SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
Contract between the owner of the goods and the
warehouseman
OCUMENTS OF ITLE
 latter agrees to store the goods
 former agrees to pay the compensation for such
storage
1.1 CONCEPTS AND FUNCTIONS
“Document of title to goods”  includes any
1.2.4 Quedan
document used in the ordinary of business in the sale
Quedans are warehouse receipts (Philippine National
or transfer of goods, as proof of the
Bank v. Umberto de Poli, April 3, 1923)
possession/control of the goods, or
 usually FOR SUGAR received by a warehouseman
authorizing/purporting to authorize the possessor of
the document to transfer/receive (by indorsement or
1.3 CLASSES OF DOCUMENTS OF TITLE
delivery) goods represented by the document [NCC
1636].
1.3.1 Negotiable documents of title (NCC 1508 does NOT refer to money.
1511)
1 D
T
NCC 1507. 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 any person named in such
document is a negotiable document of title.
1508. NEGOTIABLE DOCUMENT OF TITLE --- A
negotiable document of title may be negotiated by
delivery:
Functions:
(1) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same
undertakes to deliver the goods to the bearer; or
(1) Receipts of, or orders upon, a bailee of goods
represented
(2) Evidence of transfer of title and possession of
goods and contract between the parties
 where third parties’ rights are involved, the
form of the document (WON negotiable)
becomes important.
1.2 COMMON FORMS OF DOCUMENTS OF TITLE
1.2.1 Dock Warrant
Warrant given by dock owner to the owner of goods
imported and warehoused on the dock upon the faith
of the bill of lading.
Given as a recognition of the title to the goods of the
owner of such goods.
1.2.2 Bill of Lading
Written acknowledgment of the receipt of the goods
by a carrier, AND an agreement to transport & deliver
goods at a specified place to a person named therein/
his order/ bearer.
a.k.a. Shipping receipt, receipt for transportation,
forwarder’s receipt
Must contain:
- In writing
- Signed by carrier/agent
- Describing freight so as to identify it
- Name of consignor
- Terms of the contract of carriage
- Agreeing/directing that the freight be delivered to the
order/assigns of a specified person at a specified
place
1.2.3 Warehouse Receipt
Written acknowledgment by warehouseman of the
receipt of the goods which are placed in his
possession.
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same
undertakes 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 the negotiable document of
title, the goods are deliverable to bearer or where a
negotiable document of title has been indorsed in
blank or to bearer, any specified person, and in such
case the document shall thereafter be negotiated only
by the indorsement of such indorsee.
1509. 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.
1510. If a document of title which contains an
undertaking by a carrier, warehouseman or other
bailee to deliver the goods to bearer, to a specified
person or order of a specified person or which
contains words of import, has placed upon it the
words “not negotiable,” “non-negotiable,” or the like,
such document may nevertheless be negotiated by
the holder and is a negotiable document of title within
the meaning of this Title. But nothing in this Title
contained shall be construed as limiting or defining
the effect upon the obligations of the carrier,
warehouseman, or other bailee issuing a document of
title or placing thereon words “not negotiable,” “nonnegotiable,” or the like.
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SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
1.3.1.4 Transfer of order document without
1511. NON-NEGOTIABLE DOCUMENT OF TITLE --- A
indorsement (NCC 1515)
document of title which is not in such form that it can
be negotiated by delivery may be transferred by the
Where a negotiable document of title is transferred for
holder by delivery to a purchaser or done. A nonvalue by delivery, and the indorsement of the
negotiable document cannot be negotiated and the
transferor is essential for negotiation, the transferee
indorsement of such a document gives the transferee
acquires a right against the transferor to compel him
no additional right.
to indorse the document unless a contrary intention
appears. The negotiation shall take effect as of the
1.3.1.1 How negotiation is made
time when the indorsement is actually made.
Delivery:
1.3.2
1.3.1.2 Who may negotiate (NCC 1512)
A negotiable document of title may be negotiated
(1) By the owner thereof; or
(2) 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 in such form that it may be
negotiated by delivery
1.3.1.3 Rights of person to whom document has
been negotiated (NCC 1513, 1519)
1513. A person to whom a negotiable document of
title has been duly negotiated acquires thereby:
(1) 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 the person to whose
order the goods were to be delivered by the terms
of the document had or had ability to convey to a
purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the
document to hold possession of the goods for
him according to the terms of the document as
fully as if such bailee had contracted directly with
him.
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 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.
Indorser not a guarantor (NCC 1517)
The indorsement of a document of title shall not make
the indorser liable for any failure on the part of the
bailee who issued the document or previous indorsers
thereof to fulfill their respective obligations.
1.3.3
Negotiation not impaired by fraud, mistake,
etc (NCC 1518)
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 negotiated or a person to whom the
document was subsequently negotiated paid value
therefor in good faith without notice of the breach of
duty, or loss, theft, fraud, accident, mistake, duress or
conversion.
1.3.4
Non-negotiable documents of title (NCC
1510)
If a document of title which contains an undertaking
by a carrier, warehouseman or other bailee to deliver
the goods to bearer, to a specified person or order of
a specified person or which contains words of import,
has placed upon it the words “not negotiable,” “nonnegotiable,” or the like, such document may
nevertheless be negotiated by the holder and is a
negotiable document of title within the meaning of this
Title. But nothing in this Title contained shall be
construed as limiting or defining the effect upon the
obligations of the carrier, warehouseman, or other
bailee issuing a document of title or placing thereon
words “not negotiable,” “non-negotiable,” or the like.
