Review On Law On Sales

REVIEW ON LAW ON SALES
IMPORTANT TIPS ON THE LAW ON SALES (Arts. 1458-1637, CIVIL CODE) Contract of Sale Defined: Sale is a contract where one party (seller or vendor) obligates himself to transfer the ownership of and to deliver a determinate thing, while the other party (buyer or vendee) obligates himself to pay for said thing a price certain in money or its equivalent. (Art. 1458, Civil Code)
Essential Characteristics of the Contract of Sale: Consensual (as distinguished as real), because the contract is perfected by mere consent; Bilateral reciprocal - because both parties are bound by obligations dependent upon each other. Onerous, because to acquire the rights, valuable considerations must be given.
Commutative, as a rule, because the values exchanged are almost equivalent to each other. (NOTE: By way of exception, some contracts of sale are aleatory, that is, what one receives may in time greater or smaller than what he has given. Example: The sale of genuine sweepstakes ticket.) Principal (as distinguished from an accessory contract), because for the contract of sale to be validly exist, there is no necessity for it to depend upon the existence of another valid contract. Nominate because the Code refers to it by a special designation or name, that is the contract of sale.
Elements of the Contract of Sale: Essential elements (those without which there can be no valid sale) Consent or meeting of the minds, that is consent transfer ownership in exchange for the price Determinate subject matter (generally, there is no sale of generic thing, moreover, if the parties differ as to the object, there be no meeting of the minds). Price certain in money or its equivalent (this is the cause or consideration) (The price need not be in money)
Natural elements (those which are inherent in the contract, and which in the absence of any contrary provision, are deemed to exist in the contract) Warranty against eviction, deprivation of the property bought) Warranty against Hidden Defects
Accidental elements (those which may be present or absent in the stipulation, such as the place or time of payment, or the presence of conditions)
Stages in the Contract of Sale:

Generation or Negotiation Perfection - Meeting of the Minds Consummation - when the object is delivered and the price is paid.
SALE
There is no pre-existing credit.
Give rise to an obligation.
DATION IN PAYMENT
There is a pre-existing credit.
Extinguishes obligations.
The cause or consideration here is the price, from the viewpoint of the seller; or of the obtaining of the object from the viewpoint of the buyer.
The cause or consideration here, from the viewpoint of the person offering the dation, is the extinguishing of his debt; from the viewpoint of the creditor is the acquisition of the object offered in lieu of the original credit. There is less freedom in the determination of the price
There is greater freedom in the determination of the price.
The giving of the object in lieu of The giving of the price may the credit may extinguish generally end the obligation of the completely or partially the credit
Difference between a Contract of Sale and a Contract to Sell In a Contract of Sale, the non-payment of the price is a resolutory condition, that is the contract of sale may by such occurrence put an end to a transaction that once upon a time existed.; In a Contract to Sell, the payment in full of the price is a positive suspensive condition. Hence if the price is not paid, it is as if the obligation of the seller to deliver and to transfer ownership never became effective. In the Contract of Sale, title over the property generally transfer to the buyer upon delivery; in the Contract of Sell, ownership is retained by the seller, regardless of the delivery and it will not pass until full payment of the price. In a contract of Sale, after delivery has been made, the seller has lost ownership and cannot recover it unless the contract is resolved or rescinded. In a Contract to Sell, since the seller retains ownership, despite delivery, he is enforcing the contract if he seeks to oust the buyer for failure to pay.
The object of Sale must be LICIT and the Vendor must have the right to transfer ownership at the time the object is delivered. (Art. 1459) The object of the sale must be determinate, that is specific, but it is not essential really that at the time of perfection, the object be already specific. It is sufficient that it be capable of being determinate without nee of any new agreement. Things of potential Existence may be an object of sale. This is a future thing that may be sold. Example: "All my rice harvest next year." Note however that future inheritance cannot be sold, however. (Art. 1347, par. 2, Civil Code) Other examples of things possessed of a potential existence: Young animals not yet in existence or still ungrown fruits; The wine that a particular vineyard is expected to produce; Expected goodwill of a business
Sale of expected thing and sale of mere hope or expectancy). Art. 1461 Sale of expected thing (Emptio Rei Sperati) Sale of hope itself (Emptio Spei) NOTE: If the expected thing in (a) does not materialize, the sale is not effective. In the second, it does not matter whether the expected thing materialized or not; what IS IMPORTANT IS THAT THE HOPE ITSELF VALIDLY EXISTED. The first deals with future thing - that which is expected; the second deals with the present thing - certainty the hope or expectancy already exist. Example of Emptio Spei: Sale of a valid sweepstakes ticket. Whether the sweepstake ticket wins or not, the sale is valid. NOTE: If the hope or expectancy itself is in vain, the sale is itself VOID. Be it noted that this is not an aleatory contract for while in aleatory contract there is an element of chance, here there is completely no chance. Example : Sale of a losing ticket for a sweepstake already drawn.
Goods may be future or existing goods. Future goods are those still to be manufactured, raised or those acquired by the seller after the perfection of the contract. Art. 1462 14 An undivided Interest may also be sold. Art 1463. Also things subject to a resolutory condition may be sold. Art. 1465
Requisites in order that a thing may be the object of sale: The thing must be existing, or at least, have a future or contingent existence (Arts. 1461, 1462, 1465); It must be determinate or determinable by description or segregation (Art. 140); It must be licit or legal (Art. 1459) The vendor must have real right to transfer ownership of the thing at the time it is delivered (Art. 1459)
Objects of Contract of Sale: The following may be the objects of sale: Things having potential existence (Art. 1461, NCC); Things that are existing or to be manufactured, raised or acquired in the future or future goods (Art. 1462, NCC) Those whose acquisition by the seller depends upon contingency which may or may not happen (Art. 1462, NCC); Things subject to a resolutory condition (Art. 1465)
Requisites of price in a contract of sale: The price must be in money or its equivalent (Art. 1458) It must be certain or ascertainable (Art. 1469) It must be real, i.e., not simulated, (Art. 1471) Meaning of a price certain: The parties have fixed or agreed upon a definite amount; or It be certain with reference to another thing certain (See Art. 1472), as where the buyer agrees to pay the price as indicated in the invoices; The determination of the price is left to the judgment of a specified person or persons (Art. 1469) The last two cases are applicable only when no specific amount has been stipulated by the parties.
Rules if price is to be determined by a third person: The price fixed by the third person is binding except when he acts in bad faith or by mistake; In such case, the courts may fix the price; If the third person is unable or unwilling to fix the price, the contract shall be inefficacious (without effect), unless the parties subsequently come to an agreement ; and If the third person is prevented from fixing the price by the fault of the seller or buyer, the party not in fault may choose between rescission or fulfillment with damages in either case. (Art. 1469)
The fixing of the price may not be left to the discretion of one of the contracting parties, as it cannot be said that there is meeting of minds upon the fixed price. (Art. 1308) But if the other accepts price fixed, the sale is deemed perfected.
If the price cannot be determined, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer, he is under obligation to pay reasonable price thereof. (Art. 1474) Effect of Gross Inadequacy of Price:
It does not affect the contract of sale except when the inadequacy may indicate that there is a defect in the consent, or that the parties really intended a donation or some other act or contract.
CONTRACT OF SALE
In contract of sale, the buyer pays the price.
AGENCY TO SELL
In an agency to sell, the agent delivers the price which in turn he got from his buyer; The agent who is supposed to sell does not become the owner, even if the property has been delivered to him;
The agent who sells assumes no personal liability as long as he acts within his authority and in the name of the principal
In sale, the buyer after delivery becomes the owner;
In sale, the seller warrants
Rules to determine whether contract is sale or barter. In a contract where the consideration is partly money and partly goods, the following rules shall apply: the intention of the parties must be determined; If the intent is not clear, then apply the following rules: If the sold thing is more valuable than money, the contract is barter; If the money and the thing are equal value, the contract is sale; If the thing is less valuable than money, the contract is a contract of sale (Art. 1468, NCC)
Contract of Sale as against Contract for a Piece of Work: By the contract for a piece of work, the contractor binds himself to execute a piece of work for the employer (e.g., to construct a house) in consideration of a certain price or compensation. The contractor may either employ his labor or skill, or also furnish the material. (Art. 1713.)
A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured especially for the customer and upon his special order (e.g. dress made on the basis of the body measurement of the customer) and not for the general market, it is a contract for a piece of work. (Art. 1467)
Perfection of sale: The contract of sale is perfected at the moment there is meeting of the minds upon the thing which is the object of contract and upon the price. Effects of perfection of sale: From the moment consent is given, the reciprocal obligations of the parties arise and they may reciprocally demand the performance, subject to the Statute of Fraud; The ownership of the thing sold is not transferred until it is delivered, actually or constructively, to the buyer (Art. 1477); and In case one of the contracting parties does not comply with what is incumbent upon him, the injured party may sue for fulfillment or rescission with the right to damages in either case. (art. 1191)
Effect of an accepted unilateral promise to sell or buy a thing for a price certain: Such unilateral promise also known as option contract does not bind the promissor and may be withdrawn at any time; If the promise, however, is supported by a consideration distinct from the price, its acceptance gives rise to the perfection of the contract.
Effect of a bilateral promise to buy and sell a thing for a price certain: When the promise is bilateral, that is, one party accepts the other's promise to buy and the latter, the former's promise to sell, a determinate thing for a price certain, it has practically the same effect as a perfected contract of sale since it is reciprocally demandable. But there is no contract of sale yet until it is executed.
Rules with regards to any injury to or benefit from the thing sold, after contract is perfected but before delivery. The vendor is obliged to take care of the thing sold with proper diligence. (Art. 1163) The vendor has the right to the fruits of the thing from the time the obligation to deliver arises but shall acquire no real right or ownership over it until the same has been delivered to him (Art. 1164; Art. 1537) If the thing is determinate, the vendee may compel the vendor to make the delivery, and hold him liable for damages by reason of fraud, delay, etc., Arts. 1165 and 1170) If the thing is generic, he may ask that the obligation be complied with at the expense of the vendor if the latter fails to make delivery also with a right to damages in proper case (Arts. 1165, 1170);
If the thing is determinate, and it is lost or destroyed --a. Through the fault of one party, the party at fault is liable for damages; b. Through fortuitous event, the vendor is released from the obligation to deliver and the vendee is liable to pay the price if he has not yet paid the same (see Arts. 1480, 1583, 1189 and 1269). Art. 1504, par. 1 however provides a rule contrary to 1480); c. The vendor shall be responsible for any fortuitous event if it is so stipulated, or if the same took place after he has incurred delayed, or he has promised to deliver the same thing to two or more persons who do not have the same interest, Arts. 1164, 1262)
d. The rule under letter (b) applies to the sale of fungible things, made independently and for a single price or without consideration or their weight, number or measurement (Art. 1480). Reason: In such case, the fungible things have been " particularly designated or physically segregated" e. It does not apply where the fungible things have been sold for a price fixed in relation to weight, number or measure. In such case, the risk shall not be imputed to the vendee until they have been weighed, counted or measured and delivered;
If the thing is generic, the loss with or without the vendor's fault, of anything of the same kind does not distinguish his obligation to deliver. (Art 1262)
Special Rules on sales by description and sale by sample

