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UST Golden Notes Sales 2011 2
BS Accountancy
SALES
SALES
6.

Q:Whatisasale?

A: Sale is a contract where one party (seller)
obligateshimselftotransfertheownershipofand
to deliver a determinate thing, while the other
party (buyer) obligates himself to pay for said
thing a price certain in money or its equivalent.
(Tolentino,p.1,2000ed.)

I.INTRODUCTION

A.DEFINITIONOFTHECONTRACTOFSALE

Q:Whatisacontractofsale?
7.
8.
9.

ASTOPRESENCEORABSENCEOFCONDITION

ABSOLUTESALE
A: By the contract of sale, one of the contracting
parties obligates himself to transfer the
ownershipofandtodeliveradeterminatething,
and the other to pay therefor a price certain in
moneyoritsequivalent.(Art.1458,NCC)

KINDSOFSALES

Q:Whatarethedifferentkindsofsales?

A:Asto:
1. Natureofthesubjectmatter:
a. Saleofrealproperty;
b. Saleofpersonalproperty
2. Valueofthethingsexchanged:
a. Commutativesale;
b. Aleatorysale
3. Whether the object is tangible or
intangible:
a. Sale of property (tangible or
corporeal);


Q:Whenisasaleabsolute?

A: The sale is absolute where the sale is not
subject to any condition whatsoever and where
thetitlepassesto thebuyerupondeliveryof the
thingsold.(DeLeon,p.15)

Q:Whenisadeedofsaleconsideredabsolutein
nature?

A: A deed of sale is consideredabsoluteinnature
where there is neither a stipulation in the deed
that title to the property sold is reserved in the
selleruntilthefullpaymentoftheprice,nor one
givingthevendor therighttounilaterallyresolve
the contract the moment the buyer fails to pay
withinafixedperiod.

CONDITIONALSALE

Q:Whenisasaleconditional?

A:Itisconditionalwherethesale contemplatesa
contingency,andingeneral,wherethecontractis
subject to certain conditions, usually in the case
of the vendee, the full payment of the agreed
purchasepriceandinthecaseof the vendor,the
fulfillmentofcertainwarranties.(DeLeon,p.15)

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
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

Note: A tangibleobjectis alsocalled
choseinpossession

Sale of a right (assignment of a
right, or a credit or other
intangibles such as copyright,
trademark,orgoodwill);

Note: An intangible object is a
choseinaction.

Validityordefectofthetransaction:
a. Valid
b. Rescissible
c. Voidable
d. Unenforceable
e. Void
Legalityoftheobject:
a. Licitobject
b.
4.
5.
b. Illicitobject
Presenceorabsenceofconditions:
a. Absolute
b. Conditional
Wholesaleorretail:
a. Wholesale
b. Retail
Proximateinducementforthesale:
a. Salebydescription
b. Salebysample
c. Salebydescriptionandsample
Whenthepriceistendered:
a. Cashsale
b. Saleoninstallmentplan
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJ OYG.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
EANELLE
EE
:
J
C.
L
V
C
A
F
ICE
HAIRFOR
DMINISTRATIONAND
INANCE
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VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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UST GOLDEN NOTES 2011
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B.ESSENTIALREQUISITES
OFACONTRACTOFSALE
Q: Distinguish a conditional sale from an
absolutesale

A:
CONDITIONALSALE
Onewheretheselleris
grantedtherightto
unilaterallyrescindthe
contractpredicatedon
thefulfillmentornon‐
fulfillment,asthecase
maybe,ofthe
prescribedcondition.
Contractexecuted
betweenthesellerand
thebuyer
ABSOLUTESALE
Onewherethetitleto
thepropertyisnot
reservedtotheselleror
ifthesellerisnot
grantedtherightto
rescindthecontract
basedonthefulfillment
ornon‐fulfillment,asthe
casemaybe,ofthe
prescribedcondition.
Contracts,firstthe
contracttosell(whichis
conditionalor
preparatorysale)and
second,thefinaldeedof
saleortheprincipal
contractwhichis
executedafterfull
paymentofthepurchase
price

Q:Whatistheeffectofthenon‐performance of
the condition or if the condition did not take
place?

A: Where the obligation of either party to a
contractofsaleissubjecttoanyconditionwhich
is not performed, such party may refuse to
proceed with the contract or he may waive
performance of the condition. Unlike in a non‐
fulfillmentofawarrantywhichwouldconstitute a
breachofthecontract, thenon‐happening ofthe
condition, although it may extinguish the
obligationuponwhichit isbased,generallydoes
notamounttoabreachofacontractofsale.

Q:Inasalewithassumptionof mortgage, is the
assumption of mortgage a condition without
which there will be no perfected contract of
sale?

A:Yes.In saleswith assumption of mortgage,the
assumption of mortgage is a condition to the
seller’s consent so that without approval by the
mortgagee, no sale is perfected (Ramos v. Court
ofAppeals,G.R.No.108294Sept.15,1997)
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230
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Q:Whataretheelementsofacontractofsale?

A:ANE
1. Accidental elements – dependent on
parties’stipulations;Examples:
a. Conditions
b. Interest
c. time&placeofpayment
d. penalty

2. Natural elements – those that are
inherent even in absence of contrary
provision.
E.g.warranties

3. Essentialelements–forvalidity:
a. Consent
b. Determinatesubjectmatter
c. Consideration

Q:Whatistheeffectand/orconsequence ofthe
absenceofconsent oftheownerinacontractof
saleofsaidproperty?

A: The contract of sale is void. One of  the
essentialrequirementsofavalidcontract ofsale
istheconsentoftheowneroftheproperty.

FORMALITIESREQUIRED

Q:Isthereaformalrequirementforthevalidity
ofacontractofsale?

A:
GR: No form is required. It is a consensual
contract.(Pineda,p.78)

XPN: Under Statute of Frauds, the following
contracts must be in writing; otherwise, they
shallbeunenforceable:
1. Saleofpersonalpropertyatapricenot
lessthanP500;
2. Sale of a real property or an interest
therein;
3. Sale of property not to be performed
withinayearfromthedatethereof;
4. When an applicable statute requires
thatthecontractofsalebeinacertain
form.(Art.1403,par.2)

Note: Statute of Frauds applies only to executory
contracts but not to partially executed contracts.
(Pineda,p.81)

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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SALES
B.OPTIONCONTRACT

Q:Whatisanoptioncontract?

A: A contract granting a privilege in one person,
forwhichhehaspaidaconsideration,whichgives
him the right to buy certain merchandise or
specified property, from another person, at
anytimewithintheagreedperiod,atafixedprice.
Q: Are there instances where the Statute of
Frauds is not essential for the validity of a
contractofsale?

A:Yes.
1. When there is a note or memorandum
inwritingandsubscribedtobytheparty
orhisagent(containsessentialtermsof
thecontract);
2. When there has been partial
performance/execution (seller delivers
with the intent to transfer title/receives
price);
3. When there has been failure to object
to presentation of evidence aliunde as
to the existence of a contract without
beinginwritingandwhich iscoveredby
theStatuteofFrauds;
4. When sales are effected through
electroniccommerce.(Villanueva,p.92)

C.STAGESOFACONTRACTOFSALE

Q: What are the 3 stages involved in the
formationofacontractofsale?

A:
1. Negotiation/Policitation
2. Perfection
3. Consummation

1.NEGOTIATION/PREPARATORY
Note: Consideration in an option contract may be
anything or undertaking of value, unlike in sale
whereitmustbeapricecertaininmoney.

Q:Whatisthenatureofanoptioncontract?

A:Itisapreparatorycontractinwhichoneparty
grants to another, for a fixed period and at a
determined price, the privilege to buy or sell, or
todecidewhetherornot toenterintoaprincipal
contract. It binds the party who has given the
option not to enter into the principal contract
with any other person during the period
designated, and within that period, to enter into
suchcontractwiththeone whom theoptionwas
granted, if the latter should decide to use the
option.Itisaseparateanddistinctcontract.


Note: If theoptionisperfected, itdoes not resultin
the perfection or consummation of the sale. (Diaz,
p.7)

Q:Whatistheperiodwithinwhichtoexercise
theoption?

A:
1. Withinthetermstipulated
2. Ifthereisnostipulation,thecourt may
fixtheterm

A.OFFER
Q:Whataretherulesintheconceptionstage
abouttheoffer?

A:
OFFERIS
RULE
FLOATED
Notes:Anactionforspecificperformancetoenforce
theoptiontopurchasemustbefiledwithin10years
fromthetimethecauseofactionaccrues.
ANDITIS:
Offeris
floated
Priortoacceptance,maybe
withdrawnatwillbyofferorbutno
authoritytomodifyit
Witha
period
Mustbeacceptedwithintheperiod,
otherwise,extinguished attheendof
periodandmaybewithdrawnatwill
byofferorbutmustnotbearbitrary,
otherwise,liablefordamages
Witha
condition
Extinguishedbyhappening/non‐
happeningofcondition
without
period/
condition
Continuestobevaliddependingupon
circumstancesoftime,placeand
person
Witha
counter‐
offer
Originalofferisextinguished
The implied renewal of the lease on a month‐to‐
monthbasisdidnothavetheeffectofextending the
life of the option to purchase which expired at the
endoftheoriginalleaseperiod.Thelessoriscorrect
inrefusingto sellon thegroundthat theoptionhad
expired.(2001BarQuestion)
Q:Howisanoptionexercised?

A:Anoticeofacceptancemustbecommunicated
toofferorevenwithoutactualpaymentaslongas
paymentisdeliveredintheconsummationstage.





ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
231
UST GOLDEN NOTES 2011

Q:Whatistheeffectofaseparateconsideration
inanoptioncontract?

A:
1. Withseparateconsideration:
a. Contractisvalid
b. Offeror cannot withdraw offer
untilafterexpirationoftheoption
c. Is subject to rescission & damages
butnotspecificperformance

2. Withoutseparateconsideration:
a. theoptioncontractisnotdeemed
perfected
b. offer may be withdrawn at any
timepriortoacceptance

Note: However, even though the option was not
supported by a consideration, the moment it was
accepted,contractofsaleisperfected.(Art.1324)

Q: What is the effect of acceptance and
withdrawaloftheoffer?

A: If the offer had already been accepted and
such acceptance has been communicated to
before the withdrawal is communicated, the
acceptance creates a perfected contract, even if
noconsiderationwasasyetpaidfortheoption.

Inwhichcase,iftheofferor does notperformhis
obligationsundertheperfectedcontract, heshall
be liable for all consequences arising from the
breach thereof based on any of the available
remedies such as specific performance, or
rescissionwithdamagesinbothcases.

C.RIGHTOFFIRSTREFUSAL

Q:Whatistherightoffirstrefusal?

A: It is a right of first priority, all things and
conditionsbeingequal;identity ofthetermsand
conditions offered to the optionee and all other
prospective buyers, with optionee to enjoy the
rightoffirstpriority.Itcreatesapromisetoenter
into a contract of sale and it has no separate
consideration.

Note: Adeedof saleexecutedinfavorofa3rdparty
who cannot be deemed a purchaser in good faith,
and which is in violation of the right of first refusal
grantedtotheoptioneeisvalidbutrescissible.(Arts.
1380,1381[1])



232
Q:NDCandFirestoneenteredintoacontractof
lease wherein it is stipulated that Firestone has
the right of first refusal to purchase the leased
property "should lessor NDC decide to sell the
same”. After the rumor that NDC will transfer
thelottoPUP,Firestoneinstitutedanactionfor
specific performance to compel NDC to sell the
property in its favor. PUP moved to intervene
arguing that the Memorandum issued by then
President Aquino ordered the transfer of the
whole NDC compound to the Government,
which in turn would convey it in favor of PUP.
CanFirestoneexerciseitsrightoffirstrefusal?

A: Yes. It is a settled principle in civil law that
when a lease contract contains a right of first
refusal, the lessor is under a legal duty to the 
lessee not to sell to anybody at any price until
afterhehasmadean offertoselltothelatterata
certainpriceandthelesseehasfailedtoacceptit.
The lessee hasa right that thelessor's first offer
shallbeinhisfavor.(PUPv.CA,G.R.No.143513,
Nov.14,2001)

Q: In a 20‐year lease contract over a building,
the lessee is expressly granted a right of first
refusalshouldthelessordecidetosellboth the
land and building. However, the lessor sold the
propertyto athirdpersonwho knew aboutthe
lease and in fact agreed to respect it.
Consequently,thelesseebringsanactionagainst
both the lessor‐seller and the buyer (a) to
rescind the sale and (b) to compel specific
performance of his right of first refusal in the
sense that the lessor should be ordered to
execute a deed of absolute sale in favor of the
lessee at the same price. The defendants
contend that the plaintiff can neither seek
rescission of the sale nor compel specific
performance of a "mere" right of first refusal.
Decidethecase.

A:
a. The action filed by the lessee, for both
rescission of the offending sale and
specificperformanceofthe right offirst
refusal which was violated, should
prosper.Therulingin(EquatorialRealty
Development, Inc. v. Mayfair Theater,
Inc.,G.R.No.106063,Nov. 21, 1996),a
case with similar facts, sustains both
rightsofactionbecausethebuyerinthe
subsequent sale knew the existence of
rightoffirstrefusal,hence,inbadfaith.

b. The action to rescind the sale and to
compeltherightoffirstrefusalwillnot
prosper. (Ang Yu Asuncion v. CA, G.R.
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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Note:Itisapplicableonlytoexecutorycontractsand
not to contracts which are totally or partially
performed.
No. 109125, Dec. 2, 1994). The court
ruledthattherightoffirstrefusalis not
foundeduponacontractbutonaquasi‐
delictual relationship covered by the
principlesofhumanrelationsandunjust
enrichment (Art 19, et seq. Civil Code).
Hence,theonlyactionthatwillprosper
according to the Supreme Court is an
action for damages in a proper forum
forthepurpose.(1998BarQuestion)

If a particular form is required under the Statute of
Frauds: sale is valid & binding between the parties
butnotto3rdpersons.

Q:Maytherightoffirstrefusalbewaived?

A: Yes. Like other rights, the right of first refusal
may be waived or when a party entered into a
compromiseagreement.(Diaz,p.55)

Note:Theofferofthepersoninwhosefavortheright
offirstrefusalwasgivenmustconformwiththesame
termsandconditionsasthosegiventotheofferee.
Q: Differentiate an option contract from a right
offirstrefusal.
Q:Andresleasedhis housetoIrisforaperiodof
2years,attherateofP25,000monthly,payable
annuallyinadvance.Thecontractstipulatedthat
it may be renewed for another 2‐year period
upon mutual agreement of the parties. The
contractalsograntedIristherightoffirstrefusal
topurchasetheproperty atanytimeduringthe
lease, if Andres decides to sell the property at
the same price that the property is offered for
saletoathirdparty.Twenty‐threemonthsafter
executionoftheleasecontract,Andressoldthe
housetohismotherwhois notathirdparty.Iris
filedanactiontorescindthesaleand tocompel
Andres to sell the property to her at the same
price. Alternatively, she asked the court to
extend the lease for another two years on the
sameterms.
A: Anoption contract is a preparatorycontract in
which one party grants to another, for a fixed
periodandatadeterminedprice,theprivilegeto
buyorsell,ortodecidewhetherornottoenter
into a principal contract. It binds the party who
has given the option not to enter into the
principal contract with any other person during
theperioddesignated,andwithinthatperiod, to
enter into such contract with the one whom the
optionwasgranted,ifthelattershoulddecideto
use the option. It is a separate and distinct
contract.

Inarightoffirstrefusal,whilethe objectmaybe
determinate, the exercise of the right would be
dependent not only on the grantor’s eventual
intentiontoenterintoabinding juridical relation
with another but also on terms, including the
price,thatareyettobefirmedup.(Diaz,p.54)

Q: Can Iris seek rescission of the sale of the
propertytoAndres’mother?
A: Iris can seek rescission because pursuant to
EquatorialRealtyCo.v.MayfairTheaterrescission
isareliefallowedfortheprotectionofone of the
contracting parties and even third persons from
all injury and damage the contract of sale may
causeortheprotectionofsomeincompatibleand
preferredright.
OPTION
CONTRACT
Principalcontract;
standsonitsown
Needs separate
consideration
Q: Will the alternative prayer for extension of
theleaseprosper?
Subjectmatter&price
mustbevalid
A:No, theextension of the lease shouldbe upon
the mutual agreement of the parties. (2008 Bar
Question)

Notconditional
Notsubject tospecific
performance


Q:Isitnecessarythattherightoffirstrefusalbe
embodiedinawrittencontract?

A:Yes,thegrantofsuchrightmustbeclearand
express.
RIGHTOFFIRST
REFUSAL
Accessory;cannotstand
onitsown
Doesnotneedseparate
consideration
Theremustbesubject
matterbutpricenot
important
Conditional
Subjecttospecific
performance


ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
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UST GOLDEN NOTES 2011

D.POLICITATION/MUTUALPROMISETOBUY
ANDSELL/

Q:Whatispolicitation?

A: Policitation is defined as an unaccepted
unilateralpromisetobuyorsell.Thisproducesno
judicialeffectandcreatesnolegalbond.This isa
mereoffer,andhasnotyetbeenconvertedintoa
contract. It covers the period from the time the
prospective contracting parties indicate interest
in the contract to the time the contract is
perfected.(Villanueva,p.6).

Q: Is there a legal bond already created in the
negotiationstage?

A: None. In negotiation (policitation) stage, the
offerisfloatedaswellastheacceptance.
2.PERFECTION
Q:Whenisacontractofsaledeemedperfected?

A:
GR: It is deemed perfected at the moment
there is meeting of minds upon the thing
which is the object of the contract and upon
theprice.(Art.1475,par.1)

XPN: When thesale is subject to asuspensive
conditionbyvirtueoflaworstipulation.
Q: Spouses Raet and Mitra negotiated with
Gatusaboutthepossibilityofbuyinghisrightsto
certainunitsatasubdivisiondevelopedbyPhil‐
Ville for them to be qualified to obtain loans
fromGSIS.TheypaidanamountforwhichGatus
issued them receipts in her own name. GSIS
disapproved their loan application. Phil‐Ville
advisedthemtoseekother sources of financing.
In the meantime, they were allowed to remain
inthesubjectpremises.Isthereaperfectedand
enforceable contract of sale or at least an
agreement to sell over the disputed housing
units?