1.3.4.1 Rights of person to whom document has
been transferred (NCC 1514)
A person to whom a document of title has been
transferred, but not negotiated, acquires thereby, as
against the transferor, the title of the goods, subject
to the terms of any agreement with the transferor.
If the document is non-negotiable, such person also
acquires the right to notify the bailee who issued the
document of the transfer thereof, and thereby to
acquire the direct obligation of such bailee to hold
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possession of the goods for him according to the
separately paid for, and the seller makes defective
terms of the document.
deliveries in respect of one or more installments, or
the buyer neglects or refuses without just cause to
Prior to the notification to such bailee by the transferor
take delivery of or pay for one or more installments, it
or transferee of a non-negotiable document of title,
depends in each case on the terms of the contract and
the title of the transferee to the goods and the right to
the circumstances of the case, whether the breach of
acquire the obligation of such bailee may be defeated
contract is so material as to justify the injured party in
by the levy of an attachment of execution upon the
refusing to proceed further and suing for damages for
goods by a creditor of the transferor, or by a
breach of the entire contract, or whether the breach is
notification to such bailee by the transferor or a
severable, giving rise to a claim for compensation but
subsequent purchaser from the transferor of a
not a right to treat the whole contract as broken.
subsequent sale of the goods by the transferor.
2.1.2 Modes of manifesting acceptance (NCC
1.3.5 Warranties of a person negotiating or
1585)
transferring document (NCC 1516)
The buyer is deemed to have accepted the goods
A person who for value negotiates or transfers a
when he intimates to the seller that he has accepted
document of title by indorsement or delivery, including
them, or when the goods have been delivered to him,
one who assigns for value a claim secured by a
and he does an act in relation to them which is
document of title unless a contrary intention appears,
inconsistent with the ownership of the seller, or when,
warrants:
after the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has
(1) That the document is genuine;
rejected them.
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would
impair the validity or worth of the document; and
(4) That he has a right to transfer the title to the goods
and that 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 the goods represented thereby.
1.3.6
Rules on levy/garnishment of documents of
title
2.1.3
Effect of wrongful refusal to accept (NCC
1588)
If there is no stipulation as specified in the first
paragraph of Art. 1523, when the buyer’s refusal to
accept the goods is without just cause, the title
thereto passes to him from the moment they are
placed at his disposal.
2.1.4
Liability for interest (NCC 1589)
The vendee shall owe interest for the period between
the delivery of the thing and the payment of the price,
in the following three cases:
2 RIGHTS AND OBLIGATIONS OF THE
VENDEE
(1) Should it have been so stipulated;
2.1 PRINCIPAL OBLIGATIONS OF THE VENDEE
(NCC 1582)
(3) Should he be in default, from the time of judicial or
extrajudicial demand for payment of the price.
The vendee is bound to accept delivery and to pay the
price of the thing at the time and place stipulated in
the contract.
2.2 RIGHTS OF THE VENDEE
If the time and place should not have been stipulated,
the payment must be made at the time and place of
the delivery of the thing sold.
2.1.1
No obligation to accept delivery by
installments (NCC 1583)
Unless otherwise agreed, the buyer of goods is not
bound to accept delivery thereof by installments.
Where there is a contract of sale of goods to be
delivered by stated installments, which are to be
(2) Should the thing sold and delivered produce fruits
or income;
2.2.1
Right to examine the goods before delivery
(NCC 1584)
Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have
accepted them unless and until he has had a
reasonable opportunity of examining them for the
purpose of ascertaining whether they are in
conformity with the contract, if there is no stipulation
to the contrary.
Unless otherwise agreed, when the seller tenders
delivery of goods to the buyer, he is bound, on request,
to afford the buyer a reasonable opportunity of
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examining the goods for the purpose of ascertaining
Should such ground not exist, the provisions of Art.
whether they are in conformity with the contract.
1191 shall be observed.
Where goods are delivered to a carrier by the seller, in
accordance with an order from or agreement with the
buyer, upon the terms that the goods shall not be
delivered by the carrier to the buyer until he has paid
the price, whether such terms are indicated by
marking the goods with the words “collect on
delivery,” or otherwise, the buyer is not entitled to
examine the goods before the payment of the price, in
the absence of agreement or usage of trade
permitting such examination.
2.2.2
Acceptance not a bar to action for damages
(NCC 1586)
In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not
discharge the seller from liability in damages or other
legal remedy for breach of any promise or warranty in
the contract of sale. But, if, after acceptance of the
goods, the buyer fails to give notice to the seller of the
breach in any promise of warranty within a reasonable
time after the buyer knows, or ought to know such
breach, the seller shall not be liable therefor.
2.2.3
No obligation to return goods wrongfully
delivered (NCC 1587)
Unless otherwise agreed, where goods are delivered
to the buyer, and he refuses to accept them, having
the right so to do, he is not bound to return them to
the seller, but it is sufficient if he notifies the seller
that he refuses to accept them. If he voluntarily
constitutes himself a depositary thereof, he shall be
liable as such.