In the contract of sales of goods by description or by sample, the contract may be rescinded if the bulk of goods delivered do not correspond with the description or by the sample; If the contract be by sample as well as by description, it is not sufficient that the bulk of goods correspond with sample if they do not correspond with the description; The buyer shall have reasonable opportunity of comparing bulk with the description or sample (Art. 1481)
Principle of Earnest Money: Earnest Money is that given by the buyer to the seller to bind the bargain. It is actually a partial payment of the purchase price and is considered as proof of the perfection of the contract. Earnest Money vs. Option Money Earnest money is part of the purchase price, while option money is given as distinct consideration for an option contract; Earnest money is given only if there is already a sale while option money applies to sales not yet perfected; When the earnest money is given, the buyer is bound to pay the balance, while the would be buyer who gives option money is not required to buy. But option money may become earnest money if the parties so agree.
Remedies of vendor in Sale of Personal Property Payable in Installments. (RECTO LAW)) The vendor of personal property payable in installments may exercise any of the following remedies: Elect fulfillment upon the vendee's failure to pay; Cancel the sale, if the vendee shall have failed to pay two or more installments; or Foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more installments. Nature of the above remedies in Recto Law: These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a waiver of the right to resort to the others.
Right of the vendor to recover the unpaid balance of the purchase price: The vendor who has chosen specific performance or to exact fulfillment of the obligation is not limited to the proceeds of the sale, on execution, of the mortgaged goods. He may still recover from the purchaser the unpaid balance of the price, if any on real or personal properties of the purchaser not exempt by law from attachment or execution;
If the vendor chooses rescission or cancellation of the contract upon the vendee's failure to pay two or more installments, the latter can demand the return of payments already made unless there is a stipulation about forfeiture. (See Art. 1468) If the vendor has chosen the third remedy of foreclosure of the chattel mortgage, he shall have no further action against the vendee for the recovery of any unpaid balance of the price and any agreement to the contrary is void. The foreclosure is caused by selling the mortgaged personal property at public auction and applying the proceeds of the sale to the satisfaction of the claim secured by the mortgage.
Requisites before Art. 1484 may be applied: There must be a contract The contract must be of sale, an absolute sale or conditional; What is sold in personal property The sale must be in installment Instances where Art. 1484 may not be applied: It does not apply in real property mortgage. It does not apply to sale of personal property in straight terms, a sale on straight terms being one, which the balance, after the payment of initial sum should be paid in totality at the time specified.
Lease of Personal Property with Option to Buy is considered as sale of property in installments. (Art. 1485) As a rule, payment of installments should be returned unless parties stipulate that the same shall not be returned. Expenses for the execution and registration shall be borne by the vendor in the absence of any agreement between the parties to the contrary.
REALTY INSTALLMENT BUYER PROTECTION ACT (MACEDA LAW) R.A. NO. 6552 In transactions involving the sale or financing of real estate on installment payments including residential condominium apartments, under the Maceda Law, (R.A.NO. 6552), the rights of the buyer who has paid at least two (2) years installments and subsequently defaulted in the succeeding installments are the following: To pay w/out additional interest, the unpaid installment within total grace period earned by him fixed at the rate of one-month grace period for every one year of installments made. The right however shall be exercised by him only once in every 5 years of the life of the contract and its extensions, if any; and
If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on property equivalent to 50% of the total payments made and after 5 years of installments, and additional 5% every year but not to exceed 90% of the total payments made. (Section 3, R.A. No. 6552 (Maceda Law), Realty Installment Buyer Protection Act) The above law excludes from its operation sales on installments of industrial lots and commercial buildings and sales to tenants under the CARP. Down payments, deposits or options on the contract shall be included in the computation of the total number of installments payable.
Effect of buyer on realty installments has paid less than 2 years of installments: The seller shall give him a grace period of not less than 60 days from the date the installment became due. If he fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt of the buyer of the notice of cancellation or the demand for rescission of the contract by notarial act. Sec. 24 of P.D No. 957 otherwise known as the Subdivision and Condominium Buyers Protective Decree provides that the rights of the buyer of subdivision lot or condominium unit in the event of his failure to pay the installments due to reasons other than failure of the owner or developer to develop the project shall be governed by R.A No. 6552 or the Maceda Law.
Capacity to sell and buy: (Who can enter in a Contract of Sale?) General Rule: All persons, whether natural or juridical, who are authorized by the Civil Code to oblige themselves may enter in to a contract of sale. Exceptions are those who suffer absolute incapacity and relative incapacity under Arts. 1490-1491)
NOTE : Minors and other incapacitated persons may validly enter into contracts of sale on necessaries and the price payable in such case shall be the reasonable price. (Art. 1489) Meaning of Necessaries: those which are needed for sustenance, dwelling, clothing and medical attendance in keeping with the financial capacity of the family of the incapacitated person (Art. 194. Family Code.)
Persons disqualified to sell and buy: The husband and wife cannot sell property to each other, except: when a separation of property was agreed upon in the marriage settlement; or when there has been judicial separation of property Persons who, because of their position and relation with the person under their charge or property under their control are prohibited from acquiring said property either directly or indirectly and whether in private or public sale, namely: guardians; agents;
executors and administrators; public officers and employees; and judicial officers and employees and lawyers others especially disqualified by law The seller in an auction sale may not bid unless notice is given reserving such right. (Art. 1476 (4); An unpaid seller cannot buy, directly or indirectly the goods sold by him, in case of resale (Art. 1533) Note: Sales contracted in violation of Nos. 1, 2 & 3 would make the contract voidable. If sale was contracted by those falling under nos. 4-6 would make the contract void for being contrary to public policy.
The prohibition udder Nos. 1 & 2 are applicable to sales in legal redemption, compromises and renunciations. Art. 1492)
Compromise is a contract whereby the parties, by reciprocal concessions, avoid a litigation or put an end to one already commenced. (Aer. 2028). It is the amicable settlement of a controversy. Renunciation, a creditor gratuitously abandons his right against his creditor. The other terms used by the law are condonation and remission. The persons disqualified to buy referred to in Articles 1490 and 1491 are also disqualified to become lessees of the things mentioned therein.
Art. 1493. If at the time the contract of sale is perfected, the thing which is the object of the contract has been entirely lost, the contract shall be without any effect. But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. OBJECT Specific thing
Art. 1494. Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale: (1) As avoided; or (2) 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 which the ownership will pass, if the sale was divisible. Object specific goods refer to definition GOODS IDENTIFIED AND AGREED UPON AT THE TIME A CONTRACT OF SALE IS MADE.
Rules regarding risk of loss in contracts of sale: If the thing is lost before perfection, the seller and not the one who intends to purchase bears the loss in accordance with the principle that the thing perishes with the owner (res permit domino). If the thing is lost at the time of perfection, the contract is void or inexistent (Art. 1409 The legal effect is the same as when the object is lost before the perfection of the contract of sale (Art. 1493) If the subject matter (i.e., a specific thing like car) is only partially lost, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its proportionate price. (Art. 1493)
If the subject matter (i.e., a specific mass like 100 cavans of rice in a warehouse) have perished in part or in whole or in material part so deteriorated in quality, without the knowledge of the vendee, the vendee may choose to avoid or cancel the contract or treat valid the existing goods if divisible and pay the agreed price for the remaining goods. If the contract is indivisible, the object is treated as specific thing. (Art. 1494)
If the thing is lost after perfection but before delivery, that is even before ownership is transferred to the buyer, the risk of loss by a fortuitous event without the sellers fault is borne by the buyer as an exception to the rule of res perit domino. (Art. 1480).
Note: This is in conflict with Article 1504 which provides that unless otherwise agreed, the goods remain at the sellers risk until ownership therein is transferred to the buyer
If the thing is lost after delivery, the buyer bears the risk of loss following the rule of res permit domino. Where the seller reserves ownership of goods merely to secure the performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of delivery. Where the actual delivery has been delayed through the fault of either the buyer or the seller, the goods are risk of the party at fault. (Art. 1504)
Obligations of the Vendor: to transfer ownership (cannot be waived) to deliver (cannot be waived) to warrant the object sold (this can be waived or modified since warranty is not an essential element of a contract of sale; to preserve the thing from perfection to delivery otherwise he can be held liable for damages.
Effect of Failure to deliver in time: If the seller promised to deliver at a stipulated time and such period is of the essence of the contract, but did not comply with his obligation on time, he has no right to demand payment of the price. As a matter of fact, the vendee-buyer may ask for rescission of the sale.
Ownership is transferred generally only by delivery. Kinds of Delivery

