Page 1 of 21 | RFBT Handout No. 03
LAW ON SALES
ATTY. NICKO SORIANO, CPA
LAW ON SALES
ATTY. NICKO SORIANO, CPA
CONTRACTS OF SALE, IN GENERAL
DEFINITION:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver
a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Characteristics of a Contract of Sale:
1. Purpose: of the delivery is to transfer of ownership;
2. Perfection: as a rule, is by mere consent, since there exists a contract of sale the moment the parties “obligate”
themselves;
3. Subject Matter: determinate thing.
4. Cause: onerous, since the cause or consideration of the parties is the prestation or promise of the other;
5. Bilateral Contract: since both parties have their respective obligations;
6. Nominate Contract: not only because there’s a specific designation of the contract, but more so because there are
specific rules provided by law to govern the rights and obligations of the parties, after stipulations;
7. Commutative: in the sense that there is equivalence in the prestation of the parties. Ordinarily, price reflects the value
of the property, since the seller would not normally accept a price below the value of the property and the buyer would
not normally pay an amount more than the value of the property.
Aleatory: there is also a sale of hope where there is no equivalence in the value of prestations. Since the obligation of the
other party is not certain to arise. E.g., lotto. (Art. 1461)
DISTINGUISHED FROM OTHER TRANSACTIONS:
1. Contract for a piece of work
SALE: 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.
CONTRACT FOR A PIECE OF WORK: if the goods are to be manufactured specially for the customer and upon his
special order, and not for the general market.
SIMILARITIES:
a. There is transfer of ownership
b. Buyer/Customer pays the price.
DISTINCTION: is as to the subject matter: in a contract of sale, the subject is a thing and its delivery, in a contract for a
piece of work, the subject is service.
Importance of Distinction: for purposes of applying the Statute of Frauds, only the sale of personal property priced P500
or more is required to be in writing.
ILLUSTRATION: X bought from Y customized shoes size 20 for P20,000. Is the contract enforceable if not in writing?
2. Dacion en pago
SIMILARITIES: In dacion en pago, there is also a transfer of ownership of the thing delivered and it is likewise governed by
the law on sales.
DISTINCTIONS:
CONTRACT OF SALE
DACION EN PAGO
Source of obligation
Special form of payment which extinguishes an obligation
No requirement for a pre-existing obligation
There is a need for a pre-existing obligation
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ATTY NICKO SORIANO, CPA
LAW ON SALES
3.
Barter
Art. 1468. If the consideration of the contract consists partly in money, and partly in another thing, the transaction shall
be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered
a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent;
otherwise, it is a sale.
ILLUSTRATION: In an agreement where A obliged himself to give to B a watch worth P800,000, and B obliged himself to
give to A, his car and cash P350,000. What contract was entered into?
4. Contract of agency to sell
Art. 1466. In construing a contract containing provisions characteristic of both the contract of sale and of the contract of
agency to sell, the essential clauses of the whole instrument shall be considered. (n)
SIMILARITY: in both contracts, things or objects are delivered to the buyer/agent.
DISTINCTION:
1. In a contract of sale, there is transfer of ownership. In an agency to sell, the delivery of objects to the agent for him to
sell, does not transfer ownership to him.
2. In a contract of sale, after delivery, risk of loss is with the buyer already. In agency to sell, the risk of loss remains with
the principal-owner and not transferred to the agent.
ILLUSTRATION: X delivered to Y, maong pants, for the purpose of selling them. While in Y’s possession, the store of Y
was burned down and the maong pants were destroyed. Is Y still liable to pay X?
KINDS OF SALE AS TO TRANSFER OF OWNERSHIP UPON DELIVERY:
1. In absolute sale, ownership transfers upon delivery, actual or constructive, even if no total payment of the price has
been made yet.
ILLUSTRATION: Arthur sold to Richard his car and delivered the same. They agreed that Richard would pay P50,000
as downpayment, and the balance of P100,000 is payable in 4 equal installments. While in Richard’s garage, the car
was stolen. Is Richard liable to pay the balance of the price?
2. A conditional sale is the kind of contract of sale where ownership automatically transfers to the buyer upon fulfillment
of the condition, which is usually the full payment of the price, without need of a new agreement or to execute a new
contract.
A Contract to Sell is a special kind of conditional sale where ownership does not automatically pass upon fulfillment of
the condition. It will only give the buyer the right to demand the execution of a deed of sale or to compel the seller to
sell. Ownership transfers only upon execution of the deed of sale or some other mode of delivery.
Conditional Sale vs. Contract to Sell:
ILLUSTRATION: X sold to Y his land for P1M, the price payable in 10 equal monthly installments. X executed a deed
stating that X retains ownership over the land despite delivery thereof subject to the full payment of the price. Upon full
payment, will Y become the owner of the land?
ELEMENTS OF A CONTRACT OF SALE
1. Natural – those which are deemed part of the contract even if not stipulated or even if the parties are unaware. Deemed
part of the contract by law. E.g., warranties.
2. Accidental – present only because the parties so stipulated. E.g. obligation to pay interest. E.g., in a contract of sale of
a parcel of land, obligation of the seller to cause the registration of the land in the name of the buyer.
3. Essential – required for validity.
ESSENTIAL ELEMENTS OF A CONTRACT OF SALE
1. Consent of the contracting parties, i.e., the buyer and the seller.
Incapacity: consent may have been given, but the one giving it is incapacitated.
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ATTY NICKO SORIANO, CPA
LAW ON SALES
a. Absolute Incapacity – the party cannot give consent to any and all contract, which may result in the contract being
voidable or void.
Minors and those without capacity to act: may enter into a valid contract of sale of “necessaries” as provided under Art.
1489. Necessaries are those which are indispensable for sustenance, dwelling, clothing and medical attendance.
b. Relative Incapacity – the party is prohibited from entering some specific transactions with some persons and sometimes
over specific things.
Examples of Relative Incapacity:
a. Husband and wife cannot sell property to each other, except:
i. When a separation of property was agreed upon in the marriage settlements; or
ii. When there has been a judicial separation or property
b. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the
mediation of another:
i. The guardian, the property of the person or persons who may be under his guardianship;
ii. Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the
principal has been given;
iii. Executors and administrators, the property of the estate under administration;
iv. 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 intrusted to them; this provision shall
apply to judges and government experts who, in any manner whatsoever, take part in the sale;
v. 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.
vi. Any others specially disqualified by law
Example: Aliens are prohibited by the Constitution from acquiring lands in the Philippines, except by succession or
in case of a former natural born Filipino citizen who has lost his citizenship.
2. Cause – as to each contracting party is the prestation or promise to be performed by the other party. For the buyer, it
is the delivery of the object, while for the seller, it is the payment of the price.
Rules as to PRICE:
a. It must be certain.
i. With reference to another thing certain, or
ii. The determination thereof be left to the judgment of a special person or persons.
1) Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the
parties subsequently agree upon the price.
2) If the third person or persons acted in bad faith or by mistake, the courts may fix the price.
3) Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the
buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the
buyer, as the case may be
b. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that
the parties really intended a donation or some other act or contract.
c. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that
which the thing sold would have:
i. On a definite day, or
ii. In a particular exchange or market, or
iii. When an amount is fixed above or below the price on such day, or in such exchange or market, provided said
amount be certain.
d. The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by
one of the parties is accepted by the other, the sale is perfected.
Where the price cannot be determined in accordance with the preceding rules, or in any other manner, the contract is
inefficacious.
However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable
price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case
3. Object – is the subject matter which may be things or rights.
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ATTY NICKO SORIANO, CPA
LAW ON SALES
Service: unlike in contracts, in general, where “service” may be the object of the contract, in sales, service cannot be a valid
subject since the purpose of a contract of sale is to transfer ownership and no person acquires ownership over service. It,
may, however, be another contract, such as a lease or agency.
Rules as to Objects of Contracts of Sale:
a. It must be licit or within the commerce of men.
b. The vendor must have a right to transfer the ownership thereof at the time it is delivered.
c. It must be determinate. A thing is determinate when:
i. It is particularly designated or
ii. Physical segregated from all other of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of
being made determinate without the necessity of a new or further agreement between the parties.
d. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, even though
i. The seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and
ii. The number, weight or measure of the goods in the mass is undetermined.
By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass.
If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass
and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary i ntent
appears.
ILLUSTRATION: B entered into a contract of sale with S for the purchase of 100 sacks of rice that will come from S’
warehouse. the number of sacks of rice in the warehouse of S is not yet determined. Is the contract of sale valid?
e. It may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by
the seller after the perfection of the contract of sale, in this Title called "future goods."
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or
may not happen.
i.
Emptio rei speratae - sale of future thing; must come into existence otherwise the sale will not be effective; e.g.
wine, milk, butter.
ii. Emptio spei – sale of hope itself; produces effects even if the thing hoped does not come into existence. E.g., lotto
ticket
iii. Vain Hope – the sale of vain hope is void. E.g. lotto ticket that was already drawn.
f.
The sole owner of a thing may sell an undivided interest therein. E.g., X owns a land, he may sell even just one-half or
one-fourth of it.
g. Things subject to a resolutory condition may be the object of the contract of sale, such as one that is the subject to a
right of repurchase.
PERFECTION OF A CONTRACT OF SALE
Consensual Contract: sale, being a consensual contract, is perfected by mere consent as to the object of the contract
and upon the price.
Transfer of ownership: however, happens only after delivery, either actual or constructive, as a general rule. Except if the
parties agreed that ownership will not pass until full payment of the price.
Sale by Auction: is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other
customary manner.
Before perfection:
1. Any bidder may retract his bid; and
2. the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.
Object of a sale by auction: Where goods are put up for sale by auction in lots, each lot is the subject of a separate
contract of sale.
Seller’s right to bid:
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ATTY NICKO SORIANO, CPA
LAW ON SALES
1. General Rule: The seller has no right to bid
2. Requisites for the seller to have the right to bid.
a. The right to bid was expressly reserved;
b. Notice was given to the bidders; AND
c. It is not prohibited by law or stipulation.
Any sale made contradicting the above may be treated as fraudulent by the buyer.
Option Agreement and Contract: A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price, known as option money.
Rules Appliable:
1. A period agreed upon under an Option Agreement by the offerer and the offeree is not binding upon the offeror unless
it is supported by a consideration distinct from the price, which we call the option money.
2. Accordingly, the offerer may withdraw his offer at any time, even before the expiration of the period agreed upon, without
being liable for damages.
3. If there is such a separate consideration, the agreement as to the period is covered by an Option CONTRACT. In which
case, the offerer cannot withdraw the offer without being liable for damages for breach of the option contract.
4. In either case, if there is acceptance by the offeree which was already communicated, withdrawal cannot be validly
made since there is already a perfected contract of sale and there is no “offer” to withdraw anymore, subject to the
Statute of Frauds as to enforceability.
ILLUSTRATION: S offered to sell his land to B for P1M which B accepted and was given 30 days within which to pay the
price. Is there an option agreement/contract?
ILLUSTRATION: S offered to sell his land to B for P1M and gave the latter (B) 30 days to decide whether or not to accept
the offer. Is there an option agreement/contract?
ILLUSTRATION: S offered to sell his land to B for P1M and gave the latter (B) 30 days to decide whether or not to accept
the offer. B gave P5,000 to ensure the 30-day period to decide. Is there an option agreement/contract?
EARNEST MONEY – forms part of the purchase price and is proof of perfection of a contract of sale.
Option Money is a separate consideration to give the offeree a definite period within which to decide whether or not to
accept an offer, there is no perfected contract of sale yet and does not form part of the purchase price.
SALE OF GOODS BY DESCRIPTION OR SAMPLE: the contract may be rescinded if the bulk of the goods delivered
do not correspond with the description or the sample.
SALE OF GOODS BY DESCRIPTION AND SAMPLE: if the contract be by sample as well as 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.
FORM: no specific form is required for the perfection of a contract of sale.
However, the same is still subject to the Statute of Frauds for its enforceability, particularly the following provisions:
1. Those not to be performed within 1 year;
2. Sale of personal property the price not less than (or at least) P500
3. Sale of real property
As such, the above contracts of sale must be in writing or in some memorandum, in order to be enforceable.
INSTALLMENT SALES
RECTO LAW
APPLICATION: The Recto Law applies to a contract of sale of personal property the price of which is payable in
installments.
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ATTY NICKO SORIANO, CPA
LAW ON SALES
The law, however, does not apply to sales “on credit”, only sales in “installment.”
It likewise applies 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.
ALTERNATIVE REMEDIES OF THE SELLER:
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.
The remedies are alternative. As such, if the seller/vendor invoked one, he can no longer invoke any of the two remaining
remedies. Any agreement to the contrary shall be void.
ILLUSTRATION: S sold to B a motorcycle for a price of P100,000, secured by a chattel mortgage on the motorcycle. B is
required to pay a downpayment of P50,000 and the balance is payable on or before December 31, 2020. If B fails to pay
on due date and S foreclosed the mortgage on the motorcycle, but resulted in a deficiency balance of P10,000, can S still
collect the deficiency?
ILLUSTRATION: S sold to B a motorcycle for a price of P100,000, secured by a chattel mortgage on the motorcycle,
payable in 10 equal monthly installments. B failed to pay the first intallment, can S foreclose the mortgage or cancel the
sale?
FORFEITURE OF INSTALLMENTS IN CASE OF CANCELLATION: The 2nd option of cancelling the sale would entail
mutual restitution by the parties.
General Rule: The seller is allowed to retain a reasonable amount of the purchase price already paid as compensation
for the use of the thing (rent), or ALL of the amount paid only if there is a forfeiture clause which entitles him to the
purchase price already paid at the time of cancellation.
Exception: the retention of ALL the purchase price would be unconscionable.
FORECLOSURE OF THE CHATTEL MORTGAGE: The 3rd option entails that the foreclosed mortgage is the mortgage
on the personal property itself, and in case of deficiency of the foreclosure sale proceeds, the seller is NOT entitled to
recover such, since recovery of the deficiency falls under option 1.