2.2.4
Right to suspension of payment of price (NCC
1590)
Should the vendee be disturbed in the possession of
ownership of the thing acquired, or should he have
reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he
may suspend the payment of the price until the vendor
has caused the disturbance or danger to cease,
unless the latter gives security for the return of the
price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the vendee
shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of the
payment of the price.
2.2.5
When rescission of sale of real property may
be made (NCC 1591-1592)
1591. Should the vendor have reasonable grounds to
fear the loss of immovable property sold and its price,
he may immediately sue for the rescission of the sale.
1592. In the sale of immovable property, even though
it may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no
demand for rescission of the contract has been made
upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term.
2.2.6
Rescission in case of sale of movable thing
(NCC 1593)
With respect to movable property, the rescission of the
sale shall of right take place in the interest of the
vendor, if the vendee, upon the expiration of the
period fixed for the delivery of the thing, should not
have appeared to receive it, or, having appeared, he
should not have tendered the price at the same time
unless a longer period has been stipulated for its
payment.
ARRA REALTY CORPORATION V. SPOUSES
ARGUELLES 20 SEPTEMBER 2004
LAFORTEZA V. MACHUCA 333 SCRA 643
VDA. DE MISTICA V. NAGUIAT 418 SCRA 73
Pertinent provisions of RA 6552
3 ACTIONS FOR BREACH OF
CONTRACT OF SALE OF GOODS
3.1 AVAILABLE REMEDIES ON THE PART OF THE
SELLER:
3.1.1
Action for payment of price (NCC 1595)
Where, under a contract of sale, the ownership of the
goods has passed to the buyer, and he wrongfully
neglects or refuses to pay for the goods according to
the terms of the contract of sale, the seller may
maintain an action against him for the price of the
goods.
Where, under a contract of sale, the price is payable
on a certain day, irrespective of delivery or of transfer
of title, and the buyer wrongfully neglects or refuses to
pay such price, the seller may maintain an action for
the price, although the ownership in the goods has not
passed. But it shall not be a defense to such an action
that the seller at any time before the judgment in such
action has manifested an inability to perform the
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contract of sale on his part or an intention not to
(2) When a bill of exchange or other negotiable
perform it.
instrument has been received as conditional
payment, and the condition on which it was
Although the ownership in the goods has not passed,
received has been broken by reason of the
if they cannot readily be resold for a reasonable price,
dishonor of the instrument, the insolvency of the
and if the provisions of Art. 1596(4) are not
buyer, or otherwise.
applicable, the seller may offer to deliver the goods to
the buyer, and, if the buyer refuses to receive them,
In Arts. 1525 and 1535 the term “seller” includes an
may notify the buyer that the goods are thereafter held
agent of the seller to whom the bill of lading has been
by the seller as bailee for the buyer. Thereafter the
indorsed, or a consignor or agent who has himself
seller may treat the goods as the buyer’s and may
paid, or is directly responsible for the price, or any
maintain an action for the price.
other person who is in the position of a seller.
3.1.2
Action for damages in case of nonacceptance of goods (NCC 1596)
3.1.4.2 Remedies of an unpaid seller (NCC 15261535)
Where the buyer wrongfully neglects or refuses to
accept and pay for the goods, the seller may maintain
an action against him for damages for nonacceptance.
1526. Subject to the provisions of this Title,
notwithstanding that the ownership in the goods may
have passed to the buyer, the unpaid seller of goods,
as such, has:
The measure of damages is the estimated loss directly
and naturally resulting in the ordinary course of events
from the buyer’s breach of contract.
(1) A lien on the goods or right to retain them for the
price while he is in possession of them;
Where there is an available market for the goods in
question, the measure of damages is, in the absence
of special circumstances showing proximate damage
of a different amount, the difference between the
contract price and the market or current price at the
time or times when the goods ought to have been
accepted, or, if no time was fixed for acceptance, then
at the time of the refusal to accept.
If, while labor or expense of material amount is
necessary on the part of the seller to enable him to
fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to
proceed no further therewith, the buyer shall be liable
to the seller for labor performed or expenses made
before receiving notice of the buyer’s repudiation or
countermand. The profit the seller would have made
if the contract or the sale had been fully performed
shall be considered in awarding damages.
3.1.3
Action for rescission of contract (NCC 1597)
Where the goods have not been delivered to the
buyer, and the buyer has repudiated the contract of
sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach
thereof, the seller may totally rescind the contract of
sale by giving notice of his election so to do to the
buyer.
3.1.4
Unpaid Seller
(2) In case of the insolvency of the buyer, a right to
stopping the goods in transitu after he has parted
with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this
Title.
Where the ownership in the goods has not passed to
the buyer, the unpaid seller has, in addition to his
other remedies, a right of withholding delivery similar
to and coextensive with his rights of lien and stoppage
in transitu where the ownership has passed to the
buyer.
1535. Subject to the provisions of this Title, the
unpaid seller’s right of lien or stoppage in transitu, is
not affected by any sale, or other disposition of the
goods which the buyer may have made, unless the
seller has assented thereto.