1. Actual or real (Art. 1497) 2. Legal or constructive a. legal formalities (Art. 1498) b. symbolica tradition or traditio symbolica (such as the delivery of the key of the place where the movable sold is being kept) (Art. 1498 par. 2);
c.
traditio longa manu (by mere consent or agreement) if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale (Art. 1499) d. traditio breva manu ( if the buyer had already the possession of the object even before the purchase, as when the tenant of the car buys the car, that his possession as an owner). ( Art. 1499)
e. traditio constitutum possessorium (opposite of
f.
tradito breva manu) possession as owner changed, for example possession as a lease. I.e, I sold my car but continued to possess it as a lessee of the purchaser (Art. 1500) Quasi-tradition - delivery of rights, credits or incorporeal property made by: by placing titles of ownership in the hands of the buyer; or allowing the buyer to make use of the rights. (Art. 1501) execution of legal documents
Cases when delivery does not transfer ownership over thing sold. 1. Where a contrary intention appears by the terms of the contract: a. In case of express reservation by the seller of his title, until certain conditions have been fulfilled (Art. 1503, par. 1) particularly the full payment of the purchase price. (Art. 1478); b. In case of implied reservation of title as when goods are deliverable to the order of the seller or his agent; and
c. In sale on approval, or trial or on satisfaction (Art.
1502); 2. Where the seller failed to make such contract with the carrier on behalf of the buyer as may be reasonable under the circumstances (See Art. 1523, par. 2); and 3. Where the seller failed to give notice to the buyer as may enable him to insure the goods during their transit if under the circumstances it is usual to insure them. (Note: Nos. 2 & 3 are also exceptions to the general rule that delivery to the carrier is deemed delivery to the buyer)
Sale or Return - it is a contract by which 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.
Note : In sale or return, the risk of loss or injury rests upon the buyer
Sale on Trial or Approval - It is a contract in the nature of option to purchase if goods prove satisfactory, the approval of the buyer being a condition precedent. In this kind of contract, the title shall continue in the seller until the sale has become absolute: Upon the buyer's approval or acceptance made known to the seller; Upon the buyer's doing any other act adopting the transaction; or Upon the retention by the buyer of the goods beyond the time fixed (or a reasonable time) without giving notice of rejection. (Art. 1502) Note : In sale or return, the risk of loss or injury rests upon the buyer while in sale on approval, the risk still remains in the seller.
RESERVATION OF OWNERSHIP
General rule, delivery to the buyer transfers ownership. Exceptions: When there is express reservation ownership made by the seller. When there is implied reservation ownership such as in the following:
1. Where the goods are shipped and by the bill of lading the goods are deliverable to seller or his agent, the seller thereby reserves ownership in the goods. (Art. 1503 paragraph 2) In this case, the carrier becomes the bailee for the seller. The last sentence of paragraph 2 states however that if it were not for the bill of lading, ownership would still pass to the buyer, then the sellers property or right in the specific goods shall merely for security only, meaning the seller is reserving his right to the goods not in the concept of the owner but merely for purpose of ensuring that the buyer will fulfill his obligations under the contract of sale.
2. Where goods are shipped and by the bill of lading the goods are deliverable to the order of the buyer or his agent, but the possession of the bill of lading is retained by the seller or agent, the seller thereby retains a right to the possession of the goods as against the seller. (Art. 1503 par. 3) In this case, the buyer, as a consignee cannot take delivery of the specific goods until the seller releases the bill of lading. The seller will not release possession of the bill of lading to the buyer, until the latter pays the purchase price and fulfill any other conditions, if any.
3. Where the seller draws on the buyer for the price and transmits the bill of exchange and the bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the title is regarded as retained in the seller until the bill of exchange is paid. The fact that the bill of lading and bill of exchange are attached together indicates that the seller intends to make the delivery of the goods conditional upon the payment or acceptance of the draft. In this case, attachment of the bill of exchange to the bill of lading will serve notice to the carrier not to deliver the goods until the buyer is able to accept or pay the bill of exchange. Should the buyer dishonor the bill of exchange by non-acceptance or by non-payment, he must return thee bill of lading to the seller. If the wrongfully retains the bill of lading, he acquires no additional right.
The last portion of par. 4 of Art. 1503 states that if in the bill of lading the specific goods are: a) Made deliverable to the buyer or to order of the buyer, b) The bill of lading is indorsed in blank, or c) The bill of lading is indorsed to the buyer by the consignee name therein, a subsequent purchaser in good faith and for value of the bill of lading or of the goods from the buyer will acquire ownership of the goods although the bill of exchange has been dishonored.
Unless otherwise authorized by the buyer, seller must make contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods. If the seller fails to do so and the goods are lost or damaged in the course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller liable for damages. (Article 1523 par. 2)
Article 1504 reiterates the principle of res perit domino meaning the owner bears the loss. Unless otherwise agree, if the seller retains ownership of the goods sold, then he bears the loss through fortuitous event. If ownership of the goods is already to the transferred to the buyer, he bears the risk. Exceptions: a) Reservation of owner for purpose of securing performance by the buyer of his obligation specifically payment in full of the purchase price, in this case, buyer bears the risk. b) Where the actual delivery of the goods havee been delayed through the fault either of the seller or the buyer, the party at fault shall bear the risk of loss of the goods.
What title is acquired by the vendee or buyer if the object which he bought was sold by somebody who is not the owner thereof and who was not authorized to sell it? The vendee, in such a case acquires no better title to the object than the vendor had. Reason. He is not the owner of the goods himself and he has no authority to sell the goods from the owner or he sold the goods without the owners consent. This rule, however is subject to the following exceptions: Where the owner ratifies the sale made by the seller Where the true owner is estopped or precluded by his conduct from denying the vendor's authority to sell; Where the sale is made by the registered or apparent owner in accordance with recording or registration laws; Where the sale or under the order of a court of competent jurisdiction; and Where the purchase is made in a merchant's store or in fairs, or markets, in accordance with the Code of Commerce and special laws (Art. 1505)
Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, a) the buyer acquires good title to the goods, provided (2) he buys them in good faith, for value and (3) without notice of the seller defect of title. (Art. 1506)
Define Negotiable Document of Title: A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of the any person named in such document is a negotiable document of tile. (Art. 1507) Nature of Document of Title: It refers to goods and not to money. They all have this in common: that they are receipts of a bailee, or orders upon a bailee,
Common forms of Document of title: Bill of Lading- A contract or receipt for the transport of goods and their delivery to the persons named therein, to order or to bearer. It usually involves three persons - the carrier, the shipper and the consignee. The shipper and the consignee may be one and the same person. Dock warrant- An instrument given by dock owners to an importer of goods warehoused on the dock recognizing the importer's title to the said goods; Warehouse receipt - A contract or receipt for goods deposited with the warehouseman containing the latter's undertaking to hold and deliver the said goods to a specified person, to order or to bearer. Quedan is warehouse receipt usually for sugar received by warehouseman.
A negotiable document of title may be negotiated by delivery: Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer; Where by the terms of the document the carrier, warehouseman or other bailee negotiating the same undertakes to deliver to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer; Where by the terms of a negotiable document of title, the goods are deliverable to bearer or where the negotiable document of title has been indorsed in blank or bearer, any holder may indorse the same to himself or to any specified person, and in such are the document shall thereafter be negotiated only by the indorsement of such indorsee. (Art. 1508)
Negotiable document of title be negotiated by indorsement A negotiable document of title may be negotiated by the indorsement of the person to whose order the goods are by the terms of the document deliverable. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. (Art. 1509)
Who may negotiate a negotiable document of title? By the owner thereof; By any person to whom the possession or custody of the document has been entrusted by the owner, if by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is such form that it may be negotiated by delivery (Art. 1512)
A person to whom negotiable document of title has been duly negotiated acquires thereby: Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as to the person to whose order the goods were to be delivered by the terms of the document had and had ability to convey to a purchaser in good faith for value; The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of document as fully as if such bailee had contracted directly with him (Art. 1513).
What are the implied warranties of the person who negotiates a document of title by indorsement or delivery? A person, who for value negotiates or transfers a document of title by indorsement or delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants: That the document is genuine; That he has legal right to negotiate or transfer it; That he has knowledge of no fact which would impair the validity or worth of the document; and That he has right to transfer the title of the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title of goods represented thereby (Art. 1516)
Note : The person to whom a negotiable document of title was issued must be the owner of the goods, otherwise, it cannot effect a valid negotiation. Hence, if the goods are stolen and place to the bailee for deposit. The negotiation of the document of title cannot validly transfer ownership.
But if goods are legitimately deposited, Article 1518 applies. The validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress or conversion, if the person to whom the document was subsequently negotiated paid value therefore in good faith without notice of the breach of duty, or loss, theft, frau, accident, mistake, duress or conversion.
Art. 1519. If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court.
Art. 1520. A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. As a general rule, attachment or levy of goods covered by negotiable document of title is prohibited. The only recognized exceptions to the general rule are as follows: a) If the document is surrendered to him; or (2) negotiation is enjoined.
Instances when bailee can be compelled to surrender goods. The rule is baille cannot be compelled to surrender the goods in his possession covered by a negotiable document of title. He may do so, however: ( a) if document is surrendered to him or (2) the document is impounded by the court.
Art. 1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. (n)
Art. 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate.
Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest. In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the whole of the goods. The provisions of this article are subject to any usage of trade, special agreement, or course of dealing between the parties. (n)
Under Article 1523, the general rule delivery to the carrier is delivery to the buyer when the seller is authorized or required to send the goods to the buyer (See. Art. 1521) Exceptions are in case of express and implied reservations ( Art. 1503) Seller duties if required to deliver the goods to the buyer To enter on behalf of buyer into such contract with the carrier reasonable under circumstances. If he omits to do so, (1) the buyer may decline to treat delivery to carrier as delivery to himself in case goods are lost or damaged in course of transit, or (2) the buyer may hold the seller responsible in damages ( par 2 of Art. 1523) If buyer exercised the first option, the transfer of ownership will be deemed not to have taken place; and To give notice to buyer regarding necessity to insure goods, if under the circumstances it is usual to insure them. If seller fails to so, the risk will be borne by him.
PLACE OF DELIVERY (Art. 1521)

Where there is an agreement, express or implied, the place of delivery is that agreed upon; Where there is no agreement, the place of delivery is determined by usage of trade; Where there is no agreement and there is also no prevalent usage, the place of delivery is the sellers place of business; In any other case, the place of delivery is the sellers residence; and In case of specific goods, which to the knowledge of the parties at the time the contract was made were in some other place, that place is the place of delivery, in the absence of any agreement or usage of trade to the contrary.
Explain F.O.B, C.I.F., F.A.S., & C & F., EX (Point of Origin) and Ex dock; F.O.B - The initials for the words, "Free on Board". This means that the goods are to be deliverable free of expense to the buyer to the point where they are F.O.B. C.I.F. - The initials stand for the words "cost, insurance and freight." They signify that the price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by the seller up to the point especially named. F.A.S. - The initials mean "free alongside vessel" (named port of shipment). Under this term, the seller pays all charges and bears the risk until the goods are placed alongside overseas vessel and within reach of its loading tackle.
C & F - The initials signify that the price fixed includes cost and freight to the named point of destination. Ex Factory, Ex Warehouse, etc. (named point of origin) - Under this term, the price quoted applies only at the point of origin, and the seller agrees to place the goods at the disposal of the buyer at the agreed place on the date within the period fixed. Ex Dock (named port of importation). - Under this term, the seller quotes a price including the cost of the goods on the dock at the named port of importation.
The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for payment has been fixed in the contract. As a rule, the obligation to deliver the thing subject matter of a contract arises from the moment of its perfection and from the time the obligation may be enforced. But a contract of sale is bilateral and so the obligation to deliver the thing is accompanied the obligation by the payment of the price. These obligations are reciprocal. Exception: If the time for such payment has been fixed in the contract, the thing must be delivered though the price has not been paid yet.
Define an unpaid seller under Art. 1525

An unpaid seller is one who has not been paid or tendered the whole price; or who has received a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has been broken by reason of dishonor of the instrument. (Art. 1525)
Rights of the UNPAID SELLER Even if the ownership in the goods has already passed to the buyer, they are: A lien on the goods or right to retain them for the price while in his possession; POSSESSORY LIEN A right of stopping the goods in transitu in case of insolvency of the buyer; STOPPAGE IN TRANSITU A right of resale; and A right to rescind the sale.
Cases where the unpaid seller exercises his right of possessory lien: When the goods have been sold without any stipulation as to credit; Where the goods have been sold on credit, but the term of the credit has expired; and Where the buyer becomes insolvent. The seller may exercise his right o lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. (Art. 1527)
An unpaid seller loses his lien to the goods: When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving ownership of the goods or the right of possession thereof; When the buyer or his agent lawfully obtains possession of the goods; When the unpaid seller waives his lien. Mere judgment by a court obtained by the unpaid seller for the price of the goods is not a ground for the loss of his lien. (Art. 1529)
The right of stoppage in transitu is the right of the unpaid seller who has parted with the possession of the goods, when the buyer is or becomes insolvent, to stop them and resume possession while they are in transit. The unpaid seller will become entitled to the same rights to the goods as if he had never parted with possession (Art. 1530)
Requisites in the exercise of the right of stoppage in transitu:

