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Article 1582. Primary Obligations of the Vendee:
a. To accept the delivery of the thing
b. To pay the purchase price simultaneously upon the delivery of the thing unless a period
or term has been agreed upon.
EXCEPTION TO SIMULTANEITY OF ACTS: if parties agreed, such as in sale by
instalments.
Payment shall be made at the stipulated time and place of delivery. If there is no stipulation
at the time and place of delivery of the thing.
*** The failure of the vendee to pay the price after delivery if ownership had been transferred, does
not cause the ownership to revert back to the seller until and unless the bilateral contract of sale is
first rescinded. [Chua Hoi vs. Kapunan]
Article 1583. Rules in case of Contract of Sale of goods to be delivered in stated instalments.
Two instances contemplated:
a. Seller makes defective deliveries in one or more instalments—Buyer may reject the
defective portion and accept the good ones
b. Buyer refuses w/o just cause to take delivery or pay one or more instalments—
determine whether breach is material to warrant refusal to proceed with the entire contract of sale.
When the breach is severable the injured party can seek damages or compensation but not to
rescind the whole contract.
Article 1584. Buyer’s Right to examine goods.
a. Delivery w/o previous examination: The buyer is not deemed to have accepted the same unless
he had a reasonable opportunity of examining them for the purpose of finding out whether they
conform with the specifications agreed upon.
b. Tender of Delivery by the seller: If seller tenders delivery, he should give the buyer if the latter
requested, the reasonable opportunity of examining the goods to determine whether they conform
with the contract.
When right of examination not allowed?
a. If there is an express stipulation to the contrary
b. When the goods are deliveres “collect on delivery”, the buyer cannot examine the goods
unless he pays first the price. Exception: He need not pay the price if there is a contrary agreement
or the examination is permitted by usage of trade at the place of delivery.
Article 1585. Signs or Evidence of Acceptance by the buyer of Goods delivered to him. (CPR)
a. When he communicates with the seller expressly manifesting his acceptance thereof.
b. When he performs an act in relation to the goods inconsistent with the ownership of the
seller. Examples: (a) continuous possession and use of goods (b) reselling the goods (c) mortgaging
the goods
c. When after the lapse of a reasonable time following the delivery, he retains the goods
w/o complaining to the seller or w/o intimating that he has rejected them.
Article 1586. Acceptance of Goods. Mere Acceptance does not necessarily discharge the seller
from liability for the breach of any promise or warranty. However to make the seller liable the buyer
must notify the seller w/in a reasonable time about the breach of promise or warranty.
Purpose of Notice: To insulate the seller from belated claims of defects and to allow him to
make urgent investigation on the validity of claims.
Article 1587. Effects of Justifiable refusal to accept delivery by the buyer
1. Buyer has no duty to return the goods to the seller but must notify the seller of his refusal
to accept the goods. (Risk of Loss here is on the seller)
2. Buyer may voluntarily constitute himself as depositary of the goods, but he will be liable
for damages if he does not fulfil the duties of a depositary as required by law. (Risk of loss is on the
buyer)
Article 1588. Effect of Unjustifiable Refusal to accept goods by the buyer: Title or ownership
passes to him from the time goods were placed at his disposal.
Exceptions: a. If there is contrary agreement
b. If the seller reserves ownership as security for payment of the price [1503 & 1523]
Article 1589. When vendee is bound to pay interest (period b/w date of delivery and date of
payment) after delivery:
a. if the parties stipulated
b. if the thing sold and delivered produces fruits or income
c. if the vendee is in default, from the time demand is made upon him either juidicially or
extra-judicially.
Article 1590. When can the vendee suspend payment of the price (total or remaining)?
1. If he is disturbed in his possession or ownership of the thing brought
2. If he has a well-grounded fear that his possession or ownership would be disturbed by a
vindicatory action or foreclosure of mortgage.
Length of suspension: While the danger or disturbance exists.
