1584 1589)
Rule: Buyer has the right to inspect the thing.
Sale is consensual contract.
Standard: Reasonable time
Right of examination is not absolute. It is upon
request.
Seller refuses: Buyer can rescind the contract and
recover the price.
Buyer can waive his right to inspect.
Modes of Expressing Acceptance
- Express Acceptance
Orally or in writing
Writing is still verbal communication. Orally
- Implied Acceptance
If the buyer does something that is not consistent
with the ownership of the seller
As if the buyer already accepted it
Retention of the goods
Is acceptance a precondition for delivery? No.
Delivery is an obligation of the vendor. Acceptance is
an obligation of the vendee.

Acceptance and actual receipt?

Acceptance without receipt: Rescind the right to
examination
Receipt without acceptance: No right to examination
Acceptance does not discharge the seller in its
continuing obligations
- Warranties against hidden defects and
encumbrances
- Stipulation: Seller is not liable
Requirement for notice: Reasonable time
Period: From the time of acceptance until the period
in which the buyer should have been aware of the
defect (constructive knowledge)
The law expects a certain level of diligence from the
buyer.
Refusal of the Buyer is Justified 1587
Not bound to return it
Sellers Risk of Loss
Wrongful Refusal
Title passes to the buyer
Buyers Risk of Loss
Interest 1589 (SID)
Delivery but no payment
Accrual: Delivery and payment
- Stipulated
- Thing sold produces fruits/income
- Default

d) Inspections and Acceptance

e) Payment of Price (1590)
Disturbed in the possession
Well-grounded fear of vindicatory action

Buyer cant suspend

- Buyer paid in full
- Seller gives security
- Mere trespass (remedy against trespasser)
18) Remedies of an Unpaid Seller
Unpaid Seller
- Whole price has not been paid or tendered
- Bill of exchange/negotiable instrument was
received as conditional payment, and the
condition was broken:
o Dishonor of the instrument
o Insolvency of the buyer
Actual payment: Delivery of Legal Tender
Basis of right: Spirit of fairness and justice sale is
bilateral
Rights of an Unpaid Seller:
Possessory Lien
Stoppage in transitu
Right to Resale

Right to Rescind

Possessory Lien
Right to retain them for the price while he is in
possession of them.
Scenario: Seller has possession.
Exists: (WEI)
- Cash sale: Without any stipulation as to credit
- Sold on credit, but credit term has expired
- Buyer becomes insolvent
o Basis: When one party in a bilateral contract is
incapacitated to perform his part of the
agreement, the other party is excused from
performing his part.
Insolvency inability to pay liabilities as they fall due
Loses lien (COW)
- Delivery to carrier or other bailee (without
reserving the ownership)
o The seller can stop the goods in transit, but it
cannot be said that the seller has any lien upon
them.
o Reservation of ownership does not give rise to a
lien when
- Buyer obtains possession of goods
o Possession is necessary for the lien
o Wrongful taking does not destroy the lien
o Goods are in buyers possession for examination:
not a surrender of lien
- Waiver
o Express agreement to surrender it
o Allowed to alter goods: waiver
Basis of right: Inherent justice
Partial delivery: Lien on remainder
- Lien not lost by part delivery
- Exemption: Symbolic delivery of the whole
o Delivery was done with an intent to waive the
lien/right to retention
Sale of goods by buyer: Sellers right of lien or
stoppage in transitu not affected
- Exception: Seller assents
Stoppage in transitu
You lose the lien when you do not have possession.
Exercised when:
- Obtaining actual possession
- Giving notice of claim to carrier/bailee in
possession
When it can be invoked: seller parted with goods
Right: Same right as though he had never parted with
the possession thereof

Requisites:
- Unpaid seller
- Insolvent buyer
- Goods in transit
o Delivered to the carrier for the purpose of
transmission to the buyer
o Goods are rejected, carrier continues in
possession of them
- Seller takes possession or gives notice to
bailee
o Person in actual possession
o Principal, in a time and circumstance, in which the
principal may prevent delivery to the buyer
- Seller surrenders negotiable document of title
o Complication: negotiate/indorse
o Obligation to deliver the goods to seller only
arises after the dot has been surrendered for
cancellation
o DoT was negotiated to an innocent purchaser for
value prior to cancellation of document: right of
negotiated DoT superior to sellers lien
- Seller bears the expenses of delivery after the
exercise of right
Basis: injustice of allowing the buyer to have
possession and ownership of the goods when he has
not paid and cannot pay the price which was to be
given in return for the goods
In transit:
Delivered to a carrier by land, water, or air, or
other bailee for purpose of transmission to the
buyer, until the buyer takes delivery of them from
such carrier
Rejected by the buyer, carrier or bailee continues
in possession of them
Not in transit:
After delivery to the buyer or his agent on his
behalf
Buyer obtains delivery of goods before arrival at
destination
After the arrival at the appointed destination,
carrier acknowledges to the buyer that goods he
holds the goods on his behalf (attornment)
Carrier wrongfully refuses to deliver the goods to
the buyer in that behalf
Delivered to a transportation system chartered by the
buyer: possession of the carrier as a carrier or as an
agent of the buyer
Partial delivery: Right on stoppage on remainder
Right of Resale
IFF, allowed only when is there possessory lien or
right of stoppage in transitu
Resale allowable when: (P, ER, DPUT)

 Goods are perishable (Time is of the essence)

Right expressly reserved (in case of default)
Buyer delays payment for an unreasonable
time

Effect of resale
Seller not liable to original buyer for profit made from
resale. Breach of contract is damnum absque
injuria (damage without injury)
Seller can recover from the buyer damages for any
loss occasioned by the breach of the contract of sale.
Notice of resale not essential
Right to resell is based on buyers delay in payment
for an unreasonable time: failure to give notice is
relevant upon the question whether the buyer has
been in default for an unreasonable amount of time
Rescission
IFF, allowed only when is there possessory lien or
right of stoppage in transitu
Rescission allowed when:
Right to rescind expressly reserved
Buyer delays in payment for an unreasonable time

Scope: Applied to leases of personal property with

option to buy
Stipulation on installments: Stipulation is valid
insofar as the same may not be unconscionable
under the circumstances
Maceda Law
Buyer has paid more than two years worth of
installments:
Pay, without additional interest, the unpaid
installments due within the total grace period
earned. (One month = one year of payments)
Contract is cancelled. Seller refunds 50% of
total payments made plus an additional 5%
for every year in excess of five years
o Cancellation takes place 30 days from
buyers receipt of the notice of
cancellation
o Notice of cancellation was done by
notarial act.
<2 years
- Grace period
of not less than
60 days

Effect: Seller resumes ownership, Buyer may be

made liable for damages for any loss occasioned by
breach of contract

2 years
- Grace period
(one month per
year of
payment)
- Entitled to
50% of all
payments

Mutual Restitution
- When people return the original consideration
(buyer returns object, seller returns price)

PD 957

Manner: Notice to the buyer or some overt act

showing an intention to rescind

Warranty
Representation made
by seller of the thing
with respect to its
character, quality, or
ownership by which he
induces the buyer to
purchase the same
- Non-performance of
such is a breach of
warranty

19) Installment Sales

Recto Law (Article 1484)
Remedies of Vendor:
Exact fulfillment of obligation, should vendee fail
to pay
Cancel the sale, failure to pay covers two or more
installments
Foreclosure of chattel mortgage, failure to pay
covers two or more installments
o No further action to recover any unpaid
balance of the price
Nature of the Remedies: Alternative not cumulative
Prevents mortgagee from seizing mortgaged
property, buying it at the foreclosure sale at a low
price then bringing a suit against the mortgagor for a
deficiency judgment. The invariable result is the
mortgagor is without the property and still owing the
full amount of the original indebtedness.

5 years
- Grace period
(one month per
year of
payment)
- Entitled to
50% of all
payments
- 5% every year

20) Warranties of the Seller

Condition
Uncertain event or
contingency on the
happening of which the
obligation of the contract
depends

- Refuse to proceed with

contract
- Proceed with contract,
waive the condition

A condition becomes a warranty when it was

done in the nature of a promise that it should
happen.
Express
Affirmation of fact or promise by the seller
Natural tendency to induce the buyer to
purchase
Buyer purchases the thing relying thereon

Effect of Expression of Opinion

General Rule: An expression of opinion does not
import a warranty.
Exemption: Seller made the affirmation or
statement as an expert and it was relied upon by
the buyer.
Implied

Warranty as to Sellers Title

He has a right to sell the thing sold and to transfer

ownership to the buyer
Does not apply to judicial sales

Warranty Against Eviction

Buyer shall not be disturbed in his legal and
peaceful possession thereof
Scope: Includes judicial sales
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

Essential Elements:
- Vendee is deprived of the whole or a part of
the thing purchased
Warranty is applicable to trespass in law.
o Mere trespass in fact does not give
rise to the application of the doctrine.
o Disturbance in question is disturbance
in law.
- Deprived by virtue of a final judgment
o Appeal for decision is not required for
vendors liability for eviction
o Warranty cannot be
- Based on a right prior to the sale or an act
imputable to the vendor
- Vendor was summoned in suit for eviction at
the instance of the vendee
o Rationale: Opportunity to show that
the action interposed against the
vendee is unjust and to defend his title
that he has transferred.
- No waiver on the part of the vendee
Vendors liability is waivable.
o Warranty is not an essential element in
a sale. It can be diminished, increased
or suppressed by agreement.
o Void if the seller was in bad faith.
Exemptions:
- Adverse possession commenced before the sale
but the prescriptive period is completed after
transfer
o Prescription: acquisition of ownership and
real rights through the lapse of time in the

manner and under the conditions prescribed

by law
Rationale: Vendee could easily interrupt the
running of the period by necessary action.

Property was sold due to nonpayment of taxes

due and not made known to the vendee before
the sale: Liability for eviction
Types of Waiver
Consciente: Without the knowledge and assumption
of the risks of eviction
- Vendors Liability: Value at the time of eviction
Intencionada: Waiver is made with the knowledge
and risk of eviction
- Vendors Liability: Exempted from obligation
Right of Buyer When Liability Occurs: (VICE)
- Value of thing sold at the time of eviction
- Income or fruits delivered to the party who won
the suit against him
- Costs of the suit which caused the eviction
o Includes cost of suit against seller for the
warranty
- Expenses of the contract
- Damages and interests and ornamental expenses
(bad faith)
Partial Eviction
Scope: Includes two things jointly sold, where the
buyer would not have purchased one without the
other
Remedies available: Rescission or Liability for
Eviction
- Contemplates that the one demanding can return
what he has received from the contact

Warranty Against Hidden Defects

Free from hidden faults/defects not

declared/known to the buyer

General Rule: Caveat Venditor

Seller warrants even though he was not aware.
Sound price warrants a sound article.
Exemption: Stipulation to contrary and vendor was
not aware
Remedies: Accion redhibitoria or accion quanti
minoris
Requisites:
- Defect must be important or serious
Renders the thing sold unfit for intended use,
Diminishes its fitness for use to the extent that
the vendee would not have acquired it or
would have acquired it for a lower price
- It must be hidden

Not known, could not have been known

It must exist at time of sale
Vendee must give notice of defect within a
reasonable time
- Actions for reduction must be bought within
the proper period
Things
6 months from delivery
Animals
40 days from delivery
-

No waiver of warranty

Exemption: Vendee is an expert

Thing sold was lost because of hidden defects
Vendor was aware
Price + Expenses +
Damages
Vendor was not aware
Price + Interest
Thing sold was lost because of fortuitous event:
Price paid value at time of lost

Warranty Against Encumbrances

Remedies available: Damages for breach of warranty
or Rescission*
- Rescission available if buyer would not acquire
property had he been aware thereof
- Lack of knowledge is not a defense.
Exemption:
- Non-apparent burden was recorded in the
Registry of Property
- Burden is apparent: made known and is
continually kept in view by external signs
- Vendee had knowledge
Time Period:
One year from
execution of deed
After the one year
period, one year from
discovery of
encumbrance

Reasonably fit for a general purpose

Sale by Sample:
- Sample not merchantable: Goods similar to
sample
- Sample subject to latent defect: Warranty of
merchantibility
Implied Warranty Not Applicable:
As is and what is sale
Nothing more than that the vendor makes no
warranty as to the quality or workable condition of the
goods.
Does not extend to liens or encumbrances unknown
to the vendee and cannot be disclosed by physical
examination.
Sale of secondhand articles
No implied warranty for fitness.
Sales by virtue of authority in fact or law
No implied warranty as to the sellers title.
In Relation to Consumer Laws
o Terms of Warranty
21) Breach of Contract for Sale of Goods
Goods
- all chattels personal but not things in action or
money of legal tender
Remedies Available to the Seller: PP, DNA, RC
Payment of Price
Damages for Non-Acceptance
Rescission of the Contract

Rescission or damages
Damages

Warranty Of Fitness and Quality

The thing sold is reasonably fit for the particular

purpose for which it was acquired

Exemption: Patent or Trade Name

Quality: state or condition
Implied Warranty of Fitness:
- Buyer, expressly or by implication, manifests to
the seller the particular purpose for which the
goods are acquired
- Buyer relies upon sellers skill or judgment
Implied Warranty of Merchantibility:
Scenario: Sale by description
- Merchantibility: Identity between what is
described and between what is tendered

Remedies Available to the Buyer: SP, R/DBW

Specific Performance
Rescission or Damages for Breach of
Contract
Remedy: Sellers right of action for payment of
price
General Scenario: Wrongful refusal of the buyer
to pay or accept the goods.
Requisite: Ownership of the goods must have
passed to the buyer.
Scenario 1: Buyer wrongfully neglects or refuses to
pay.
Object is mortgaged: Obligation to pay
remains with first buyer
Failure to pay the price =/= revert
ownership of the goods to the first seller
Scenario 2: Buyer wrongfully refuses to pay price
payable on a certain day.
Scenario 3: Goods cannot readily be resold for a
reasonable price. Seller offers to deliver the goods

and buyer refuses to receive them. The seller is a

bailee for the buyer.
Remedy: Sellers remedy for damages of nonacceptance
General Scenario: Wrongfully neglects/refuses to
accept and pay for the goods.
Requisite: Ownership to goods has not passed.
Damages: Estimated loss directly and naturally
resulting in the ordinary course of events from
the buyers breach of contract
Scenario 1: There is an available market for the
goods in question.
Contract Price Market Price, at the time
when the goods ought to have been accepted
Damages: Not only the actual loss suffered
but also unrealized profit
Scenario 2: There are special circumstances showing
proximate damage of a different amount.
Scenario 3: Buyer repudiates the contract or
countermands.
Damages: Labor or expenses incurred prior to
the notice of repudiation and profit he may
have received
Scenario 4: No available market
Damages: Entitled to the full amount
Remedy: Rescission
Scenario: Buyer repudiates the sale, manifests
inability to perform obligation, or has committed
breach of contract
Requisite: Goods have not been delivered to the
buyer
recoupment
22) Extinguishment of Sale
Common
Special
Extra-Special Conventional Redemption and Legal
Redemption
Conventional Redemption
The right which the vendor reserves to himself, to
reacquire the property sold provided he reimburses
the vendee of the price, the expenses of the contract,
any other necessary and useful expenses made on
the thing sold.
Payment for repurchase (Offer plus tender of
price):
Price of the sale (not the value), expenses of the
contract and other legitimate payments, and
necessary and useful expenses made on the thing
sold.
Scope: Real and Personal Property
Agreement

Time Period

Absence of express
stipulation
Definite period
Period agreed upon not
specified/anytime you
have the money
Final judgment rendered
that contract pacto de
retro

4 years
Period stipulated, if less
than or equal to ten years
10 years

30 days from date of final

judgment

Limitation of Period:
Renders the tenure of the property uncertain
Vendor fails to avail the right to repurchase:
Judicial order is necessary before recording in the
Registry of Deeds
Equitable Mortgage
- intention of the parties to make the property
subject of the contract as a security for the
fulfillment of an obligation
Remedies to Pacto de Retro problem:
Pactum Commissorium
Usury Law
Presence of any of these circumstances gives
rise to the presumption of an equitable mortgage:
Rationale: Inconsistent with the vendees acquisition
of the right of ownership
- Price of sale with right to repurchase is unusually
inadequate
- Vendor remains in possession as lessee
- Another instrument extending the period of
redemption or granting a new period is
executed
- When the purchaser retains for himself part of
the purchase price
- Case where it may be fairly inferred that the real
intention of the parties is that the transaction
shall secure payment of a debt or the
performance of any other obligation
Interest = any money, fruits, or other benefit received
as rent
In case of doubt, a sale with a right to repurchase
shall be construed as an equitable mortgage.
Rationale: Law is conservative.
Scope: Applies to contracts purporting to be an
absolute sale
Apparent vendor may ask for reformation.
Reformation
- written instrument is made or construed to
express or conform to the real intention of the
parties

Seller can bring his action against every

possessor whose right is derived from the
vendee
- Vendor a retro cannot exercise right of
redemption against an innocent purchaser for
value if his right was not properly registered
- Right to repurchase is a real right
Vendee is subrogated to the vendors rights and
actions. Ownership is subject to the right of
redemption of the vendor.
Subrogation: transfer to the person subrogated the
credit with all the rights
Creditors cannot make use of right to redemption
until after they have exhausted the property of the
vendor. Subject to the satisfaction of the vendee.
Scenario: Vendee subsequently acquires the
whole of an undivided immovable.
Right to repurchase: Compel vendor to redeem whole
property

Scenario: Co-owners jointly sell undivided

immovable.
Right to repurchase: Limited to respective shares
Alternative: Vendee refuses partial redemption, and
compels vendors to repurchase the whole
Scenario: Separate sales of co-owners interest in
undivided immovable.
Right to repurchase: Limited to shares
Alternative for whole redemption not allowed.
Fruits at the Time of Sale
Rights at Redemption:
Free from all charges or mortgages. However, leases
executed in good faith according to the custom of the
place where the land is located must be respected.
Legal Redemption
Right to be subrogated in place of the one who
acquires a thing by purchase or by dation in payment
or by another transaction whereby ownership is
transmitted by onerous title.
People Entitled: Co-owners & owners of adjoining
lands