If, however, a negotiable document of title has been
issued for goods, no seller’s lien or right to stoppage
in transitu shall defeat the right of any purchaser for
value in good faith to whom such document has been
negotiated, whether such negotiation be prior or
subsequent to the notification to the carrier, or other
bailee who issued such document, of the seller’s
claim to a lien or right of stoppage in transitu.
3.1.4.2.1 Lien on the goods
The seller of goods is deemed to be an unpaid seller
within the meaning of this Title:
1527. Subject to the provisions of this Title, the
unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or
tender of the price in the following cases, namely:
(1) When the whole of the price has not been paid or
tendered;
(1) Where the goods have been sold without any
stipulation as to credit;
3.1.4.1 Concept (NCC 1525)
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(2) Where the goods have been sold on credit, but the
(2) If, after the arrival of the goods at the appointed
term of the credit has expired; and
destination, the carrier or other bailee
acknowledges to the buyer or his agent that he
(3) Where the buyer becomes insolvent.
holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his
The seller may exercise his right of lien
agent; and it is immaterial that further
notwithstanding that he is in possession of the goods
destination for the goods may have been
as agent or bailee for the buyer.
indicated by the buyer;
1528. Where an unpaid seller had made part delivery
of the goods, he may exercise his right of lien on the
remainder, unless such part delivery has been made
under such circumstances as to show an intent to
waive the lien or right of retention.
1529. The unpaid seller of goods loses his lien
thereon:
(1) When he delivers the goods to a carrier or other
bailee for the purpose of transmission to the
buyer without reserving ownership in the goods or
the right to the possession thereof;
(2) When the buyer or his agent lawfully obtains
possession of goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does
not lose his lien by reason only that he has obtained
judgment for decree for the price of the goods.
3.1.4.2.2 Right of stoppage in transitu
1530. Subject to the provisions of this Title, when the
buyer of goods is or becomes insolvent, the unpaid
seller who has parted with the possession of the
goods has the right of stopping them in transitu, that
is to say, he may resume possession of the goods at
any time while they are in transit, and he will then
become entitled to the same rights in regard to the
goods as he would have had if he had never parted
with the possession.
1531. Goods are in transit within the meaning of the
preceding article:
(1) From the time when they are delivered to a carrier
by land, water, or air, or other bailee for the
purpose of transmission to the buyer, until the
buyer, or his agent in that behalf, takes delivery
of them from such carrier or other bailee;
(2) If the goods are rejected by the buyer, and the
carrier or other bailee continues in possession of
them, even if the seller has refused to receive
them back.
Goods are no longer in transit within the meaning of
the preceding article:
(1) If the buyer, or his agent in that behalf, obtains
delivery of the goods before their arrival at the
appointed destination;
(3) If the carrier or other bailee wrongfully refuses to
deliver the goods to the buyer or his agent in that
behalf.
If the goods are delivered to a ship, freight train, truck,
or airplane chartered by the buyer, it is a question
depending on the circumstances of the particular
case, whether they are in the possession of the carrier
as such or as agent of the buyer.
If part delivery of the goods has been made to the
buyer, or his agent in that behalf, the remainder of the
goods may be stopped in transitu, unless such part
delivery has been under such circumstances as to
show an agreement with the buyer to give up
possession of the whole of the goods.
1532. The unpaid seller may exercise his right of
stoppage in transitu either by obtaining actual
possession of the goods or by giving notice of his claim
to the carrier or other bailee in whose possession the
goods are. Such notice may be given either to the
person in actual possession of the goods or to his
principal. In the latter case the notice, to be effectual,
must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery of to the
buyer.
When notice of stoppage in transitu is given by the
seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or
according to the directions of, the seller. The expenses
of such delivery must be borne by the seller. If,
however, a negotiable document of title representing
the goods has been issued by the carrier or other
bailee, he shall not be obliged to deliver or justified in
delivering the goods to the seller unless such
document is first surrendered for cancellation.
3.1.4.2.3 Right of resale
1533. Where the goods are of perishable nature, or
where the seller expressly reserves the right of resale
in case the buyer should make default, or where the
buyer has been in default in the payment of the price,
for an unreasonable time, an unpaid seller having a
right of lien or having stopped the goods in transitu
may resell the goods. He shall not thereafter be liable
to the original buyer, upon the contract of sale for any
profit made by such resale, but may recover from the
buyer damages for any loss occasioned by the breach
of the contract of sale.
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payment of the price and otherwise, as the court may
Where a resale is made, as authorized in this article,
deem just.
the buyer acquires a good title as against the original
buyer.
3.2.2 Action by buyer for rescission or damages for
It is not essential to the validity of a resale that notice
breach of warranty (NCC 1599)
of an intention to resell the goods be given by the
seller to the original buyer. But where the right to resell
Where there is a breach of warranty by the seller, the
is not based on the perishable nature of the goods or
buyer may, at his election:
upon an expressed provision of the contract of sale,
(1) Accept or keep the goods and set up against the
the giving or failure to give such notice shall be
seller, the breach of warranty by way of
relevant in any issue involving the question whether
recoupment in diminution or extinction of the
the buyer had been in default for an unreasonable
price;
time before the resale was made.
It is not essential to the validity of a resale that notice
of the time and place of such resale should be given
by the seller to the original buyer.