The seller must be unpaid (Art. 1525) The buyer must be insolvent; The goods must be in transit (Art. 1531) 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 (Art. 1532 p. 1) The seller must surrender the negotiable document of title, if any, issued by the carrier or bailee (ibid, p. 2) The seller must bear the expenses of delivery of the goods after the exercise of the right. (Ibid.)
Manner of which unpaid seller may exercise the right to stop the goods in transitu: Either by taking actual possession of the goods; By giving notice of his claim to the carrier of business in whose possession the goods are. The seller must surrender the negotiable document of title, if any issued by the carrier or bailee. (Art. 1532)
Instances where goods are considered not already in transitu:

The goods are no longer in transit after delivery to the buyer or his agent in that behalf and in the following cases: 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; and If the carrier or bailee wrongfully refuses to deliver the goods to the buyer. (Art. 1531)
Effects of Sale of Goods subject to unpaid sellers right of lien or stoppage in transitu: They are: The seller's right is not affected by any disposition of goods made by the buyer, unless he has assented thereto. If, however, the goods are covered by a negotiable document of title, the seller's right cannot prevail rights of purchaser for value in good faith to whom the document has been indorsed. (Art. 1535)
Right to Resale: This right can be the unpaid seller only when he has right of lien or right to stop goods in transitu and under any of the three following cases: a. Where the goods are perishable in nature;
b. Where the right to resell is expressly reserved in case the buyer should make a default; and; c. Where the buyer delays in the payment of the price for an unreasonable time.
Effect of Resale:
The seller is not liable for any profit made by such resale; but if he sells for less than the price, he has the right to sue for the balance. As against the original buyer, the new buyer acquires a good title to the goods.
Note: It is not essential to the validity of a resale that notice of an intention to resell the goods be given by the seller to the original seller. Except where the resale is based on the default of the buyer in the payment of the price, as notice in this case is relevant in any question whether the buyer had been in default for unreasonable time before the resale was made.
No notice is required for the time and place of such resale to the buyer. Seller is not allowed to directly or indirectly buy the goods in a public or private sale.
Cases when an unpaid seller exercises his right to rescind: Either of the two situations, namely: When the right to rescind is expressly reserved; or When the buyer defaults or delays in the payment of the price for an unreasonable time. In the case of rescission, the seller resumes ownership in the goods. While the seller shall not be liable to the buyer upon the contract of sale, the latter, however, may be made liable to the seller for damages for any loss occasioned by the breach of contract. (Art. 1534)
Note ; An unpaid seller has right to rescind only if he has either a right of lien or a right to stop goods in transitu. Effect of Rescission: The seller resumes ownership of the goods. While the seller shall not be liable to the buyer upon the contract of sale, the latter however may be made liable to the seller for damages for any loss in occasioned by the breach of contract (par. 1, Art. 1533)
How to rescind?
An election by the seller to rescind may be manifested by notice to the buyer or some other over act showing an intention to rescind. Communication of such election to the buyer is not necessary.
Rules In Case the Area or Number Sale of Real Estate:

Rules in case the area or number is greater or less that stated in the contract of Sale of Real Estate: The sale is made with a statement of its area at the rate of a certain price for a unit of measure or number (e.g. a parcel of land containing an area of 1,000 square meters is sold at P 100.00 per square meter) If the actual area, for example is 1,100 sq. meters - The vendee may accept the area included in the contract (1,000 sq. meters) and the rest (100 sq. meters). If he accepts the whole area, he must pay for the same at the contract rate of P 110,000. (Art. 1546)
Rules In Case the Area or Number Sale of Real Estate:

If the actual area is 900 sq. meters - The vendee may choose between a proportionate reduction of the price (P 90,000) and the rescission of the contract, provided in the latter case the lack in the area be not less than 1/10 or more of that stated. (See Art. 1539) The sale is made for lump sum - There shall be no increase or decrease of the price. (Art. 1542) Reason: The law presumes that the purchaser had in mind a determinate price for the real estate and that he ascertained the area and quality before the contract was perfected. This rule applies when two or more immovable properties are sold for a single price (See Art. 1541). It does not apply if the deficiency is so material as to go to the essence of the contract, for under such circumstances, gross mistake may be inferred.
RULES ON DOUBLE SALES

If the property sold is movable, the vendee who first took possession in good faith shall acquire the ownership. If the property sold is immovable, the ownership shall belong to: The vendee who first registered the sale in good faith in the Registry of Property (Registry of Deeds); In the absence of registration, the vendee who in good faith, first took possession; and In the absence of both registration and possession, the vendee who presents the oldest title (who first bought the property), provided there is good faith. (Art. 1544)
RULES ON DOUBLE SALES

The rule on double sales do not apply in cases: The contract first registered is fictitious or forged; The vendor is not the owner of the property; or The sale is not made by the same vendor
CONDITIONS AND WARRANTIES

What is a condition? It means an uncertain event or contingency on the happening of which the obligation of the contract depends. In such case the obligation of the contract does not attach until the condition is performed. Effect of condition: If the obligation of either party is subject to any condition and such condition is no fulfilled, such party may either: a. Refuse to proceed with the contract; or b. Proceed with the contract, waiving the performance of the condition

Express or Promissory Warranty - They are any affirmation of fact or any promise by the seller relating to the thing, the natural tendency of which is to induce the buyer to purchase the thing and the buyer thus induced purchases the same. It is express as this one agreed by the parties. Seller makes any statement or promise about the goods and the buyer completely rely on the strength of such statement or promise when he purchased the goods. Be it noted that a warranty is part of the contract of sale. It is therefore, immaterial, whether the seller did not know that it was true or false. No intent is necessary to make the seller liable for his warranty.

Effect of Opinion: There is no sellers warranty if the seller merely expresses his opinion as to the goods. The exception is when the seller is considered an expert on the matter and the buyer relies on such expert opinion and buys the goods. Art. 1340 The usual exaggerations in trade, when the other party has opportunity to know the facts are not in themselves fraudulent. Art. 1341- A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the formers special knowledge. Misrepresentation in good faith is not fraudulent but may constitute error (Art. 1343)
Warranties in the Contract of Sale

Implied Warranties: They are agreements or stipulations the existence of which is presumed although not expressed in any words in the contract. It automatically comes into existence when a merchant sells goods, guaranteeing that items sold are fit for the purpose for which goods would ordinarily be used .
Implied Contracts:
Warranty against eviction -the seller warrants that he has a right to sell the thing at the time when the ownership is to pass and that the buyer shall from that time have and enjoy the legal peaceful possession of the thing; Warranty against hidden defects or unknown encumbrances - The seller guarantees the thing sold is free from any hidden faults or defects or any charge or encumbrance not declared or known to the buyer. (Art. 1547)
Implied Contracts:
Warranty against hidden defects or unknown encumbrances - The seller guarantees the thing sold is free from any hidden faults or defects or any charge or encumbrance not declared or known to the buyer. (Art. 1547)
Implied Contracts:
Warranty of Fitness or Merchantability - The seller warrants that the seller guarantees that the thing sold is reasonably fit for the known particular purpose for which it was acquired by the buyer or, where it was bought by description, that it is of merchantable quality. (Art. 1565) Note: the rule on warranty does not apply to a sheriff, auctioneer, mortgage, pledgee or other person who sells by virtue of authority in fact or law. In other words, the persons enumerated are not liable to a third person with a legal and equitable interest in the thing sold. (Art. 1547, par. 2)
Implied Contracts:
Implied Warranty are not applicable in the following cases: a. As is and where is basis sale reason seller makes no warranty at all. b. Sale of second hand articles exception is if it is sold under circumstances as to raise an implied warranty c. Sale by virtue of authority in fact or law- the sheriff, auctioneer, mortgagee, pledgee or other person who sells the object by virtue of foreclosure or execution. The rule on caveat emptor or let buyer beware applies
There is implied warranty as to ownership. The seller warrants that a. He has the right to sell the thing either as an owner or the authorized representative of the owner. b. He can pass legal title to the goods at the time of delivery; c. The buyer shall have legal and peaceful possession and enjoyment of the object. Meaning of eviction:
Warranty Against Eviction
It is a 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. (Art. 1548)
EVICTION
Requisites for Warranty of Eviction The vendee is deprived in whole or in part of the thing purchased; He is deprived by virtue of a final judgment (Art. 1557) The judgment is based on a right prior to the sale or an act imputable to the vendor; The vendor was summoned in the suit for eviction at the instance of the vendee (Art. 1558); and There is no waiver on the part of the vendee. (Art. 1548)

Warranty against eviction refers to trespass in law and not mere trespass in fact. The disturbance refers to is disturbance of law which requires a person to go to courts claiming the thing sold or part thereof necessitating judgment from the court. Art. 1549 Vendee has no duty to appeal from the judgment in order to hold seller liable for eviction. Art. 1550 If adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer the vendor shall not be liable.
2 kinds of Prescription: a) Acquisitive prescription right is acquired through lapse of time. b) Extinctive prescription- when ownership or dominion is lost through lapse of time. Completed before the sale seller is liable because the deprivation is based on a right prior to the sale and an act imputable to the seller. Completed after the sale. Even if prescription begun before the sale but completed after the sale as the limit prescribed by law has been completed, the seller this time is not liable. Reason the vendee could easily interrupt the running the prescriptive period by bringing the appropriate action.

Art.1551- refers to eviction due to non-payment of taxes. The vendor will be liable to the vendee for eviction if the latter is deprived of the land due to the vendors non-payment of overdue real estate taxes. If the vendor did not inform the vendee of the taxes in arrears at the time of the sale, the vendor is in bad faith and will be liable. The eviction is due to an act imputable to the vendor. Art. 1552 The judgment debtor is also responsible for eviction in judicial sales unless it is otherwise decreed in the judgment.