However, if what is foreclosed is another security or a mortgage on different property, the prohibition to collect the deficiency
would not apply, since foreclosure of a mortgage of a different thing precisely falls under option 1 also.
ILLUSTRATION: B bought a truck from S worth P2,000,000 payable P100,000 installment, secured by a chattel mortgage
on the truck itself. As additional security, B’s brother, X, executed a real estate mortgage over his own land in favor of S. B
defaulted in the first two installments leaving an unpaid balance of P2,000,000.
1. If S would foreclose the chattel mortgage on the truck, would there be a remedy to collect deficiency if it was sold for
less than the unpaid amount?
2. If S forecloses the real estate mortgage, would there be a remedy to collect deficiency if it was sold for less than the
unpaid amount?
MACEDA LAW
APPLICATION: the Maceda Law, or the Realty Installment Buyer Act (RA No. 6552), applies to a contract of sale of
residential realty on installments, where the buyer is given protection in case of failure to pay installments.
Similar to the Recto Law, the Maceda Law does not apply to sales “on credit”, only ones in installment.
RIGHTS OF THE BUYER UNDER THE MACEDA LAW
1. If installments already paid are less than two years equivalent:
a. Grace Period - pay without interest within 60 days. Note, however, that this right can only be applied once every 5
years.
b. The buyer may sell or assign his interest;
c. Pay the entire balance.
2. After two years’ worth of installment, the buyer will have the following additional rights:
a. In addition to the 60 day grace period, the buyer shall have additional 1 month grace period for every year of
installment payments after the first 2 years installments;
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LAW ON SALES
b. If the seller will exercise his right to rescind the contract, he is required to first give the Cash Surrender Value to
the buyer.
Cash Surrender Value:
i. Minimum of 50% of all payments (including downpayment) plus
ii. 5% after five years (55% after 7 years of payment); and
iii. 5% for every additional year thereafter upto a maximum of 90% (or 14 years of instalment).
ILLUSTRATION: Pricilla purchased a residential condominium unit in Makati City from the Citiland Corporation for a price
of P10 Million, payable P3 Million down and the balance with interest thereon at 14% per annum payable in sixty (60) equal
monthly installments of P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that should the
vendee fail to pay three (3) successive installments, the sale shall be deemed automatically rescinded without the necessity
of judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way of rental for the use
and occupancy of the unit and as liquidated damages. For 46 months, Pricilla paid the monthly installments religiously, but
on the 47th and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due but the vendor
refused to receive the payments tendered by her. The following month, the vendor sent her a notice that it was rescinding
the Deed of Conditional Sale pursuant to the stipulation for automatic rescission, and demanded that she vacate the
premises.
Was the contract of sale validly rescinded?
VOID STIPULATIONS: The following are void stipulations:
1. Stipulation as to interest or damages or penalty during the grace period
2. Forfeiture clause
3. Automatic cancellation or rescission upon default of the buyer
RESCISSION REQUIREMENTS: the rescission will take effect only after 30 days from complying with both:
1. Notice to be given to the buyer as to the intention to rescind
2. Payment of the cash surrender value
ILLUSTRATION: Pricilla purchased a residential condominium unit in Makati City from the Citiland Corporation for a price
of P10 Million, payable P3 Million down and the balance with interest thereon at 14% per annum payable in sixty (60) equal
monthly installments of P198,333.33. They executed a Deed of Conditional Sale in which it is stipulated that should the
vendee fail to pay three (3) successive installments, the sale shall be deemed automatically rescinded without the necessity
of judicial action and all payments made by the vendee shall be forfeited in favor of the vendor by way of rental for the use
and occupancy of the unit and as liquidated damages. For 46 months, Pricilla paid the monthly installments religiously, but
on the 47th and 48th months, she failed to pay. On the 49th month, she tried to pay the installments due but the vendor
refused to receive the payments tendered by her. The following month, the vendor sent her a notice that it was rescinding
the Deed of Conditional Sale pursuant to the stipulation for automatic rescission, and demanded that she vacate the
premises.
CONDOMINIUMS
PD No 957 or the THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE covers the sale of
condominium units, among others.
Rules affecting installment purchases of Condominiums:
1. Non-forfeiture of payments: No installment payment made by a buyer in a subdivision or condominium project for the
lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to
the owner or developer, desists from further payment due to the failure of the owner or developer to develop
the subdivision or condominium project according to the approved plans and within the time limit for complying
with the same.
Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding
delinquency interests, with interest thereon at the legal rate. (Section 23, PD 957)
2. Failure to pay installments: The rights of the buyer in the event of this failure to pay the installments due for reasons
other than the failure of the owner or developer to develop the project shall be governed by RA 6552 (Maceda Law).
OBLIGATIONS OF THE VENDOR
1. To take care of the thing after the contract has been perfected, prior to delivery.
Loss of the thing pending delivery:
a. If the object is entirely lost - the contract shall be without any effect.
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LAW ON SALES
b. If the thing is lost in part only, the buyer may choose between:
i. Withdrawing from the contract; and
ii. Demanding the remaining part, paying its price in proportion to the total sum agreed upon.
c. 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:
i. As avoided; or
ii. 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.
Risk of Loss: General Rule: the thing perishes with the owner, following the principle of res perit domino.
Exceptions:
a. Stipulation
b. Security title - 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 goods are at the buyer's risk from the time of such delivery;
c. Delay in the delivery – whoever causes the delay shall bear the risk of loss.
ILLUSTRATION: On January 1, 2020, B Bookstore sold to Atty. X law books for the latter’s library for a price of P350,000,
where Atty. X will pay P100,000 upon delivery and the balance will be paid on December 31, 2020. Delivery was already
made but it was mentioned in the contract that the ownership over the books does not pass to Atty. X until full payment
of the price. On June 30, 2020 after delivery but before due date of the balance of the purchase price, the office of Atty.
X was destroyed by fire together with the books purchased from B Bookstore. Atty. X now argues that ownership was
retained by B Bookstore, thus following the res perit domino doctrine, it should bear the risk of loss and he (Atty. X) is
no longer liable for the balance. Is Atty. X correct?
Note: the risk of loss is where it is important why there are distinctions in the following:
 Contract of Sale vs. Contract of Agency to Sell
 Sale or Return vs. Sale on Approval/Trial/Satisfaction
SALE OR RETURN: where the goods are delivered to the buyer but the buyer has an option to return the goods instead
of paying the price, the ownership passes to the buyer but he may revest the ownership in the seller by returning or
tendering the goods within the time fixed in the contract, or when no time is fixed, within a reasonable time.
Note that ownership transfers to the buyer upon delivery. As such, the buyer bears the risk of loss once the goods are
delivered.
SALE ON APPROVAL OR ON TRIAL OR ON SATISFACTION: Here, there is delivery of the goods also, but no transfer
of ownership yet. As such, the seller, being the owner, bears the risk of loss.
The ownership passes to the buyer:
a. When he signifies his approval or acceptance to the seller or does any other act adopting the transaction
b. If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection,
then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been
fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
2. Obligation to pay taxes and incidents of the sale, unless otherwise agreed upon;
3. To warrant the thing (see Warranties);
4. To transfer ownership.
Seller need not be the owner for validity of the contract: the seller need not be the owner and the sale is still valid
if he sold the thing in a capacity authorizing him to do so such as a liquidator, executor, administrator, sheriff, or a notary
(in case of pledge).