Situations where vendee cannot suspend payment despite presence of disturbance (SSS-TP)
1.
When the vendor has given security for the return of the price
2.
When the parties have stipulated
3.
When the vendor has succeeded in eliminating the danger or disturbance
4.
If disturbance is mere act of trespass
5.
If vendee has fully paid the price
**Other causes for suspension: non-compliance by vendor of certain conditions; warranty
of eviction
Article 1591. Immediate rescission in sale of immovables, if the vendor has reasonable ground
to fear the loss of the immovable.
** Vendor however has the alternative of compelling specific performance if the ground to
fear loss does not exist.
Article 1592. Exception to the general rule on rescission in case of sale of immovables.
General Rule on Rescission: The court may fix the period of payment when there
is just cause. Exception: Court is not allowed to grant a new period. Once there is a judicial demand
by notarial act received by the vendee, the court may not grant him a new term. The reason is that
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the vendee already enjoyed the advantage of paying beyond the time originally fixed in the contract,
during the time when no demand for rescission either judicially or extra-judicially has taken place.
*Art. 1592 Not applicable in:
1. Sales by instalments where parties have laid down the procedure to be followed in the
event the vendee failed to fulfill his obligation
2. A mere promise to sell where the title remains with the vendor until full payment of the
price.
Article 1593. Automatic Rescission of sale of movables. Conditions for applicability:
1. if the vendee upon the expiration of the period fixed for the delivery of the thing
purchased, refused to receive it w/o justifiable cause
2. if he failed to pay the price unless granted a longer period w/in w/c to pay.
Reason why judicial or notarial act not required: Personal things do not generally keep a stable price
in the market, any delay in their disposal may prejudice the vendor.
Actions for breach of contract of sale of goods
Article 1594. Actions available to vendor when there is breach of contract of sale on the part of
the vendee: (PDR)
1. Action for payment of the price of the goods [1595]
2. Action for damages due to wrongful neglect and refusal to accept and pay for the goods [1596]
3. Action for rescission if buyer has repudiated the contract or has manifested his inability to perform
his obligation [1597]
Actions available to the vendee, in case of breach by the vendor (SDR)
1. Action for specific performance in case of failure of the vendor to deliver the goods [1598]
2. Action for damages for breach of warranty but accepting the goods [1599]
3. Action for rescission for breach of warranty where the vendee may validly refuse acceptance of
the goods, or even if the goods had already been received, he may return them [1599 par. 4]
Article 1595. Action for collection of price, available in the following cases: (OPR)
1. When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses
to pay for the price according to the terms of the contract
2. When the price is payable irrespective of delivery or transfer of title, on a certain day and the
buyer wrongfully neglects or refuses to pay such price.
Defense of Buyer: He may establish the fact that the seller has at anytime before judgment,
manifested his inability not to comply with the contract
3. When the goods cannot readily be resold for a reasonable price and the buyer refuses to receive
the goods when offered for delivery except when 1596 par. 4 is applicable (there is notice of
stopping the contract), with notification that the seller is holding them as bailee for the buyer
Article 1596. Damages for non-acceptance of goods.
Measure of damages:
1. As a rule: estimated loss directly and naturally resulting in the ordinary course of events from the
buyer’s breach (no available market)
2. When there is available market: “difference” between contract price and market or current price at
the time when the goods ought to have been accepted or if not time has been fixed at the time of
refusal (If there are special circumstances establishing proximate damages of a different amount
than the “difference” described then liability is based on the proximate damages) Proximate
Damages: refer to damages other than unrealized profits
* Repudiation of the contract or notice of stopping the contract, such as in the case of a sale
where goods are to be manufactured. Buyer here shall be liable for the cost of:
1. labor performed
2. expenses for materials used before receiving the notice of repudiation for stoppage
3. unrealized profits
Article 1597. When seller may rescind contract in case there is no delivery yet
1. When buyer repudiated the contract
2. When the buyer has manifested his inability to perform his obligations
3. When the buyer has committed a breach of the contract
* Notice must be given to the buyer to totally rescind the contract.