Any stipulation exempting the vendor from the obligation to answer for eviction shall be VOID, if he acted in bad faith. (Art. 1552) When is in vendor in bad faith and therefore liable in case of eviction despite the presence of stipulation exempting him: a. If he sells the same property to 2 or more vendees. b. If he knows of any cause for eviction at the time of the sale and he did not inform the vendee of it.
EVICTION
Kinds of Waiver of Eviction Consciente. - The waiver is voluntarily made by the vendee without the knowledge and assumption of risks of eviction. The vendor shall only pay the value of which the thing sold had at the time of eviction; and Intencionada. - The vendee makes the waiver with knowledge of the risks of eviction and assumption of its consequences. (Art. 1554) The vendor is not liable for eviction if he acted in good faith. (Art. 1553)
EVICTION
Rights of the vendee in case of eviction occurs: The return of the value which the thing sold had at the time of the eviction, be it greater or lesser than the price of the sale; The income or fruits if he has been ordered to deliver them to the party who won the suit against him; The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty;
EVICTION
The expenses of the contract, if the vendee has paid them; and The damages and interests, and the ornamental expenses, if the sale was made in bad faith. (Art. 1555)
Note: In case of partial eviction, the vendee has the option either to enforce the vendor's liability for eviction (Art. 1555) or to demand rescission of the contract. (Art. 1556) In case the vendee is totally evicted from the thing sold, he cannot avail of the remedy contemplates that the one demanding it is able to return whatever he has received under the contract.
EVICTION
Rights of the vendee in case of eviction occurs: The return of the value which the thing sold had at the time of the eviction, be it greater or lesser than the price of the sale; The income or fruits if he has been ordered to deliver them to the party who won the suit against him; The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty;
EVICTION
The vendor shall not be obliged to make good the proper warrant, unless he is summoned in the suit for eviction at the instance of the vendee. (Art. 1558) The vendee must make vendor a co-defendant. Hence the vendee has to file a third party complaint against the vendor when sued for the recovery of the property. (Art. 1559)
Requites of Warranty against hidden encumbrances:

Meaning of Easement or servitude: An easement or servitude imposed upon an immovable for the benefit of another immovable belonging to a different owner. The immovable in favor of which the easement is established is known as dominant estate and that which is subject thereto is servient estate. (Art. 13, NCC)

Types of easements: a. Continuous easements those the use of which is or may be incessant, without the intervention of human act. b. Discontinuous easements those which are used at intervals and depend upon the acts of man. c. Apparent easements those which are made known and are continually kept in view by external signs that reveal use and enjoyment of the same. A right of way is an apparent easement. d. Non-apparent easements- those which show no external indication of their existence. A party wall is a non-apparent easement.

The encumbrance must be important (the vendee would not have purchased the property had he been aware of its existence); The encumbrance is not registered, unless expressly warranted free from burdens. Reason: Registration constitute constructive notice.

The vendee had no knowledge of the encumbrance whether it is registered or not. Reason: Otherwise, there is no warranty; and The action for rescission or damages must be brought within the proper period (supra); in case of immovable property encumbered with any nonapparent burden or easement-within one year from the execution of the deed of sale. (Art. 1560) If the period of one year has elapsed, the vendee of an immovable may only bring an action for damages also within one year from the discovery of the nonapparent burden or servitude.
Warranty Against Redhibition

Warranty against Redhibition - is the avoidance of a sale on account of some service or defect in the thing sold, which renders its use impossible, or so inconvenient and imperfect that it must be supposed that the buyer would not have purchased it has he known of the vice. Requisites of Warranty Against Redhibitory Defects (Hidden, Physical defects): The defect must be serious or important; It must be hidden;
Warranty Against Redhibition

It must exist at the time of the sale; The vendee must give notice of the defect to the vendor within a reasonable time (Art. 1586) The action for rescission or reduction of the price must be brought within the proper period - 6 months from the delivery of the thing sold (Art. 1571) or within 40 days from the date of delivery in case of animals (Art. 1577, par. 10 and; There must be no waiver of warranty on the part of the vendee.
WARRANTY AGAINST HIDDEN DEFECTS

When is defect considered important: If it renders the thing sold unfit for which it is intended; If it diminishes its fitness for such use to such extent that the vendee would not have acquired it had he had been aware thereof or would have given a lower price for it. (Art. 1561) Defect is hidden when it was not known and could not have been known to the vendee. Hence, there is no warranty if the defect is patent and visible.
IMPLIED WARRANTIES OF QUALITY

Warranty of Merchantability is a warranty that goods are fit for general purpose for which they are sold, while warranty of fitness is a warranty that the goods are suitable for the special purpose of the buyer which will be satisfied by mere fitness for general purpose . Meaning of Quality of Goodsincludes their state or condition (Art. 1636). This is aimed to promote the high standard in business and to discourage unfair dealings.

They are based on the principle that HONESTY IS THE BEST POLICY.

Is there warranty as to quality or fitness for any particular purpose? None. Except if: The buyer expressly or by implication, manifests to the seller the particular purpose for which the goods are acquired; The buyer relies upon the seller's skill or judgment.

Implied Warranty of Merchantability Where goods are bought by description, the seller impliedly warrants that goods are of merchantable quality. Merchantable is not a warranty of quality in the sense of requiring a particular grade but it does require identity between what is described in the contract and what is tendered, in the sense that the latter is sold of such quality to have some value.

Sale Under Patent or Trade Name there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. Reason is when the buyer by defining what he wants exercised his own judgment instead of relying to the upon the seller. Exception: if there is a stipulation. Thus there is implied warranty of fitness for a particular purpose when the buyer relied upon the sellers judgment rather than the patent or trade name.

An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (Art. 1564)
In case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample.
IMPLIED WARRANTY
The vendor is responsible to the vendee for any hidden faults or defects in thing sold, even though he was not aware thereof. This provision shall not apply if the contrary has been stipulated and the vendor was not aware of the hidden faults or defects in the thing sold. - Article 1566 this principle is known as caveat vendidor . A sound price warrants a sound article. With respect to third person, the principle of caveat emptor still applies.
IMPLIED WARRANTY
Caveat venditor is the general rule at present. Caveat emptor Let the buyer beware. With respect to third persons, caveat emptor applies. Thus one who buy real property without checking the vendors title where persons other than the vendor in possession, takes all the risk and losses consequent to such failure in case the vendors title is defective.
IMPLIED WARRANTY
Alternative remedy of the buyer to enforce warranty: Accion redhibitoria to withdraw from the contract. Accion quanti minoris- demand a proportionate reduction of the price With right of damages in either case. This right is also given to the vendee in case of sale of animals with redhibitory defect. Arty. 1567
Art. 1568 Effect of loss of thing sold on account of hidden defect. a) If the vendor was aware of the hidden defect in consequence of which the thing sold was lost, he shall bear the loss because he acted in bad faith. In such case, the vendee has the right to recover: 1. Price paid 2. The expenses of the contract; and 3. Damages b) If the vendor was not aware of them, he shall be obliged only to return: 1. Price 2. the interest thereon and 3. Expenses of the contract if paid by the vendee. No damages as he is not guilty of bad faith.
IMPLIED WARRANTY
IMPLIED WARRANTY
If the thing sold had no hidden defect; its loss through a fortuitous event or through fault of the vendee is of course to be borne by the vendee. However, the vendor is obliged to return the price paid, less the value of the thing at the time of loss in case where hidden defects existed. Under Article 1569, the vendor is still made liable on his warranty. The above rule shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. (Art.1470)
IMPLIED WARRANTY
Prescriptive Period: Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. (Art. 1471)
IMPLIED WARRANTY IN SALE OF ANIMALS

Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have purchased the sound animal or animals without the defective one. The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the animals composing the same.

Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of other things. Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned.

Art. 1575. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor.

Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory. But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages.

Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. This action can only be exercised with respect to faults and defects which are determined by law or by local customs.
Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death existed at the time of the contract. Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect.
Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. Art. 1581. The form of sale of large cattle shall be governed by special laws. Anti-Cattle Rustling Law of 1974 (P.D. No.533) sale of carabao, cow, horse, mule, ass or other domesticated member of the bovine family.
CONSUMERS ACT
REPUBLIC ACT NO. 7394 - "Consumer Act of the Philippines."
What is R.A. 7394? RA 7394 is the Consumer Act of the Philippines which took effect on 15 July 1992.
CONSUMERS ACT
Declaration of Basic Policy. It is the policy of the State to protect the interests of the consumer, promote his general welfare and to establish standards of conduct for business and industry. Towards this end, the State shall implement measures to achieve the following objectives: a) protection against hazards to health and safety; b) protection against deceptive, unfair and unconscionable sales acts and practices; c) provision of information and education to facilitate sound choice and the proper exercise of rights by the consumer; d) provision of adequate rights and means of redress; and e) involvement of consumer representatives in the formulation of social and economic policies.
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The following agencies implement the Consumer Act:
a. Department of Trade and Industry (DTI) Consumer Product Quality and Safety Deceptive, unfair and unconscionable sales acts and practices Weights and measures (metrication) Consumer Products and Service Warranties Price Tag Labeling and Packaging Liability for Products and Services Service and repair shops Advertising and sales promotion
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b. Department of Agriculture (DA) Agricultural Products
Quality and Safety Labelling and Packaging
c. Department of Education, Culture and Sports (DECS)

Consumer education and information
d. Department of Health (DOH) Food, drugs, cosmetics and devices and hazardous substances.
Quality and safety Advertising and sales promotion Price tags
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e. Bangko Sentral ng Pilipinas (BSP) Consumer credit transactions extended by banks and other financial intermediaries f. Securities and Exchange Commission (SEC) Credit facilities extended to consumers by financing companies
When is the Consumer Act applicable?

The Act is applicable if:
the COMPLAINANT is a natural person; the SUBJECT of the violation is a consumer product or service; and the NATURE of the complaint is regarding any of the aforementioned concern
What is consumer product or service? Consumer product or service means goods, service and credits, debts or obligations which are primarily for personal, family, household or agricultural purpose, which shall include, but not limited to food, drugs, cosmetics and devices.
What can a consumer do if he has a complaint?
The consumer must do the following:

Identify the problem and what you believe would be a fair settlement. Do you want your money back (Refund)? Would you like the product repaired (Repair)? Will exchange do (Replace)? Gather documentation regarding your complaint eg. sales receipts, repair orders, warranties, cancelled checks, or contract which will support the complaint and help the company solve your problem.
Go back to where you made the purchase. Contact the person who sold you the item or performed the service. Calmly and accurately explain the problem and what action you would like taken. If that person is not helpful, ask for the supervisor or manager and repeat your complaint. A large percentage of consumer problems are resolved at this level.
Write formal letter. If you are not satisfied with the response, write a formal letter of complaint to the consumer protection agency concerned. State your name and address; the name and address of the establishment against whom you are complaining; the circumstances regarding the complaint including names, dates, places, etc. Enclose supporting documents such as official receipts, deed of sale and the like and you should be prepared to make an appearance when called, especially during the mediation conference.
What is the period for filing consumer complaints? Within 2 years from the time the consumer transaction was consummated or the deceptive or unfair and unconscionable act or practice was committed, and in case of hidden defects, from discovery thereof. Where can a consumer complaint be filed? The administrative complaint shall be filed in duplicate with the Provincial Office having jurisdiction over the subject of the complaint. In areas where there are no Provincial Offices, the complaint shall be filed in the Regional Office. In cases where the complainant and respondent are situated in different provinces, the complainant has the option to choose the place where to file the complaint. The civil/criminal action shall be filed with the appropriate regular courts (Municipal Trial Court/Regional Trial Court).
What are the remedies available to consumers?