(2) Accept or keep the goods and maintain an action
against the seller for damages for breach of
warranty;
The seller is bound to exercise reasonable care and
judgment in making a resale, and subject to this
requirement may make a resale either by public or
private sale. He cannot, however, directly or indirectly
buy the goods.
(3) Refuse to accept the goods and maintain an action
against the seller for damages for breach of
warranty;
3.1.4.2.4 Right to rescind
1534. An unpaid seller having the right of lien or
having stopped the goods in transitu, may rescind the
transfer of title and resume the ownership in the
goods, where he expressly reserved the right to do so
in case the buyer should make default, or where the
buyer has been in default in the payment of the price
for an unreasonable time. The seller shall not
thereafter be liable to the buyer upon the contract of
sale, but may recover from the buyer damages for any
loss occasioned by the breach of the contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested
by notice to the buyer or by some overt act an intention
to rescind. It is not necessary that such overt act
should be communicated to the buyer, but the giving
or failure to give notice to the buyer of the intention to
rescind shall be relevant in any issue involving the
question whether the buyer had been in default for an
unreasonable time before the right of rescission was
asserted.
3.2 AVAILABLE REMEDIES ON THE PART OF THE
BUYER:
3.2.1
Action by buyer for specific performance (NCC
1598)
Where the seller has broken a contract to deliver
specific or ascertained goods, a court may, on the
application of the buyer, direct that the contract shall
be performed specifically, without giving the seller the
option of retaining the goods on payment of damages.
The judgment or decree may be unconditional, or
upon such terms and conditions as to damages,
(4) Rescind the contract of sale and refuse to receive
the goods or if the goods have already been
received, return them or offer to return them to
the seller and recover the price or any part
thereof which has been paid.
When the buyer has claimed and been granted a
remedy in anyone of these ways, no other remedy
can thereafter be granted, without prejudice to
the provisions of the second paragraph of Art.
1191.
When the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach
of warranty when he accepted the goods without
protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he
fails to return or offer to return the goods to the
seller in substantially as good condition as they
were in at the time the ownership was transferred
to the buyer. But if deterioration or injury of the
goods is due to the breach of warranty, such
deterioration or injury shall not prevent the buyer
from returning or offering to return the goods to
the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the
goods. If the price or any part thereof has already
been paid, the seller shall be liable to repay so
much thereof as has been paid, concurrently with
the return of the goods, or immediately after an
offer to return the goods in exchange for
repayment of the price.
Where the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an
offer of the buyer to return the goods, the buyer
shall thereafter be deemed to hold the goods as
bailee for the seller, but subject to a lien to secure
payment of any portion of the price which has
7
SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid
BORBON II V. SERVICEWIDE SPECIALISTS, INC. JULY
seller by Art. 1526.
11, 1996
(5) In the case of breach of warranty of quality, such
loss, in the absence of special circumstances
showing proximate damage of a greater amount,
is 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.
3.2.3
Rule in case of sale by description or by
sample (NCC 1481)
In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk of
the goods delivered do not correspond with the
description or the sample, and if the contract be by
sample as well as by description, it is not sufficient
that the bulk of goods correspond with the sample if
they do not also correspond with the description.
The buyer shall have a reasonable opportunity of
comparing the bulk with the description or the sample.
3.3 RECTO LAW (SALE OF MOVABLES ON
INSTALLMENTS) (NCC 1484-1486)
NCC 1484. In a contract of sale of personal property,
the price of which is payable in installments, the
vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the
vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay
cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendee’s
failure to pay cover two or more installments. In
this case, he shall have no further action against
the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be
void.
NCC 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
NCC 1486. In the case referred to in two preceding
articles, a stipulation that the installments or rents
paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be
unconscionable under the circumstances.
LEVI HERMANOS, INC. V. GERVACIO 69 PHIL 52
ZAYAS V. LUNETA MOTOR COMPANY 117 SCRA 726
BACHRACH MOTOR CO V. MILLAN 61 PHIL 409
TAJANLANGIT V. SOUTHERN MOTORS, INC. 101 PHIL
606
CRUZ V. FILIPINAS INVESTMENT & FINANCE CORP. 23
SCRA 791
4 RISK OF LOSS (NCC 1174,
1493-94, 1504, 1538, 1189)
NCC 1174. Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the
assumption of risk, no person shall be responsible for
those events which, could not be foreseen, or which,
though foreseen, were inevitable.
NCC 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.
NCC 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
this 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.
NCC 1504. Unless otherwise agreed, the goods
remain at the seller’s risk until the ownership therein
is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the
buyer’s risk whether actual delivery has been made or
not, except that:
(1)
Where delivery of the goods has been made to
the buyer or to a bailee for the buyer, in pursuance of
the contract and the ownership in the goods has been
retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the
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SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
goods are at the buyer’s risk from the time of such
5.1 COMMON CAUSES
delivery;
(2)
Where actual delivery has been delayed
through the fault of either the buyer or seller the goods
are at the risk of the party in fault.
NCC 1538. In case of loss, deterioration or
improvement of the thing before its delivery, the rules
in NCC 1189 shall be observed, the vendor being
considered the debtor.
NCC 1189. When the conditions have been imposed
with the intention of suspending the efficacy of an
obligation to give, the following rules shall be
observed
in
case
of
the
improvement/loss/deterioration of the thing during
the pendency of the condition:
(1)
If the thing is lost without the fault of the
[vendor], the obligation shall be extinguished;
(2)
If the thing is lost through the fault of the
[vendor], he shall be obliged to pay damages; it is
understood that the thing is lost when it
perishes/goes out of commerce/disappears in such a
way that its existence is unknown/it cannot be
recovered;
(3)
When the thing deteriorate without the fault of
the [vendor], the impairment is to be borne by the
[vendee];
5.2 SPECIAL CAUSES
5.3 EXTRA-SPECIAL CAUSES
5.3.1
Conventional Redemption (NCC 1601 –
1616)
Catangcatang v Legayada
Villarica v CA
Diamante v CA
Vda. De Urbano v. GSIS
Legaspi v CA
5.3.1.1 Definition
NCC 1601. Conventional redemption shall take place
when the vendor reserves the right to repurchase the
thing sold, with the obligation to comply with the
provisions of NCC 1616 and other stipulations which
may have been agreed upon.
NCC 1616. The vendor cannot avail himself of the
right of repurchase without returning to the vendee
the price of the sale, and in addition:
(1)
The expenses of the contract, and any other
legitimate payments made by reason of the sale;
(4)
If the thing deteriorates through the fault of
the [vendor], the [vendee] may choose between the
rescission of the obligation and its fulfillment, with
indemnity for damages in either case;
(2)
The necessary and useful expenses made on
the thing sold.
(5)
If the thing is improved by its nature/by time,
the improvement shall inure to the benefit of the
[vendee];
5.3.1.3 Period of redemption (NCC 1606)
(6)
If it is improved at the expense of the [vendor],
he shall have no other right than that granted to the
usufructuary.
5 EXTINGUISHMENT OF SALE (NCC
1600)
NCC 1600. Sales are extinguished by the same
causes as all other obligations, by those stated in the
preceding articles of this Title, and by conventional or
legal redemption.
5.3.1.2 Distinguished from option to purchase
NCC 1606. The right referred to in NCC 1601, in the
absence of an express agreement, shall last 4yrs from
the date of the contract.
Should there be an agreement, the period cannot
exceed 10yrs.
However, the vendor may still exercise the right to
repurchase within 30days from the time final
judgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase.
5.3.1.4 Effect when no redemption is made
5.3.1.5 Equitable mortgage
NCC 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
(1)
When the price of a sale with right to
repurchase is unusually inadequate;
(2)
When the vendor remains in possession as
lessee or otherwise;
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SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
(3)
When upon/after the expiration of the right to
6.2 EXCLUDED CASES OF ASSIGNMENT (NCC
repurchase another instrument extending the period
1635)
of redemption / granting a new period is executed;
(4)
When the purchaser retains for himself a part
of the purchase price;
(5)
When the vendor binds himself to pay the
taxes on the thing sold;
(6)
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.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be subject to the usury laws.
NCC 1603. In case of doubt, a contract purporting to
be a sale with right to repurchase shall be construed
as an equitable mortgage.
6.3 PERFECTION (NCC 1624-25)
C&C Commercial Corp. v. PNB
6.4 EFFECTS OF ASSIGNMENT (NCC 1626-27)
6.5 WARRANTIES OF ASSIGNOR (NCC 162829)
6.6 SPECIAL RULES
6.6.1
Assignment/Sale of Inheritance (NCC 163033)
6.6.2
Assignment of Incorporeal Right under
Litigation (NCC 1634)
6.7 RIGHT OF REPURCHASE (NCC 1634-35)
NCC 1604. The provisions of NCC 1602 shall also
apply to a contract purporting to be an absolute sale.
NCC 1605. In the cases referred to in NCC 1602 to
1604, the apparent vendor may ask for the
reformation of the instrument.
5.3.1.6 Right of the parties to the fruits of the land
(NCC 1617)
5.3.1.7 Right of vendor a retro as to
charges/encumbrances (NCC 1618)
5.3.2
Legal Redemption; concept and instances
(NCC 1619-1623)
Alonzo v IAC
Primary Structures Corporation v Sps. Valencia
Lee Chuy Realty Corp. v CA
6 ASSIGNMENT OF CREDITS AND
OTHER INCORPOREAL RIGHTS
(NCC 1624-1635)
6.1 CONCEPT
Assignment of credit  contract by which the owner
(assignor/creditor) of a credit and other incorporeal
rights transfers (onerously/gratuitously) to another
(assignee) his rights and actions against a third
person (debtor).
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SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
NCC 1687 (NOT of indefinite duration)
EASE
 terminable without necessity of a special
notice upon the expiration of any month.
7 L
7.1 CONCEPT AND SCOPE (NCC 1642-44)
Concept: an agreement whereby one person (lessor)
binds himself to grant temporarily the enjoyment or
use of a thing or to render some work or service to
another (lessee) who undertakes to pay rent,
compensation or price therefor.
Subject-matter of lease
NCC 1643 applies to lease of things  whether
movable or immovable
 provisions on leases of lands are also applicable to
leases of personal property except obvious cases (by
nature and intent of the provision, N/A)
In lease of chattels
the lessor loses complete control over the chattel
leased although the lessee would be responsible to
the lessor should he make bad use thereof.
Lease of personalty with option to buy
is NOT a lease but an installment sale.
Kinds:
NCC 1642. The contract of lease may be of things, or
of work and service.
(1)
Lease of Things
NCC 1643. In the lease of things, one of the parties
binds himself to give to another the enjoyment or use
of a thing for a price certain, and for a period which
may be definite/indefinite. However, no lease for
more than 99yrs shall be valid.
Involving an obligation on the part of the lessor to
deliver the thing which is the object thereof and
the correlative right of the lessee to the peaceful
and adequate enjoyment thereof for a price
certain (NCC 1654)
Note: If the period exceeds 99yrs, the lease is
considered as having expired after the end of said
term.
 Where there is an implied new lease (NCC
1670), the lease will be for an indefinite time.
 If term is fixed but is indefinite, but from the
circumstance it can be inferred that a period was
intended, the courts may fix the duration (NCC
1196)
 If no term is fixed, NCC 1682 applies (for rural
lands) and NCC 1687 applies (for urban lands).
 Lease of things during the lifetime of one of the
parties is for an indefinite period.
 Lease for such time as the lessor/lessee may
please is one for life, ending upon the death of
either party.
Note: Verbal contract of lease “for as long as the
lessees are doing business and as long as they
can pay just rents”
 held to be a lease from month to month under
Note: The continuance and fulfillment of a lease of
a house CANNOT be made to depend solely upon
the uncontrolled choice of the lessee on WON the
lessee would pay rentals.
(2)
Lease of Work
Refers to a CONTRACT FOR A PIECE OF WORK
 involving an obligation on the part of the
independent contractor (lessor)
 to execute a piece of work for the employer
(lessee) in consideration of a certain
price/compensation (NCC 1713)
(3)
Lease of Service
Involving an obligation on the part of the
housekeeper (NCC 1689), laborer/employee (NCC
1700), or common carrier (NCC 1732)
 to do/perform a service for the head of the
family/master // employer// passenger/shipper
of goods in consideration of compensation.
Note: Lease of Work and of Service cover:
HOUSEHOLD SERVICE (NCC 1689-99);
CONTRACT OF LABOR (NCC 1700-12);
CONTRACT FOR A PIECE OF WORK (NCC 1713-31);
and
COMMON CARRIERS (NCC 1732-1766)
7.1.1
Distinctions:
7.1.1.1 Lease and Sale
LEASE OF THINGS
Only the enjoyment/use
is transferred
Transfer is temporary
Lessor need not be the
owner
Price of the subject
matter  usually not
mentioned
SALE
Ownership is transferred
Transfer is permanent,
unless subject to a
resolutory condition
Seller must be the
owner // at least
authorized by the owner
to transfer ownership of
the thing sold at the
time it is delivered
Price of thing  fixed in
the contract
7.1.1.2 Lease of Things and Lease of Services
7.1.1.3 Lease of Services and Contract for Piece of
Work
NCC 1644. In the lease of work/service, one of the
parties binds himself to execute a piece of work / to
render to the other some service for a price certain,
but the relation of the principal and agent DOES NOT
exist between them.
11
SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
In lease of work:
merely to be exhibited // when they are accessory to
 the object: execution of a piece of work for an
an industrial establishment.
employer by an independent contractor
In lease of service:
 the object: performance of some service for an
employer by a house helper, laborer // for a
passenger/ owner of goods by a common carrier.
7.2 LEASE OF RURAL AND URBAN LANDS
In both kinds, the employer/passenger/owner of
goods binds himself to pay some
remuneration/compensation in favor of the
independent contractor/employee/ common carrier
 the relation of principal and agent DOES NOT exist
between the parties
NCC 1490. The husband and the wife cannot sell
property to each other, except:
7.2.1
Disqualifications of Lessee (NCC 1646 in rel
to 1490-91)
(1).
When a separation of property was agreed
upon in the marriage settlements; or
7.1.1.4 Lease of Services and Agency
(2).
When there has been a judicial separation of
property under Article [134 FC].
NCC 1868. By the contract of agency a person binds
himself to render some service / to do something in
representation/on behalf of another, with the
consent/authority of the latter
NCC 1491. The following persons cannot acquire by
purchase, even at a public or judicial auction, either in
person or through the mediation of another:
LEASE OF
WORK/SERVICE
Basis: employment
Lessor performs a
material act for the
benefit of his employer
without representation
of the latter
Work/service must be
for a
price/compensation
The will of both parties is
necessary for the
extinguishment of the
relationship
Only two persons are
involved: lessor & lessee
In lease of work, the risk
of loss before delivery is
borne by the
independent contractor,
especially in lease of
work for a fixed price
In lease of work, the
independent contractor
is personally liable for
his contracts with 3rd
parties
In lease of service, the
lessor (like a servant/
laborer) ordinarily
performs only ministerial
duties
AGENCY
Basis: representation
Agent executes a
juridical act for and in
behalf of his principal
Agency is presumed to
be for a compensation
Will of one is sufficient
Three persons involved:
principal, agent, and 3rd
person with whom the
agent has contracted
Risk is borne by the
principal since the
agent acts merely as
representative
Agent is not liable for
contracts with 3rd
parties, unless he
expressly binds himself
/ exceeds the limits of
his authority
Agent exercises
discretionary powers
(1).
The guardian, the property of the person or
persons who may be under his guardianship;
(2).
Agents, the property whose administration or
sale may have been entrusted to them, unless the
consent of the principal have been given;
(3).
Executors and administrators, the property of
the estate under administration;
(4).
Public officers and employees, the property of
the State or of any subdivision thereof, or of any
government owned or controlled corporation, or
institution, the administration of which has been
entrusted to them; this provision shall apply to judges
and government experts who, in any manner
whatsoever take part in the sale;
(5).
Justices, judges, prosecuting attorneys, clerks
of superior and inferior courts, and other officers and
employees connected with the administration of
justice, the property and rights in litigation or levied
upon an execution before the court within whose
jurisdiction or territory they exercise their respective
functions;
this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to
the property and rights which may be the object of any
litigation in which they may take part by virtue of their
profession;
(6).
7.2.2 Recording of Lease (NCC 1647-48)
Note: Actual knowledge == registration
7.2.3
7.1.2
Lease of Consumable Goods (NCC 1645)
NCC 1645. Consumable goods cannot be the subject
matter of a contract of lease, except when they are
Any others specially disqualified by law.
Assignment of Lease (NCC 1649)
7.2.4 Sublease
Malasarte v CA
12
SALES FINALS OUTLINE | BY: SOLANO, Morris Medel F. | San Beda Law
7.2.4.1 Distinguished from Assignment of Lease
Tagbilaran Integrated Sellers Association v CA
7.2.4.2 Right of Lessee to sublease (NCC 1650)
7.2.6
7.2.4.3 Obligations of Sublessee (NCC 1651-52)
7.2.6.1 General Obligations (NCC 1657)
7.2.5
7.2.6.2 Urgent Repairs (NCC 1662)
Obligations of Lessor
7.2.5.1 General Obligations (NCC 1654)
The lessor is obliged:
(1).
To deliver the thing which is the object of the
contract in such a condition as to render it fit for the
use intended;
(2).
To make on the same during the lease all the
necessary repairs in order to keep it suitable for the
use to which it has been devoted, unless there is a
stipulation to the contrary.
(3).
To maintain the lessee in the peaceful and
adequate enjoyment of the lease for the duration of
the contract.
7.2.5.2 Warranties of Lessor (NCC 1653)
The provisions governing warranty, contained in the
Title on Sales, shall be applicable to the contract of
lease.
In the cases where the return of the price is required,
reduction shall be made in proportion to the time
during which the lessee enjoyed the thing.
7.2.5.3 Alteration of the thing leased (NCC 1661)
The lessor cannot alter the form of the thing leased in
such a way as to impair the use to which the thing is
devoted under the terms of the lease.
7.2.5.4 Useful improvements and ornamental
expenses (NCC 1678)
If the lessee makes, in good faith, useful
improvements which are suitable to the use for which
the lease is intended, without altering the
form/substance of the property leased, the lessor
upon the termination of the lease shall pay the lessee
½ of the value of the improvements at that time.
Should the lessor refuse to reimburse said amount,
the lessee may remove the improvements, even
though the principal thing may suffer damage thereby.
He shall not, however, cause any more impairment
upon the property leased than is necessary.
Obligations of Lessee
7.2.6.3 Trespass made by a third person (NCC
1663-64)
7.2.7
Remedies of a party in case of failure of the
other to comply with his obligation/s
7.2.7.1 Rescission (NCC 1659)
7.2.7.2 Remedies of lessee
7.2.7.2.1 When the thing leased is totally or partially
destroyed (NCC 1655)
7.2.7.2.2 When the lessor fails to make repairs (NCC
1658)
7.2.7.2.3 Dangerous condition of the thing leased
for habitation (NCC 1660)
7.2.7.2.4 Return of the thing leased (NCC 1665-66)
7.2.7.2.5 Liability for loss or deterioration of the
thing leased (NCC 1667-68)
7.2.7.3 Remedies of lessor
7.2.7.3.1 Ejectment; grounds (NCC 1673)
7.2.7.4 Termination of lease by the purchase of the
leased land (NCC 1676-77)
In the absence of registration,
 the purchaser may terminate the lease
save when there is a stipulation in the contract of sale
// when the purchaser knows of the existence of the
lease
 actual knowledge == registration
7.2.7.5 RA 9161 RENTAL REFORM ACT OF 2001
7.2.8
Expiration of Lease (NCC 1669)
7.2.8.1 Implied new lease (NCC 1670 & 1672)
7.2.8.2 Rule in case of continued possession over
lessor’s objection (NCC 1671)
7.2.8.3 Duration of rural lease (NCC 1682)
7.2.9
Obligation of outgoing/incoming lessee or
lessor (NCC 1683)
With regard to ornamental expenses, the lessee shall
not be entitled to any reimbursement, but he may
remove the ornamental objects, provided no damage
is caused to the principal thing, and the lessor does
not choose to retain them by paying their value at the
time the lease is extinguished.
Chua Tee Dee v CA
13