Article 1598. Remedy of buyer in Contract to deliver specific goods: Specific Performance w/o
giving the seller option to retain the goods on payment of damages.
Article 1599. Remedies of buyer when seller commits breach of warranty.
1. Recoupment—whereby the buyer accepts the goods but he sets up against the seller the
reduction or extinction of the purchase price.
2. Action for damages—whereby the buyer may (a) accept the goods but w/ damages or (b) refuse
to accept the goods for the breach of warranty but also with damages.
3. Rescission—whereby the buyer seeks the cancellation of the sale and as a consequence there
will be restoration on both sides.
**Situations when buyer cannot choose or elect rescission (KNR)
1. If he knows of the breach of warranty when he accepted the goods w/o protest
2. If he fails to notify the seller w/in a reasonable time of the election to rescind
3. If he fails to return or offer to return the goods to the seller in substantially the same condition as
they were at the time the ownership was transferred to him.
Extinguishment of Sales
Art. 1600- Causes for Extinguishing Sales
1. Ordinary Causes—causes which extinguish ordinary contracts such as:
a. Payment
b. Loss of the things
c. Novation
d. Merger of rights of creditor and debtor
e. Rescission
f. Fulfillment of resolutory condition
g. Prescription
2. Special Causes—refer to conventional redemption and legal redemption
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CONVENTIONAL REDEMPTION.
Art. 1601. Requisites REV-CR
a. The vendor reserves the right to repurchase the thing sold
b. He shall shoulder the expenses of the contract and other legitimate payments made by the buyer.
c. He shall pay the value of the necessary and useful expenses made on the thing incurred by the
buyer
d. He shall comply with other stipulations agreed upon.
e. He shall return the price of the sale
Characteristics of Conventional Redemption [EAR RPR]
a. It begins to exist at the time of the perfection of the contract. (It becomes a mere promise to sell if
stipulated upon after the sale had been consummated)
b. It is an accidental stipulation because it is a right created by the parties
c. It is reciprocal when the right to redeem is exercised. (both vendor and vendee has obligations
with each other)
d. It gives rise to a real right when properly registered because it affects third persons.
e. It is potestative as its exercise depends upon the sole will of the vendor.
f. It is a resolutory condition because when it is fulfilled, the ownership of the vendee over the
thing is extinguished
PACTO DE RETRO SALE vs. MORTGAGE
PACTO DE RETRO SALE
Ownership is consolidated in the vendee if
vendor does not repurchase w/in time agreed
upon
No obligation on the part of the vendee to
foreclose
Vendor has no more right to redeem after
expiration of period to redeem
Vendee may alienate property
Vendee becomes automatically the owner in
case of vendor’s failure to redeem
Vendee is entitled to reimbursement for
necessary and useful expenses
Equitable Mortgage—one which lacks the proper formalities, form of words or other requisites
prescribed by law for a mortgage, but however shows the intention of the contracting parties to
make the property subject of the contract as security for a debt and contains nothing impossible or
contrary to law.
Consequences of Declaration of Pacto de Retro Sale as an Equitable Mortgage (PTFR)
1. The repurchase price paid by the vendor is considered the principal of the loan.
2. Title remains in the vendor or if the title has already been transferred to the vendee, the same
must be revested into the vendor by a deed of reconveyance.
3. Any money fruits or other benefits received thereafter by the vendee are considered interests on
the loan.
4. If the vendor does not redeem on time the remedy of the vendee is to foreclose the mortgage.
Art. 1603—In case of doubt, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.
Rationale: Least transmission of rights.