This is different from a pledge or mortgage which requires the pledger or mortgagor to be the absolute owner of the
thing.
SELLER IS NOT THE OWNER:
General Rule: the buyer acquires no better title to the goods than the seller had
Exceptions: In all of these exceptions, the buyer acquires GOOD TITLE to the object even if the seller is not the owner.
a. Seller is authorized by the owner – such as an agent.
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b. Seller had statutory or judicial authority to sell – such as a guardian, executor, administrator, or court sheriff.
ILLUSTRATION: S sold to B a cellphone which belongs to O (the owner). Is the sale valid?
Can O recover the cellphone?
c.
In cases of estoppel:
i. As to the owner: estoppel in pais - by his conduct or representation, he led the buyer to believe that the seller
had authority to sell.
ii. As to the seller: estoppel by deed – if after the sale, the seller acquired ownership, such ownership automatically
passes to the buyer as to the thing already delivered
ILLUSTRATION: S sold to B a cellphone which belongs to O (the owner of the cellphone and father of S).
 Assuming B, knowing that the cellphone belongs to O, asked the latter if he was really selling it through S, and
O said yes, when in fact there is no such authority, can O still recover the cellphone?
 Assuming B had no knowledge that the cellphone was in fact that of O, bought the same and it was delivered
to him. Later on, O died and S, being the sole heir, became the owner of the cellphone. Can S still recover
the cellphone?
d. Sale of an Apparent Owner: REQUISITES:
i. There is apparent ownership
ii. Buyer in good faith and for value – the buyer had no knowledge of any defect in the seller’s title at the time of
full payment (not only at the time of sale).
iii. There must be a law from which apparent ownership may be had, such as:
1) PD 1529 which provides that those dealing with registered land need not inquire beyond the title, also
known as the mirror principle, unless the buyer is required under the law to exercise the highest degree of
diligence, e.g., banks and public utility companies.
2) Factor’s Act (agency) – so far as third persons are concerned, they only have to rely on the power of
attorney as written, they need not inquire into limitations imposed by the principal to the agent not written.
3) Art. 1518 – for goods covered by negotiable instruments.
ILLUSTRATION: O, the owner of a lot, gave to S, his lawyer, the title to such lot for safekeeping as he (O) was
going abroad. S executed a forged deed of sale and made it appear that O sold to him the lot. Armed with the forged
deed of sale, S was able to secure a title to his name. S then sold to B the lot. When O returned, he saw that B was
already making constructions over the lot and learned that it was sold to B by S. Can O recover the lot from B?
e. Purchase from a Merchant Store, Market or Fair in good faith and for value: the purpose of this exception is
to facilitate commercial transactions so as not to degrade the trust in sales made through such stores.
ILLUSTRATION: X stole the cellphone of O and sold it to S Trading, Inc. in greenhills. B then bought the same
cellphone from S Trading, Inc. O later on saw B in possession of the cellphone. Can O recover the same from B?
Right of buyer to reimbursement: One who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same. If the possessor of a movable lost or which the owner has
been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
ILLUSTRATION: Rita was the owner of a valuable painting which was stolen from her house. Later on, she saw
the same painting in the house of Mario. When inquired, Mario said that he acquired the same from a gallery auction.
Can Rita recover the painting from Mario?
If yes, is Mario entitled to reimbursement?
5. To deliver the determinate or specific thing including the fruits from the moment the obligation to deliver arises
and the accessions and accessories thereof.
Delivery is the mode by which ownership is transferred. It is accomplished by placing the thing in the control and
possession of the vendee.
MODES OF DELIVERY: THINGS
a. Actual Delivery: The actual and physical transfer of the thing to the buyer.
b. Constructive Delivery
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i.
c.
Traditio Longa Manu: literally, long-hand delivery, or by pointing to the thing sold accomplished by mere consent
of the seller, ownership transfers to the buyer, because at the time of sale, the seller cannot transfer possession
to the buyer, e.g., the thing is leased by another.
ii. Consitutum Posessorium: at the time of sale, the seller is in possession and remains in possession in another
concept other than an owner, like that of a lessee, depositary or borrower. E.g., sale lease-back.
iii. Brevi Manu: or short hand delivery. When the buyer is in possession of the thing, in a concept other than that
of an owner, at the time of sale, and remains in possession after sale, now as owner. E.g., a lessee who buys
the thing leased.
iv. Symbolic Delivery: where the seller merely gives the key to a warehouse where the goods are located or in a
sale of car, the delivery of the keys is symbolic delivery.
v. Execution of the Required Formality: by execution of a public instrument. This mode of delivery is available to
both sale of rights and sale of things;
Delivery to a common carrier: when the parties so agreed that the seller will deliver to the common carrier for
ultimate delivery to the buyer. In this case, there is already delivery upon receipt of the common carrier. EXCEPT:
i. Ownership is reserved by the seller – such as if it is deliverable to the seller or his agent.
ii. The seller reserved possession – goods are deliverable to the buyer, but possession of the bill of lading is with
the seller.
iii. A Bill of Exchange is drawn by the seller against the buyer and the latter dishonors the same.
MODE OF DELIVERY: As to rights:
a. By execution of an instrument;
b. Quasi Traditio:
i. When the title of ownership is placed in the possession of the vendee (e.g., certificates of stock for sale of
shares of stock);
ii. By the use of the vendee of his rights with the vendor’s consent. (e.g., the vendee of shares where the same
has not been transferred in his name yet, with the consent of the owner, through a proxy, he may exercise his
rights as a stockholder)
TIME OF DELIVERY:
a. Stipulation of the parties;
b. If no stipulation, within a reasonable time.
PLACE OF DELIVERY:
a. Stipulation of the parties;
b. If no stipulation, by usage of trade;
c. If no stipulation nor usage of trade, the seller’s place of business;
d. If none, the seller’s residence.
e. However, 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.
SELLER IS NOT BOUND TO DELIVER:
a. If it is a pure obligation and the buyer does not pay; or
b. If there is a period agreed upon, the obligation to deliver shall be demandable at that time. Except, if the buyer loses
the right to make use of the period under Art. 1198
QUANTITY TO BE DELIVERED:
DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF PERSONAL PROPERTY:
1. Delivery is less than quantity agreed upon, the buyer may:
a. Reject the delivery; or
b. Accept or retain the goods delivered and pay:
(1) The full contract price if he knew that the seller is not going to perform the contract in full; or
(2) Pay the fair value of the goods delivered if without such knowledge.
ILLUSTRATION: B purchased from S 1,000 sacks of rice at a price of P1,000/sack. At the time of delivery, S
delivered only 900 sacks. The sacks of rice has a fair market value of P900/sack. What are the remedies of B?
2. Delivery is greater than quantity agreed upon, the buyer may:
a. Accept the goods in the quantity agreed upon and reject the rest; or
b. Accept the whole of the goods delivered and pay for them at the contract rate.