For Administrative Proceedings:
replacement or repair of product or services refund of payment made restitution or rescission of contract reimbursement to complainant of amount spent in pursuing the complaint
For civil/criminal action

civil action award of damages replacement or repair of product or services refund of payment made restitution or rescission of contract reimbursement to complainant of amount spent in pursuing the complaint criminal action - defendant, if found guilty by the court can be sentenced to imprisonment or payment of fine or both, at the discretion of the court.
What are the advantages of filing complaint before the implementing agencies (administrative proceedings)? The advantages are:
mediation/arbitration is more economical and timesaving complainant need not undergo the rigors and expense of a court case
The National Consumer Affairs Council (NCAC) is the body created by the Consumer Act to improve the management, coordination and effectiveness of consumer programs and policies of the different government agencies and private organizations.
What is the Composition of the NCAC?
Department of Trade and Industry Department of Education, Culture and Sports Department of Health Department of Agriculture 4 consumer organizations of nationwide base 2 business/industry sectors
CONSUMERS ACT
Consumer Product and Service Warranties ARTICLE 66. Implementing Agency. The Department of Trade and Industry, shall strictly enforce the provision of this Chapter and its implementing rules and regulations. ARTICLE 67. Applicable Law on Warranties. The provisions of the Civil Code on conditions and warranties shall govern all contracts of sale with conditions and warranties.
CONSUMERS ACT
ARTICLE 68. Additional Provisions on Warranties. In addition to the Civil Code provisions on sale with warranties, the following provisions shall govern the sale of consumer products with warranty: a) Terms of express warranty. Any seller or manufacturer who gives an express warranty shall: 1) set forth the terms of warranty in clear and readily understandable language and clearly identify himself as the warrantor;
CONSUMERS ACT
2) identify the party to whom the warranty is extended; 3) state the products or parts covered; 4) state what the warrantor will do in the event of a defect, malfunction of failure to conform to the written warranty and at whose expense; 5) state what the consumer must do to avail of the rights which accrue to the warranty; and 6) stipulate the period within which, after notice of defect, malfunction or failure to conform to the warranty, the warrantor will perform any obligation under the warranty.
CONSUMERS ACT
b) Express warranty operative from moment of sale. All written warranties or guarantees issued by a manufacturer, producer, or importer shall be operative from the moment of sale.
CONSUMERS ACT
Sales Report. All sales made by distributors of products covered by this Article shall be reported to the manufacturer, producer, or importer of the product sold within thirty (30) days from date of purchase, unless otherwise agreed upon. The report shall contain, among others, the date of purchase, model of the product bought, its serial number, name and address of the buyer. The report made in accordance with this provision shall be equivalent to a warranty registration with the manufacturer, producer, or importer. Such registration is sufficient to hold the manufacturer, producer, or importer liable, in appropriate cases, under its warranty.
CONSUMERS ACT
2) Failure to make or send report. Failure of the distributor to make the report or send them the form required by the manufacturer, producer, or importer shall relieve the latter of its liability under the warranty: Provided, however, That the distributor who failed to comply with its obligation to send the sales reports shall be personally liable under the warranty. For this purpose, the manufacturer shall be obligated to make good the warranty at the expense of the distributor.
CONSUMERS ACT
3) Retail. The retailer shall be subsidiary liable under the warranty in case of failure of both the manufacturer and distributor to honor the warranty. In such case, the retailer shall shoulder the expenses and costs necessary to honor the warranty. Nothing therein shall prevent the retailer from proceeding against the distributor or manufacturer.
CONSUMERS ACT
4) Enforcement of warranty or guarantee. The warranty rights can be enforced by presentment of a claim. To this end, the purchaser needs only to present to the immediate seller either the warranty card of the official receipt along with the product to be serviced or returned to the immediate seller. No other documentary requirement shall be demanded from the purchaser. If the immediate seller is the manufacturer's factory or showroom, the warranty shall immediately be honored. If the product was purchased from a distributor, the distributor shall likewise immediately honor the warranty. In the case of a retailer other than the distributor, the former shall take responsibility without cost to the buyer of presenting the warranty claim to the distributor in the consumer's behalf.
CONSUMERS ACT
5) Record of purchases. Distributors and retailers covered by this Article shall keep a record of all purchases covered by a warranty or guarantee for such period of time corresponding to the lifetime of the product's respective warranties or guarantees. 6) Contrary stipulations null and void. All covenants, stipulations or agreements contrary to the provisions of this Article shall be without legal effect.
CONSUMERS ACT
c) Designation of warranties. A written warranty shall clearly and conspicuously designate such warranty as: 1) "Full warranty" if the written warranty meets the minimum requirements set forth in paragraph (d); or 2) "Limited warranty" if the written warranty does not meet such minimum requirements.
CONSUMERS ACT
d) Minimum standards for warranties. For the warrantor of a consumer product to meet the minimum standards for warranty, he shall: 1) remedy such consumer product within a reasonable time and without charge in case of a defect, malfunction or failure to conform to such written warranty; 2) permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part, as the case may be, where after reasonable number of attempts to remedy the defect or malfunction, the product continues to have the defect or to malfunction.
CONSUMERS ACT
The warrantor will not be required to perform the above duties if he can show that the defect, malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use thereof. e) Duration of warranty. The seller and the consumer may stipulate the period within which the express warranty shall be enforceable. If the implied warranty on merchantability accompanies an express warranty, both will be of equal duration.
CONSUMERS ACT
Any other implied warranty shall endure not less than sixty (60) days nor more than one (1) year following the sale of new consumer products. f) Breach of warranties. 1) In case of breach of express warranty, the consumer may elect to have the goods repaired or its purchase price refunded by the warrantor. In case the repair of the product in whole or in part is elected, the warranty work must be made to conform to the express warranty within thirty (30) days by either the warrantor or his representative. The thirty-day period, however, may be extended by conditions which are beyond the control of the warrantor or his representative. In case the refund of the purchase price is elected, the amount directly attributable to the use of the consumer prior to the discovery of the nonconformity shall be deducted.
CONSUMERS ACT
2) In case of breach of implied warranty, the consumer may retain in the goods and recover damages, or reject the goods, cancel and contract and recover from the seller so much of the purchase price as has been paid, including damages.
CONSUMERS ACT
ARTICLE 72. Prohibited Acts. The following acts are prohibited: a) refusal without any valid legal cause by the total manufacturer or any person obligated under the warranty or guarantee to honor a warranty or guarantee issued; b) unreasonable delay by the local manufacturer or any person obligated under the warranty or guarantee in honoring the warranty; c) removal by any person of a product's warranty card for the purpose of evading said warranty obligation; d) any false representation in an advertisement as to the existence of a warranty or guarantee.
CONSUMERS ACT
ARTICLE 73. Penalties. a) Any person who shall violate the provisions of Article 67 shall be subject to fine of not less than Five hundred pesos (P500.00) but not more than Five thousand pesos (P5,000.00) or an imprisonment of not less than three (3) months but not more than two (2) years or both upon the discretion of the court. A second conviction under this paragraph shall also carry with it the penalty or revocation of his business permit and license. b) Any person, natural or juridical, committing any of the illegal acts provided for in Chapter III, except with respect to Article 67, shall be liable for a fine of not less than One thousand pesos (P1,000.00) but not more than Fifty thousand pesos (P50,000.00) or imprisonment for a period of at least one (1) year but not more than five (5) years, or both, at the discretion of the court. The imposition of any of the penalties herein provided is without prejudice to any liability incurred under the warranty or guarantee.
Principal obligations of the vendee:

To accept delivery; and To pay the price of the thing sold Time and place of payment: At the time and place stipulated in the contract; and If there is no stipulation as to the time and place of payment, at the time when and place where the thing sold is delivered by the Vendor. (Art. 1582; Art. 1251)

General rule: In an ordinary contract for sale of goods, the buyer is not bound to receive the delivery of the goods in installments. He is entitled of the delivery of all the goods at the same time. Exceptions: If there is an agreement. Where separate price has been fixed for each installment, in case of breach, liability depends on each case on the terms of the contract and the circumstances of the case whether the breach thereof is severable or not.

If the seller makes defective deliveries or the buyer wrongfully neglects or refuses to accept delivery or fails to pay any installment, the injured party may sue for damages for breach of the entire contract if the breach is so material as to affect the contract as a whole. Where the breach is severable , it will severable, it will merely give rise to a claim for compensation for the particular breach but not a right to treat the whole contract as broken.

Acceptance is assent to become owner of the specific goods when delivery of them is offered to the buyer. Actual delivery is contemplated. The right of examination or inspection is thus a condition precedent to the transfer of ownership unless there is a stipulation.

Note: In a C.O.D. sale, in the absence of agreement or usage of trade permitting such examination. But the buyer is still entitled to examine the goods after their delivery and payment of the price for the purpose of ascertaining whether they are in conformity with the contract (Art. 1584)

Kinds of Acceptance of the buyer of the goods sold: Express - when he intimates to the seller that he accepts them; or Implied - (a) when the buyer, after delivery of goods, does any act inconsistent with the sellers ownership, as when he sells or attempts to sell the goods, or he uses or makes alteration in them in a manner proper only for an owner; or (b) when the buyer, after the lapse of a reasonable time, retains the goods without intimating his rejection. (Art. 1585)

Acceptance of the goods by the buyer does not discharge the seller from liability in damages or other legal remedy ( like rescission) for breach of any promise or warranty in the contract of sale. Art. 1586 requires the buyer in order to hold the seller breach of promise or warranty, to give notice to the seller of any such breach within a reasonable time. Time is counted not simply from the moment buyer knows of the defect, but from the time when he ought to have known it.

If the goods have been sent to the buyer and he rightfully refuses to accept them, as in the case, where the goods are not of the kind and quality agreed upon, he is in the position of a bailee who has had goods thrust upon him without his assent. While the goods remains with the buyer, they are of course under the sellers risk. (Art. 1587)

If the buyer refuses to accept the goods without just cause, the title to the goods passes to him from the moment they are placed at his disposal. (Art. 1588) When is the vendee obliged to pay interest for the price for the period between delivery of the thing and payment of the price? Should it have been so stipulated; Should the thing sold and delivered produce fruits or income; and Should he be in default, from the time of judicial or extra-judicial demand for the payment of the price. (Art. 1589)

Suspension of payment of the price by the buyer may be effected in the following cases: If he is disturbed in the possession or ownership of the thing sold; or If he has a well grounded fear that his possession or ownership would be disturbed by a vindicatory action for or foreclosure of mortgage. (Art. 1590) Cases wherein vendee cannot suspend payment even if there is disturbance in his ownership or possession of the thing bought:

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 trespass. Of course the vendee can no longer suspend payment in case he has fully paid the price.