A: None.Therewasno contract of saleperfected
between the private parties over the said
property,therebeingnomeetingofthemindsas
toterms,especiallyonthe pricethereof.Atbest,
only a proposed contract to sell obtained which
didnotevenripenintoaperfected contractdue
at the first instance to private respondents'
inability tosecureapprovaloftheirGSIShousing
loans. As it were, petitioners and private
respondents have not hurdled the negotiation
phaseofacontract,whichistheperiodfrom the
time the prospective contracting parties indicate
234
interestonthecontractto the timethecontract
comes into existence the perfection stage upon
the concurrence of the essential elements
thereof. (Sps. Raet & Sps. Mitra v. CA, G.R. No.
128016,Sept.17,1998)

Q: Severino executed two deeds when he sold
his propertytoHenrysothatHenrycanobtain a
loanwithPhilamLife.Healsoauthorized Henry
tofileanejectment suitagainstthelesseesand
when the prayer for ejectment was granted,
Henrytookpossessionoftheproperty.Severino
now claims ownership over the property
claimingthatthesaleisfictitiousthereforethere
wasnosaletospeakof.IsSeverino’scontention
correct?

A:No.Thereisaperfectedcontractofsaledueto
the second deed of sale in this case. The basic
characteristic of an absolutely simulated or
fictitiouscontract is thatthe apparentcontractis
not really desired or intended to produce legal
effectsoralterthejuridicalsituationoftheparties
in any way. However, in this case, the parties
already undertook certain acts which were
directed towards fulfillment of their respective
covenantsundertheseconddeed,indicatingthat
they intended to give effect to their agreement.
Further, the fact that Severino executed the two
deeds, primarily so that Henry could eject the
tenant and enter into a loan/mortgage contract
with Philam Life, is a strong indication that he
intendedtotransferownershipofthepropertyto
Henry.Forwhy(HernandoR.Penalosav.Severino
Santos,G.R.No.133749,Aug.23,2001)

Q: What is the effect of Severino’s and Henry’s
failure to appear before the notary public who
notarizedthedeed?

A: None. The non‐appearance of the parties
beforethenotarypublicwhonotarized thedeed
does not necessarily nullify nor render the
parties' transaction void ab initio. Article 1358,
NCConthenecessityofapublicdocumentisonly
forconvenience,not forvalidityor enforceability.
Whereacontractisnot intheformprescribedby
law,thepartiescan merely compeleachotherto
observe that form, once the contract has been
perfected.

Note: Contracts are obligatory in whatever form
they may have been entered into, provided all
essentialrequisitesarepresent.(Penalosav.Santos,
G.R.No.133749,Aug.23,2001)


CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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0
SALES
D.OBLIGATIONSCREATED
Q:Whenisanauctionsaleperfected?

A: A sale by auction is perfected when the
auctioneerannouncesitsperfectionbythefallof
thehammer,orinothercustomarymanner.(Art.
1476,par.2)

Q: Does the seller have the right to bid in an
auctionsale?

A: Yes. The seller has the right to bid provided
thatsuchrightwasreservedandnoticewasgiven
tothateffect.(Pineda,p.53)

Q:Whenisasaleofforeignexchangeconsidered
perfected?

A: A sale of foreign exchange is considered
perfected from the moment the Bangko Sentral
ng Pilipinas authorizes the purchase, even if the
foreign bank has not yet honored the letter of
credit. (Pacific Oxygen and Acetylene Co. v.
CentralBank,G.R.No.L‐21881,Mar.1,1968)
OBLIGATIONSOFTHEBUYER

Q:Whataretheobligationsofthebuyer?

A:
1. Paymentoftheprice
GR: Seller is notbound to deliver unless
thepurchasepriceispaid 
XPN: A period of payment has been
fixed
2. Acceptdeliveryofthingsold
3. Payforexpensesofdelivery

Note: A grace period granted the buyer in case of
failure to pay is a right not an obligation. Non‐
payment would still generally require judicial or
extrajudicialdemandbeforedefaultcanarise.

Q:Whataretheotherobligationsofthebuyer?

A:
1. To take care of the goods without the
obligation to return, where the goods
are delivered to the buyer and he
rightfullyrefusestoaccept;

3.CONSUMMATION
Q: How does the consummation stage in a
contractofsaletakeplace?

A: It takes place by the delivery of the thing
togetherwiththepaymentoftheprice.

Q: A and PDS Development Corp. executed a
contracttosellaparcel ofland.Adiedwithout
having completed the installment on the
property. His heirs then took over the contract
tosellandassumedhisobligationsbypayingthe
sellingpriceof the lot  from their ownfunds, and
completed the payment. To whom should the
finalDeedofAbsoluteSalebeexecutedbyPDS?

A:Having stepped into the shoes of the deceased
with respect to the said contract, and being the
oneswhocontinuedtopaytheinstallmentsfrom
their own funds, A’s heirs  became the lawful
ownersofthesaidlotinwhosefavor thedeed of
absolute sale should have been executed by
vendor PDS. (Dawson v. Register of Deeds of
QuezonCity,G.R.No.120600Sept.22,1998)










Note:Thegoodsinthebuyer’spossession
areattheseller’srisk.

2.
3.
To be liable as a depositary if he
voluntarilyconstitutedhimselfassuch;
To pay interestfor the period between
delivery of the thing and the payment
ofthepriceinthefollowingcases:
a. shouldithavebeenstipulated;
b. shouldthethingsoldanddelivered
producesfruitsorincome;or
c. should he be in default, from the
time of judicial or extra‐judicial
demand for the payment of the
price.

OBLIGATIONSOFTHESELLER

Q:Whataretheobligationsoftheseller?

A:DDTWTP
1. Deliverthethingsold;
2. Deliver fruits & accessions/accessories
accruingfromperfectionofsale;
3. Transfertheownership;
4. Warranties;
5. Takecareofthething,pendingdelivery,
withproperdiligence;
6. Payfortheexpensesofthedeed ofsale
unless there is a stipulation to the 
contrary
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
235
UST GOLDEN NOTES 2011

E.CHARACTERISTICSOFACONTRACTOFSALE
2.

Q: What are the characteristics of a contract of
sale?

A:
1. Consensual
2. Bilateral
3. GR:Commutative

XPN: Aleatory – In some contracts of
sale,whatone receivesmayintimebe
greater or smaller than what he has
given.(Tolentino,p.2,2000ed)
4. Principal
5. Title and not a mode of acquiring
ownership
6. Onerous
7. Reciprocal
8. Nominate

Q: Is a contract of sale identified as such based
on the nomenclature given to the contract by
theparties?

A: No. Contracts are not defined by the parties
but byprinciplesoflaw.Todeterminethenature
of the contract, the courts arenot bound by the
name or title given to it by the contracting
parties. It is the intention of the parties which
controls. (Diaz, Law on Sales as expounded by
Jurisprudence,2006ed.,p.1)

Q: What are the factors to be considered in
determiningthenatureofthecontract?
A:
1. Languageofthecontract
2. Conductofparties

F.DISTINCTIONSOFTHECONTRACTOFSALE
WITHOTHERCONTRACTS

Q:DistinguishSalefromthefollowing:

1. Donation.

SALE
DONATION
Onerous
Consensual
Gratuitous/onerous
Formalcontract
LawonSales
LawonDonation


3.
AgencytoSell
SALE
Sellerreceivesprofit
AGENCYTOSELL
Agentnotobligedtopay
forprice;must
accountforthe
proceedsofthesale.
Principalremainsthe
ownerevenifthe
objectdeliveredto
agent
Agentassumesnopersonal
liabilityaslongas
withinauthoritygiven
Mayberevoked
unilaterallyevenw/o
ground
Agentnotallowedtoprofit
Realcontract
Personalcontract
Buyerpaysforprice
ofobject
Buyerbecomes
ownerofthing
Sellerwarrants
Notunilaterally
revocable

4.
DacionenPago
SALE
DACIONENPAGO
Nopre‐existing
credit
Contractwherepropertyis
alienatedtoextinguishpre‐
existingcredit/debt
Buyer‐seller
relationship
Novatescreditor‐debtor
relationshipintoseller‐buyer

5.
Lease
SALE
Obligationtoabsolutely
transferownershipof
thing
Considerationistheprice
Sellerneedstobeownerof
thingtotransfer
ownership.

Note:Leasewithoptionto
buy–reallyacontractof
salebutdesignatedas
leaseinname.







236
Barter
SALE
BARTER
Considerationisgiving
Considerationis
ofmoneyaspayment
givingofathing
Ifconsiderationconsistspartyinmoney&partlyby
thing–lookatmanifestintention;
Ifintentionisnotclear–Art.1468
Valueofthingismore
Valueofthingisequal
thanamountofmoney=
orlessthanamountof
Barter
money=Sale
Bothare governedbylawonsales
LEASE
Useofthingisfor
specifiedperiodonly
withobligationto
return
Considerationisthe
rental
Lessorneednotbe
owner

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
document entitled "Receipt of Down Payment"
in favor of Alcaraz for the purchase of their
house and lot, with the condition that Ramona
will make a down payment upon execution of
the document. The Coronels would then cause
the transfer of the property in the name of
Ramonaandwillexecuteadeedofabsolutesale
in favor of Ramona. Ramona paid the
downpayment as agreed. Is there a perfected
contractofsaleoramerecontracttosell?
G.CONTRACTTOSELL

Q:Whatisacontracttosell?
A: It is one form of conditional sale where
ownership or title is retained by the seller until
thefulfillmentofapositivesuspensivecondition,
normally the payment of the purchase price by
thebuyerin themanneragreedupon.(Gomezv.
CA,et.al.,G.R.120747,Sept.21,2000)

Q: Distinguish a contract tosell from a contract
ofsale.
A:The agreement could not have been a contract
tosellbecausethesellershereinmadenoexpress
reservation of ownership or title to the subject
parcel of land. The Coronels had already agreed
tosellthehouseandlot theyinheritedfromtheir
father, completely willing to transfer full
ownership of the subject house and lot to the
buyer if the documents were then in order.
However, the TCT was then still in the name of
theirfather,thatiswhytheycausedthe issuance
of a new TCT in their names upon receipt of the
downpayment.Assoonasthenew TCTisissued
in their names, they were committed to
immediately execute the deed of absolute sale.
Onlythenwilltheobligationofthebuyertopay
the remainder of the purchase price arise.  This
suspensive condition was fulfilled. Thus, the
conditional contract of sale became obligatory,
the only act required for the consummation
thereof being the delivery of the property by
means of the execution of the deed of absolute
sale in a public instrument, which they
unequivocally committed themselves to do as
evidenced by the "Receipt of Down Payment."
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
1996)
A:
CONTRACTOFSALE
CONTRACTTOSELL
Asregardstransferofownership
Ownershipistransferred
Ownershipis
tothebuyerupon
transferreduponfull
deliveryoftheobjectto
paymentofthe
him.
purchaseprice.
Note:Vendorhaslost
Note:Priortofull
andcannotrecover
payment,ownershipis
ownershipuntiland
retainedbytheseller.
unlessthecontractis
resolvedorrescinded
Astonumbersofcontractsinvolved
Therearetwocontracts:
1.Thecontracttosell

Note:Conditionalor
preparatorysale
Thereisonlyone

contractexecuted
2.Thedeedofabsolute
betweenthesellerand
sale
thebuyer.

Note:Theprincipal
contractisexecuted
afterfullpaymentofthe
purchaseprice.
Paymentasacondition
Fullpaymentofthe
priceisapositive
Non‐paymentofthe
suspensivecondition.
priceisaresolutory
Note:Failuretofully
condition.Vendorloses
paythepriceisnota
ownershipoverthe
breachbutanevent
propertyandcannot
thatpreventsthe
recoverituntiland
obligationofthevendor
unlessthecontractis
toconveytitlefrom
resolvedorrescinded.
becomingeffective.
Remediesavailable
1. Specific
1. Resolution
2. Performance
2. Damages
3. Rescission
4. Damages
Q:Insteadofexecutingadeed ofAbsoluteSale
in favor of Ramona, the Coronels sold the
property to Catalina and unilaterally and
extrajudicially rescinded the contract with
Ramona.  Ramona then filed a complaint for
specific performance.  Will Ramona’s action
prosper?
A: Yes. Under Article 1187, the rights and
obligations of the parties with respect to the
perfected contract of sale became mutually due
and demandable as of the time of fulfillment or
occurrence of the suspensive condition.  Hence,
petitioner‐sellers' act of unilaterally and
extrajudicially rescinding the contract of sale
cannot be justified, there being no express
stipulation authorizing the sellers to 
extrajudicially rescind the contract of sale.
(Coronel, et al. v. CA, G.R. No. 103577, Oct. 7,
1996)

Q: Having agreed to sell property which they
inheritedfromtheirfather,whichwasthenstill
intheirfather’sname,theCoronelsexecuteda
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
237
UST GOLDEN NOTES 2011

Q:Whataretheinstanceswhenwhatisinvolved
isacontracttosell?

A:
1. Wheresubjectmatterisindeterminate
2. Saleoffuturegoods
3. Stipulation that deed of sale &
corresponding certificate of sale would
beissuedonlyafterfullpayment

II.PARTIESTOACONTRACTOFSALE
Q:Whoarethepartiestoacontractofsale?

A:
1. Seller–onewhosellsandtransfers the
thingandownershiptothebuyer
2. Buyer – one who buys the thing upon
payment of the consideration agreed
upon

A.CAPACITYOFTHEPARTIES
Q:Whomayenterintoacontractofsale?

A: 
GR:Any person whohas capacity to contract
or enter into obligations, may enter into a
contractofsale, whetherasparty‐seller oras
party‐buyer.

XPN:
1. Minors, insane and demented persons
and deaf‐mutes who do not know how
towrite
2. Persons under a state of drunkenness
orduringhypnoticspell
3. Husband and wife ‐ sale by and
betweenspouses

Note:Contractsofsaleenteredbysuchlegally
incapacitated persons are merely voidable,
subject to annulment or ratification. However,
the action for annulment cannot be instituted
by the person who is capacitated since he is
disqualified from alleging the incapacity of the
personwithwhomhecontracts.

However,statusofprohibitedsalesbetween
spousesisnotmerelyvoidable,butnulland
void.

XPNtoXPN:

1. Where necessaries are sold and
delivered to a minor or other person
without capacity to act, he must pay a
reasonablepricetherefor.
2. Incaseofsalebetweenspouses:
238
a.
whenaseparationofpropertywas
agreed upon in the marriage
settlements;or
b. when there has been a judicial
separation of property agreed
uponbetweenthem

B.ABSOLUTEINCAPACITY

Q:Whoarethoseabsolutelyincapacitatedto
enterintoacontractofsale?

A:
1. Unemancipatedminors(Art.1327,NCC);
2. Insaneordementedpersons,anddeaf‐
mutes who do not know how to write
(Art.1327,NCC)

Q: May a capacitated person file an action for
annulment using as basis the incapacity of the
incapacitatedparty?

A: No. He is disqualified from alleging the
incapacityofthepersonwhomhecontracts(Art.
1397,NCC);

Q: In a defective contract, where such defect
consists in the incapacity of a party, does the
incapacitated party have an obligation to make
restitution?

A:
GR:heincapacitatedpersonisnotobligedto
makeanyrestitution.
XPN:insofarashehasbeenbenefitedbythe
thing or price received by him. (Art. 1399,
NCC)

C.RELATIVEINCAPACITY

Q: Who are those relatively incapacitated to
enterintoacontractofsale?

A:
1. Spouses(Art.1490,NCC)
2. Agents, Guardians, Executors and
Administrators, Public Officers and
Employees, Court Officers and
Employees, and others specially
disqualifiedbylaw.(Art.1491,NCC)

Note: Under Art. 1490 of the NCC, spouses cannot
sellpropertytoeachother,except:

a. When a separation of property was
agreedinthemarriagesettlements;or
b. When there hasbeenajudicialseparation
ofpropertyagreeduponbetweenthem.


CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
Q:Whatisthestatusofthe followingcontracts
ofsale?

A:
1. Thatenteredintobyminors:
a. Merely voidable, subject to
annulmentorratification
b. Action for annulment cannot be
instituted by the person who is
capacitatedsinceheisdisqualified
fromallegingtheincapacityofthe
person with whom he contracts
(withpartialrestitutioninsofaras
the minor is benefited) where
necessaries are sold and delivered
toaminororotherpersonwithout
capacity to act, he must pay a
reasonableprice(Art.1489)

2. Saleby&betweenspouses(Art.1490):
a. Statusofprohibitedsalesbetween
spouses:
GR:Nullandvoid


XPN: In case of sale between
spouses:
b.

3.
i. When a separation of
property was agreed upon in
themarriagesettlements;or
ii. When there has been a
judicialseparation ofproperty
agreeduponbetweenthem

Reasons:
i. Preventdefraudingcreditors
ii. Avoid
situation
where
dominant spouse takes
advantage over the weaker
spouse
iii. Avoid circumvention on
prohibition of donation
betweenspouses

rd
Contractofsalewith3 parties:
GR: Under the law on sales, it
would seem that a spouse may,
without the consent of the other
spouse,
enter
into
sales
transactions in the regular or
normal pursuit of their profession,
vocationortrade.(inrelationwith
Art.73,FamilyCode)


XPN: Even when the property
regimeprevailingwasthe conjugal
partnership of gains, the Supreme
Courtheldthesaleby thehusband
ofaconjugalpropertywithoutthe
consent of the wife is void, not
merely voidable under Art. 124 of
theFamilyCodesince theresulting
contract lack one of the essential
elements of full consent. (Guiang
v. CA, G.R. No. 125172, June 26,
1998)

Between Common Law Spouses ‐ also
nullandvoid.

In Calimlim‐Canullas v. Fortun, the
Court decided that sale between
common law spouses is null and void
because Art. 1490 prohibits sales
between spouses to prevent the
exercise of undue influence by one
spouse over the other, as well as to
protecttheinstitution ofmarriage.The
prohibitionappliestoacouplelivingas
husband and wife without the benefit
ofmarriage,otherwise, thecondition of
those incurred guilt would turn out to
be better than those in legal union.
(Calimlim‐Canullasv.Fortun,et.al.,G.R.
No.L‐57499,June22,1984)

But when the registered property has
beenconveyedsubsequentlytoathird‐
partybuyeringoodfaithandforvalue,
then reconveyance is no longer
available to common‐law spouse‐seller,
since under the Torrens system every
buyer has a right to rely upon the title
ofhisimmediateseller.(Cruzv.CA,G.R.
No.120122,Nov.6,1997)
Q:Whohastherighttoassailthevalidityofthe
transactionbetweenspouses?