ILLUSTRATION: B purchased from S 1,000 sacks of rice at a price of P1,000/sack. At the time of delivery, S
delivered only 900 sacks. The sacks of rice has a fair market value of P900/sack. The seller delivered 1,100 sacks
of rice. What are the remedies of B?
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3. Delivery of goods mixed with goods of different description not included in the contract, the buyer may accept the
goods which are in accordance with the contract and reject the rest.
4. In no. 2 and 3, if the subject matter is indivisible, the buyer may reject the whole of the goods.
ILLUSTRATION: B purchased a specific cow from B with a weight of 80kgs., at the time of delivery, the cow’s
weight was 100kgs. In this case, the buyer will have the additional option to reject the entire delivery. The same will
be true if the weight of the cow was 70kgs only, since the subject matter is indivisible.
DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF REAL ESTATE
A. AT A RATE OF A CERTAIN PRICE FOR A UNIT OF MEASURE OR NUMBER:
1. Delivery is LESS than that agreed upon, the buyer may:
a. Ask for specific performance and demand delivery of the shortage;
b. Ask for the proportionate reduction of the price (accion quanti minoris)
c. Rescission, in case:
(1) The area lacking is at least 1/10 of that agreed upon; or
(2) The buyer would not have entered into the contract, had he known of its smaller area.
The same rules apply if any part of the immovable is not of the QUALITY specified in the contract (except that
rescission is an available remedy in the event that the inferior value is MORE THAN 1/10 of the price agreed upon)
even if the area delivered be that agreed upon.
ILLUSTRATION: S and B entered into a contract of sale for 1,000 sqm of land at the rate of P1,000/sqm. If it turns
out that the actual area of the land is only 950 sqm. What are the remedies of B?
2. If the delivery is in excess of the area agreed upon, the buyer may:
a. Accept the area agreed upon and reject the rest; or
b. Accept the whole and pay at the contract rate.
ILLUSTRATION: S and B entered into a contract of sale for 1,000 sqm of land at the rate of P1,000/sqm. If it turns
out that the actual area of the land is only 1,100 sqm. What are the remedies of B?
The above rules likewise applies to judicial sales.
B. SALE OF REAL ESTATE FOR A LUMP SUM PRICE: whatever is the actual area of the land, the buyer is still
required to pay the price agreed upon and the seller is bound to deliver the entire area.
If the actual area is bigger than the agreed upon area, and the seller should not deliver the whole actual area, the
buyer may:
a. Reduce the price to be paid, in proportion to what is lacking in the area or number; or
b. Rescind the contract for failure of the vendor to deliver what has been stipulated.
ILLUSTRATION: S and B entered into a contract of sale concerning the corner lot of 5th and 27th streets in a
particular city. They agreed to a price of P1,000,000 for an estimated area of the land of 1,000sqm, more or less.
This is a lump sum sale. And the entire P1M is the price for the land, regardless of the agreed area.
1. If it turns out that the actual area is 900 sqm. only, what are the obligations of S and B?
2. If it turns out that the actual area is 1,100sqm., what are the obligations of S and B?
3. If the seller only delivered 1,000sqm, where the actual area is 1,100 sqm., what are the remedies of B?
RIGHTS OF AN UNPAID SELLER
Unpaid Seller: the seller of the goods is deemed to be an unpaid seller when:
1. The whole of the price has not been paid or tendered;
2. A bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which
it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise
Rights of an Unpaid Seller: notwithstanding that the ownership of the goods may have passed to the buyer, the unpaid
seller of goods has the following rights:
1. Possessory lien – right to retain the goods or right to withhold delivery of the goods.
Grounds:
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a. Where the goods have been sold without any stipulation as to credit;
b. Where the goods have been sold on credit, but the term of credit has expired;
c. Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the
buyer.
Partial Lien: Where an unpaid seller has 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.
Loss of possessor lien: happens:
a. When the seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without
reserving the ownership in the goods or the right to the possession thereof;
b. When the buyer or his agent lawfully obtains possession of the goods;
c. By waiver.
The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained judgment
or decree for the price of the goods.
Sale of the thing by the buyer to third persons:
a. As a rule, the seller does not lose his right to possessory lien or right of stoppage in transitu.
b. Exceptions:
i. If the seller assented to the transfer;
ii. If the goods are covered by a negotiable document of title and it is sold to a purchaser for value in good faith to
whom such document has been negotiated.
2. Stoppage in transitu – right to stop the goods while in transit.
Requisites:
a. The seller already parted with the possession of the goods;
b. The goods are already in transit;
c. The buyer is insolvent.
Goods are in transit:
a. 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;
b. 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:
a. If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination;
b. If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer
or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or
his agent; and it is immaterial that further destination for the goods may have been indicated by the buyer;
c. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf.
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.
Right of stoppage in transitu is exercised:
a. By taking actual possession of the goods; or
b. By giving notice of his claim to the carrier or other bailee who is in possession of the goods, as a consequence of
which:
i. The carrier or bailee then must redeliver the goods to, or according to the directions of, the seller.
ii. The expenses of such delivery must be borne by the seller.
iii. 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 not delivering the goods to the seller unless such document is
first surrendered for cancellation.
3. Resale
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Grounds:
a. The goods are perishable in nature
b. The seller expressly reserves the right of resale in case the buyer should make default, or
c. Where the buyer has been in default in the payment of the price for an unreasonable time
To exercise such right: the unpaid seller must have a right of lien or stoppage in transitu.
In case the resale proceeds are:
 LESS than the price in the original sale, the seller can recover from the original buyer the difference as damages
occasioned by the breach of contract of sale;
 MORE than the price in the original sale, the seller is entitled to the profit made in such resale.
Good Title: the buyer in the resale acquires a good title as against the original buyer.
Notice: except in case of resale made because the goods are perishable, notice shall be given to the original buyer
about:
a. The intention to resell – which is relevant to prove that the buyer has been in default for an unreasonable length of
time.
b. The date, time and place of resale – to be considered doing the resale in good faith and entitle the seller to any
deficiency.
Note, however, that failure to give notice does not affect the validity of the resale.
Participation of the seller in the resale: is prohibited from being the buyer in the resale, either directly or indirectly,
whether the resale be public or private.
4. Rescission
Grounds:
a. When the right to rescind is expressly reserved by the seller;
b. When the buyer has been in default in the payment of the price for an unreasonable time.
To exercise such right: the unpaid seller must have a right of lien or stoppage in transitu.
Recovery of damages: the seller is not liable to the buyer upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of contract.
Notice: is not necessary for the validity of rescission. But the same shall be relevant in determining whether the buyer
has been in default for an unreasonable length of time.
Mutually Exclusive Rights: the right of possessory lien and stoppage in transitu are mutually exclusive in the sense that
both rights cannot exist together at the same time. This is because the right of possessory lien presupposes that the seller
retains possession, while in stoppage in transitu, the seller should have parted with the possession already.
Note, however, that for the right of resale and right to rescind, it is necessary that the seller has either possessory lien or
the right of stoppage in transitu.
Insolvency of the buyer: is a requisite only for the right of stoppage in transitu, but not in all other rights. It is, however, a
ground to exercise possessory lien, but still, not a requisite.
RULES ON DOUBLE SALE
MOVABLE PROPERTY: if the same movable is sold by the vendor to two or more vendees, the one who has a better right
over the thing shall be the first one to take possession in good faith.
ILLUSTRATION: S sold his car to B1 on June 1, 2020. Later on, he sold the same car to B2, who had no knowledge of the
first sale, on June 15, 2020, where B2 immediately took possession. Who has a better right between B1 and B2?
IMMOVABLE PROPERTY: if the same immovable property is sold by the vendor to two or more vendees, the one who has
a better right over the thing shall be:
1. The one to first register in good faith; if none,
2. The one to first take possession in good faith; if none still,
3. The one with the oldest title.
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“Good faith” pertains to the time of registration or possession not the time of perfection of sale: as such, if at the
time of the second sale, the buyer had no knowledge of the prior sale, but learns of it prior to registration or possession (if
there is no registrant), he will NOT be considered a registrant/possessor in good faith.
ILLUSTRATION: On June 30, 2020, Jesus sold a specific parcel of registered land to Jaime. On July 15, 2020, he sold the
same land to Jose.
1. If Jose registers the second sale first, without knowledge of the existence of the first sale, who will have a better right?
2. If at the time of sale to Jose, he did not know of the existence of the sale to Jaime, but learns of it before registering,
who will have a better right?
3. If no one registered their sale, and Jose first took possession without knowledge of the existence of the first sale, who
has a better right?
4. If there was no registrant nor any possessor in good faith, who will have a better right?
ILLUSTRATION: On June 30, 2020, Jesus sold a specific parcel of registered land to Jaime. On July 15, 2020, he sold the
same land to Jose. On July 17, 2020, Jaime knew that Jesus sold again the same parcel of land to Jose. Jaime then
immediately went to the Register of Deeds to have his sale registered. Who has a better right?
BOTH SALES MUST BE VALID: In order for the Rules on Double Sale to apply, it presupposes that both the sale are valid
or at least voidable or rescissible, prior to annulment or rescission.
ILLUSTRATION: Rica filed a petition for annulment of his marriage with Richard. They were under the regime of Absolute
Community of Property. Richard hired Atty. Cruz who was paid through conveyance of a parcel of land which he recently
purchased with his lotto winnings. The transfer documents were duly signed and Atty .Cruz took possession by fencing the
entire parameter. Richard then offered the same parcel of land to spouses Garcia. Immediately after the sale, the Sps.
Garcia commenced the construction on the land which was objected to by Atty. Cruz, who claims he has a better right over
the property. Is Atty. Cruz correct?
CONDITIONS AND WARRANTIES
CONDITIONS: where the obligation of either party to a contract of sale is subject to any condition which is not performed,
such party may:
1. Refuse to proceed with the contract; or
2. Waive the performance of the condition; or
3. Treat the non-performance as a breach of warranty and ask for damages.
ILLUSTRATION: S Company sold to B Company a specific parcel of land worth P2M. B Company is required to give a
downpayment of P1M, and the balance is to be paid upon removal of the informal settlers in the said land. In this case,
1. The removal of the informal settlers is the example of a condition which is placed upon the performance of the buyer’s
obligation to pay the balance of the purchase price.
2. In the event that the condition is not fulfilled, the buyer will have three options as stated above.
WARRANTIES: Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural
tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchase the thing
relying thereon.
Opinion of the seller: is not understood to be a warranty unless the seller made such affirmation or statement as an expert
and it was relied upon by the buyer.
Express Warranty: is an affirmation of fact or promise by the seller relating to the thing which would induce the buyer to
buy the same. However, those relating to opinions of the seller are not considered warranties unless they are made by
experts and the buyer relies upon them.
Warranties under the Consumer Act (RA No. 7394)
Applicability: Consumer products are goods which are primarily for personal, family, household or agricultural purposes
which shall include but not limited to goods, drugs, cosmetics and devices;
Requirements: Any seller or manufacturer who gives an express warranty for consumer products is required to do the
following:
1. Set the terms of warranty in clear and readily understandable language and clearly identify himself as the warrantor;
2. Identify the party to whom the warranty is extended;
3. State the products or parts covered;
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4. State what the warrantor will do in the event of a defect, malfunction or failure to conform to the written warranty and at
whose expense;
5. State what the consumer must do to avail of the warranty rights;
6. Stipulate the warranty period.
Period of Warranty – It is also mandated that all written warranties or guarantees issued by a manufacturer, producer, or
importer shall be operative from the moment of sale. The period of warranty shall be:
1. The parties 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 durations;
2. Any other implied warranty shall endure not less than 60 days nor more than one year following the sale of new
consumer products.
Implied Warranties:
1. Warranty against eviction – that the seller has a right to sell the thing at the time when ownership is to pass, and that
the buyer shall from that time have and enjoy legal and peaceful possession of the thing;
Eviction; requisites:
a. The vendee is deprived of the whole or of a part of the thing purchased;
b. By virtue of a final judgment
c. The vendor is summoned in the suit for eviction at the instance of the vendee.
d. Such judgment is based on:
i. A right prior to the sale or
ii. An act imputable to the vendor
Rules Applicable:
a. The warranty applies even if there is no agreement to such effect;
b. The vendee need not appeal from the decision in order that the vendor may become liable for eviction.
c. When the adverse possession had been commenced before the sale but the prescriptive period is completed after
the transfer, the vendor shall not be liable for eviction.
d. If the property is sold for non-payment of taxes due and not made known to the vendee before the sale, the vendor
is liable for eviction.
e. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment.
f. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the
vendor be made a co-defendant.
Extent of Liability: First, it will depend whether the seller is in bad faith:
a. If the seller is in bad faith, he shall be liable for:
i. Value of the thing sold at the time of eviction;
ii. Income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
iii. Costs of the suit which caused the eviction, and, in a proper case, those of the suit bought against the vendor
for the warranty;
iv. Expenses of the contract, if the vendee has paid them;
v. Damages and interests and ornamental expenses.
b. If the seller is in good faith, the liability of the vendor shall depend whether there is a waiver executed by the buyer:
i. If there is no waiver, the seller is liable for VICE above except Damages.
ii. If there is a waiver, the liability of the vendor shall depend whether the buyer is aware of the risk of eviction:
1) Consciente – the buyer is not aware of the risk, or without knowledge of the defect in the title of the seller:
seller is still liable but only for the VALUE of the thing at the time of eviction;
2) Intencionada – the buyer was aware of the risk of eviction or of the defect in the title of the seller, the seller
is no longer liable for anything.
Partial Loss: should the vendee lose only a part of the thing sold but the same is of such importance, in relation to the
whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the
obligation to return the thing without other encumbrances that those which it had when he acquired it, instead of enforcing
the vendor’s liability for eviction.
Two or more things sold: the same rules as to partial loss shall apply:
a. If they have been jointly sold for a lumpsum; or
b. Even if they were sold for a separate price for each of them if it should appear that the vendee would not have
purchased one without the other.
2. Warranty against hidden defects or of quality - the thing shall be free from any hidden faults or defects.
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Hidden Defects: it would render the thing unfit for its intended use; or diminish its fitness for such use to such extent
that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it.
Vendor not liable: in case:
a. The defects are patent or those which may be visible; or
b. Even if not visible, the vendee who is an expert, by reason of his trade or profession, should have known.
Warranty of Fitness of Goods: there is an implied warranty that the goods shall be reasonably fit for such purpose;
a. The buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are
acquired, and
b. It appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not),
In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its
fitness for any particular purpose, unless there is a stipulation to the contrary.
Warranty of Merchantable Quality: there is an implied warranty that the goods shall be of merchantable quality
a. Where the goods are brought by description
b. From a seller who deals in goods of that description (whether he be the grower or manufacturer or not),
In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an 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.
Other rules on warranty against hidden defects or of quality:
a. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not
aware thereof, unless there is contrary stipulation.
b. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage
of trade.
Remedies of the vendee:
a. Withdraw from the contract plus damages;
b. Accion quanti minoris or demand a proportionate reduction of the price plus damages.
Loss of the thing with hidden defect; liability of the seller:
a. If the cause was the defect itself: the seller shall be liable for:
i. Price
ii. Expenses of the contract
iii. Interest (if in good faith)
iv. Damages (if in bad faith)
b. If the cause of the loss is a fortuitous event or through the fault of the vendee, the seller shall be liable to refund the
price less the value at the time of loss, plus damages (if he was aware).
Judicial sales: the above rules likewise apply to judicial sales, except the judgment detor shall not be liable for damages.
Prescriptive period for the remedies: is 6 months from delivery.
REDHIBITORY DEFECTS IN ANIMALS
Redhibitory Defect is the hidden defect on animals that, even in case a professional inspection has been made, should
be of such nature that expert knowledge is not sufficient to discover it.
But if the veterinarian, through ignorance or bad faith shall fail to discover or disclose it, he shall be liable for damages.
Sale of more than 1 animal: General Rule: The redhibitory defect of one shall only give rise to its redhibition, and not of
the others; Except: if the vendee would not have purchased the sound animal or animals without the defective one, which
is 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.
No warranty: There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock
sold as condemned.
Void sale of animals:
a. The sale of animals suffering from contagious diseases shall be void.
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b. If the use or service for which they are acquired has been stated in the contract, and they are found to be unfit
therefor.
Remedies and Prescriptive Period: Remedies of the vendee in case of sale of animals with redhibitory defects are similar
to the remedies for breach of warranty against hidden defects; but he must make use thereof within the same period
which has been fixed for the exercise of the redhibitory action or 40 days.
Other Rules:
a. 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.
b. 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.
c. Sale of large cattle is governed by special laws.
3. Warranty against non-apparent encumbrances: an encumbrance (or an easement or servitude) is a burden
imposed upon an immovable for the benefit of another immovable belonging to a different owner. It is non-apparent,
when there are no external indications of their existence.
The warranty against non-apparent encumbrances arises when the same is:
a. Not mentioned in the agreement; or
b. Not recorded in the Registry of Property (now Registry of Deeds).
In which case, the buyer has the following remedies, within 1 year, counted from:
a. Ask for the rescission of the contract – from execution of the deed;
b. Ask for damages – from discovery.
Not applicable to: the implied warranties are not applicable to a sheriff, auctioneer, mortgagee, pledgee or other person
professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable
interest.
OBLIGATIONS OF THE VENDEE:
1. To pay the price
a. At the time and place stipulated; or if none was stipulated, the payment must be made at the time and place of
the delivery of the thing sold.
b. The vendee shall be liable for interest for the period between the delivery of the thing and the payment of the price
in the following cases:
i. Should it have been so stipulated;
ii. Should the thing sold and delivered produce fruits or income;
iii. Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.
Suspension of payments: if the vendee is disturbed in the possession or 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:
i. The seller gives security for the return of the price in a proper case, or
ii. It has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment.
iii. There was only a mere act of trespass
Vendor’s Remedy of Rescission: The vendor may immediately sue for rescission if:
i. The vendee has not yet paid after delivery is made
ii. The subject matter is immovable property
iii. There is reasonable fear of loss of the property sold and its price. (Art. 1591)
Note, however, that Art. 1191 (on reciprocal obligations) still applies, where rescission can be had even without
reasonable fear of loss if the vendee fails to pay upon delivery.
However still, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract may be had, 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. To accept delivery
Delivery by installments: The buyer is not bound to accept delivery by installments, unless otherwise agreed upon.
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If it was agreed that delivery be done in installments and payments separately made, and
a. the seller makes defective deliveries in respect of one or more instalments, or
b. the buyer neglects or refuses without just cause to take delivery of or pay for one or more instalments,
It depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract
is:
a. So material as to justify the injured party in refusing to proceed further and suing for damages for breach of the
entire contract, or
b. Severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken
Deemed Acceptance: the buyer is deemed to have accepted the delivery if:
a. He intimates to the seller that he has accepted the thing;
b. He does any act which is inconsistent with the ownership of the seller;
c. After the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.
Buyer’s obligation to notify the seller of breach of promise or warranty: After delivery is made, as a general rule,
the seller is not discharged of liability for damages or of breach of warranty.
EXCEPT:
a. There is an express or implied agreement to the contrary; or
b. The buyer fails to give notice to the seller of the breach within a reasonable time after the buyer knows, or ought
to know of such breach.
Notify the seller in case of refusal: 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.
Right to Examine:
a. Delivered goods 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.
b. Unless otherwise agreed, the seller is bound, on request, to afford the buyer a reasonable opportunity of
examining the goods for the purpose of ascertaining whether they are in conformity with the contract
c. Where goods are delivered to a carrier by the seller, upon the terms that the goods shall not be delivered by the
carrier to the buyer until he has paid the price, 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.
Vendor’s Remedy of Rescission is an available remedy to the seller with respect to movable property, if the vendee
upon the expiration of the period fixed for the delivery of the thing :
a. Should not have appeared to receive it, or,
b. Having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated
for its payment.
EXTINGUISHMENT OF A CONTRACT OF SALE:
Sales are extinguished by the same causes as all other obligations, and by conventional or legal redemption.
CONVENTIONAL REDEMPTION
CONVENTIONAL REDEMPTION: otherwise known as “right of repurchase” shall take place when the vendor reserves
the right to repurchase the thing sold, with the obligation to return the price, expenses related thereto and usefule and
necessary expenses, and other stipulations which may have been agreed upon.
The sale, with a right of repurchase, is also known as pacto de retro sale.
Ownership: transfers to the vendee-a-retro upon delivery. However, this ownership is not absolute but only conditional.
This is because the vendor-a-retro may be able to exercise the right to repurchase and the ownership of the buyer will be
terminated. Thus, it can be said that the ownership of the vendee-a-retro is subject to a resolutory condition.
Amount to be paid at the time the right is exercised:
1. The purchase price;
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2. The expenses of the contract, and any other legitimate payments made by reason of the sale; and
3. Useful and necessary expenses (e.g., fencing of the land)
Fruits:
At the time of
sale
There
are
visible
or
growing fruits
No fruits
At the time of
redemption
There
were
fruits as well
Some exist
Effect
If purchaser paid for the fruits existing at the time of sale, he shall be entitled to
reimbursement or pro-rating of the fruits existing at the time of redemption.
If no indemnity was paid by the purchaser, there is no such liability for reimbursement
or pro-rating.
The fruits shall be prorated between the redemptioner (Seller-a-retro) 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.
Equitable Mortgage: a sale with a right of repurchase (or even a contract of absolute sale) is presumed to be an equitable
mortgage in 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;
3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or
granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. 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.
The remedy would be to ask for the reformation of the instrument purporting to be a contract of sale with right of repurchase
or a contract of absolute sale.
In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.
Period to exercise right of repurchase:
1. That which was agreed upon which cannot exceed 10 years;
2. If no agreement as to the period, it shall be four years from the date of the contract.
3. The vendor may still exercise the right to repurchase within thirty days 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.
ILLUSTRATION: On Jan. 1, 2020, S sold to B with a right of repurchase a car, giving S 5 years to exercise such right or
until Jan. 1, 2025. On Jan. 1, 2024, S sued for reformation of instrument, claiming that the transaction is really one of an
equitable mortgage. The court rendered its decision on Jan. 1, 2026 which he received on the same day. Can S still redeem
the car?
No Redemption/Repurchase was made:
1. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to pay
the required amounts shall not be recorded in the Registry of Property without a judicial order, after the vendor has
been duly heard.
2. In case of personal property, the consolidation of ownership is by operation of law.
By consolidation of ownership, it means that the ownership of the vendee becomes absolute and the resolutory condition is
removed.
Vendor’s Right of Repurchase:
1. 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.
2. The vendee is subrogated to the vendor's rights and actions.
3. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have
exhausted the property of the vendor.
Multiple Parties
1. SALE OF UNDIVIDED IMMOVABLE – vendee eventually acquires the whole; may compel the vendor to redeem the
whole property.
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ILLUSTRATION: A and B are co-owners of a land. A sold his share to X with a right to repurchase. B eventually sold
his share to X too. X can compel A to redeem the entire lot.
2. SEVERAL PERSONS JOINTLY AND IN THE SAME CONTRACT: sell an undivided immovable with a right of
repurchase:
a. SELLERS – can only redeem their share
b. BUYER – can compel redemption of the entire property; cannot be compelled to agree to a partial redemption
ILLUSTRATION: A and B, co-owners, sold their respective shares in the same Deed of Sale to X with a right of
repurchase. In this case, A can only redeem his share, but X cannot be compelled to a partial redemption; he can
require B to also redeem. If B does not want to, A cannot validly exercise his right of redemption for his share alone.
Same rule applies to CO-HEIRS (A sold his land to B with a right of repurchase; A1 and A2 are the heirs of A. If A dies,
same rule above applies to A1 and A2 as if they are A and B in the above illustration.)
If VENDEE has multiple heirs – the action for redemption should be to each for his own share.
3. CO-OWNERS SOLD SEPARATELY – each can exercise his own right of redemption and cannot be compelled to
redeem the whole property.
ILLUSTRATION: A and B are co-owners of a land, they sold in separate deeds of sale with a right of repurchase they
respective shares in different instances, to X. Here, A or B can exercise their respective rights of redemption alone and
cannot be compelled to redeem jointly.
LEGAL REDEMPTION
LEGAL REDEMPTION: 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.
The Right of Legal Redemption is available to:
1. Co-owners – a co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners
or of any of them, are sold to a third person.
Subject property: may be movable or immovable property.
Amount to be paid for redemption: is the purchase price, unless the price of alienation is grossly excessive, in which
case, the redemptioner shall pay only a reasonable one.
Multiple redemptioners: should two or more co-owners desire to exercise the right of redemption, they may only do so
in proportion to the share they may respectively have in the thing owned in common
ILLUSTRATION: A, B and C inherited, in equal right, the land of their father X. The land has not been partitioned yet.
C sold his share to Z at the time the entire land had a fair market value of P1,500,000. In this case,
1. Can A/B exercise the right of redemption?
2. If C sold his 1/3 share to Z for P500,000, how much will the redemptioner(s) be required to pay?
3. If C sold his 1/3 share to Z for P2,000,000, how much will the redemptioner(s) be required to pay?
4. If A and B want to exercise the right of redemption, who shall be allowed to do so?
2. Owners of adjoining lands – have the right of redemption in case of transfers of land.
Rural Land; Requisites:
a. The subject is rural land;
b. The land does not exceed one hectare;
c. The redemptioner is an owner of a land adjoining the subject rural land;
d. The adjacent lands is not separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit
of other estates; and
e. The grantee does not own any rural land;
Multiple redemptioners: in case two or more adjoining owners desire to exercise the right of redemption at the same
time:
a. The owner of the adjoining land of smaller area shall be preferred; and
b. Should both lands have the same area, the one who first requested redemption.
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ILLUSTRATION: A sold his rural land which does not exceed 1 hectare to X. A’s land is bound in the north by B’s land,
to the west by E’s land, to the south by D’s land and the east by a river, across the river is C’s land, as follows:
B
B
R
O
O
K
E
A
F
D
C
In this case,
1. Who can exercise the legal right of redemption by an adjacent/adjoining rural land owner?
2. If all of them wishes to exercise their right of redemption, who shall be preferred?
3. Assuming B and D’s lot are of the same area and both of them wishes to exercise the right of redemption, who shall
be preferred?
4. Assuming A is merely a co-owner with Z of the land, then Z will have preference over all the adjoining/adjacent land
owners.
If there are co-owners: the right of redemption of the co-owners excludes that of adjoining owners. Or in other words,
the right of redemption of co-owners is superior to the adjacent land owners.
Redemption and Pre-emption of Urban Land; Requisites:
a. The subject is urban land;
b. The area of the land is so small and so situated that a major portion thereof cannot be used for any practical purpose
within a reasonable time, having been bought merely for speculation;
c. The one exercising the right of redemption or pre-emption is an adjoining land owner.
When redemption, when pre-emption:
a. Pre-emption is the right exercised by the adjoining land owner if the sale is NOT YET perfected;
b. Redemption is the right exercised if the sale is already perfected.
Multiple persons exercising the right of redemption/pre-emption: the one whose intended use is best justified shall be
preferred.
PERIOD TO EXERCISE LEGAL RIGHT OF REDEMPTION: 30 days from NOTICE in writing by the prospective vendor, or
by the vendor. 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 written notice thereof to all possible redemptioners.
ILLUSTRATION: Aida and Lorna are co-owners of an undivided land. On November 30, 2015, Aida sold her share to Fe.
Lorna discovered the sale on January 15, 2020 while she was settling the real property tax of the land. Lorna still exercise
the right of redemption?
To summarize the differences:
Co-owners
Adjacent rural land
owners
Adjacent urban land
owners
Subject matter
Real or personal property
Rural land – complying with
the above requisites
Urban land – complying with
the above requisites
Amount to be paid for redemption
purchase price
unless grossly excessive, in which
case, only a reasonable one.
Purchase price
Purchase price
Multiple Redemptioners
All, pro-rata
1. Smaller lot area
2. if same area, first
One whose use is
justified
--- END OF HANDOUTS ---
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