Effect of a stipulation that upon failure to pay the price at the time agreed upon, the rescission of the contract of sale shall takes place: With respect to immovables: Before a demand of rescission has been made by the vendor, either judicially or extra-judicially, the vendee may still pay the price even after the expiration of the stipulated period of payment. After such demand, the court may not grant the vendee new term. (Art. 1592) With respect to movable property. The vendor can rescind the contract as a matter of right, if the vendee without valid cause does not (1) accept delivery or (2) pay the price unless a credit period for its payment has been stipulated. (Art. 1593) Reason: The price of personal properties are so changeable that any delay in their disposal might cause the vendor great prejudice.
ACTIONS AVAILABLE FOR BREACH OF CONTRACT OF SALE OF GOODS

Chapter 6 applies only on contract of sale of goods. It does not apply to sale of real property Goods includes all chattels personal but not things in action or money of legal tender in the Phils. The term includes growing fruits and crops. (Art. 1636 (1)

What are the available remedies? Action of the seller for payment of the price (Art. 1595); Action of the seller for damages for nonacceptance of goods (Art. 1596); Action by the seller for rescission of the contract (Art. 1597) Action by the buyer for specific performance (Art. 1598) Action by the buyer for rescission or damages for breach of warranty (Art. 1599)

Action for payment of the price may be maintained by the vendor when: When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay such price; When the price is payable on a certain day and the buyer wrongfully neglects or refuses to pay such price,, irrespective of delivery or of transfer of title; and When the goods cannot readily be resold for a reasonable price and the buyer wrongfully refuses to accept them even before the ownership in the goods has passed. (Art. 1595)

The rule is the seller cannot maintain an action for the price if the ownership in the goods has not yet passed to the buyer except when the price is payable on a certain day or unless the goods cannot be readily be resold for a certain price and for the reason in terms of damages, the seller can avail of the right to damages contemplated in the last or 4th paragraph of Article 1596.

Under the last paragraph of Art. 1595, as a procedure the seller may notify the buyer after latter unjustifiably refuses to receive the goods that he shall be holding the goods as bailee for the buyer. Thereafter the seller may treat the goods as the buyers and may maintain an action for the price/
.An action against the buyer for damages for nonacceptance may be maintained by the vendor if in case the buyer wrongfully neglects or refuses to accept and pay for the goods (Art. 1596). If the buyer without lawful cause neglects or refuses to accept the goods and pay for the price the seller may maintain an action against him for damages for nonacceptance. In an executory contract, where ownership in the goods has not passed, the seller cannot maintain an action to the price, the seller remedy is for damages. If the goods are not yet identified at the time of the contract or subsequently, the sellers right is necessarily confined to an action for damages.
Example: S sold B a piano If B wrongfully refuses to accept and pay for the goods. S may bring an action against him for damages for non-acceptance.
What is the measure of damages? Difference between contract price and market price. The estimated loss directly and naturally resulting from the buyers breach of contract. The formula is the difference between the contract price, that is the amount of obligation which the buyer failed to fulfill and the market or current price, that is, the value of the goods which the seller has left upon his hand. meaning not only the actual damages suffered by the seller but also the unrealized profits. What is there is no available market price in which the goods can be sold at the time? The seller is entitled to the full amount of damage which he has rally sustained by a breach of contract.
If there are special circumstances present which will aggravate the damage sustained by the seller, the latter is entitled of proximate damages of greater amount than the difference between contract price and market price when damages can be attributed to the non-performance of the obligations. Measurement of damages for repudiation or countermand. In case of repudiation of the contract by the buyer, the measure of damages to which the seller is entitled would include (1) The labor performed and expenses incurred for materials before receiving notice of the buyers repudiation and (2) Profit he would have realized if the sale had been fully performed.
ACTIONS AVAILABLE FOR BREACH OF CONTRACT OF SALE OF GOODS Measure of liability for damages. Article 2201 of the Civil Code states:
In contracts and quasi-contracts, the damages fir which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of obligation and which the parties have foreseen or could have reasonably foreseen at the time obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.
What action or actions are available to the seller of the goods in case the buyer wrongfully refuses to accept the goods sold? a. Maintain an action for damages because of non-acceptance. (Art. 1596) b. Hold the goods as bailee for the buyer and bing an action for the price (Art. 1595, 3rd par) c. Ask for the resolution of the contract for failure of the buyer to fulfill obligations.

The vendor may rescind the sale of goods which have not yet delivered when: When the buyer has repudiated the contract of sale; When the buyer has manifested his inability to perform his obligations thereunder; and When the buyer has committed a breach of the contract of sale (Art. 1597) Note: The power to rescind is implied in reciprocal obligations under Art. 1191

The automatic rescission here requires notice thereto the buyer.

Vendee can maintain an action against the vendor for specific performance in case the vendor fails to comply with his contract to deliver specific or ascertained goods, the seller cannot retain the goods on payment of damages. ( Art. 1598) Reason: Damages are imposed by law to insure fulfillment of the contract and to substitute for it. (Art. 1911)

Rule When the seller has broken a contract to deliver to deliver specific or ascertained goods: a. Observe that here the seller is guilty, hence there is no right of retention on his part even if the seller is willing to pay damages. b. Note that there must be an order from the court for specific performance. c. Note further that the court may make the order on application of the buyer.

Remedies available to the buyer when the seller has been guilty of a breach of promise or warranty: Recoupment. - accept goods and set up the seller's breach to reduce or extinguish the price; Action for damages. - accept the goods and maintain an action for damages of the warranty; Counterclaim for damages. - refuse to accept the goods and maintain an action for damages for the breach of the warranty;

Rescission - rescind the contract of sale by returning or offering the return of the goods and recover the price. (Art. 1599) Rescission is not proper if (a) buyer accepted the goods knowing of the breach of warranty without protest, (2) if he fails to notify the seller within reasonable time of his election to rescind; and if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him

Rights and obligations of buyer in case of rescission: 1. If rescinded, the buyer shall cease to be liable for the price, his only obligation is to return the goods. 2. If he has paid the price or any part thereof he may recover it from seller 3. He has the right to hold the goods as bailee for the seller should the vendor refuse the return of the price and to have a lien on the goods for any portion of the price which he already paid which lien he may enforce as if he is an unpaid seller.

Note: The above remedies are alternative. The only exception is when after the payee has chosen fulfillment, it should become impossible, in which case he may also sue for rescission. Measure of damages: in the absence of special circumstances showing proximate damage of greater amount, in case of breach of warranty of quality, the buyer is entitled of the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
Causes: Common - those causes, which are also means of extinguishing all other contracts like payment, loss of the thing, condonation, etc. (Art. 1231); Special - those causes which are recognized by law on sales (such those covered by Arts. 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567 and 1591); Extra-special - those causes, which are given special discussion by the Civil Code and these, are conventional redemption and legal redemption.
EXTINGUISHMENT OF CONTRACT OF SALE

Define Conventional Redemption: It is the right, which the vendor reserves to himself, to reacquire the property sold provided he (1) reimburses the vendee of (a) the price, (b) the expenses of the contract, (c) any other legitimate payments made thereof and (d) the necessary and useful expenses made on the thing sold (art. 1616); and (2) fulfills other stipulations which may have been agreed upon. (Art. 1601) A pacto de retro sale is a sale which contains a stipulation for conventional redemption

Subject matter of conventional redemption: Both real and personal property may be subject matter of sales with right to repurchase although certain articles in the chapter are applicable only to immovables such as Article 1607, 1611- 1614, 1617, 1618).

Nature of Conventional Redemption contractual accidental stipulation real right, when it is registered as it binds third persons potestative, it depends on the will of the vendor resolutory condition, when the right is exercised, the right of ownership by the vendee is extinguished; Reserved at he moment of the perfection of the contract for if it is agreed afterwards, there is only a promise to sell which produces different rights and effects.

The Pacto de Retro problem Instances where pacto de retro or sale with right to repurchase are considered as equitable mortgage: When the price of a sale with right to repurchase is unusually inadequate; When the vendor remains in possession as lessee or otherwise; 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;

When the purchaser retains for himself a part of the purchase price; When the vendor binds himself to pay taxes on the thing sold; and In any other case where it may be fairly 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. (Art. 1602)

Meaning of Equitable Mortgage. An equitable mortgage is one, which although it lacks the proper formalities of a mortgage, shows the intention of the parties to make the property as security for a debt.

The law recognizes existence of the modus operandi of creditors to conceal the loaned amount in form of a pretended purchase price. To secure a loan, a pacto de retro sale is drawn up omitting the procedure for foreclosure mandated by law. It is a violation of the rule that the creditor cannot appropriate the things given in pledge or mortgage because these are supposed sold when principal obligation becomes due and unpaid and not appropriated. This prohibition is under the PACTO COMMISORIO or pactum commisorium rule.

Art. 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. Art. 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument.

Period to exercise the right to repurchase in conventional redemption may be exercised: If there is no agreement granting the vendor the right to redeem, there is no right of redemption since the sale is considered as an absolute sale. If the parties agreed only on the right to redeem on the part of the vendor but there is a total absence of express stipulation as to the time within which the repurchase should be made, then the period of redemption shall be four (4) years from the date of contract;

If the parties agree on a definite period of redemption, then the right to redeem must be exercised within the period fixed provided it does not exceed 10 years; If the parties agree that the vendor shall have the right to redeem and they intend a period which, however is not specified (e.g. at any time the vendor has the money) then the redemption period is 10 years. From the time final judgment was rendered in a civil action on the basis that the contract was a true sale with the right to repurchase the vendor a retro has 30 days within which to exercise the right to repurchase. (Art. 1606)

Period of Redemption cannot be extended after its expiration because what is to be extended has already extinguished. Before its expiration, it can be extended provided the extension including the original term shall not extend beyond 10 years; otherwise the extension is void as to the excess. Reason for limiting period of redemption Based on public interest. It makes tenure of the enjoyment of property uncertain. Hence, ownership is characterized as temporary in character.

Art. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. There is necessity of judicial order for recording of consolidation of ownership in sale with right to repurchase involving immovable. The reason for the requirement is to determine whether the transaction is truly a pacto de retro sale and not equitable mortgage.

Art. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. The right to redeem is a real right and it follows the property whether it goes most especially if the right to repurchase is duly registered, the present owner of the property must respect the right to redeem of the seller.

Art. 1609. The vendee is subrogated to the vendor's rights and actions. A pacto de retro sale is after all a sale and therefore transfers ownership to the buyer. The latter then can enjoy the ownership of the property subject to the right to redeem of the seller.

Art. 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they exhausted the property of the vendor. Under Article 1177, one of the remedies of the creditor is accion subrogatoria. Take note however that the remedy is subsidiary which can be availed only if no other principal remedies are possible or if they have already been exhausted.

Art. 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption. - purpose is to discourage co-ownership - Applicable to immovable only Art 498 If the co-owners cannot agree that the thing be allotted to one of them, it shall be sold and its proceeds be distributed.

Be it noted that in this provision, there is a demand for partition from the co-owners in so far as his share is concerned and since the immovable is indivisible, the rule is that it must be allotted to the co-owner who shall indemnify the others and if the co-owners cannot agree that the thing be allotted to one of them, it shall be sold and proceeds is distributed. In either case, the vendee who acquires the whole of the undivided immovable a part of which is subject to a right to repurchase has the right to demand the that the vendor a retro who likes to exercise his right of redemption, redeem the whole property.