A:Thefollowingaretheonlypersonswhocan
questionthesalebetweenspouses:
1. The heirs of either of the spouses who
havebeenprejudiced;
2. Priorcreditors;and
3. The State when it comes to the
paymentofthepropertaxesdueonthe
transactions
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
239
UST GOLDEN NOTES 2011

Q:Whoarethepersonswithrelativeincapacitytobethevendeeinacontractofsale?

A:AGE‐COP
RELATIVELY
INCAPACITATEDTOBUY
PROPERTIESINVOLVED
Propertyentrustedtothemfor
administrationorsale

XPN:Whenprincipalgavehis
consent
Propertyofthewardduring
periodofguardianship

Agents
STATUSOFSALE

Voidable
Note:Contractsenteredby
guardianinbehalfofwardare
rescissibleifwardsufferslesion
bymorethan¼ofthevalueof
property.
Guardian
Executorsand
administrators
Propertyoftheestateunder
administration
Courtofficersand
employees
Propertyandrightsinlitigationor
leviedupononexecutionbefore
thecourtundertheirjurisdiction
Othersspecially
disqualifiedbylaw
Pubicofficersand
employees

Void

PropertyoftheStateentrustedto
themforadministration
RATIFICATION
Canberatifiedafterthe
inhibitionhasceased

Reason:theonlywrongthat
subsistsistheprivatewrong
totheward,principalor
estate;andcanbecondoned
bytheprivateparties
themselves
Cannotberatified

Reason:Itisaprivatewrong.
(Villanueva,LawonSales,p.
30‐31)

Note:Prohibitionsareapplicabletosalesinlegalredemption,compromisesandrenunciations.

InthecaseofRubiasv. Batiller(51SCRA 120),itsoughttodeclarethedifferenceinthenullitybetweencontracts
enteredintobyguardians,agents,administratorsandexecutors,fromthecontractsenteredintoby judges,judicial
officers,fiscalsandlawyers.
240
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
D.SPECIALDISQUALIFICATIONS
Q:Whoarethosepersonsspeciallydisqualified
bylawtoenterintocontractsofsale?

A:ALIEN‐UnOS
1. ALIENswhoaredisqualifiedtopurchase
private agriculturallands(Art. XII Secs. 3
&7)
2. Unpaid seller having a right of lien or
havingstoppedthegoodsintransitu, is
prohibitedfrombuyingthegoodseither
directlyorindirectlyintheresale ofthe
same at public/private sale which he
maymake(Art.1533[5];Art.1476[4])
3. The Officer holding the execution or
deputy cannot become a purchaser or
be interested directly or indirectly on
any purchase at an execution. (Sec. 21
Rule39,RulesofCourt)
4. In Sale by auction, seller cannot bid
unless notice has been given that such
saleissubjecttoaright tobidinbehalf
oftheseller.(Art.1476)

Q: Atty. Leon G. Maquera acquired his client’s
property as payment for his legal services, then
sold it and as a consequence obtained an
unreasonable high fee for handling his client’s
case.Didhevalidlyacquirehisclient’sproperty?

A: No. Article 1491 (5) of the New Civil Code
prohibits lawyer’s acquisition by assignment of
the client’s property which is the  subject of the
litigation handled by the lawyer. Also, under
Article 1492, the prohibition extends to sales in
legal redemption. (In Re: Suspension from the
Practice of Law in the territory of Guam of Atty.
LeonG.Maquera,B.M.No.793,July30,2004)


ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
241
UST GOLDEN NOTES 2011

III.SUBJECTMATTEROFSALE

A.REQUISITESOFAVALIDSUBJECTMATTER

Q:Whataretherequisitesofaproperobjectof
sale?

A:
1. Things
a. Determinateordeterminable
b. Lawful (licit), otherwise contract is
void
c. Should not be impossible (within
thecommerceofmen)

2. Rights

GR:Mustbetransmissible.
XPN:
a. Futureinheritance
b. Service – cannot be the object of
sale. They are not determinate
things and no transfer of
ownershipisavailablebutitcanbe
theobjectofcertaincontractssuch
uas contract for a piece of work.
(Pineda,Sales,2002ed.,p.13)

Q:Rodriguezfirstpurchasedaportionof aLotA
consisting of 345 square meters located in the
middle of Lot B, which has a total area of 854
square meters, from Juan. He then purchased
another portion of said lot. As shown in the
receipt, the late Juan received P500.00 from
Rodriguez as "advance payment for the
residential lot adjoining his previously paid lot
onthreesidesexcepting onthe frontage.Juan’s
heirs now contests the validity of the
subsequent sale, alleging that the object is not
determinateordeterminable.Decide.

A: Their contention is without merit. There is no
disputethatRodriguezpurchasedaportionofLot
Aconsistingof345squaremeters.Thisportionis
locatedinthemiddleofB,whichhasa totalarea
of 854 square meters, and is clearly what was
referredtointhereceiptas the"previouslypaid
lot."Sincethelotsubsequently soldtoRodriguez
issaidto adjointhe"previouslypaidlot"on three
sides thereof, the subject lot is capable of being
determined without the need of any new
contract. The fact that the exact area of these
adjoiningresidentiallotsissubjecttotheresultof
asurveydoesnotdetractfromthefactthatthey
aredeterminateordeterminable. Concomitantly,
theobjectof thesaleiscertainanddeterminate.
(Heirs of San Andres v. Rodriguez, G.R. No.
135634,May31,2000)
242
Note: Wherelandis soldfor a lumpsum and not so
much per unit of measure or number, the
boundaries of the land stated in the contract
determine the effects and scopeof thesale, not the
areathereof.Thevendorsareobligatedtodeliverall
the land included within the boundaries, regardless
of whether the real area should be greater or
smaller than that recited in the deed. This is
particularly true where the area is described as
"humigitkumulang,"thatis,moreorless.(Semirav.
CA,G.R.No.76031,Mar.2,1994)

Q:Canrightsbetheobjectsofsale?

A:Yes,iftheyaretransmissible.(Art.1347)

B.PARTICULARKINDS

Q:Whatmaybeobjectsofsale?

A:
1. Existing Goods – owned/ possessed by
selleratthetimeofperfection

2. Future Goods – goods to be
manufactured,raised,acquiredbyseller
after perfection of the contract or
whose acquisition by seller depends
uponacontingency(Art.1462)

Note: Sale of future goods is valid only as an
executory contract to be fulfilled by the acquisition
&deliveryofgoodsspecified.
3.
4.
SaleofUndividedInterestorShare
a. Sole owner may sell an
undividedinterest.(Art.1463)
Ex.Afractionorpercentageof
suchproperty
b. Saleofanundividedshareina
specific mass of fungible
goods makes the buyer a co‐
owner of the entire mass in
proportion to the amount he
bought.(Art.1464)
c. A co‐owner cannot sell more
than his share (Yturralde v.
CA)

SaleofThingsinLitigation
a. Sale of things under litigation
isrescissibleifenteredintoby
the defendant , without the
approvalofthelitigantsorthe
court(Art.1381)
b. Norescissionisallowedwhere
the thing is legally in the
possession of a 3rd person
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
5.
6.
A.SALEBYAPERSONWHODOESNOTOWNTHE
THINGSOLD

Q: Whatisthestatusofasaleby apersonwho
doesnotownthethingsubjectofthesale?

A:Itdependsuponthestageofthesale.
1. When seller is not owner at perfection
stage–thesaleisvalid.
Ownershipofthesubjectmatterby the
seller at this stage is not an essential
requirementforthevalidityofsale.Itis
necessary at the time of delivery.
Hence,avalidcontractofsalecancover
subjectmatterthatisnotyetexistingor
even a thing having only a potential
existence at the time of perfection; or
even a thing subject to a resolutory
condition.




who did not acted in bad
faith.

Things subject to Resolutory Condition.
Ex. Things acquired under legal or
conventional right of redemption, or
subjecttoreservatroncal.(Art.1465)

Indeterminate Quantity of Subject
Matter
a. The fact that the quantity is
not determinate shall not be
an obstacle to the existence
of the contract provided it is
possible to determine the
same, without need of a new
contract.(Art.1349)


IV.OBLIGATIONOFTHESELLER
TOTRANSFEROWNERSHIP
Note:Ifthesellerlateracquirestitlethereto
anddeliversit,titlepassesbyoperationof
law.

Q:Shouldthesellerbe theowner at the timeof
perfectionofthecontract?

A:
GR:No.Sellermusthavethe right to transfer
ownership at the time of delivery or
consummation stage. He need not be the
owner at the time of perfection of the
contract.

XPN: Foreclosuresale wherein the mortgagor
shouldbetheabsoluteowner.

Q: EJ was subjected to a buy‐bust operation
where police officers posed to buy 500 pesos
worth of “S”. She was then charged with a
violation of the Dangerous Drugs Act for
traffickingdrugs.EJusesasdefenseherlackof
possession of the object of the sale. Would her
contentionfreeherfromliability?

A: No. Though she was not in possession of the
object of sale, Article 1459 merely requires that
the vendor must have the right to transfer
ownership of the object sold at the time of
delivery.  In the case at bar, though Beth is not
the owner, she had the right to dispose of the
prohibited drug.  Ownership was thereafter
acquireduponherdeliverytothemeninthe alley
after her payment of the price. (People v.
Ganguso,G.R.No.115430,Nov.23,1995)






2.
When seller is not owner at
consummationstage
a. Old view – the contract of sale is
valid, but the transfer of title is
void. (Mindanao‐Academy, Inc. v.
Yap, G.R. No. L‐17681, Feb. 26,
1965)
b. New view – the sale by a non‐
owner of the subject property is
void instead of treating the
tradition/delivery aspect as having
no effect on transferring
ownership to the buyer. (DBP v.
CA,G.R.No.110053,Oct.16,1995)


Note:Nemodatquodnonhabet–you
cannotgivewhatyoudonothave,properly
applicabletotheconsummationofasale.

Q: What is the legal effect of sale by a non‐
owner?

A:
GR: The buyer requires no better title to the
goods than the seller had; caveat emptor
(buyerbeware).

XPN:
1. Estoppel – when the owner of the
goodsisbyhisconductprecluded from
denyingtheseller’sauthoritytosell
2. When the contrary is provided for in 
recordinglaws
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
243
UST GOLDEN NOTES 2011

3.
4.
5.
6.
7.
When thesaleismadeunderstatutory
power of sale or under the order of a
courtofcompetentjurisdiction
When thesaleismade ina merchant’s
store in accordance with the Code of
Commerceandspeciallaws
When a person who is not the owner
sells and delivers a thing, and
subsequentlyacquiredtitlethereto
When the seller has a voidable title
whichhasnotbeenavoidedatthetime
ofthesale
Salebyco‐ownerof thewholeproperty
oradefiniteportionthereof
Specialrightsofunpaidseller
8.

Q: What are the instances when the Civil Code
recognizes saleof things not actually or already
ownedbytheselleratthetimeofsale?

A:
1. Sale of a thing having potential
existence(Art.1461,NCC)
2. Saleoffuturegoods(Art.1462,NCC)
3. Contract for the delivery at a certain
price of an article, which the seller in
the ordinary course of business
manufactures/procuresforthegeneral
market,whetherthesameisonhandat
thetimeornot(Art.1467,NCC)

B.SALEBYAPERONHAVINGAVOIDABLETITLE

Q:Whatistheeffectofasalemadebytheseller
withvoidabletitleovertheobject?

A:
1. Perfectionstage:valid–buyer acquires
titleofgoods
2. Consummationstage:valid–If thetitle
hasnotyetbeenavoidedatthetimeof
saleandthebuyermustbuy thegoods
underthefollowingconditions:
a. Ingoodfaith
b. Forvalue
c. Withoutnoticeofseller’sdefect of 
title

EMPTIOREISPERATAE
Saleofthinghaving
potentialexistence
Uncertaintyisw/regard
toquantity&quality
Contractdealsw/future
thing
Saleisvalidonlyi fthe
expectedthingwill
exist.
244
EMPTIOSPEI
Saleofmerehopeor
expectancy
Uncertaintyisw/regard
toexistenceofthing
Contractdealsw/
presentthing–hope
orexpectancy
Saleisvalideventhough
expectedthingdoes
notcomeinto
existenceaslongas
thehopeitselfvalidly
existed.(eg.lotto)
Note:ThepresumptionisEmptio ReiSperatae

Q: Jose, as co‐owner, sold the entire land in
favor of his minor daughter, Ida. Alleging that
Jose had fraudulently registered it in his name
alone, his sisters, sued him for recovery of 2/3
share of the property. Ida did not pay for the
land.Isthesalevalid?

A: No. Jose did not have the right to transfer
ownership of the entire property to petitioner
since2/3thereofbelongedtohissisters.Also,Ida
couldnothavegivenherconsenttothecontract,
being a minor at the time. Consent of the
contracting parties is among the essential
requisites of a contract, including one of sale,
absent which there can be no valid contract.
Moreover,Idaadmittedlydidnotpayanycentavo
for the property, which makes the sale void.
Article1471oftheCivilCodeprovides:Iftheprice
issimulated,thesale isvoid,buttheactmaybe
shown to have been in reality a donation, or
someotheractorcontract.(Labagalav.Santiago,
G.R.No.132305,Dec.4,2001)


V.PRICE

A.MEANINGOFPRICE

Q:Whatisaprice?

A: Price signifies the sum stipulated as the
equivalent of the thing sold and also every
incidenttakenintoconsiderationforthe fixingof
thepriceputtothedebitofthebuyerandagreed
tobyhim.(Villanueva,p.52)

B.REQUISITESFORAVALIDPRICE

Q:Whataretherequisitesofprice?

A:Mustbe:
1. Real
2. Inmoneyoritsequivalent
3. Certain or ascertainable at the time of
theperfectionofthecontract

C.HOWPRICEISDETERMINED

Q:Whenispricecertain?

A:
1. Ifthereisastipulation
2. If it be with reference to another thing
certain
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
3.
4.
Q: What is the effect on the contract of sale in
case of a breach in the agreed manner of
payment?

A:None.Itisnottheactofpayment ofpricethat
determines the validity of a contract of sale.
Paymentofthe pricehasnothingtodo with the
perfection of the contract, as it goes into the
performance of the contract. Failure to pay the
consideration is different from lack of
consideration. Failure to pay such results in a
righttodemandthefulfillmentorcancellation of
theobligationunderanexistingvalidcontract.On
theotherhand,lackofconsiderationpreventsthe
existence of a valid contract. (Sps. Bernardo
Buenaventura and Consolacion Joaqui v. CA, GR
No.126376,Nov.20,2003)

Q:Ispaymentof thepurchasepriceessentialto
transferownership?

A: Unlessthe contract contains a stipulationthat
ownershipofthe thingsoldshallnotpasstothe
purchaser until he has fully paid the price,
ownershipofthethingsoldshallbetransferredto
the vendee upon the actual or constructive
deliverythereof.(Diaz,p.48)

E.WHENNOPRICEISAGREEDUPONBYTHE
PARTIES

Q:Whatistheeffectoffailuretodeterminethe
price?

A:
1. Where contract is executory –
ineffective
2. Where the thing has been delivered to
and appropriated by the buyer – the
buyer must pay a reasonable price
therefore
If the determination of the price is left
tothejudgmentofspecifiedperson(s)
By reference to certain fact(s) as
referredtoinArt.1472(Art.1469)

Note:Ifthepriceisbasedonestimates,itis
uncertain.

D.GROSSINADEQUACYOFTHEPRICE

Q:Whatistheeffectofgrossinadequacyof
price?

A:
GR:Itdoesnotaffectthevalidityofthesaleif
itisfixedingoodfaithandwithoutfraud

XPN:CoRDS
1. If Consent is vitiated (may be annulled
orpresumedtobeequitablemortgage)
2. If the parties intended a Donation or
someotheract/contract
3. Ifthepriceissolow astobe“Shocking
totheconscience”
4. If in the eventof Resale, a better price
canbeobtained

Note:
GR:Thevalidityofthesaleisnotnecessarilyaffected
where the law gives the owner the right to redeem
because the lesser the price, the easier it is for the
ownertoeffectredemption.

XPN:Whilethereisnodisputethatmereinadequacy
ofthepriceper se will notsetasideajudicialsaleof
realproperty,nevertheless,wheretheinadequacyof
the price is purely shocking to the conscience, such
thatthemindrevoltsatitandsuchthatareasonable
man would neither directly or indirectly be likely to
consenttoit, thesamewillbesetaside.(Cometav.
CA351SCRA294)

Q:Whatistheeffectifthepriceissimulated?

A:
GR:Contractofsaleisvoid.

XPN:Theactmaybeshowntohavebeenin
realityadonationorsomeotheractor
contract.

Q:Whatisconsideredreasonableprice?

A:Generallythemarketpriceatthetimeand
placefixedbythecontractorbylawforthe
deliveryofthegoods.


Note: The fixing of the price cannot be left to the
discretionofoneoftheparties.However,iftheprice
fixedbyoneofthe partiesisacceptedbytheother,
thesaleisperfected.


ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
245
UST GOLDEN NOTES 2011

F.MANNEROFPAYMENT

Q: What is the effect of a breach of the agreed
mannerofpaymenttothecontractofsale?

A: None.  A contract of sale being a consensual
contract, it becomes binding and valid upon the
meetingofthemindsastoprice.
1. Ifthereissuch meetingofthemindsas
to price, the contract of sale is valid,
despite the manner of payment, or
even the breach of that manner of
payment.
2. If the real price is not stated in the
contract, then the contract of sale is
validbutsubjecttoreformation.
3. Ifthereisnomeetingoftheminds asto
thepricebecause thepricestipulatedin
the contract is simulated, then the
contract is void, in accordance with
Article 1471 of the Civil Code. (Sps.
Buenaventura v. CA, G.R. No. 126376,
Nov.20,2003)

Q: Distinguish the failure to pay the
considerationfromlackofconsideration.

A:
Note: A definite agreement on the manner of
payment of the price is an essential element in the
formation of a binding and enforceable contract of
sale.(Cov.CA,G.R.No.123908,Feb.9,1998)

G.EARNESTMONEYVIS‐A‐VISOPTIONMONEYY

OPTIONMONEY

Q:Whatistheeffectoffailuretodeterminethe
price?

A:
1. Where contract is executory –
ineffective
2. Where the thing has been delivered to
and appropriated by the buyer – the
buyer must pay a reasonable price
therefore

Q: In an action for specific performance with
damages,Xallegedthattherewasanagreement
topurchasethelotofY.Asregardsthemanner
of payment, however, Y’s receipts contradicted
the testimony of X. The receipts failed to state
the total purchase price or prove that full
payment was made. For this reason, it was
contended that there was no meeting of their
minds and there was no perfected contract of
sale.Decide.

A: The question to be determined should not be
whethertherewasanagreedprice,butwhatthat
agreed price was. The sellers could not render
invalid a perfected contract of sale by merely
contradictingthebuyer’sobligationregardingthe
price, and subsequently raising the lack of
agreement as to the price. (David v. Tiongson,
G.R.No.108169,Aug.25,1999)










246
FAILURETOPAY
LACKOF
CONSIDERATION
CONSIDERATION
Astovalidityofcontractofsale
Itisnottheactofpayment
ofpricethatdetermines
thevalidityofacontractof
sale.
Lackofconsideration

preventsthe
Note:Paymentoftheprice
existenceofavalid
hasnothingtodowiththe
contract.
perfectionofthecontract.
Instead,itgoesintothe
performanceofthe
contract.
Astoresultantright
Failuretopaythe
Thecontractofsaleis
considerationresultsina
nullandvoidand
righttodemandthe
producesnoeffect
fulfillmentorcancellation
whatsoever
oftheobligationunderan
existingvalidcontract.

Note: The fixing of the price cannot be left to the
discretionofoneoftheparties.However,iftheprice
fixedbyoneofthepartiesisaccepted bytheother,
thesaleisperfected.

Q:Whatisanoptionmoney?

A:The distinct consideration in caseofanoption
contract. It does not form part of the purchase
price hence, it cannot be recovered if the buyer
didnotcontinuewiththesale.

Q:Whenispaymentconsideredoptionmoney?

A:Paymentisconsideredoptionmoneywhenitis
given as a separate and distinct consideration
from the purchase price. Consideration in an
option contract may be anything or undertaking
ofvalue.
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
Simeonsuddenlyhasachangeofheart,claiming
that the deal is disadvantageous to him as he
hasfoundoutthat thepropertycanfetchthree
times the agreed purchase price. Bert seeks
specific performance but Simeon contends that
he has merely given Bert an option to buy and
nothing more and offers to return the option
moneywhichBertrefusestoaccept.

1. Will Bert's action for specific
performanceprosper?Explain.
2. May Simeon justify his refusal to
proceed with the sale by the fact that
the deal is financiallydisadvantageous
tohim?Explain.

A:
1. Bert's action for specific performance
will prosper because there was a
binding agreement of sale, not just an
optioncontract.Thesalewasperfected
upon acceptance by Simeon of 10% of
the agreed price. This amount is in
reality an earnest money which, under
Art. 1482, "shall be considered as part
of the price and as proof of the
perfection of the contract." (Topacio v.
CA, G.R. No. 102606, July 3, 1992;
VillongcoRealtyv.Bormaheco,G.R.No.
L‐26872,July25,1975).

2. Simeon cannot justify his refusal to
proceed with the sale by the fact that
the deal is financially disadvantageous
to him. Having made a bad bargain is
not a legal ground for pulling out of a
bindingcontractofsale,intheabsence
ofsomeactionable wrongbytheother
party (Vales v. Villa, G.R. No. 10028,
Dec. 16, 1916), and no such wrong has
been committed by Bert. (2002 Bar
Question)

VI.FORMATIONOFCONTRACTOFSALE

EARNESTMONEY

Q:Whatisanearnestmoneyor“arras”?

A: This is the money given to the seller by the
prospectivebuyertoshowthat thelatteristruly
interestedinbuyingtheproperty,anditsaimisto
bindthebargain.(Pineda,p.75)

Q: What is the effect of giving an earnest
money?

A:Itformspartofthepurchasepricewhichmay
bedeductedfromthetotalprice.Italso servesas
a proof of the perfection of the contract of sale.
The rule is no more than a disputable
presumption and prevails only in the absence of
contrary or rebuttable evidence. (PNB v CA, 262
SCRA464,1996)

Note: Option money may become earnest money if
thepartiessoagree.

Q: When is payment considered an earnest
money?

A: When the payment constitutes as part of the
purchaseprice.Hence,incasewhenthesaledid
not happen, it must be returned to the
prospectivebuyer.

Q: Distinguish option money from earnest
money.

A:
OPTIONMONEY
Moneygivenas
distinct
considerationfor
anoptioncontract
Appliestoasale
notyetperfected
Prospectivebuyeris
notrequiredto
buy.
Ifbuyerdoesnot
decidetobuy,it
cannotbe
recovered.
EARNESTMONEY
Formspartofthe
purchaseprice
Givenonlywhenthereis
alreadyasale
Whengiven,thebuyeris
boundtopaythe
balance.
Ifsaledidnotmaterialize,
itmustbereturned.
(Villanueva,p.87,
Pineda,p.77)
Note:seeIntroduction,StagesofContractofSale
pp.230‐234



Q: Bert offers to buy Simeon's property under
the following terms and conditions: P1 million
purchase price, 10% option money, the balance
payable in cash upon the clearance of the
property of all illegal occupants. The option
money is promptly paid and Simeon clears the
propertyofallillegaloccupantsinnotimeatall.
However, when Bert tenders payment of the
balance and asks for the deed of absolute sale,
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
247
UST GOLDEN NOTES 2011

VII.TRANSFEROFOWNERSHIP

A.MANNEROFTRANSFER

Q:Whatistheeffectofdelivery?

A:
GR:Title/ownershipistransferred

XPN:Contraryisstipulatedasinthecaseof:
1. Pactum reservatii in domini –
agreement that ownership will remain
with seller until full payment of price
(Contracttosell);
2. Saleonacceptance/approval;
3. Saleonreturn;
4. There is implied reservation of
ownership;

Note:Sellerbearsexpensesofdelivery.

Q: Spouses Bernal purchased a jeepney from
Union Motor to be paid in installments.  They
thenexecutedapromissorynoteand adeedof
chattelmortgagein favorofUnionMotorwhich
in turn assigned the samewithJardine Finance.
Toeffectuatethesaleaswell astheassignment
of the promissory note and chattel mortgage,
the spouses were required to sign documents,
one of which was a sales invoice. Although the
Spouses have not yet physically possessed the
vehicle, Union Motor’s agent required them to
signthereceiptasaconditionforthedeliveryof
thevehicle.Itwasdiscoveredthatthesaidagent
stolethevehicleevenpriortoitsdelivery tothe
spouses. Was there a transfer of ownership of
thesubjectvehicle?

A: No. The issuance of a sales invoice does not
prove transfer of ownership of the thing sold to
the buyer; an invoice is nothing more than a
detailed statement of the nature, quantity and
cost of the thing sold and has been considered
notabillofsale.

Theregistrationcertificatesignedbythespouses
does not conclusively prove that constructive
delivery was made nor that ownership has been
transferred to the respondent spouses.  Like the
receipt and the invoice, the signing of the said
documentswasqualifiedbythe factthatit wasa
requirement of Union Motor for the sale and
financingcontracttobeapproved.Inallformsof
delivery, it is necessary that the act of delivery,
whether constructive or actual, should be
coupledwiththeintentionofdeliveringthething.
The act, without the intention, is insufficient.
Inasmuch as there was neither physical nor
constructive delivery of a determinate thing, (in
248
this case, the subject motor vehicle) the thing
sold remained at the seller’s risk. The Union
Motor should therefore bear the loss of the
subject motor vehicle after its agent allegedly
stolethesame.(UnionMotorCorp.v.CA,G.R.No.
117187,July20,2001)

Q:Howmaythebuyeracceptthedeliveryofthe
thingsold?

A:
1. Express–heintimatestosellerthat he
hasaccepted
2. Implied 
a. Buyer does not act inconsistent
with ownership of seller after
delivery
b. Retainswithoutintimatingtoseller
thathehasrejected

Q: What is the effect if the buyer refuses to
acceptdespitedeliveryoftheobjectofthesale?

A: Delivery is completed. Since delivery of the
subjectmatterofthesaleisanobligation onthe
part of the seller, the acceptance thereof by the
buyer is not a condition for the completeness of
thedelivery.(Villanueva,p.117)

Note: Thus, even with such refusal of acceptance,
delivery (actual/constructive), will produce its legal
effects. (e.g. transferring the risk of loss of the
subject matter to the buyer who has become the
ownerthereof)(Villanueva,p.117)

UnderArt.1588,whenthebuyer’srefusaltoaccept
the goods is without just cause, the title thereto
passes to him from the moment they are placed at
hisdisposal.(Villanueva,p.117)

Q:Ispaymentofthepurchasepriceessentialto
transferownership?

A:Unlessthe contract contains a stipulationthat
ownershipofthethingsoldshallnotpassto the
purchaser until he has fully paid the price,
ownershipofthethingsoldshallbetransferredto
the vendee upon the actual or constructive
deliverythereof.(Diaz,p.48)

Q: What are the effects of a sale of goods on
installment?

A:
1. Goods must be delivered in full except
whenstipulated

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
2.
c. when the seller of the
goodsdrawson thebuyerfor
the price and transmits the
billofexchangeandthe billof
lading to the buyer , and the
latter does not honor the bill
of exchange by returning the
billofladingtotheseller
4. WhensaleisnotVALID
5. Whentheseller isnot theownerof the
goods
XPNs:
a. Estoppel: when the owner is
precluded from denying the
sellersauthoritytosell
b. Registered land bought in
good faith: Ratio: Buyer need
not go beyond the Torrens
title
c. OrderofCourtsinaStatutory
Sale
d. When the goods are
purchased in a Merchant’s
store, Fair or Market (Art.
1505)

SALEONTRIAL,APPROVALORSATISFACTION
c.
Whennotexaminedbythebuyer–itis
notaccepteduntilexaminedoratleast
hadreasonabletimetoexamine

Q:Whenmaythebuyersuspendpaymentofthe
price?

A:
GR:
1. If he is disturbed in the possession or
ownershipofthethingbought
2. If he has well‐grounded fear that his
possession or ownership would be
disturbed by a vindicatory action or
foreclosureofmortgage.

Note: These grounds are not exclusive. It can
only be exercised if the price or any part
thereofhas notyetbeenpaidandthecontract
is not yet consummated. (Art. 1590) If the
disturbance is caused by the existence of non‐
apparentservitude,theremedyisrescission.

XPN:
1. Sellergivessecurityforthereturnofthe
priceinapropercase;
2. A stipulation that notwithstanding any
suchcontingency,thebuyermustmake
payment;
3. Disturbance or danger is caused by the
seller;
4. If the disturbance is a mere act of
trespass;
5. Uponfullpaymentoftheprice.


B.WHENDELIVERYDOESNOTTRANSFERTITLE

Q:Whatissaleontrial,approvalorsatisfaction?

A: It is a contract in the nature of an option to
purchaseifthegoodsprovetobesatisfactory,the
approval of the buyer being a condition
precedent.

Q: What are the rules in case of sale on trial,
approvalorsatisfaction?

A:


Q:Whendoesdeliverydoesnottransfertitle?

A:
1. SaleonTrial,Approval,orSatisfaction
2. When there is an EXPRESS
RESERVATION
a. If it was stipulated that
ownership shall not pass to
the purchaser until he has
fullypaidtheprice(Art.1478)
3. When there is an IMPLIED
RESERVATION
a. a. When goods are shipped,
but the bill of lading states
that goods are deliverable to
the seller or his agent, or to
the order of the seller or his
agent
b. b. When the bill of lading is
retained by the seller or his
agent
Title
RiskofLoss
Astotrial
Whenperiod
withinwhichbuyer
mustsignifyhis
acceptanceruns
Remainswithseller
GR:Bornebyseller
XPN:
1. Buyerisatfault
2. Buyeragreedto
beartheloss
GR:Buyermustgivegoodsa
trial
XPN:Buyerneednotdosoif
itisevidentthatitcannot
performthework.
Itrunsonlywhenalltheparts
essentialfortheoperationof
theobjecthasbeendelivered
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA 
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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UST GOLDEN NOTES 2011

Validityof
stipulationthata
3rdpersonmust
satisfyapprovalor
satisfaction
Ifthesaleismade
toabuyerwhois
anexpertonthe
objectpurchased
b.
Allowing buyer to make use of
rights
4. Tradition by operation of law –
Execution of a public instrument is
equivalent to delivery. But to be
effective, it is necessary that the seller
have such control over the thing sold
that,at themomentofsale,itsmaterial
deliverycouldhavebeenmade.

GR:Thereispresumptionofdelivery

XPN:
a. Contrarystipulation;
b. When at the time of execution,
subject matter was not subject to
thecontrolofseller;
c. Seller has no capacity to deliver at
timeofexecution;
d. Such capacity should subsist for a
reasonable time after execution of
instrument.
rd
Valid,providedthe3 person
isingoodfath
Generally,itcannotbe
consideredasaleonapproval

C.KINDSOFDELIVERY

Q:Whatarethedifferentkindsofdelivery?

A:
1. Actual – thing sold is placed under the
controlandpossessionofbuyer/agent;
2. Constructive – does not conferphysical
possession of the thing, but by
constructionoflaw,isequivalenttoacts
ofrealdelivery.

Requisites:
a. The seller must have control over
thething
b. The buyer must be put under
control
c. Theremustbeintentiontodeliver
the thing for purposes of
ownership

i. TradicionSymbolica–delivery
of
certain
symbols
representingthething
ii. Tradicion Instrumental –
delivery of the instrument of
conveyance.
iii. Traditio Longa Manu –
Delivery of thing by mere
agreement;whensellerpoints
to the property without need
ofactuallydelivering
iv. TradicionBreviManu–Before
contractofsale,thewould‐be
buyer was already in
possession of the would‐be
subjectmatterofsale
v. ConstitutumPossessorium–at
the time of perfection of
contract, seller continues to
have possession merely as a
holder

3. Quasi‐tradition – delivery of rights,
credits or incorporeal property, made
by:
a. Placing titles of ownership in the
handsofthebuyer;
250

Note: Delivery should be coupled with intention of
delivering the thing, and acceptance on the part of
the buyer to give legal effect of the act.  Without
suchintention,thereisnosuchtradition.

Q: Susan invested in commodity futures
trading in OCP, which involves the buying or
selling of a specified quantity and grade of a
commodity at a future date at a price
establishedattheflooroftheexchange.Asper
termsofthetradingcontract,customer'sorders
shallbedirectlytransmittedbyOCPasbrokerto
itsprincipal,FrankwellEnterprises,whichinturn
mustplacethecustomer'sorderswiththeTokyo
Exchange. In this case, however, there is no
evidence of such transmission. When Susan
withdrew her investment, she was not able to
recover the entire amount. She thus filed a
complaintandthetrialcourtruled inherfavor,
sayingthatthecontractisa speciesofgambling
andthereforevoid.Isthecourt’srulingcorrect?

A:Yes.Atradingcontractisacontractforthesale
of products for future delivery, in which either
seller or buyer may elect to make or demand
delivery of goods agreed to be bought and sold,
but where no such delivery is actually made. In
this case, no actual delivery of goods and
commodity was intended and ever made  by the
parties. In the realities of the transaction, the
parties merely speculated on the rise and fall in
thepriceof thegoods/commoditysubjectmatter
of the transaction. If Susan’s speculation was
correct, she would be the winner and OCP, the
loser,soOCPwouldhavetopayherthe"margin".
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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0
SALES
2.
Butifshewaswrong inherspeculationthenshe
wouldemergeastheloser andOCP,thewinner.
OCP would then keep the money or collect the
difference from her. This is clearly a form of
gambling provided for with unmistakable
certainty under Article 2018. (Onapal Phils.
Commodities,Inc.vs.CAandSusanChua,G.R.No.
90707,Feb.1,1993)

3.
Note:  Futures Commission Merchant/Broker refers
to a corporation or partnership, which must be
registered and licensed as a Futures Commission
Merchant/Broker and is engaged in soliciting or in
accepting orders for the purchase or sale of any
commodity for future delivery on or subject to the
rulesofthecontractmarketand that,inconnection
with such solicitation or acceptance of orders,
accepts any money, securities or property (or
extends credit in lieu thereof) to margin, guarantee
or secure any trade or contract that results or may
resulttherefrom.

4.
FOB (Free On Board) – when goods are
delivered at the point of shipment,
delivery to carrier by placing the goods
onvesselisdeliverytobuyer
CIF(Cost,Insurance,Freight)–
a. When buyer pays for services of
carrier, delivery to carrier is
delivery to buyer, carrier as agent
ofbuyer;
b. Whenbuyerpayssellertheprice–
from the moment the vessel is at
the port of destination, there is
alreadydeliverytobuyer
COD (Collect On Delivery) – the carrier
acts for the seller in collecting the
purchase price, which the buyer must
paytoobtainpossessionofthegoods.

Q: What are the seller’s duties after delivery to
thecarrier?

A:
1. To enter on behalf of the buyer into
such contract reasonable under the
circumstances;
2. To give notice to the buyer regarding
necessityofinsuringthegoods.

Q:Whereistheplaceofdelivery?

A:
1. Thatagreedupon
2. Placedeterminedbyusageoftrade
3. Seller’splaceofbusiness
4. Seller’sresidence
5. In case of specific goods, where they
canbefound

Q:Whenshouldtheobjectbedelivered?

A:
1. Stipulatedtime
2. Ifthereisnone,atareasonablehour.

Q: What are the effects of a sale of goods on
installment?

A:
1. Goods must be delivered in full except
whenstipulated
2. Whennotexaminedbythe buyer – it is
notaccepteduntilexaminedoratleast
hadreasonabletimetoexamine



Q: Given that actual possession, control and
enjoyment is a main attribute of ownership, is
symbolicdeliverybymereexecutionofthedeed
of conveyance sufficient to convey ownership
overproperty?

A: Yes, possession is also transferred along with
ownership thereof by virtue of the deed of
conveyance. The mere execution of the deed of
conveyanceinapublicdocument isequivalentto
the delivery of the property, prior physical
deliveryorpossessionisnotlegallyrequired.The
deedoperatesasaformalorsymbolicdelivery of
the property sold and authorizes the buyer or
transferee to use the document as proof of
ownership.Nothingmoreis required.(Sps.Sabio
v. International Corporate Bank, Inc. et. at. G.R.
No.132709,Sept.4,2001)

Q:Candeliverybeeffectedthroughacarrier?

A:
GR: Yes,if theseller is authorized. Delivery to
carrierisdeliverytothebuyer.

XPN:
1. Acontraryintentionappears
2. Impliedreservationofownershipunder
Art.1503,pars1,2,3.

Q:Whatarethekindsofdeliverytocarrier?

A:
1. FAS(FreeAlongSide)–whengoodsare
delivered alongside the ship, there is
alreadydeliverytothebuyer
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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
Q: When is the seller not bound to deliver the
thingsold?

A:
1. Ifthebuyerhasnotpaidtheprice;
2. Noperiodforpaymenthasbeenfixedin
thecontract;
3. Aperiodforpaymenthasbeenfixedin
the contract but the buyer has lost the
righttomakeuseofthetime.

D.DOUBLESALE

Q:Whenisthereadoublesale?

A:Thereis double sale when the sameobject of
thesaleissoldtodifferentvendees.

Note:Requisites:
1. Samesubjectmatter
2. Sameimmediateseller
3. Twoormoredifferentbuyers
4. Bothsalesarevalid
Note: Where one sale is absoluteandtheotherisa
pacto de retro transaction where the period to
redeemhasnotyetexpired,Art.1544will notapply.
(Pineda,p.223)

Q:Whatistheruleondoublesale?


A:Firstintime,priorityinright


Note:RuleonDoubleSaleregardingimmovables:
GR:ApplyArt.1544
XPN: Sale of registered lands – apply Torrens
System

Q: What are the rules according to Article 1544
oftheCivilCode?

A:
c. Movable–Ownerwhoisfirsttopossess
ingoodfaith
d. Immovable–
d. Firsttoregisteringoodfaith
e. No inscription, first to possess in
goodfaith
f. No inscription & no possession in
good faith – Person who presents
oldesttitleingoodfaith

E.PROPERTYREGISTRATIONDECREE

Q: Ten Forty Realty purchased from Galino a
parcel of land. However, the Deed of Sale was
not recorded in the Registry of Deeds.
Subsequently,Galinosoldthesamepropertyto
Cruz who immediately took possession of the
said property.  Who has a better right between
TenFortyandCruz?
A:Intheabsenceoftherequiredregistration,the
law gives preferential right to the buyer who in
good faith is first in possession. The subject
252
property had not been delivered to Ten Forty;
hence, it did not acquire possession either
materially or symbolically. As between the two
buyers, therefore, respondent was first in actual
possession of the property. (Ten Forty Realty &
Dev’t. Corp. v. Cruz, G.R. No. 151212, Sept. 10,
2003)

Q:Explaintheprinciple ofpriustempore,potior
jure.

A:Knowledgebythefirstbuyerofthesecondsale
cannotdefeatthefirstbuyer’srightsexceptwhen
the second buyer first registers in goodfaith the
secondsale.Conversely,knowledgegainedbythe
second buyer of the first sale defeats his rights
evenifheisfirsttoregister,sincesuchknowledge
taintshisregistrationwithbad faithtomerit the
protection of Art. 1544 (2nd par.), the second
realty buyer must act in good faith in registering
hisdeedofsale.(Diaz,p.125)

Q: Juliet offered to sell her house and lot,
together with all the furniture and appliances
therein,toDehlma.Beforeagreeing topurchase
the property, Dehlma went to the Register of
DeedstoverifyJuliet’stitle.Shediscoveredthat
while the property was registered in Juliet’s
name under the Land Registration Act, as
amendedbythePropertyRegistrationDecree,it
wasmortgagedtoElainetosecureadebtofP80,
000. Wanting to buy the property, Dehlma told
Juliet to redeem the property from Elaine, and
gave her an advance payment to be used for
purposes of releasing the mortgage on the
property. When the mortgage was released,
JulietexecutedaDeedofAbsolute Saleoverthe
property which was duly registered with the
RegistryofDeeds,andanewTCTwasissuedin
Dehlma’s name. Dehlma immediately took
possession over the house and lot and the
movables therein. Thereafter, Dehlma went to
the Assessor’s Office to get a new tax
declaration under her name. She was surprised
to find out that the property was already
declared for tax purposes in the name of XYZ
Bankwhichhadforeclosedthemortgageon the
propertybeforeitwassoldtoher.XYZBankwas
alsothepurchaserintheforeclosure saleofthe
property. At that time, the property was still
unregistered but XYZ Bank registered the
Sheriff’sDeedofConveyanceinthedaybook of
the Register of Deeds under Act 3344 and
obtainedataxdeclarationinitsname.
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
WasDehlmaapurchaseringoodfaith?

A: Yes, Dehlma is a purchaser in good faith. She
learned about the XYZ tax declaration and
foreclosure sale only after the sale to her was
registered.Shereliedonthecertificate oftitle of 
her predecessor‐in‐interest. Under the Torrens
System, a buyer of registered lands is not
requiredbylawtoinquirefurtherthanwhatthe
Torrens certificate indicates on its face. If a
personproceedstobutitrelyingonthetitle, that
personisconsideredabuyeringoodfaith.

The “priority in time” rule could not be invoked
by XYZ Bank because the foreclosure sale of the
landinfavourofthebankwasrecordedunderAct
3344, the law governing transactions affecting
unregistered land, and thus, does not bind the
land.

Q:WhoasbetweenDehlmaandXYZBank hasa
betterrighttothehouseandlot?

A:Between Dehlmaand the bank, the former has
abetterrighttothehouseandlot.

Q:Whoownsthemovablesinsidethehouse?

A: Unless there is a contrary stipulation in the
absolutedeedofsale,Dehlmaownsthemovables
coveredbytheDeedofSaleandherownershipis
perfectedbytheexecution anddeliveryofpublic
document of sale. The delivery of the absolute
deedofsaleisasymbolical delivery ofthehouse
andlot,includingthecontentsof thehouse.This
is an obligation to deliver a specific thing, which
includes the delivery of the specific thing itself
and all of its accessions and accessories even
thoughtheymaynothavebeenmentioned(Art.
1166,CC).(2008BarQuestion)


Q:Doespriorregistrationbythesecondbuyerof
a property subject of a double sale confer
ownership or preferred right in his favor over
thatofthefirstbuyer?

A: Prior registration of the disputed property by
the second buyer does not by itself confer
ownership or a better right over the property.
Article 1544 requires that such registration must
becoupledwithgoodfaith.

Knowledge gained by the first buyer of the
secondsalecannot defeatthefirstbuyer'srights
exceptwherethesecondbuyerregistersingood
faith the second sale ahead of the first, as
providedbytheCivilCode.
Knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to
register the second sale, since such knowledge
taints his prior registration with bad faith (Art.
1544)(Uraca,et. al v.CA,G.R.No. 115158,Sept.
5,1997)

VIII.RISKOFLOSS

Q:Whenisathingconsideredlost?

A:Itisunderstoodthatthethingislostwhenit:
1. perishes,or
2. goesoutofcommerce,or
3. disappears in such a way that its
existence is unknown or cannot be
nd
recovered.(Art.1189,2 par.)

Q:Whatisdeterioration?

A: Deterioration is the lowering of the  value or
characterofathing.Itnormally occursbyreason
ofordinarywearandtear.(Pineda,Credit,p.20)

Q:Whobearstheriskoflossordeterioration?

A:
BEFORE
PERFECTION
AT
PERFECTION
AFTER
PERFECTION
BUT
BEFORE
DELIVERY
AFTER
DELIVERY
Res perit domino – Seller is the
ownersosellerbearsriskofloss


Resperitdomino

Contractshallbewithoutany
effect–thesellerbearstheloss
sincethebuyerisrelievedofhis
obligationunderthecontract
TwoViews:
Paras:Buyer,except:
1. whenobjectsoldconsistsof
fungiblegoodsforapricefixed
2. whensellerisguiltyoffraud,
negligence,default,or
violationofcontractualterms;
or
3. whenobjectsoldisgeneric.

Tolentino:Seller;
Deterioration & fruits – Buyer
bearsloss
Resperitdomino

Buyerbecomestheownerso
buyerbearsriskofloss

Delivery extinguish ownership vis‐
a‐vis the seller & creates a new
oneinfavorofthebuyer

ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
253
UST GOLDEN NOTES 2011

Q: What is the effect of the loss of the thing
subjectofthecontractatthetimeofsale?

A:
1. Totalloss–contractisvoid&inexistent
2. Partial loss – buyer may elect between
withdrawing from the contract or
demanding the remaining part, paying
itsproportionateprice

E.WhenOwnershipisTransferred

SeeTransferofOwnership.p.247


IX.DOCUMENTSOFTITLE

Q:WhatisaDocumentofTitle?

A: A document used in the ordinary course of
businessinthesaleortransferofgoods,asproof
of the possession or control of the goods , or
authorizing or purporting to authorize the
possessorofthedocumenttotransferorreceive,
either by endorsement or by delivery , goods
representedbysuchdocument(Art.1636).

Q: What is the purpose of the Documents of
Title?

A:
1. Evidence of possession or control of
goodsdescribedtherein
2. Medium of transferring title and
possession over the goods described
therein without having to effect actual
delivery(Villanueva,2009ed.)
3. Thecustodyofa negotiablewarehouse
receipts issued to the order of the
owner,ortobearer,isarepresentation
of title upon which bona fide
purchasersfor valueareentitledtorely
,despitebreachesof trustorviolations
of agreement on the part of the
apparent owner (Siy Cong Bieng v.
HSBC,56Phil598)

NegotiableDocumentsofTitle

Q:WhatisaNegotiableDocumentofTitle?

A: A document of title which states that the
goods referred therein will be delivered to the
bearer, or to the order of any person named in
suchdocument(Art.1509,NCC).



254

Q: Who may negotiate a Negotiable Document
ofTitle?

A:
1. Owner
2. Persontowhom thepossessionpr
custodyofthedocumenthasbeen
entrustedbytheowner
a. If bailee undertakes to
deliverthegoodstosuch
person
b. If document is in such
form that it may be
negotiatedbydelivery.

Non‐NegotiableDocumentsofTitle

Q:WhatareNon‐negotiabledocumentsoftitle?

A:
1. They are delivered only to a
specifiedperson
2. Carrierwillnotdeliverthegoodsto
any holder of the document or to
whom such document may have
beenendorsedbytheconsignee
3. Must present the deed of sale or
donationinhisfavour

Q: What are the warranties of seller of
documentsoftitle?

A:
1. GenuinessoftheDocument
2. Legalrighttonegotiateortransfer
3. No knowledge of fact which would
impair the validity or worth of the
document
4. Right to transfer Title to the goods and
merchantability or fitness for a
particular purpose, whenever such
warranties would have been implied
had the contract transfer the goods
withoutadocument.

RulesRegardingLevyandGarnishmentofGoods

Q: What does a person to whom a non‐
negotiable instrument has been transferred but
not negotiated, acquire as against the
transferor?

A:Heacquires:
1. Titleto thegoods,subjectto theterms
ofanyagreementwiththetransferor;
2. Right to notify the bailee who issued
the document of the transfer thereof,
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
X.REMEDIESOFANUNPAIDSELLER
and thereby to acquire the direct
obligation of such bailee to hold 
possession of the goods for him
according to the terms of the
document.

A.DEFINITIONOFUNPAIDSELLER

Q:Whoisanunpaidseller?

A:Thesellerofgoods isdeemedtobeanunpaid
sellereither:
1. when the whole of the price has not
beenpaidortendered;or
2. when 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.


Q:Howmaythetransferor’screditor defeatthe
aforementionedrightsofthetransferee?

A: Prior to the notification to such bailee by the
transferor or transferee of a non‐negotiable
document of title, the title of the transferee to
thegoodsand therighttoacquire theobligation
of such bailee may be defeated by the
transferor’screditorbythelevy ofanattachment
orexecutionuponthegoods.(Art.1514,NCC)

Q: If the goods are delivered to a bailee by the
ownerorbyapersonwhoseactinconveyingthe
title to them to a purchaser in good faith for
value and a negotiable instrument was issued
for them, can the said goods be attached,
garnishedorleviedupon?

A:
GR: No, the goods cannot be attached,
garnished or levied upon while they are in
thebailee’spossession.

XPN:
1. When the document is first
surrendered;or
2.Whenitsnegotiationisenjoined.

Note:It includesan agent of theseller to whom the
bill of lading has been indorsed, or consignor or
agentwhohashimselfpaid,orisdirectlyresponsible
for the price, or any other person who is in the
positionofaseller.

B.REMEDIESOFUNPAIDSELLER

Q:WhataretheremediesofanUnpaidSeller?

A:
I.
Ordinary

1. ActionforPrice
Exercisedwhen:
a. ownershiphaspassedtobuyer;
b. priceispayableonadaycertain
c. goods cannot readily be resold for
reasonable price and Art. 1596 is
inapplicable

2. Action for Damages – In case of
wrongfulneglectorrefusalbythebuyer
toacceptorpayforthethingsold

II.
Special

1. Possessory Lien – Seller not bound to
deliver if buyer has not paid him the
price. It is exercisable only in following
circumstances:
a. goods sold without stipulation as
tocredit
b. goods sold on credit but term of
credithasexpired
c. buyerbecomesinsolvent

Note:The bailee shallinno case be compelled
to deliver the actual possession of the goods
untilthedocumentis:
1.Surrenderedtohim;or
2.Impoundedbythecourt.
(Art.1519,NCC)

Q: What are the rights of a creditor whose
debtoristheownerofanegotiabledocumentof
title?

A: He is entitled to such aid from courts of
appropriatejurisdictionby:
1.injunction;
2.attachingsuchdocument;
3. as regards property which cannot be readily
attachedorlevieduponby ordinarylegalprocess
‐satisfyingthe claim by means allowed by law or
equity.(Art.1520,NCC)






Note:Whenpartofgoods delivered, may
stillexerciserightongoodsundelivered


ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
255
UST GOLDEN NOTES 2011

2.
StoppageinTransitu
Requisites:I‐SENT‐U
a. Insolventbuyer
b. Seller must Surrender the
negotiabledocumentoftitle,ifany
c. Seller must bear the Expenses of
delivery of the goods after the
exerciseoftheright.
d. Seller must either actually take
possession of the goods sold or
give Notice of his claim to the
carrier or other person in
possession
e. GoodsmustbeinTransit
f. Unpaidseller

3.
SpecialRighttoReselltheGoods
Exercisedwhen:
a. Goodsareperishable,
b. Stipulated the right of resale in
caseofdefault,or
c. Buyer in default for unreasonable
time
4.
SpecialRighttoRescind
Requisites:
a. Expressly stipulatedORbuyeris in
defaultforunreasonabletime
b. Noticeneededtobegivenbyseller
tobuyer

 


Note: Ownership of goods already with buyer but
sellermaystillrescind;ownershipisdestroyedeven
withoutcourtinterventionbutinordinarysale,need
togotocourt.

Q:Whataretheinstanceswhenpossessorylien
islost?

A:
1. Seller delivers without reserving
ownership in goods or right to possess
them
2. Buyer or agent lawfully  obtains
possessionofgoods
3. Waiver

Note:Sellerloseslienwhenhepartswithgoods(but
still,stoppageintransitucanbeexercised)

Q:Whatistherightofstoppageintransitu?

A:Thesellermayresumepossessionofthegoods
at any time while they are in transit, and he will
thenbecomeentitledtothesamerightsinregard
to the goods as he would have had if he had
never parted with the possession. (Art. 1530,
NCC)
256
Q:Whenaregoodsconsideredtobeintransit?

A:
1. After delivery to a carrier or other
baileeandbeforethebuyerorhisagent
takesdeliveryofthem;and
2. If the goods are rejected by the buyer,
and the carrier or other bailee
continues in possession of them. (Art.
1531,par.1)

Q: When are goods deemed to be no longer in
transit?

A:
1. Afterdeliverytothebuyerorhisagent
2. Ifthebuyer/agentobtainspossessionof
the goods at a point before the
destinationoriginallyfixed;
3. Ifthecarrierorthebaileeacknowledges
thatheholds thegoodsinbehalfof the
buyer/hisagent;
4. If the carrier or bailee wrongfully
refuses to deliver the goods to the
buyerorhisagent.(Villanueva,p.181)

XI.PERFORMANCEOFCONTRACT

A.SALEOFPERSONALPROPERTY.

RULESONSALEOFPERSONALPROPERTY.

INSTALLMENTSALESLAW

Q:WhatistheInstallmentSalesLaw?

A: Commonly known as the Recto Law. It is
embodiedinArt.1484oftheNCCwhichprovides
for the remedies of a seller in the contracts of
saleofpersonalpropertybyinstallments.

Note: Art. 1484 of the NCC incorporates the
provisions of Act No. 4122 passed by the Philippine
Legislature on Dec. 9, 1939, known as the
"Installment Sales Law" or the "Recto Law," which
thenamendedArt.1454oftheCivilCodeof1889.

Q:TowhatdoestheRectoLawapply?

A: This law covers contracts of sale of personal
propertyby installments(ActNo.4122).Itisalso
applied to contracts purporting to be leases of
personal property with option to buy, when the
lessor has deprived the lessee of the possession
or enjoyment of the thing. (PCI Leasing and
Finance Inc. v. Giraffe‐ X Creative Imaging, Inc.,
G.R.No.142618,July12,2007)

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
Q: Whatarethealternativeremediesincaseof
saleofpersonalpropertyininstallments?

A:
1. Specific Performance:  Exact fulfillment
shouldthebuyerfailtopay

GR: If availed of, the unpaid seller
cannot anymore choose other
remedies;

XPN: if after choosing, it has become
impossible,rescissionmaybepursued

2.Rescission:Cancel thesale if buyer fails
topay2ormoreinstallments

Deemedchosenwhen:
a. Noticeofrescissionissent
b. Takespossessionofsubjectmatter
ofsale
c. Filesactionforrescission

3. Foreclosure: Foreclose on chattel
mortgageifbuyerfailstopay2ormore
installments

GR: Actual foreclosure is necessary to
barrecoveryofbalance
Extent of barring effect:
purchaseprice

XPN: Mortgagor refuses to deliver
propertytoeffectforeclosure;expenses
incurredinattorneysfees,etc.

Q: When the lessor of the property chose to
deprive the lessee of the subject personal
property, can the former recover any unpaid
rentalsfromthelatter?

A: In choosing, through replevin, to deprive the
respondent of possession of the leased
equipment, the petitioner waived its right to
bring an action to recover unpaid rentals on the
saidleaseditems.

B.SALEOFREALPROPERTY.

RULESONSALEOFREALPROPERTY

REALTYINSTALLMENTBUYERACT

Q:WhatistheRealtyInstallmentBuyerAct?

A: Commonly known as the “Maceda Law.” It is
embodiedinR.A.6552whichprovidesforcertain
protection to particular buyers of real estate
payable on installments. The law declares as
"publicpolicytoprotectbuyers ofrealestateon
installment payments against onerous and
oppressiveconditions.

Note:Thepurposeofthelawistoprotectbuyersin
installmentagainstoppressiveconditions.

Q: What are the transactions/sale covered by
theMacedaLaw?

A: The law involves the sale of immovables on
installment(MacedaLaw,R.A.6552).
1. Coverage: Residential Real Estate
(Villanueva,p.431)
2. Exclude:
a. Industriallots
b. Commercial
buildings
(and
commerciallotsbyimplication)
c. Saletotenantsunderagrarianlaws

Q:Whataretherightsgrantedtobuyers?

A:
1. Buyerpaidatleast2yearsinstallment
a. Pay w/o interest the balance
withingraceperiodof1monthfor
everyyearofinstallmentpayment.
Grace period to be exercised once
every5years.
b. When no payment – cancelled;
buyer entitled to 50% of what he
has paid + 5% for every year but
not exceeding 90% of payments
made

Note:Cancellationto beeffected30
daysfromnotice&uponpaymentof
cashsurrendervalue.

2.
Buyerpaidlessthan2yearsinstallment
a. Grace period is not less than 60
daysfromduedate
b. Cancellation if failure to pay w/in
60daysgrace
c. 30 days notice before final
cancellation

Note:buyercanstillpayw/in the30
daysperiodwithinterest.

Q:Whataretheotherrightsgrantedtoabuyer?

A:
1. Sellorassignrightstoanother
2. Reinstate contract by updating within
30daysbeforeandcancellation
3. DeedofSaletobedonebynotarialact
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
0
257
UST GOLDEN NOTES 2011

4.
5.
Pay full installment in advance the
balanceofpriceanytimew/ointerest
Have full payment annotated in
certificateoftitle

Note: Applies to contracts even before the lawwas
enacted.Stipulationtothecontraryisvoid

Q:Whataretheso‐called“Maceda”and“Recto”
laws in connection with sales on installments?
Givethemostimportantfeaturesoneachlaw.

A: The Maceda Law (R.A. 6552) is applicable to
salesofimmovableproperty oninstallments.The
mostimportantfeaturesare:

1. After having paid installments for at least
two years, the buyer is entitled to a
mandatorygraceperiodofonemonthfor
everyyearofinstallmentpaymentsmade,
to pay the unpaid installments without
interest.

Ifthecontractis cancelled, thesellershall
refund to the buyer the cash surrender
value equivalent to fifty percent (50%) of
the total payments made, and after five
years of installments, an additional five
percent(5%)everyyear butnot toexceed
ninety percent (90%) of the total
paymentsmade.

2. In case the installments paid were less
than2years,thesellershallgivethebuyer
agraceperiodofnotlessthan60days.If
thebuyerfailstopay theinstallmentsdue
at the expiration of the grace period, the
seller may cancel the contract after 30
days from receipt by the buyer of the
notice of cancellation or demand for
rescissionbynotarialact.(Rillov.CA,G.R.
No.125347June19,1997)

The Recto Law (Art.1484) refers to sale of
movablespayableininstallmentsandlimitingthe
rightofseller,incase ofdefaultby thebuyer,to
oneofthreeremedies:
1. Exactfulfillment;
2. Cancel the sale of two or more
installmentshavenotbeenpaid;
3. Foreclose the chattel mortgage on the
thingssold,alsoincaseofdefaultoftwo
or more installments, with no further
action against the purchaser. (1999 Bar
Question)

Q: Bernie bought on installment a residential
subdivision lot from DEVLAND. After having
faithfully paid the installments for 48 months,
258
Bernie discovered that DEVLAND had failed to
develop the subdivision in accordance with the
approved plans and specifications within the
timeframeintheplan.Hethuswrotealetter to
DEVLAND informing it that he was stopping
payment.Consequently, DEVLAND cancelledthe
sale and wrote Bernie, informing him that his
paymentsareforfeitedinitsfavor.
1. Was the action of DEVLAND proper?
Explain.
2. Discuss the rights of Bernie under the
circumstances.
3. Supposing DEVLAND had fully
developed the subdivision but Bernie
failedtopayfurtherinstallments after
4 years due to business reverses.
Discuss the rights and obligations of
theparties.

A:
1. Assuming  that  the  land  is  a
residential subdivision project under
P.D. No. 957 (The Subdivision and
Condominium
Buyers
Protective
Decree), DEVLAND's action is not
properbecauseunderSection23ofsaid
Decree,noinstallmentpaymentshallbe
forfeited to the owner or developer
when the buyer, after due notice,
desistsfromfurtherpaymentduetothe
failure of the owner‐developer to
develop the subdivision according to
theapprovedplansandwithin thetime
limitforcomplyingwiththesame.

2. Under the same Section of the Decree,
Bernie may, at his option, be
reimbursed the total amount paid
including amortization interests but
excluding delinquency interests at the
legalrate.HemayalsoasktheHousing
andLandUseRegulatoryBoardtoapply
penal sanctions against DEVLAND
consistingofpayment ofadministrative
fine of not more than P20.000.00
and/orimprisonmentfornotmorethan
20years.

3. Under R.A. No. 6552 (Maceda Law),
DEVLAND has the right to cancel the
contractbutithastorefundBerniethe
cash surrender value of the payments
on the property equivalent to 50% of
the total payments made. (2005 Bar
Question)



CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
XII.WARRANTIES

Q:Whatisawarranty?

A: A statement or representation made by the
seller of goods, as part of the contract of  sale,
havingreferencetothecharacter,quality,ortitle,
of the goods, and by which he promises or
undertakestoinsurethatcertainfactsareorshall
beashethenrepresents.

B.IMPLIEDWARRANTIES

Q:Whatareimpliedwarranties?

A: Warranties deemedincludedin all contractsof
salebyoperationoflaw.(Art.1547)

1. Warranty that seller has right to sell –
refers to consummation stage. Not
applicable to sheriff, auctioneer,
mortgagee,pledge

2. Warrantyagainsteviction

 Requisites:JPENS
a. BuyerisEvictedinwholeor inpart
fromthesubjectmatterofsale
b. FinalJudgment
c. Basis of eviction is a right Prior to
saleoractimputabletoseller
d. Seller has been Summoned in the
suit for eviction at the instance of
buyer; or made 3rd party
defendant through 3rd party
complaintbroughtbybuyer
e. Nowaiveronthepartofthebuyer

Note:Mayeitherbeexpressorimplied.

Q:Whatistheeffectofabreachofwarranty?

A:Buyermay:
1. Refusetoproceedwiththecontract;or
2. Proceed with the contract; waive the
condition.

Note:Iftheconditionis inthenaturethatitshould
happen, the non‐performance may be treated as a
breachofwarranty.

Q: What are the kinds of warranties?
Distinguish.

A:
i.
Express
ii.
Implied
Note: For eviction – disturbance in law is
requiredandnotjusttrespassinfact.


3.
Warranty against encumbrances (non‐
apparent)
A.EXPRESSWARRANTIES

Q:Whatareexpresswarranties?

A: Any affirmation of fact or any promise by the
sellerrelatingtothething ifthenaturaltendency
of such affirmation or promise is to induce the
buyer to purchase the same, and if the buyer
purchasesthethingrelyingthereon.(Art.1546)

Q: What are the requisites of express
warranties?

A:AIR
1. It must be an Affirmation of fact
relatingtothesubjectmatterofsale
2. Natural tendency is to Induce buyer to
purchasesubjectmatter
3. Buyer purchases the subject matter
Relyingthereon

Q: Whatistheliabilityof thesellerforbreachof
expresswarranties?

A:The selleris liablefor damages. (Villanueva,p.
249)



Requisites:
a. immovable sold is encumbered
with non‐apparent burden or
servitude not mentioned in the
agreement
b. nature of non‐apparent servitude
or burden is such that it must be
presumed that the buyer would
not have acquired it had he been
awarethereof

XPN: warranty not applicable when
non‐apparent burden or servitude is
recorded in the Registry of Property –
unless there is expressed warranty that
the thing is free from all burdens &
encumbrances

4.

WarrantyagainstHiddenDefects
Requisites:HENNAS
a. DefectisimportantorSerious
i. The thing sold is unfit for the
usewhichitisintended
ii. Diminishesitsfitnessforsuch
use or to such an extent that
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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
b.
c.
d.
e.
f.
the buyer would not have
acquiredithadhebeenaware
thereof
DefectisHidden
DefectExistsatthetimeofthesale
BuyergivesNoticeof the defect to
thesellerwithinreasonabletime
Actionforrescissionorreductionof
the price is brought within the
properperiod
i. 6 months – from delivery of
thethingsold

ii. Within 40 days – from the
deliveryincaseofanimals
There must be No waiver of
warrantyonthepartofthebuyer.

Q:Whenisimpliedwarrantynotapplicable?

A:ASAP
1. “Asisandwhereis”sale
2. Saleofsecondhandarticles
3. Salebyvirtueofauthorityinfactorlaw
4. Sale at public auction for tax
delinquency

C.EFFECTSOFWAIVEROFIMPLIEDWARRANTIES

Q:Whataretheeffectsofwaiverofanimplied
warranty?

A:
1. Seller in bad faith & there is waiver
againsteviction–void
2. When buyer w/o knowledge of a
particular
risk,
made
general
renunciation of warranty – is not a
waiverbutmerelylimitsliabilityofseller
incaseofeviction
3. When buyer with knowledge of risk of
eviction assumed its consequences &
made a waiver – seller not liable
(applicable only to waiver of warranty
againsteviction)

WARRANTYAGAINSTEVICTION

Q:Whatisawarrantyagainsteviction?

A: In a contract of sale, unless a contrary
intention appears, there is an implied warranty
onthepart ofthesellerthatwhen theownership
istopass,andthatthebuyershallfrom thattime
haveandenjoythelegalandpeacefulpossession
st
ofthething.(Art.1547,1 paragraph)


260
Q: What is covered by a warranty against
eviction?

A:It covers eviction by a final judgment basedon
arightpriortothesaleoranactimputabletothe
vendor,thevendeeisdeprivedofthewholeor of
apartofthethingpurchased.

The vendor shall answer for the eviction even
though nothing has been said in the contract on
thesubject.(Art.1548,NCC)

Q: What is the effect of a breach of warranty
againsteviction?

A: The buyer shall have the right to demand the
seller:

1. Thereturn ofthevaluewhichthething
soldhadatthetimeof theeviction,be
itgreaterorlesserthantheprice ofthe
sale
2. The income or fruits, if he has been
ordered to deliver them to the party
whowonthesuitagainsthim
3. The costs of suit which caused the
eviction,and,inapropercase,thoseof
suitbroughtagainstthevendorfor the
waranty
4. The expenses of contract if buyer has
paidthem
5. The damages and interests and
ornamental expenses if sale was made
inbadfaith.

Note: Vendoris liable for any hidden defect evenif
heisnotaware.(CaveatVenditor)

Purchasermustbeawareofthe title ofthevendor.
(CaveatEmptor)

Q:Whataretherightsofbuyerincaseofpartial
eviction?

A:
1. Restitution (with obligation to return
thethingw/ootherencumbrancesthan
thosewhichithadwhenheacquiredit)
2. Enforcement of warranty against
eviction(Paras,p.153andArt.1556)

WARRANTYAGAINSTHIDDENDEFECT

Q:Whatisahiddendefect?

A: A hidden defect is one which is unknown or
couldnothavebeenknowntothebuyer.(Diaz,p.
145)

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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0
SALES
Note:Sellerdoesnotwarrantpatentdefect;Caveat
emptor(buyerbeware)

3.
Q:Whatisaredhibitorydefect?

A: It is a defect in the article sold against which
defect the seller is bound to warrant. The vice
must constitute an imperfection, a defect in its
nature,ofcertainimportance;andaminordefect
does not give rise to redhibition. (De Leon,
Comments and Cases on Sales and Lease, 2005
ed,p.318)

Q:Whatisaredhibitorydefectonanimals?

A:Ifthehiddendefectofanimals,evenincasea
professionalinspectionhasbeenmade,shouldbe
of such a nature that expert knowledge is not
sufficient to discover it, the defect shall be
consideredasredhibitory.

Q:Whenisthesaleofanimalvoid?

A:Thesaleisvoidifanimalis:
1. Sufferingfromcontagiousdiseases;
2. Unfit for the use or service for which
theywerepurchasedasindicatedinthe
contract

Q: When is a vendor responsible for hidden
defects?

A:Ifthehiddendefectswhich thethingsoldmay
have:
1. Renderitunfitfortheuseforwhichitis
intended,or
2. Diminishitsfitnessforsuchuseto such
an extent that, had the vendee been
aware thereof, he would not have
acquireditorwouldhavegivenalower
priceforit.(Art.1561)

Q: Up to what extent does the seller warrant
againsthiddendefects?

A:The seller is responsibleto the vendeefor any
hidden faults or defects in the thing sold, even
thoughhewasnotawarethereof.

Q: When is the seller not answerable for the
defectsofthethingsold?

A:
1. For patent defects or those which are
visible,or
2. Even for those which are not visible if
thebuyerisanexpertwho,byreasonof
his trade or profession, should have
knownthem(Art.1561),or
Ifthecontraryhasbeenstipulated,and
thevendorwasnotawareofthehidden
faults or defects in the thing sold. (Art.
1566)

Q: What is the effect of a breach of warranty
againsthiddendefects?

A: It would depend on whether the seller had
knowledgeofsuchdefectandwhethertherehas
beenawaiverofthewarranty.

1. If the thing should be lost in
consequence of the hidden faults, and
sellerwasawareofthem–heshall:
a. beartheloss,
b. returnthepriceand
c. refundtheexpensesof thecontract
withdamages

2. If the thing is lost and seller was not
awareofthehiddenfaults–heshall:
a. returnthepriceandinterest
b. reimburse the expenses of the
contract which the buyer might
have paid, but not for damages.
(Villanueva, Law on Sales,2004 ed,
pp.548‐549)

Q:Whataretheremediesofthebuyerincaseof
saleofthingswithhiddendefects?

A:Thevendeemayelectbetween:
1. Withdrawingfromthecontract,or
2. Demanding a proportionate reduction
of the price, with damages in either
case.

Q: Is there a waiver of warranty against hidden
defectswhenthelesseeinspectedthepremises
andpushedthroughwiththecontract?

A: Yes. Under Arts. 1561 and 1653 of the Civil
Code, the lessor is responsible for warranty
against hiddendefects, but heis not answerable
forpatentdefectsor those, which are visible.Jon
de Ysasi admitted on cross‐examination that he
inspectedthepremisesthreeorfourtimesbefore
signing the lease contract. During his inspection,
he noticed the rotten plywood on the ceiling,
whichinhisopinionwascausedby leakingwater
or termites. Yet, he decided to go through with

theleaseagreement. Hence,respondentscannot
be held liable for the alleged warranty against
hidden defects. (Jon and Marissa De Ysasi v.
Arturo and Estela Arceo, G.R. No. 136586, Nov.
22,2001)

ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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
IMPLIEDWARRANTIESINCASEOFSALEOF
GOODS

Q: What are the specific implied warranties in
saleofgoods?

A:
1. Warrantyoffitness

GR:Noimpliedwarranty

XPN:
a. Buyer manifests to the seller the
particular purpose for which the
goodsarerequired;and
b. Buyer relies upon the seller’s skill
orjudgment

2. Warranty of merchantability – That
goodsarereasonablyfitforthegeneral
purposeforwhichtheyaresold.

CAVEATEMPTOR

Q:Whatdoestheprincipleofcaveatemptor
mean?

A: It literally means, ‘Let the buyer beware’. The
rule requires the purchaser to be aware of the
supposed title of the vendor and one who buys
without checking the vendor’s title takes all the
risks and losses consequent to such failure.
(Agcaoili,p.184)

Q: In what particular sale transactions does
caveatemptorapply?

A:
1. Salesofanimals(Art.1574)
2. Doublesales(Art.1544)
3. Insheriff’ssales(Art.1570)
4. Taxsales(Art.1547,lastparagraph)

Note:Intheabovesales,thereisnowarrantyoftitle
or quality on the part of the seller. The purchaser
whobuyswithoutcheckingthe titleof thevendoris
assumingallrisksofeviction.

Insheriff’ssales,thesheriffdoesnotguaranteethe
title to real property and it is not incumbent upon
him to place the buyer in possession of such
property.(Pinedasales,p.275)

Q: Is caveat emptor applicable in sales of
registeredland?

A: No. The purchaser of a registered land under
theTorrenssystemismerelychargedwithnotice
oftheburdensandclaims onthepropertywhich
262
are inscribed on the face of certificate of title.
(Pinedasales,p.275)

Q:Doescaveatemptorapplyinjudicialsales?

A:Yes.Thepurchaserinajudicialsaleacquiresno
higher or better title or right than that of the
judgmentdebtor. Ifit happensthatthe judgment
debtorhasnoright,interest,orlienonandtothe
property sold, the purchaser acquires none.
(Pinedasales,p.280)

D.REMEDIESINCASEOFBREACHOFWARRANTY

Q:Whataretheremediesofthebuyerincaseof
breachofwarranty?

A:
1. Accept goods & set up breach of
warranty by way of recoupment in
diminutionorextinctionortheprice.
2. Acceptgoods&maintainactionagainst
sellerfordamages
3. Refuse to accept goods & maintain
actionagainstsellerfordamages
4. Rescind contract of sale & refuse to
receive goods/return them when
alreadyreceived.

Q: Are the remedies of the buyer in case of
breachofwarrantyabsolute?

A: No. The vendee's remedies against a vendor
with respect to the warranties against hidden
defects of or encumbrances upon the thing sold
arenotlimitedtothoseprescribedinArticle1567
where the vendee, in the case of Arts. 1561,
1562, 1564, 1565 and 1566, may elect either to
withdraw from the contract or demand a
proportionate reduction of the price, with
damagesineithercase.

Thevendeemayalsoaskfortheannulmentofthe
contract upon proof of error or fraud, in which
case the ordinary rule on obligations shall be
applicable. Under the law on  obligations,
responsibilityarisingfromfraudisdemandablein
all obligations and any waiver of an action for
future fraud is void. Responsibility arising from
negligence is also demandable in any obligation,
butsuchliabilitymay beregulated bythecourts,
accordingtothecircumstances.

The vendor could likewise be liable for quasi‐
delict underArticle 2176 of theCivil Code, and an
action based thereon may be brought by the
vendee.Whileitmaybetruethatthepre‐existing
contract between the parties may, as a general
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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rule, bar the applicability of the law on quasi‐
delict, the liability may itself be deemed to arise
from quasi‐delict, i.e., the acts which breaks the
contract may also be a quasi‐delict. (Coca‐Cola
Bottlers Philippines, Inc. v. CA, G.R. No. 110295,
Oct.18,1993)

Q: What are the instances when the buyer
cannotrescindthesaleincase thereisabreach
ofwarranty?
A:
1. Ifheknewofthebreachofwarranty
2. If he fails to return or offer to return
goods to seller in substantially as good
condition as they were at time
ownershipwastransferred
3. If he fails to notify the seller within a
reasonable time of his election to
rescind

E.CONDITIONVIS‐À‐VISWARRANTY

Q: What is the effect of non‐fulfillment of a
condition?

A: If imposed on the perfection of contract –
prevents the juridical relation itself from coming
intoexistence

Theotherpartymay:
1. Refusetoproceedwiththecontract
2. Proceed w/ contract, waiving the
performanceofthecondition

Q: What is the difference between a condition
andawarranty?

A:
CONDITION
Purportstothe
existenceofobligation
Mustbestipulatedto
formpartofthe
obligation
Mayattachitselfto
obligationofsellerto
deliverpossession&
transfer
WARRANTY
Purportstothe
performanceof
obligation
Neednotbestipulated;
mayformpartof
obligationbyprovision
oflaw
Relatestothesubject
matteritselforto
obligationoftheseller
astothesubjectmatter
ofthesale
XIII.BREACHOFCONTRACT

A.REMEDIESOFTHESELLER
Note:seeRectoandMacedaLaw(XI.Performanceof
Contract)p.258

B.REMEDIESOFTHEBUYER

Q:Whataretheremediesofthebuyer?

A:
I.
Immovablesingeneral
1. Disturbed in possession or with
reasonablegroundstofeardisturbance
–Suspendpayment
2. Incaseofsubdivision orcondoprojects
–Ifrealestatedeveloperfailstocomply
with obligation according to approved
plan:
a. Rescind
b. Suspend payment until seller
complies
II.
Movables
1. Failure of seller to deliver – Action for
specificperformancewithoutgivingthe
sellertheoptionofretainingthegoods
onpaymentsofdamages
2. Breach ofseller’s warranty – The buyer
may, at his election, avail of the
followingremedies:
a. Accept goods & set up breach of
warrantybyway ofrecoupmentin
diminution or extinction or the
price.
b. Accept goods  & maintain action
againstsellerfordamages
c. RefusetoAcceptgoods&maintain
actionagainstsellerfordamages
d. Rescind contract of sale & refuse
to receive goods/return them
whenalreadyreceived.


Note: When the buyer has claimed and been
grantedaremedyinanyoftheseways,noother
remedy can thereafter be granted, without
prejudiceto thebuyer’s right to rescind,even if
previously he has chosen specific performance
when fulfillment has become impossible.
(Villanueva, p. 389 in relation with Art. 1191,
NCC)

3.









Disturbed in possession or with
reasonablegroundstofeardisturbance
–Suspendpayment

ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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UST GOLDEN NOTES 2011

XIV.EXTINGUISHMENTOFSALE

A.CAUSESOFEXTINGUISHMENT

Q: What are the causes for extinguishment of
sale?

A:Acontractofsaleisextinguishedby:

1. Same causes as all other obligations,
namely:
a. Paymentorperformance
b. Lossofthethingdue
c. Condonation or remission of the
debt
d. Confusion or merger of the rights
ofcreditoranddebtor
e. Compensation
f. Novation
g. Annulment
h. Rescission
i.
Fulfillmentofresolutorycondition
j.
prescription
2. Causesstatedintheprecedingarticles;
3. ConventionalRedemption;or
4. Legalredemption

B.REDEMPTION

Q:Whatisredemption?

A: It is a mode of extinguishment wherein the
seller has the right to redeem or repurchase the
thingsolduponreturnofthepricepaid.

Q:Whatarethekindsofredemption?

A:
1. Legal
2. Conventional

Q:Shouldtherighttoredeembeincorporatedin
everycontractofsale?

A:The rightof thevendor to redeem/ repurchase
must appear in the same instrument. However,
partiesmaystipulateontherightofrepurchasein
a separate document but in this case, it is valid
only between the parties and not against third
persons.(Pineda,p.333)







264
Q: What is thedifference between pre‐emption
andredemption?

A:
PRE‐EMPTION
Arisesbeforesale
Rescissioninapplicable
Actionisdirectedagainst
prospectiveseller
REDEMPTION
Arisesaftersale
Therecanberescission
oforiginalsale
Actionisdirected
againstbuyer

B.PERIODOFREDEMPTION

Q:Whatistheperiodofredemption?

A:
1. No period agreed upon – 4 years from
dateofcontract
2. When there is agreement – should not
exceed 10 years; but if it exceeded,
validonlyforthefirst10years.
3. When period to redeem has expired &
there has been a previous suit on the
nature of the contract – seller still has
30 days from final judgment on the
basis that contract was a sale with
pactoderetro:

Rationale: no redemption due to
erroneous belief that it is equitable
mortgagewhichcanbe extinguishedby
payingtheloan.

4. When period has expired & seller
allowed the period of redemption to
expire–sellerisatfaultfor nothaving
exercised his rights so should not be
grantedanewperiod

Note:Tenderofpaymentissufficient but itis not in
itself a payment that relieves the seller from his
liabilitytopaytheredemptionprice.

Q: When does period of redemption begin to
run?

A:
1. Right of legal pre‐emption or
redemptionshallbeexercisedwithin30
daysfromwrittennoticebythebuyer–
deed of sale not to be recorded in
Registry
of
Property
unless
accompaniedbyaffidavitthatbuyerhas
givennoticetoredemptioners

2. When there is actual knowledge, no
need to give written notice; period of
redemption begins to run from actual
knowledge
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0

SALES
D.EXERCISEOFTHERIGHTTOREDEEM

Q: Is written notice mandatory for the right of
redemptiontocommence?

A: Yes, the notice must be in writing stating the
executionofthesaleanditsparticulars.Itmaybe
madeinaprivate orpublicdocument.(Pineda,p.
400)

Q: Is there a prescribed form for an offer to
redeem?

A: There is no prescribed form for an offer to
redeem to be properly effected. Hence, it can
either be through a formal tender with
consignation of the redemption price within the
prescribed period. What is paramount is the
availmentofthefixedanddefinite periodwithin
whichtoexercisetherightoflegalredemption.

propertywhichheoughtnot,inequity andgood
conscience, hold and enjoy. It has been broadly
ruled that a breach of confidence, although in
business or social relations, rendering an
acquisition or retention of property by one
person unconscionable against another, raises a
constructivetrust.Itisraisedbyequity inrespect
ofproperty,whichhasbeenacquiredbyfraud,or
where, although acquired originally without
fraud, it is against equity that it should be
retained by the person holding it. (Arlegui v. CA
G.R.No.126437,Mar.6,2002)

Note: "A constructive trust is substantially an
appropriate remedy against unjust enrichment. It is
raised by equity in respect of property, which has
beenacquiredbyfraud,orwhere,althoughacquired
originally without fraud, it is against equity that it
shouldberetainedbythepersonholdingit."(76Am.
Jur.2d,Sec.222,p.447citedinArleguiv.CAG.R.No.
126437,Mar.6,2002)

D.CONVENTIONALREDEMPTION
Note: Art. 1623 does not prescribe any distinctive
methodfornotifyingtheredemptioner.

Q:Whatisconventionalredemption?

A: Seller reserved the right to repurchase thing
soldcoupledwithobligationto returnpriceofthe
sale, expenses of contract & other legitimate
payments and the necessary & useful expenses
madeonthethingsold


Q: Is tender of payment necessary for
redemptiontotakeeffect?

A: Tender of payment is not necessary; offer to
redeemisenough.

Q:Whatistheeffectoffailuretoredeem?

A: There must be judicial orderbefore ownership
of real property is consolidated to the buyer a
retro.

TRUSTDESONTORT

Q:Whatisatrustdesontort?

A: It is a trust created by the purchase or
redemption of property by one other than the
person lawfully entitled to do so and in fraud of
theother.

Q:Doconstructivetrustsariseonlyoutoffraud
orduress?

A: No.A constructive trust, otherwise known asa
trustexmaleficio,atrustexdelicto,atrustdeson
tort,aninvoluntarytrust,or animpliedtrust,isa
trustbyoperationoflawwhicharises contraryto
intention and in invitum, against one who, by
fraud, actual or constructive, by duress or abuse
ofconfidence,bycommissionofwrong,orbyany
form of unconscionable conduct, artifice,
concealment, or questionable means, or who in
any way against equity and good conscience,
either has obtained or holds the legal right to
Note: Right to repurchase must be reserved at the
timeofperfectionofsale.(Pineda,p.333)

E.LEGALREDEMPTION

Q:Whatislegalredemption?

A:  Also referred to as “retracto legal”, it is the
righttobesubrogateduponthesametermsand
conditionsstipulatedinthecontract, inthe place
ofonewhoacquiresthe thingbypurchase orby
dation in payment or by other transaction
whereby ownership is transmitted by onerous
title.

Q:Whataretheinstancesoflegalredemption?


A:
1. Sale of a co‐owner of his share to a
stranger(Art.1620)
2. Whenacreditorotherincorporealright
inlitigationissold(Art.1634)
3. Saleofanheirofhishereditaryrightsto
astranger(Art.1088)
4. Sale of adjacent rural lands not
exceeding1hectare(Art.1621)
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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0
265
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
5.
Sale of adjacent small urban lands
bought merely for speculation (Art.
1622)

Q: Are there other instances when the right of
legalredemptionisalsogranted?

A:
1. Redemptionofhomesteads
2. Redemptionintaxsales
3. Redemptionbyjudgmentdebtor
4. Redemptioninextrajudicialforeclosure
5. Redemption in judicial foreclosure of
mortgage

Q:Whendoeslegal redemptionperiodbeginto
run?

A: The right of legal redemption shall not be
exercised except within 30 days from the notice
in writing by the prospective seller, or seller, as
the case may be. The deed of sale shall not be
recorded in the Registry of Property unless
accompaniedbyanaffidavitofthesellerthat he
has given written notice thereof to all possible
redemptioners.(Art.1623,NCC)

C.EQUITABLEMORTGAGE

Q:Whatisanequitablemortgage?

A:Onewhichlackstheproperformalities,formor
words orotherrequisitesprescribedbylaw fora
mortgage,butshowstheintentionof theparties
to make the property subject of the contract as
security for a debt and contains nothing
impossibleorcontrarytolaw

Q:Whatarethe essentialrequisitesofequitable
mortgage?

A:
1. Partiesenteredintoacontractofsale
2. Their intention was to secure an
existingdebtbywayofamortgage.

Q: What is the rule on the presumption of an
equitablemortgage?

A:  A sale with conventional redemption is
deemed to be an equitable mortgage in any of
thefollowingcases:(Art.1602)AIR‐STAR
1. Price of the sale with right to
repurchaseisunusuallyInadequate
2. Seller Remains in possession as lessee
orotherwise
3. Uponoraftertheexpirationoftheright
to repurchase Another instrument
266
4.
5.
6.
7.
extending the period of redemption or 
grantinganewperiodisexecuted
Purchaser Retains for himself a part of
thepurchaseprice
Sellerbindshimselftopay theTaxeson
thethingsold
In any other case where the real
intention of the parties is that the
transactionshallSecurethepaymentof
adebtortheperformanceofanyother
obligation.
Art. 1602 shall also apply to a contract
purportingtobeanAbsolutesale.(Art.
1604)

Note: In case of doubt in determining whether it is
equitable mortgage or sale a retro (with right of
repurchase); it shall be construed as equitable
mortgage.

Remedyisreformation.
Anequitablemortgageisonewhichalthoughlacking
in some formality, or form or words, or other
requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real
propertyassecurity foradebt,and containsnothing
impossibleorcontrarytolaw.

Q: Does inadequacy of price constitute proof
sufficient to declare a contract as one of
equitablemortgage?

A:Mere inadequacy of the price is not sufficient.
The price must be grossly inadequate, or purely
shockingtotheconscience.(Diaz,p.186)

Q:Xtransferredthreeparcelsoflandinfavor of
Y. The transaction was embodied in two Deeds
of Absolute Sale for the price of P240, 000. The
titles of said lots were transferred to Y.
However, X failed to vacate and turn over the
purchased lots. This prompted Y to file an
ejectment suit against X. X claimed that the
transactions entered between them were not
actually sales, but an equitable mortgage. Does
the transaction involve an absolute sale or an
equitablemortgageofrealproperty?

A: It is an absolute sale. Decisive for the proper
determination of the true nature of the
transaction between the parties is the intent of
the parties. There is no conclusive test to
determinewhetheradeed absoluteonitsfaceis
reallyasimpleloan accommodationsecured by a
mortgage.Todeterminewhetheradeedabsolute
in form is a mortgage in reality, the court is not
limited to the written memorials of the
transaction.Thisissobecausethe decisivefactor
in evaluating such agreement is the intention of
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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0
SALES
operation,hewas requiredtoexecuteadeedof
saleoveraparcel of land in favor of Eulalia. She
soldthepropertytohergrandnieceJocelynwho
thereafter instituted an action for ejectment
against the Spouses Bandong.   To assert their
right, Spouses Bandong filed an action for
annulment of sale against Eulalia and Jocelyn
allegingthattherewasnosaleintendedbutonly
equitable mortgage for the purpose of securing
theshortageincurredbyDomengintheamount
ofP70,000.00whileemployedas“biyahero”by
Eulalia. Wasthedeedof salebetweenDomeng
and Eulalia a contract of sale or an equitable
mortgage?

A: It is an equitable mortgage. In executing the
said deed of sale, Domeng and Eulalia never
intendedthetransferofownership of thesubject
property but to burden the same with an
encumbrance to secure the indebtedness
incurred by Domeng on the occasion of his
employment with Eulalia. The agreement
betweenDominador andEulaliawasnotavoided
in its entirety so as to prevent it from producing
anylegaleffectatall.Instead,thesaidtransaction
isanequitablemortgage,therebymerely altering
the relationship of the parties from seller and
buyer, to mortgagor and mortgagee, while the
subjectpropertyisnottransferredbut subjected
toalien infavorofthelatter.(Sps. Raymundo, et
al.v.Sps.Bandong,G.R.No.171250,Jul.4,2007)

G.DISTINGUISHEDFROM
OPTIONTOBUY

Q: On May 19, 1951, the spouses‐sellers
executeda publicinstrumentofabsolute salein
favor of the buyer for a consideration which is
sufficientlyadequate.Afewdaysthereafter,the
buyers executedinfavorofthesellersanoption
to buy within one year, the property subject of
the absolute sale, which option was extended
foramonth.Priortotheexpirationof saidone‐
year period, the buyer sold said property to a
thirdperson.

If the spouses‐sellers would file an action for
reformation of instrument where they seek
reformation of the absolute sale into one of
equitablemortgage,willsaidactionprosper?

A: No, it will not prosper. If a seller has been
granted merely an option to buy (not a right to
repurchase)withinacertainperiod, andtheprice
paidbythebuyerisadequate,thesaleisabsolute
andcannotbeconstruednorpresumedtobeone
of equitable mortgage, even if the period within
whichtoexercisetheoptionhasbeenextended.
the parties, as shown not necessarily by the
terminology used in the contract but by all the
surrounding circumstances, such as the relative
situations of the parties at that time; the
attitudes, acts, conduct, and declarations of the
parties; the negotiations between them leading
to the deed; and generally, all pertinent facts
having a tendency to fix and determine the real
nature of their design and understanding. As
such, documentary and parol evidence may be
submittedandadmittedtoprovetheintentionof
theparties.(Sps Austriav.Sps Gonzales,G.R.No.
147321,Jan.21,2004)

Q: Ceballos was able to borrow from Mercado
certain sum of money and as security, she
executed a Deed of Real Estate Mortgage over
thesubjectproperty.Thesaidmortgagewasnot
registered.  Ceballos defaulted. Thereafter, a
DeedofAbsoluteSalewasexecutedbyCeballos
and her husband whereby the mortgaged
property was sold to Mercado for the price of
P16, 500.00. Ceballos offered to redeem the
property from Mercado for the price of P30,
000.00 but the latter's wife refused since the
samewasalreadytransferredintheirnamesby
virtue of the Deed of Absolute Sale.  As a
consequence,Ceballosfiledthecasecontending
that the Contract should be declared as an
equitable mortgage.   Is the contention of
Ceballoscorrect?

A: No.The instances when a contract, regardless
of its nomenclature, may be presumed to be an
equitablemortgageareenumeratedinArt. 1602
of the Civil Code. Here, none of those
circumstances were present. The original
transactionwasaloan.Ceballosfailedtopay the
loan; consequently, the parties entered into
anotheragreement—theassailed,dulynotarized
DeedofAbsoluteSale,whichsupersededtheloan
document. Ceballos had the burden of proving
that she did not intend to sell the property and
that Mercado did not intend to buy it; and that
the new agreement did not embody the true
intention of the parties. (Ceballos v. Intestate
Estate of the Late Emigdio Mercado, G.R. No.
155856,May28,2004)

Q:Eulaliawasengagedinthebusinessofbuying
and selling large cattle. In order to secure the
financialcapitalsheadvancedforheremployees
(biyaheros) she required them to surrender TCT
of their properties and to execute the
corresponding Deeds of Sale in her favor.
Domeng Bandong was not required to post any
security but when Eulalia discovered that he
incurred shortage in cattle procurement
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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0
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UST GOLDEN NOTES 2011

(Villarica, et. al. v. CA, G.R. L‐19196, Nov. 29,
1968)

Note:SCheld that in this case, there was no sale
a retro and that the right of repurchase is not a
rightgrantedthesellerbythebuyerinaseparate
instrument. Such right is reserved by the vendor
inthesameinstrumentof thesaleasoneofthe
stipulationsinthecontract.