*Although in conflict with Art. 1378, where it provides that if the contract is onerous, the
doubt shall be settled in favor of the greatest reciprocity of interests, Art. 1603 is the exception. This
is justified by the condemnation of pactum commissorium (which is a stipulation that creditor
automatically becomes owner of a property upon non-payment by the debtor)
Art. 1604—Art. 1602 also applicable to contract purporting to be an absolute sale
MORTGAGE
Failure of mortgagor to pay his obligations on
time does not deprive him of his interest in the
property
Mortgagee must foreclose if he wants to secure
a perfect title
Mortgagor may redeem before foreclosure and
even after, w/in one year from registration of the
sale in extra-judicial foreclosure. In judicial
foreclosure redemption may be made before
confirmation of the sale by the court.
Mortgagee cannot alienate property
Mortgagee does not automatically become
owner, there must be foreclosure sale first
Mortgagee is not entitled to reimbursement for
improvements he made
Art. 1602—Presumption of Equitable Mortgage. (IPERTOD)
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.
7. When there is doubt as to whether contract is Pacto de retro or an equitable mortgage
Art. 1605—Vendor may ask for reformation of instrument in cases referred to in 1602 & 1604
Art. 1606—Time to redeem in conventional redemption
1. If there is a period agreed upon then this shall be observed, but this should not exceed 10 years
2. If there is no period agreed upon, the redemption shall be exercised within 4 years from the
date of contract.
3. If an action was brought by the seller claiming that the contract was an equitable mortgage but
later on proven that it was Pacto de retro Sale, he is given 30 days from the time final judgment was
rendered to repurchase.
Art. 1607—Judicial Order is required for the registration of the consolidation of ownership of a
real property in the vendee by failure of the vendor to redeem.
Rationale: To accord the vendor the maximum safeguards for the protection of his legal
rights under the true agreement of the parties.
Art. 1608—The vendor may exercise his right of redemption against every possessor whose
right is derived from the vendee, even if the second contract does not mention of the right of
redemption.
Art. 1609—Vendee is subrogated to the vendor’s rights and actions
As owner, vendee may:
a. transfer his rights to a 3rd person
b. mortgage the property
c. enjoy the fruits thereof
d. recover the property against every possessor
e. perform other acts of ownership
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Art. 1610—Creditors of the vendor must exhaust first all the other properties of vendor before
they could exercise the right of redemption against the vendee.
Art. 1611—Applicability.
1. The vendee entered a Pacto de Retro Sale of a part of an undivided immovable.
2. The vendee later acquired the whole of the property.
3. The vendor in the “Pacto de Retro Sale of a part” wishes to exercise his right of redemption over
the part.
If the above mentioned are present the vendee may compel the vendor in the Pacto de Retro Sale
of a part to redeem the whole property.
Rationale: Co-ownership is not favored, because the co-owners are reluctant to make
improvements on the property due to the state of instability in its ownership.
Art. 1612—Joint Pacto de Retro Sale by Co-Owners or Co-Heirs of an Undivided Immovable.
❖ Each Co-Owner/Co-Heir can exercise right of redemption with respect to their share
Art. 1613—In the case referred to in Art. 1612, vendee may demand that all the vendors or coheirs come to an agreement upon the repurchase of the whole thing, if they failed to do so vendee
cannot be compelled to accept partial redemption.
Art. 1614—Separate Sales of Shares of Co-owners of an undivided immovable.
❖ Each vendor may exercise their right of redemption independently and the vendee
cannot compel any of them to redeem the whole property
Art. 1615—If the vendee dies and property is left to several heirs, the action for redemption can
only be brought to each of them independently with respect to their share, whether or not the
property is still undivided or already partitioned.
Art. 1616—Obligations of the Vendor a Retro if he desires to redeem
a. Return to the vendee the price of the sale
b. He shall shoulder the expenses of the contract and other legitimate payments made by the buyer.
c. He shall pay the value of the necessary and useful expenses made on the thing incurred by the
buyer
Art. 1617—Rule in case there is no agreement on the sharing of the fruits of the property.
1. If there are fruits at the time of the sale and the vendee paid them, he shall be reimbursed by the
vendor.
2. Where there are no fruits at the time of the sale but there are existing at the time of redemption,
the vendee shall be entitled to the fruits gathered for one year reckoned from the last anniversary of
the date of the effectivity of the contract of sale.
Art. 1618—The vendor who recovers the thing shall receive it free from all charges or
mortgages constituted by the vendee, but shall respect the lease contract constituted on the
property in good faith and in accordance with the customs of the place.
LEGAL REDEMPTION (1619)
--is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.
Art. 1620—A co-owner of a thing may exercise the right of redemption when the shares of all the
other co-owners or any of them are sold to a 3rd person. If the price of alienation is grossly
excessive, redemptioner shall pay only a reasonable price.
--If two or more co-owners desire to exercise right of redemption they may only do
so in proportion to their share.
Art. 1621—Redemption by adjacent owner of rural lands. Requisites: (RATSO)
1. The adjacent lands involved must be rural land.
2. The rural land alienated and to be redeemed must not exceed one hectare in area
3. The alienation must be made in favor of a third person, not in favor of another adjacent owner
4. The two lands involved must not be separated by brooks, drains, ravines, roads and other
servitudes for the benefit of other estates.
5. The vendee or grantee must already be an owner of a rural land. If he does not own any,
redemption is not allowed.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the one
with a smaller area shall be preferred. If both have same area, the one who first requested.
Art. 1622—Applicability: Piece of Urban Land which is so small and so situated that a major
portion cannot be used for any practical purpose w/in a reasonable time, having bought merely for
speculation and is about to resold.
*Speculation—means buying or selling with expectation of profiting by a rise and fall in
price.
Rights recognized by Article 1622.
1. Right of Pre-emption—the right of an adjacent owner to purchase the property before it is sold
to a third person or before the projected sale to a 3rd person is consummated.
2. Right of Redemption—the right of an adjacent owner to redeem the property after the sale had
been perfected and consummated.
Pre-emption
Redemption
Arises before sale
Arises after sale
No Rescission because no sale as yet exists
There can be rescission of the original sale
The action is directed against the prospective Action is directed against the buyer
seller
* Preference when two or more owners of adjoining lands wish to exercise the right of redemption
or pre-emption: To the owner whose intended use is best justified.
Art. 1623—Period of Legal Pre-emption or Redemption.
❖ Must be exercised within 30 days from the notice in writing by the prospective vendor.
❖ The deed of sale executed by the vendor is not registered if not accompanied by an affidavit that
he has given the required written notice.
❖ The right of redemption of co-owners is superior to the right of adjoining owners.
Instances of Legal Redemption under the Civil Code (CHURC)
1. Sale of a co-owner of his share to a stranger (1620)
2. Sale of an heir of his hereditary rights to a stranger (1088)
3. Sale of adjacent small urban lands bought merely for speculation (1622)
4. Sale of adjacent rural land not exceeding one hectare (1621)
5. When a credit or other incorporeal right in litigation is sold (1634)
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Instances of Legal Redemption under special laws (THEJA)
1. Redemption in tax sales
2. Redemption of homesteads
3. A right of redemption in cases of extra-judicial foreclosures
4. An equity of redemption in cases of judicial foreclosures
5. Redemption by an agricultural tenant of land sold by the landowner
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of Credit—an agreement whereby credits, rights or actions pertaining to a person
(called assignor) are transferred by him to another (called assignee) either onerously or gratuitously
who acquires the power to enforce the same against the debtors.
Nature of Assignment of Credits and other incorporeal rights: Has all the elements of a contract of
sale: (1) consent (2) Object which is the credit, right , action assigned and (3) consideration which is
the price paid for the assignment, or liberality of the assignor if the assignment is gratuitous.