Art. 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share. The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired. Redemption in joint sale by co-owners of undivided immovable. None of them can exercise beyond their respective shares. The same rules applies if the co-heirs of the seller wishes to redeem, they can redeem only for their respective shares.

Art. 1613. In the case of the preceding article, the vendee may demand of all the vendors or coheirs that they come to an agreement upon the purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. Nevertheless, the vendee is still given the right to demand of all the vendors to come to an agreement upon the repurchase of the whole thing sold and he could not be compelled to sell it in the absence of such condition.

Art. 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property. Art. 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them. But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole.
The vendor in the exercise of the right to repurchase has to return the following: The price of the sale; The expenses of the contract, any other legitimate payments made by reason of the sale; and The necessary and useful expenses made on the thing sold, (Art. 1616) Meaning of Necessary expenses- are those incurred for the preservation of the thing or those which seek to prevent the waste, deterioration or loss of the thing. Meaning of useful expenses are those which increases the value of the thing or create improvement thereon.

Effect of the failure of the vendor to redeem: In personal property. - The vendee's title becomes irrevocable; In case of real property - The consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of Article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. (Art. 1607). Reason: The transaction may not be a genuine pacto de retro but only an equitable mortgage.

Art. 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed. Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale.

Rules; 1. 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. 2. If no indemnity was paid by the vendee for the fruits, there shall be no reimbursement for those existing at the time of redemption. 3. If the property had no fruits at the time of the sale and some exist at the time of the redemption, they shall be apportioned proportionately between the redemptioner and the vendee, giving the vendee a share in proportion to the time he possessed the property during the last year counted from the anniversary of the date of sale to compensate the vendee for his expenses. The same rule is believed to be applicable if there were fruits at the time of the sale and the vendee paid for them.

Art. 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated
LEGAL REDEMPTION
DEFINITION OF LEGAL REDEMPTION

It is the 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. (Art. 1619)
Acquisition is by virtue of:

a) Purchase b) Dation in payment c) Any other transaction whereby ownership is transmitted by onerous title
Instances of Legal Redemption:

Redemption by a co-heir of the share by the other heir, (Art. 1088).; Redemption by a co-owner, (Art. 1620); Redemption by an adjoining owner of a piece of rural land (Art. 1621) and or urban land (Art. 1622); Redemption by a debtor in case of sale of right in litigation. (Art. 1634); and

Under special laws (among others) Redemption by owner of real property sold for delinquent taxes. The period is one year; Repurchase by homesteader of homestead sold under the Public Land Act. The period is 5 years.

Redemption by judgment debtor or redemptioner of property sold on execution. The period is 12 months; Redemption by mortgagor after mortgaged property has been judicially foreclosed and sold. The period is 90 days. If foreclosure is extrajudicial, the period is one year from the time of the registration of the sale.
Applicability of Legal Redemption
It is without qualifications even if it uses the word thing. It both applies to MOVABLES AND IMMOVABLES.
NATURE AND BASIS OF LEGAL REDEMPTION
It is in a nature of a mere privilege created partly for reason of public policy and partly for the benefit and convenience of the vendorredemptioner to afford him way out of what might be disagreeable or inconvenient association into which he has been thrust.
Requisites for exercise of the right of legal redemption by co-owner

1. There must be co-ownership. 2. There must be alienation of all or any of the shares of the other co-owners; 3. The sale must e to a stranger ( Art. 1620) 4. The sale must be made before partition (Art. 1088)
Reason for Legal Redemption of Co-owner

To minimize co-ownership. Note that for Article 1620 to apply, the share must have been sold to a third person. Hence if the purchaser is also a coowner, there is no legal redemption.
The co-owner who desires to redeem must tender the entire amount of the redemption price or validly consign the same in court.
LEGAL REDEMPTION BY ADJACENT OWNERS OF RURAL PROPERTY

Reason for the law To foster the development of agricultural areas by adjacent owners who desire the increase for the improvement of their land. This right can be exercised only against a stranger who must have rural land and not against an adjacent rural owner who purchases the property. If stranger does not have rural land, this right will not apply.
REQUISITES
1. Both the land of the one exercising the right of redemption and the land sought to be redeemed must be rural; 2. The land must be adjacent; 3. There must be an alienation. 4. The piece of rural land alienated must not exceed one (1) hectare; 5. The vendee must already own some rural land; 6. The rural land sold must not be separated by brooks, drains, ravines, roads and other apparent servitudes from the adjoining lands.
Right of Pre-emption and Redemption of Adjacent Owners of Urban Land
Meaning of pre-emption: The act or right of purchasing before others. It is exercised before the sale or resale against the would be vendor. Meaning of Redemption: It is exercised after the sale
REQUISITES
1. The one exercising the right must be an adjacent owner; 2. The piece of land sold must be so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time; and 3. Such urban land was bought by its owner merely for speculation. ( Art. 1622)
Rules
Price to be paid is a reasonable.
Preference: In case of two or more adjoining owners desire to exercise the right of legal redemption, the law prefers him whose intended use of the land appears best justified.
Article 1622 also gives the adjoining owner the right of pre-emption which is the right of purchasing before others. It is exercised before the sale or resale against the would be vendor. The right of redemption of co-owner is preferred over that of adjoining owners.
Period for Exercise of Right of Pre-Emption or Redemption

When must the right of legal pre-emption or redemption be exercised? Within 30 days from the notice in writing by the prospective vendor or by the vendor, as the case may be. Period given is absolute. This is designed to discourage the keeping for a long time of property in a state of uncertainty, a situation which obviously unjust to the purchaser and prejudicial to public interest.
Documentary Requirement for Registration:
The deed of sale shall not be recorded in the Registry of Property unless accompanied by an affidavit of the vendor that he has given in writing notice thereof to all possible redemptioners. ( Art. 1623)
ASSIGNMENT OF CREDIT
Assignment of credit: It is a contract by which one person transfer to another his rights and actions against a third person in consideration of a price certain in money or its equivalent, (Art. 1458).
Its nature is a really a contract of sale - a sale of credit and is therefore, governed by the aw on sale. There is however, one important difference and that is, after the transfer, a definite third person is obliged; whereas, in sale, the subject is the whole world which must respect the title of the buyer.
FORMALITIES REQUIRED
As between the parties - The assignment is valid although it appears in a private document so long as the law does not require a specific form for its validity. As against third person - To affect them, the assignment must appear in a public instrument, and in case it involves real property, that it be recorded in the Registry of Property. (Art. 1625)
In an assignment of credit, the consent of the debtor is not essential. However, the creditor should notify the debtor of the assignment otherwise the latter shall be released from obligation if before having knowledge of the assignment, he already paid the creditor. (Art. 1626)
Effects of valid assignment are as follows:

Assignment transfers title to the assigned credit to the assignee; It includes all accessory rights, such as guaranty, mortgage, pledge or preference (Art. 1627); The assignee takes the credit subject to defenses, which may have been acquired by the debtor before notice of the assignment.
Warranties of an Assignor of Credit

(1) Existence of the credit; and (2) The legality of the credit, unless it should have been sold as doubtful. (art. 1628) There is no warranty as to the solvency of the debtor unless it has been expressly stipulated or unless the insolvency was prior to the sale and of common knowledge (ibid.)
Duration of Assignors Liability Where The Debtors Solvency is Expressly Waived. 1. If there is stipulation, then for the term or period fixed: 2. If there is no stipulation: a. For one year from the assignment of the credit when the period for payment of the credit has expired; b. For one year after its maturity, when such period for payment has not yet expired. ( Art. 1629)
SALE OF SUCCESSIONAL RIGHTS

The sale of successional right or the right to an inheritance before partition. An inheritance may be sold either with specification of the properties to be alienated or without enumerating the things comprising it, that is to say, the hereditary rights only (Arts. 1630, 1632). The seller of an inheritance warrants only the facts of his heirship but he does not warrant the objects which make up his inheritance.
Sale for lump sum the whole of certain rights, rents or products shall answer only the legitimacy of the whole and not the various parts of which it may be composed. (Art. 1631) The vendee shall on his part reimburse the vendor for all the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same unless there is an agreement to the contrary, (Art. 1632)
LEGAL REDEMPTION IN SALE OF RIGHT IN LITIGATION

1. There must be a sale or assignment of a credit. 2. There must be a pending litigation at the time of the assignment; and 3. The debtor must pay the assignee (a) the price paid by him. (b) the judicial costs incurred by him; and (c ) the interest on the price from the date the assignee demands payment from him. (Art. 1634)
Purpose is to give advantage to the debtor because he will pay less than the value of the credit assigned if he exercises his right to redeem. Avoid speculation from third person.
There is no right of redemption if credit is sold :

a) To a co-heir or co-owner of the right assigned. b) To a creditor in payment of his credit. c) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (Article 1635)

Review On Law On Sales

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Review On Law On Sales

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REVIEW ON LAW ON SALES

Stages in the Contract of Sale:

There is greater freedom in the determination of the price.

In sale, the buyer after delivery becomes the owner;

In sale, the seller warrants

Special Rules on sales by description and sale by sample

Ownership is transferred generally only by delivery. Kinds of Delivery

e. traditio constitutum possessorium (opposite of

c. In sale on approval, or trial or on satisfaction (Art.

PLACE OF DELIVERY (Art. 1521)

Define an unpaid seller under Art. 1525

Requisites in the exercise of the right of stoppage in transitu:

Instances where goods are considered not already in transitu:

Rules In Case the Area or Number Sale of Real Estate:

Rules In Case the Area or Number Sale of Real Estate:

RULES ON DOUBLE SALES

RULES ON DOUBLE SALES

CONDITIONS AND WARRANTIES

CONDITIONS AND WARRANTIES

CONDITIONS AND WARRANTIES

Warranties in the Contract of Sale

Warranty Against Eviction

Warranty Against Eviction

Warranty Against Eviction

Warranty Against Eviction

Warranty Against Eviction

Requites of Warranty against hidden encumbrances:

Requites of Warranty against hidden encumbrances:

Requites of Warranty against hidden encumbrances:

Requites of Warranty against hidden encumbrances:

Warranty Against Redhibition

Warranty Against Redhibition

WARRANTY AGAINST HIDDEN DEFECTS

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTIES OF QUALITY

IMPLIED WARRANTY IN SALE OF ANIMALS

IMPLIED WARRANTY IN SALE OF ANIMALS

IMPLIED WARRANTY IN SALE OF ANIMALS

IMPLIED WARRANTY IN SALE OF ANIMALS

IMPLIED WARRANTY IN SALE OF ANIMALS

c. Department of Education, Culture and Sports (DECS)

Quality and safety Advertising and sales promotion Price tags

When is the Consumer Act applicable?

What can a consumer do if he has a complaint?

The consumer must do the following:

What are the remedies available to consumers?

For civil/criminal action

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee:

Principal obligations of the vendee: