DEFINITION:
SALES
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: is to transfer of ownership;
2. Perfection: is by mere consent, since one of the parties “obligates” himself, as such, he already bound himself, a contract is already perfected even before
delivery of the thing;
3. Subject Matter: determinate thing.
4. Cause: the contract of sale is onerous, since the other party has the obligation to pay;
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 are provided by law to
govern the rights and obligations of the parties, after stipulations;
7. Commutative: classic 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. Note that things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. (Art. 1461)
KINDS OF SALE AS TO NATURE OF THE SUBJECT MATTER:
1. Real or Personal
2. Thing (corporeal or tangible) or Rights (incorporeal or intangible)
A Contract of Sale may be Absolute or Conditional:
A conditional sale, is the kind of contract of sale where ownership automatically transfers to the buyer upon fulfillment of the condition, without need of a new
agreement or to execute a new contract
In absolute sale, ownership transfers upon delivery, actual or constructive, even if no total payment yet. If no payment happened, the buyer becomes a debtor
as far as the price is concerned. The remedy for the seller is rescission and not reconveyance of the property since the property already belongs to the buyer.
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.
DISTINGUISHED FROM OTHER TRANSACTIONS:
1.
Contract for a piece of work
Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and
upon his special order, and not for the general market, it is a contract for a piece of work. (n)
Importance of Distinction: sale is covered by the statute of frauds. On the other hand, contracts for a piece of work is covered only if to be performed after
more than one year.
E.g., customized shoes. If for more than 1 year – covered by statute of frauds. If for 6 months – depends on type of contract.
SIMILARITIES:
a. There is transfer of ownership
b. Buyer pays the price.
DISTINCTION: is as to the subject matter: in a contract of sale, the subject is a thing, in a contract for a piece of work, the subject is service.
the Massachussetts Rule: if the thing to be delivered by the obligor is manufactured in the ordinary course of business, and being offered to the general
market, even if not at hand at the time the order is made, it is a contract of sale;
But, if the thing is to be manufactured only because of the order of the buyer; not offered to the general market – contract for a piece of work.
2.
Dacion en pago
SIMILARITY: upon delivery, ownership passes. Although, dacion en pago, there is always transfer of ownership.
DISTINCTION:
a. sale is a contract and a source of obligation; dation in payment is a special form of payment and a mode of extinguishment of an obligation.
b. In sale, there is no requirement of a pre-existing obligation, in dation in payment, as a special form of payment, there is a need for a pre-existing obligation.
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. (1446a)
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?
ANSWER: It depends upon the intention of the parties. If the intention is not clear, it will depend on the value of the car. If the value of the car is greater
than cash, it will be treated as barter. If the value of the car is less than P350,000 it will be treated as a sale.
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)
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.
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.
b.
c.
Husband and wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation or property
The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or
institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration
of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take part by virtue of their profession.
(6) Any others specially disqualified by law
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.
Vitiated consent: by force, intimidation, violence, mistake or fraud – the contract is voidable.
Consent by a party given by another without authority: the contract is unenforceable as to the supposed principal.
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.
The seller need not be the owner to transfer ownership: if he received authority to do so from the:
a.
b.
c.
Owner himself – agent;
Law – such as those mentioned under validity of contract above.
Court – in cases of judicial sale.
If the seller had no authority to sell: the buyer acquires no better title to the goods than the seller had, EXCEPT:
a.
b.
In cases of estoppel:
(1) 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.
(2) As to the seller: estoppel by deed – if after the sale, he acquired ownership, such ownership automatically passes to the buyer. THERE MUST BE
DELIVERY.
Sale of an Apparent Owner: the sale of an apparent owner will give the buyer a better right provided the following shall concur:
(1) There is apparent ownership
Examples:
•
An old lady asked a lawyer to register her land in her name. However, the lawyer instead registered it in his name.
•
A group of businessmen agreed to register the lot in the name of the one who will manage the business.
(2) 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).
(3) There must be a law from which apparent ownership may be had, such as:
(a) 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.
(b) 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.
(c) Art. 1518 – for goods covered by negotiable instruments.
c.
Valid Sale by Statutory or Judicial Authority – such as sales made by guardians, executors, administrators, sheriffs, etc.
d.
Purchase from a Merchant Store, Market or Fair in good faith and for value: the purpose of this exception is to facilitate commercial ransactions
so as not to degrade the trust in sales made through such stores.
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
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.
b.
c.
d.
It must be certain.
(1) With reference to another thing certain, or
(2) The determination thereof be left to the judgment of a special person or persons.
i.
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.
ii.
If the third person or persons acted in bad faith or by mistake, the courts may fix the price.
iii.
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
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.
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:
(1) On a definite day, or
(2) In a particular exchange or market, or
(3) When an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain.
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.
Service: unlike in contracts, in general, where “service” may be the object of the contract, in sales, service cannot be a valid subject since no person acquires
ownership over service, and transfer of ownership is the purpose of a contract of sale. 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:
(1) It is particularly designated or
(2) 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.
ILLUSTRATION: A agreed to sell to B his car without agreement as to its features for P1M. On the other hand, he would also sell his Mitsubishi Lancer,
2007, GSL and color black for P1M also.
In this case, the first sale is void for the object is not determinate. As to the second sale, it is valid, since it is capable of being made determinate
without need of a new or separate agreement.
d.
In the case of fungible goods, there may be a sale of an undivided share of a specific mass, even though
(1) The seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and
(2) 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 intent appears.
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.
f.
g.
The sole owner of a thing may sell an undivided interest therein.
Things subject to a resolutory condition may be the object of the contract of sale.
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:
1.
2.
3.
4.
Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.
A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement
is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without
reserve.
A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.
Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or
to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the
seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule 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.
Withdrawal of Offer:
1.
2.
In an option agreement, the offerer may withdraw the offer before acceptance is communicated to him, and he would not be liable for damages.
In an option contract, however, there is a consideration distinct and separate from the price, and as such, the offerer cannot validly withdraw before the
period agreed upon expires without being liable for damages. This does not, however, entitle the offeree the right to demand specific performance since
there is no perfected contract of sale yet.
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.
THE RECTO LAW: applies to a contract of sale of personal property the price of which is payable in installments. Under Art. 1484, the vendor will have the
following remedies in case of non-payment by the vendee:
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.
Note:
1. The law applies only in case of “installment” sales. Not to sales “on credit”. As such, if the sale of personal property required a downpayment and the whole
balance due on a certain date, the law does not apply, since it is not a sale on installment.
2. 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.
3. The 2nd and 3rd remedy are available only if there were two consecutive installments which are not paid. Accordingly, if there is only one installment that is
unpaid, only the first remedy is available. Moreover, if the buyer failed to pay twice, but not consecutively, still only the first remedy is available.
4. The 2nd option of cancelling the sale would entail mutual restitution by the parties, but the seller is allowed to retain a reasonable amout of the purchase
price already paid as compensation for the use of the thing, but he cannot retain ALL of the purchase price absent a forfeiture clause which entitles him to
the purchase price already paid at the time of cancellation. However still, this clause will not apply if the retention of ALL the purchase price would be
unconscionable.
5.
Note that under the MACEDA law, a forfeiture clause would not be valid.
The 3rd option entails that the foreclosed mortgage is the mortgage on the personal property itself, not a mortgage on a different property.
ILLUSTRATION: A bought a truck from B payable in installment secured by a chattel mortgage on the truck. As additional security, A’s brother, C, executed
a real estate mortgage over his own land in favor of B. A defaulted in two installments. Consequently, B foreclosed the real estate mortgage.
In this case, if the foreclosure sale proceeds of the real estate mortgage is less than the unpaid amount, B can still go after A to collect, under option 1
since the mortgage that was foreclosed is not the one on the truck.
6.
The law 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.
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.
Note:
1. The law applies to residential realty. Thus, it covers condominium units and houses and lots, but not ALL IMMOVABLES.
2. It pertains only to sale on installment, not “on credit”, similar to the Recto Law.
3.
Under this law, the buyer has the following rights:
a. If installments already paid are less than two years equivalent:
(1) Pay without interest within 60 days;
(2) The buyer may sell his interest;
(3) He may assign his interest (by way of donation or dacion en pago);
(4) Pay the entire balance.
b.
After two years’ worth of installment, the buyer will have the following additional rights:
(1) 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;
(2) 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:
(a) Minimum of 50% of all payments (including downpayment) plus
(b) 5% after five years (55% after 7 years of payment); and
(c) 5% for every additional year thereafter upto a maximum of 90% (or 14 years of instalment).
4.
The
a.
b.
c.
following are void stipulations:
Automatic cancellation or rescission upon default of the buyer;
Stipulation as to interest or damages or penalty during the grace period;
Forfeiture clause.
OBLIGATIONS OF THE VENDOR:
1. To take care of the thing after the contract has been perfected, prior to delivery.
Injury or Benefit Pending Delivery: After perfection of the contract to the time of delivery:
a.
b.
c.
d.
e.
f.
The seller shall take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another
standard of care;
The buyer has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the
same has been delivered to him;
They buyer may compel the seller to make the delivery. If the seller delays, or has promised to deliver the same thing to two or more persons who do
not have the same interest, he shall be responsible for any fortuitous event until he has effected the deliver.
The obligation to deliver shall be extinguished if it should be lost or destroyed without the fault of the seller, and before he has incurred in delay, except:
(1) The law so provides;
(2) If stipulated otherwise;
(3) The obligation requires the assumption of risk
The same rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or
measure.
Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have
been weighed, counted, or measured and delivered, unless the latter has incurred in delay.
Risk of Loss
a.
b.
c.
Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein
is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods
has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk
from the time of such delivery;
(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault
If the thing is lost in part only, the buyer may choose between:
(1) Withdrawing from the contract; and
(2) Demanding the remaining part, paying its price in proportion to the total sum agreed upon.
Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a
material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods
in which the ownership will pass, if the sale was divisible.
Loss, Deterioration or Improvement: the rules under Art. 1189 applies, accordingly:
a. The thing is lost (when it perishes, goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered)
(1) Without fault of the seller – obligation is extinguished;
(2) With fault of the seller – jhe is liable for damages.
b. The thing deteriorartes
(1) Without fault of the seller – the impairment is borne by the buyer;
(2) With fault of the seller – the debtor has two options:
(a) To exact fulfillment and ask for damages
(b) Rescission with damages
c. There is improvement
(1) By nature or time – the improvement will inure to the benefit of the buyer
(2) At the expense of the seller – he shall have no other right than that granted to the usufructuary, e.g., he may remove the improvement if it will
not cause damage to the thing.
Res Perit Domino: literally means the thing perishes with the owner. EXCEPTIONS:
a.
b.
c.
By stipulation – when it was stipulated that the risk of loss is with the buyer in possession of the thing even if ownership is not yet transferred.
If ownership is retained only to secure performance by the buyer. Title of the seller is known as “SECURITY TITLE”. This is what’s provided under Art.
1504(1). (Lawyer’s Coop vs. Tabora)
If there was delay in delivery of the goods and thereafter the goods are destroyed due to fortuitous event, whoever caused the delay bears the loss.
2.
3.
4.
Obligation to pay taxes and incidents of the sale, unless otherwise agreed upon;
To warrant the thing (see Warranties);
To transfer ownership. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him or in any other
manner signifying an agreement that the possession is transferred from the vendor to the vendee.
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
(1) Execution of Public Instrument: This mode of delivery is available to both sale of rights and sale of things;
(2) 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.
(3) 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.
(4) 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.
(5) Symbolic Delivery: where the seller merely gives the key to a warehouse where the goods are located. Note, if the object of the sale is the
warehouse, this is actual delivery, since the buyer would have possession and control of the warehouse.
c. 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:
(1) Ownership is reserved by the seller – such as if it is deliverable to the seller or his agent.
(2) The seller reserved possession – goods are deliverable to the buyer, but possession of the bill of lading is with the seller.
MODE OF DELIVERY: As to rights:
a. By execution of a public instrument;
b. When the title of ownership is placed in the possession of the vendee (e.g., certificates of stock for sale of shares of stock);
c. 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)
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.
SALE ON APPROVAL OR ON TRIAL OR ON SATISFACTION: 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.
TIME AND PLACE OF DELIVERY:
1. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the
contract, express or implied, between the parties.
2. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one,
and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was
made were in some other place, then that place is the place of delivery.
3. Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them
within a reasonable time.
4. Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and
until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf.
5. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.
6. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller.
7. As a rule, the time to deliver is at the time of sale, if it is a pure obligation. However, as a rule, the seller is not bound to deliver until the buyer pays.
8. 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
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.
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.
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.
DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF REAL ESTATE WITH A STATEMENT OF AREA AND THE SALE IS
AT A RATE OF A CERTAI 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 more than 1/10 of that agreed upon; or
(2) The buyer would not have entered into the contract, had he known of its smaller area.
2.
The same rules apply if any part of the immovable is not of the quality specified in the contract.
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.
The above rules likewise applies to judicial sales.
DELIVERY OF LESS OR MORE OF THE QUANTITY AGREED UPON IN SALE OF REAL ESTATE FOR A LUMP SUM PRICE:
1. Delivery is less than the area agreed upon, the buyer is bound to accept the actual area without any reduction of the price.
2. Delivery is more than the area agreed upon, the seller is bound to deliver the actual area without any increase in the price.
3. If the seller should not deliver the whole area which exceeds that which was agreed upon, 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 ofhte vendee to deliver what has been stipulated.
RIGHTS OF AN UNPAID SELLER
Unpaid Seller: the seller of the goods is deemed to be an unpaid seller when:
1.
2.
The whole of the price has not been paid or tendered;
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:
a.
b.
c.
Where the goods have been sold without any stipulation as to credit;
Where the goods have been sold on credit, but the term of credit has expired;
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.
b.
2.
As a rule, the seller does not lose his right to possessory lien or right of stoppage in transitu.
Exceptions:
(1) If the seller assented to the transfer;
(2) 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.
Stoppage in transitu – right to stop the goods while in transit.
Requisites:
a.
b.
c.
The seller already parted with the possession of the goods;
The goods are already in transit;
The buyer is insolvent.
Goods are in transit:
a.
b.
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;
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.
b.
c.
If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination;
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;
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.
b.
By taking actual possession of the goods; or
By giving notice of his claim to the carrier or other bailee who is in possession of the goods, as a consequence of which:
(1) The carrier or bailee then must redeliver the goods to, or according to the directions of, the seller.
(2) The expenses of such delivery must be borne by the seller.
(3) 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
Grounds:
a.
b.
c.
The goods are perishable in nature
The seller expressly reserves the right of resale in case the buyer should make default, or
Where the buyer has been in default in the payment of the price for an unreasonable time
To exercise such right: the unpaid seller must have a right of lien or stoppage in transitu.
In case the resale resulted in proceeds less than or more than the price in the original sale:
a.
b.
If the resale price is 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;
If the resale price is 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.
b.
The intention to resell – which is relevat to prove that the buyer has been in default for an unreasonable length of time.
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: the seller is prohibited from being the buyer in the resale, either directly or indirectly, whether the resale be public or private.
4.
Rescission
Grounds:
a.
b.
When the right to rescind is expressly reserved by the seller;
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 the seller cannot have both rights at
the same time. This is because the right of possessory lien presupposes that the seller retains possession, while in stoppage in transitu, the goods are supposedly
in transit.
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.
DOUBLE SALE; MOVABLE PROPERTY: if the same movable is sold by the vendor to two or more vendees, the one who has a better rigth over the thing
shalle be the first one to take possession in good faith.
DOUBLE SALE; 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.
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.
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.
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.
b.
c.
The vendee is deprived of the whole or of a part of the thing purchased;
By virtue of a final judgment
Such judgment is based on:
(1) A right prior to the sale or
(2) An act imputable to the vendor
Rules Applicable:
a.
b.
c.
d.
e.
f.
g.
h.
The warranty applies even if there is no agreement to such effect;
The vendee need not appeal from the decision in order that the vendor may become liable for eviction.
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.
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.
The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment.
The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof.
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.
The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee.
Extent of Liability: First, it will depend whether the seller is in bad faith:
a.
b.
If the seller is in bad faith, he shall be liable for:
(1) Value of the thing sold at the time of eviction;
(2) Income or fruits, if he has been ordered to deliver them to the party who won the suit against him;
(3) Costs of the suit which caused the eviction, and, in a proper case, those of the suit bought against the vendor for the warranty;
(4) Expenses of the contract, if the vendee has paid them;
(5) Damages and interests and ornamental expenses.
If the seller is in good faith, the liability of the vendor shall depend whether there is a waiver executed by the buyer:
(1) If there is no waiver, the seller is liable for VICE above except Damages.
(2) If there is a waiver, the liability of the vendor shall depend whether the buyer is aware of the risk of eviction:
(a) 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;
(b) 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.
b.
If they have been jointly sold for a lumpsum; or
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 oth
2. Warranty agains hidden defects or of quality - the thing shall be free from any hidden faults or defects.
Effect of Hidden Defects: it would render the thing unfit for iits indended 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.
b.
The defects are patent or those which may be visible; or
Even if not visible, the vendee who is an expert, by reason of his trade or profession, should have known.
Warranty of Quality or Fitness of Goods:
a.
b.
Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the
buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose;
Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not),
there is an implied warranty that the goods shall be of merchantable quality
Other rules on warranty against hidden defects or of quality:
a.
b.
c.
d.
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.
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.
An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade.
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.
Remedies of the vendee:
a.
b.
Withdraw from the contract plus damages;
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.
b.
If the cause was the defect itself: the seller shall be liable for:
(1)
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.
Period to file action: is 6 years from delivery.
Rules on hidden defects in animals:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
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.
If more than one animal is bought (whether for a lump sum or for a separate price for each of them), the redhibitory defect of one shall as a general
rule, 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.
The above rule is applicable in like manner to the sale of other things (not just animals).
There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned.
The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to
be unfit therefor.
The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee.
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.
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.
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.
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:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.
c. 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:
(1) The seller gives security for the return of the price in a proper case, or
(2) It has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment.
A mere act of trespass shall not authorize the suspension of the payment of the price.
d. However, if the fear of loss covers immovable property, the vendor may immediately sue for rescission.
e. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of
the contract 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
a. The buyer is not bound to accept delivery by installments, unless otherwise agreed upon.
b. If it was agreed that delivery be done in installments and payments separately made, and the seller makes defective deliveries in respect of one or more
instalments, or 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 so material as to justify the injured party in refusing to proceed
further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a
right to treat the whole contract as broken
c. Deemed Acceptance: the buyer is deemed to have accepted the delivery if:
(1) He intimates to the seller that he has accepted the thing;
(2) He does any act which is inconsistent with the ownership of the seller;
(3) After the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.
d. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages
or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give notice
to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall
not be liable therefor.
e. 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.
f. Right to Examine:
(1) Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has
had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no
stipulation to the contrary.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity
of examining the goods for the purpose of ascertaining whether they are in conformity with the contract
(3) Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods
shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words
"collect on delivery," or otherwise, the buyer is not entitled to examine the goods before the payment of the price, in the absence of agreement or
usage of trade permitting such examination.
g. With respect to movable property, the rescission of the sale shall be an available remedy to the vendor, if the vendee, upon the expiration of the period
fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time,
unless a longer period has been stipulated for its payment
BREACH OF CONTRACT OF SALE:
1. Where, under a contract of sale, the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according
to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods.
2. Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or
refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense to
such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or an
intention not to perform.
3. Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter
the seller may treat the goods as the buyer's and may maintain an action for the price.
4. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance.
5. The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract.
6. Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate
damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have
been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.
7. If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or expenses
made before receiving notice of the buyer's repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully
performed shall be considered in awarding the damages.
8. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the
buyer.
9. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall
be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional,
or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just.
10. Where there is a breach of warranty by the seller, the buyer may, at his election:
a. Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price;
b. Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;
c. Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;
d. Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the
seller and recover the price or any part thereof which has been paid
11. Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without
protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller
in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due
to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding
the sale.
12. Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If
the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the
goods, or immediately after an offer to return the goods in exchange for repayment of the price.
13. Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure payment of any portion of the price which has been paid,
and with the remedies for the enforcement of such lien allowed to an unpaid seller.
14. In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the
difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
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: 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 seller a retro may be
able to exercise the right to repurchase and the ownership of the buyer will be terminated.
Amount to be paid at the time the right is exercised:
1.
2.
3.
The purchase price;
The expenses of the contract, and any other legitimate payments made by reason of the sale; and
Useful and necessary expenses (e.g., fencing of the land)
Fruits: If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those
existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner and the
vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale.
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.
2.
3.
4.
5.
6.
When the price of a sale with right to repurchase is unusually inadequate;
When the vendor remains in possession as lessee or otherwise;
When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;
When the purchaser retains for himself a part of the purchase price;
When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be
subject to the usury laws. 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.
2.
That which was agreed upon which cannot exceed 10 years;
If no agreement as to the period, it shall be four years from the date of the contract.
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.
Other rules on conventional redemption:
1.
2.
3.
4.
5.
6.
7.
8.
9.
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.
The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have
been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons.
The vendee is subrogated to the vendor's rights and actions.
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.
In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof, may compel the vendor to redeem the
whole property, if the latter wishes to make use of the right of redemption.
If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for
more than his respective share. The same rules apply to a person who sold an immovable alone but left several heirs, in which case, the heirs may only
redeem the part which he may have acquired.
The vendee may demand of all the vendors or co-heirs that they come to an agreement upon the purchase of the whole thing sold; and should they fail to
do so, the vendee cannot be compelled to consent to a partial redemption.
Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as
regards his own share, and the vendee cannot compel him to redeem the whole property.
If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for
the whole.
The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which
the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated
LEGAL REDEMPTION: 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.
Two or more 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
2.
Owners of adjoining lands – have the right of redemption in case of transfers of land.
Rural Land; Requisites:
a.
b.
c.
d.
e.
The
The
The
The
The
subject is rural land;
land does not exceed one hectare;
redemptioner is an owner of a land adjoining the subject rural land;
adjacent lands is not separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates; and
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.
b.
The owner of the adjoining land of smaller area shall be preferred; and
Should both lands have the same area, the one who first requested redemption.
Redemption and Pre-emption of Urban Land; Requisites:
a.
b.
c.
The subject is urban land;
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;
The one exercising the right of redemption or pre-emption is an adjoining land owner.
When redemption, when pre-emption:
a.
b.
Pre-emption is the right exercised by the adjoining land owner if the sale is NOT YET perfected;
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: 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.
If there are co-owners: the right of redemption of the co-owners excludes that of adjoining owners.