Distinction :
Contract of Sale
Assignment of Credits
Basis
Property
Credit, incorporeal rights or rights
Object
Manner of Delivery of Object
Subject obligated
Ownership when transferred
Consideration
Basis
Nature
It need not be through public
instrument
The whole world
Transfer of ownership need not be
upon delivery of the thing. The
parties may agree that ownership
be transferred only after full
payment (1478)
It is always a requisite
Dation in Payment
It is an alienation of property of a
debtor in satisfaction of a debt in
money
Determinate property
of action
It must be through a public
instrument (1625)
A definite third person
Ownership is transferred upon
delivery
of
the
documents
evidencing the credit or incorporeal
rights
It is not always a requisite. Action
may be maintained by the assignee
based on his title even if there is no
consideration.
Assignment of Credits
The alienation of credits or rights,
need not be in satisfaction of
debtor’s debt
Credits, incorporeal rights or rights
of action
Obligation is not extinguished
Scope of Liability in case of breach of warranty
1. In good faith: Assignor shall pay (a) consideration of price which he received from the assignee;
(b) expenses of the contract (c) other legitimate expenses occasioned by the assignment
2. In bad faith: Same liabilities as in above but with damages
Art. 1629 Duration of the Liability of the Assignor in Good Faith (in case there is no
agreement)
1. One year from the date of the assignment of the credit if the period of payment of the credit has
already expired
2. One year after maturity of the credit if the period of payment has not yet expired
Art. 1630 Sale of Inheritance (Hereditary Rights) without specification of things.
--Seller shall only be answerable for his character as an heir. He warrants the fact of his heirship in
the estate of the decedent. If it turns out that he is not an heir, then he is liable for the breach of
warranty.
Sale of Hereditary Rights—presumes the existence of a contract or deed of sale between the
parties
Waiver of Hereditary Rights—a mode of extinction of ownership, where there is intentional
relinquishment of a known right with knowledge of its existence and intention to relinquish it in favor
of other persons who are co-heirs in the succession
Lump-Sum Purchase of the whole of certain rights, rents or products (1631)
❖
Vendor warrants the legitimacy of the whole of the rights, rents or products but not the
various parts of which the whole is composed of.
❖
Exception: If the vendee is evicted from the whole or the part of the greater value (more than
half) of the credits in which case warranty stays.
Art. 1632—If vendor profited from the fruits or received anything from the inheritance sold he
must restore it by paying the vendee, unless there is a contrary stipulation.
Art. 1633—Charges and debts on the estate paid by the vendor must be reimbursed by the
vendee, unless there is a contrary stipulation.
Consent of debtor is not necessary for the assignment. He is therefore released from the
obligation if he pays the creditor before having knowledge of the assignment (1626)
Scope of Assignment: All accessory rights, such as guaranty, mortgage, pledge or
preference (1627)
Assignment of Credit or right in Litigation. (1634)
✓ debtor is given the right to extinguish the obligation by reimbursing the assignee: (PIJ)
a. The price paid for the credit or right
b. Interest on the said price from the time the day it was paid
c. Judicial costs incurred by the assignee
✓ When is credit or right in litigation? From the time the complaint concerning the same is
answered.
✓ Prescriptive Period: 30 days from the date the assignee demands payment from debtor
Art. 1628 What the Assignor of the Credit Warrants? (ELS)
1. The existence of the credit at the time of the assignment
2. The legality of the credit unless he sold the thing as “doubtful”, meaning, he is not sure of the
validity of his acquisition of the thing sold which fact he has disclosed to the assignee
3. The solvency of the debtor, if expressly stipulated or if the insolvency of the debtor was prior to
the sale and of common knowledge
Exceptions to the Right of Extinguishment by the debtor (1635)
✓ Assignments or sales made to: (CCP)
a. A co-heir or co-owner of the right assigned
b. A creditor in payment of his credit
c. The possessor of a tenement or piece of land which is subject to the right in litigation
assigned.
Object
Obligation is extinguished
Effect
✓
✓