Also, once the instrument of absolute sale is
executed, the seller can no longer reserve the
right of repurchase and any right thereafter
grantedthesellerbythebuyercannotbearight
of repurchase but some other rights, like that of
anoptiontobuy.

XV.LAWONSALEOFSUBDIVISIONAND
CONDOMINIUM(PD957)

SCOPEOFAPPLICATION
Q:Aresalesordispositions of subdivisionlotsor
condominiumunitspriortotheeffectivityof the
decree exempt from compliance with the
requirementsstatedtherein?
A: No. It shall be incumbent upon the owner or
developer of the subdivision or condominium
project to complete compliance with his or its
obligations as provided in the decree within two
yearsfromthe dateofeffectivity of theDecree,
unless otherwise extended by the Authority or
unlessanadequateperformancebondisfiled.
Note: Failure of the owner or developer to comply
with the obligations under this and the preceding
provisions shall constitute a violation punishable
underSections38and39oftheDecree.
DEFINITIONOFTERMS
268
Q: How are the terms “buy” and “purchase”
definedundertheDecree?
A:Shallinclude any contract to buy,purchase,or
otherwise acquire for a valuable consideration a
subdivision lot, including the building and other
improvements,ifany,inasubdivisionprojectora
condominiumunitinacondominiumproject.
Q:Whatisasubdivisionproject?
A:A tract or a parcel of land registered under Act
No. 496 which is partitioned primarily for
residential purposes into individual lots with or
without improvements thereon, and offered to
thepublicforsale,incashorininstallmentterms.
Note: It shall include all residential, commercial,
industrial and recreational areas as well as open
spacesandothercommunityandpublicareasinthe
project.
Q:Whatisasubdivisionlot?
A: Any of the lots, whether residential,
commercial, industrial, or recreational, in a
subdivisionproject.
A:Asubdivision plan ofa registered land wherein
astreet,passagewayoropenspaceisdelineated
ontheplan.
A:Shallinclude:
2.
3.
4.
5.
6.
9.
solicitationofasale;
offertosell,directlyorbyanagent,or
by a circular, letter, advertisement or
otherwise;and
a. privilege given to a member of a
cooperative, corporation, partnership,
oranyassociationand/or
b.theissuanceofacertificateorreceipt
evidencing or giving the right of
participation in, or right to, any land in
consideration of payment of the
membershipfeeordues.(Deemedsale)
Q:Whatisacomplexsubdivisionplan?
Q: How is “sale” or “sell” defined under the
Decree?
1.
7.
8.
Every disposition, or attempt to
dispose,foravaluable consideration,of
a subdivision lot, including the building
andotherimprovementsthereof,ifany,
in a subdivision project or a
condominium unit in a condominium
project;
contracttosell;
contractofpurchaseandsale;
exchange;
attempttosell;
optionofsaleorpurchase;
Q:Whatisacondominiumproject?
A:The entire parcel of realproperty divided or to
bedividedprimarilyforresidentialpurposesinto
condominium units, including all structures
thereon.
Q:Whatisacondominiumunit?
A: A part of the condominium project intended
for any type of independent use or ownership,
includingoneormorerooms orspaceslocatedin
oneormore floors(orpart ofparts offloors)ina
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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building orbuildingsandsuchaccessoriesas may
beappendedthereto.
Q:Definethefollowingterms:
3.
1.
2.
3.
4.
5.
Owner.
A:Registered owner of the land subject
of a subdivision or a condominium
project.

Developer.
A: person who develops or improves
thesubdivisionprojector condominium
project for and in behalf of the owner
thereof.

Dealer.
A: any person directly engaged as
principal in the business of buying,
selling or exchanging real estate
whether on a full‐time or part‐time
basis.

Broker.
A: any person who, for commission or
other compensation, undertakes to sell
or negotiate the sale of a real estate
belongingtoanother.

Salesman.
A: person regularly employed by a
brokertoperform,forandinhisbehalf,
any or all functions of a real estate
broker.
4.
5.
thebuilding or buildingsincludedin the
condominium project in accordance
with the National Building Code (R.A.
No.6541).
The subdivision plan, as so approved,
shallthen besubmittedtotheDirector
ofLandsforapproval.
In case of complex subdivision plans,
court approval shall no longer be
required.
The condominium plan as likewise so
approved, shall be submitted to the
RegisterofDeedsoftheprovinceorcity
inwhichtheproperty liesandthesame
shall be acted upon subject to the
conditions and in accordance with the
procedureprescribedinSection4ofthe
CondominiumAct(R.A.No.4726).
Q: Part of the required documentary
attachmentstotheapplication isacertificateof
title to the property which is free from all liens
and encumbrances. Does this bar an owner of
mortgaged property from engaging in
subdivision or condominium project while the
mortgageisinforce?
A:No.Incaseanysubdivisionlotorcondominium
unitismortgaged, it issufficient if theinstrument
of mortgage contains a stipulation that the
mortgagee shall release the mortgage on any
subdivision lot or condominium unit as soon as
thefullpurchaseprice for thesameispaidby the
buyer.
Q: When is a subdivision or condominium
projectdeemedtoberegistered?
REGISTRATIONANDLICENSETOSELL
Q:Uponwhatagencyisexclusivejurisdictionto
regulaterealestatetradeandbusinessvested?
A: Upon completion of the publication
requirement
A:NationalHousingAuthority
Note: The fact of such registration shall be
evidencedbyaregistrationcertificatetobeissuedto
theapplicant‐ownerordealer.
Q: Whatmustaregisteredowner of a parcelof
landdoifhewishestoconvertsaidpropertyinto
asubdivisionorcondominiumproject?
Re: Publication requirement: This is complied with
when the NHA has caused to be published a notice
of the filing of the registration statement, at the
expense of the applicant‐owner or dealer, in two
newspapers general circulation, one published in
EnglishandanotherinPilipino,onceaweekfortwo
consecutive weeks, reciting that a registration
statement for the sale of subdivision lots or
condominium units has been filed in the National
HousingAuthority;
A:Heshall:
1.
2.
Submit his subdivision plan to the
Authority which shall act upon and
approve the same, upon a finding that
theplancomplieswith theSubdivision
Standards'andRegulations enforceable
atthetimetheplanissubmitted.
If the conversion desired involves a
condominium project, the same
procedure shall be followed except
that,inaddition,theNHAshallactupon
and approve the plan with respect to


ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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Q: After issuance of the registration certificate,
maytheownerordealeralreadysellsubdivision
lotsorcondominiumunits?
A: No. He must first obtain a license to sell the
projectwithintwoweeksfrom theregistrationof
suchproject.
Q: What is the purpose of the requirement of
postingofaperformancebondsbeforealicense
tosellmaybeissued?
A: It is to guarantee the construction and
maintenance of the roads, gutters, drainage,
sewerage,watersystem,lightingsystems,andfull
development of the subdivision project or the
condominium project and the compliance by the
owner or dealer with the applicable laws and
rulesandregulations.
to work a fraud upon prospective
buyers.
Q:Whenmayalicensetosellorregistrationofa
subdivisionorcondominiumprojectberevoked?
A: The Authority may, motu proprio or upon
verified complaint filed by a buyer of a
subdivision lot or condominium unit, revoke the
registration of any subdivision project or
condominium project and the license to sell any
subdivision lot or condominium unit in said
projectbyissuinganordertothiseffect, withhis
findings in respect thereto, if upon examination
into the affairs of the owner or dealer during a
hearing, it shall appear there is satisfactory
evidencethatthesaidownerordealer:
1.
2.
Q: Is a license to sell and performance bond
required in all subdivision and condominium
projects?
A: No. The following transactions are exempt
fromsaidrequirements:
1.
2.
3.
Sale of a subdivision lot resulting from
the partition of land among co‐owners
andco‐heirs.
Sale or transfer of a subdivision lot by
the original purchaser thereof and any
subsequentsaleofthesamelot.
Sale of a subdivision lot or a
condominiumunitbyorfortheaccount
of a mortgagee in the ordinary course
ofbusinesswhen necessarytoliquidate
abonafidedebt.
Q:Whenmayalicensetosellbesuspended?
A:
1.
2.
270
Uponverifiedcomplaintbyabuyerofa
subdivisionlotoracondominiumunitin
anyinterestedparty,theAuthoritymay,
in its discretion, immediately suspend
the owner's or dealer's license to sell
pending investigation and hearing of
thecase.
TheNHAmaymotupropriosuspendthe
license to sell if, in its opinion, any
information in the registration
statement filed by the owner or dealer
is or has become misleading, incorrect,
inadequateorincomplete orthesale or
offering for a sale of the subdivision or
condominium projectmayworkortend
3.
4.
5.
6.
isinsolvent;or
hasviolatedanyoftheprovisionsofthis
Decree or any applicable rule or
regulation of the Authority, or any
undertaking of his/its performance
bond;or
has been or is  engaged or is about to
engageinfraudulenttransactions;or
hasmade anymisrepresentationin any
prospectus, brochure, circular or other
literature about the subdivision project
or condominium project that has been
distributedtoprospectivebuyers;or
isofbadbusinessrepute;or
does not conduct his business in
accordance with law or sound business
principles.
Note: Where the owner or dealer is a partnership
or corporation or an unincorporated association,
it shall be sufficient cause for cancellation of its
registrationcertificateanditslicensetosell,ifany
member of such partnership or any officer or
director of such corporation or association has
beenguiltyofanyactoromissionwhichwouldbe
cause for refusing or revoking the registration of
anindividualdealer,brokerorsalesman.
DEALERS,BROKERSAMDSALESMEN
Q: What is the duration of the registration of
dealers,brokersandsalesmen?
A: On the thirty‐first day of December of each
year.
However, in the case of salesmen, their
registration shall also cease upon termination of
theiremploymentwithadealerorbroker.
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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Note: Renewal of registration for the succeeding
year shall be granted upon written application
therefore made not less than thirty nor more than
sixty days before the first day of the ensuing year
and upon payment of the prescribed fee, without
the necessity of filing further statements or
information, unless specifically required by the
Authority.
2.
All applications filed beyond said period shall be
treatedasoriginalapplications.
Q: When can there be refusal or revocation of
registrationasdealers,brokersorsalesmen?
A:Suchregistrationmayberefusedorrevokedby
theNHAif,afterreasonablenoticeandhearing,it
shall determine that such applicant or registrant
has:
mustbepresentedinsuchmannerthat
will not tend to mislead or deceive the
public.
The owner or developer shall
answerable and liable for the facilities,
improvements, infrastructures or other
forms of development represented or
promised in brochures, advertisements
and
other
sales
propaganda
disseminated by the owner or
developer or his agents and the same
shall form part of the sales warranties
enforceable against said owner or
developer,jointlyandseverally.
Note: Failure to comply with these warranties
shall also be punishable in accordance with the
penaltiesprovidedforinthisDecree.
violatedanyprovisionofthisDecree or
anyruleorregulationmadehereunder;
or
made a material false statement in his
applicationforregistration;or
been guilty of a fraudulent act  in
connection with any sale of a
subdivisionlotorcondominiumunit;or
demonstrated his unworthiness to
transactthebusiness ofdealer,broker,
orsalesman,asthecasemaybe.
Q: Within what period must the owner or
developer construct and provide the facilities,
improvements, infrastructures and other forms
of development, including water supply and
lighting facilities, which are offered and
indicated in the approved subdivision or
condominium plans, brochures, prospectus,
printed matters, letters or in any form of
advertisement?
Note: In case of charges against a salesman,
notice thereof shall also be given the broker or
dealeremployingsuchsalesman.
GR: Within one year from the date of the
issuanceofthelicensefor thesubdivision or
condominiumproject
1.
2.
3.
4.
A:
XPN: Such other period of time as may be
fixedbytheAuthority.
Pending hearing of the case, the Authority shall
have the power to order the suspension of the
dealer's, broker's, of salesman's registration;
provided,thatsuchordershallstatethecausefor
thesuspension.
ALTERATIONINAPPROVEDSUBDIVISIONPLAN
Q: Whatistherule iftheownerdesirestomake
alterationsintheapprovedsubdivisionplan?
The suspension or revocation of the registration
of a dealer or broker shall carry with it all the
suspensionorrevocation ofthe registration ofall
hissalesmen.
A:
GR: No owner or developer shall change or
altertheroads,openspaces,infrastructures,
facilitiesforpublicuseand/orother formof
subdivisiondevelopmentascontainedinthe
approved
subdivision
plan
and/or
representedinitsadvertisements
WARRANTIESOFTHEOWNERORDEVELOPER
Q:Inmakingadvertisements,doestheowneror
developermakewarrantiesrelativetosuch?
A:Yes.
1.
XPN: If he has obtained the permission of
theAuthorityand thewrittenconformityor
consent of the duly organized homeowners
association, or in the absence of the latter,
by the majority of the lot buyers in the
subdivision.
Advertisements that may be made
through newspaper, radio, television,
leaflets, circulars or any other form
about the subdivision or the
condominium or its operations or
activitiesmustreflect therealfactsand
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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TAKEOVERDEVELOPMENT
RIGHTSANDREMEDIESOFABUYER
Q:Maypaymentmadebyabuyerbeforfeitedin
favor of the owner or developer in case the
buyer desists from further payment due to the
failureoftheowner ordevelopertodevelopthe
subdivisionorcondominiumprojectaccordingto
theapprovedplanwithinthetimelimitprovided
for such? What is the buyer’s remedy in this
case?
A: No, suchforfeiture is not allowed. Suchbuyer
may, at his option, be reimbursed the total
amountpaidincludingamortizationinterestsbut
excluding delinquency interests, with interest
thereonatthelegalrate.
Q:Doesadefaultingbuyerhave anyrightunder
theDecree?
Q: When can
Development?
there
be
a
Take‐Over
A: The NHA may take over or cause the
development and completion of the subdivision
or condominium project at the expenses of the
ownerordeveloper,jointlyandseverally,incases
where the owner or developer has refused or
failedtodeveloporcompletethedevelopmentof
theprojectasprovidedforintheDecree.
Note: The Authority may, after such take‐over,
demand, collect and receive from the buyers the
installmentpaymentsdueonthelots,whichshallbe
utilizedforthedevelopmentofthesubdivision.

A:Yes.Therightsofthebuyerintheeventofthis
failure to pay the installments due for reasons
other thanthefailureof the ownerordeveloper
to develop the project shall be governed by
RepublicActNo.6552.
Where the transaction or contract was entered
into prior to the effectivity of Republic Act No.
6552 on August 26,  1972, the defaulting buyer
shall be entitled to the corresponding refund
based on the installments paid after the
effectivity of the law in  the absence of any
provisioninthecontracttothecontrary.
Q: What is the owner or developer’s obligation
in case the lot bought and fully‐paid by the
buyerismortgaged?
A: Inthe event a mortgageoverthelotorunitis
outstanding at the time of the issuance of the
title to the buyer, the owner or developer shall
redeem the mortgage or the corresponding
portion thereof within six months from such
issuanceinorderthatthetitleoveranyfully paid
lot or unit may be secured and delivered to the
buyerinaccordanceherewith.
Q: May the parties waive compliance with the
decree?
A: No. Any condition, stipulation, or provision in
contract of sale whereby any person waives
compliancewithanyprovisionoftheDecreeorof
anyruleorregulationissuedthereundershallbe
void.

XVI.THECONDOMINIUMACT(RA4726)

PRELIMINARIES

Q:Whatisacondominium?

A: It is an interest in real property consisting of
separate interest in a unit in a residential,
industrial or commercial building and an
undivided interest in common, directly or
indirectly,inthelandonwhichitislocatedandin
othercommonareasofthebuilding.

Note: It may include, in addition, aseparate interest
inotherportionsofsuchrealproperty.

Q:Whatcomprisesarealrightincondominium?

A: The real right in condominium may be
ownership or any other interest in real property
recognized by law, on property in the Civil Code
andotherpertinentlaws.

Q:Whatisacondominiumunit?

A: It is a part of the condominium project
intended for any type of independent use or
ownership, including one or more rooms or
spaces located in one or more floors (or part or
partsoffloors)inabuilding orbuildingsandsuch
accessoriesasmaybeappendedthereto.

Q:Whatisacondominiumproject?

A: It is the entire parcel of real property divided
or to be divided in condominiums, including all
structuresthereon,




272
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
0
SALES
Q:Whatarecommonareas?

A: The entire project excepting all units
separatelygrantedorheldorreserved.

Q:Whatismeantby“todivide”realproperty?

A: To divide the ownership thereof or other
interest therein by conveying one or more
condominiums therein but less than the whole
thereof.

Q: What is the rule as regards acquisition of
ownershipovercommonareas?

A:Transferorconveyance ofaunitorapartment,
officeorstoreorotherspacethereinshallinclude
the transfer or conveyance of the undivided
interests in the common areas or, in a proper
case, the membership or shareholdings in the
condominiumcorporation

Q: Are there any restrictions as regards
ownershipofcondominiumunitsprovidedunder
theCondominiumAct?

A:
1. Asregardsindividuals:
GR:None.

XPN: where the common areas in the
condominiumprojectareownedby the
owners of separate units as co‐owners
thereof, no condominium unit therein
shall be conveyed or transferred to
personsotherthan:
1. Filipinocitizens,or
2. Corporations at least sixty
percent of the capital stock of
whichbelongtoFilipinocitizens

XPN to the XPN: in cases of hereditary
succession.

2. Asregardscorporations:
Where the common areas in a
condominium project are held by a
corporation, no transfer or conveyance
of a unit shall be valid if the
concomitant
transfer
of
the
appurtenant
membership
or
stockholding in the corporation will
cause the alien interest in such
corporation to exceed the limits
imposedbyexistinglaws.


corporation
shall
constitute
managementbodyoftheproject.

Q: What are the incidents of a condominium
grant?

A: Unless otherwise expressly provided in the
enabling or master deed or the declaration of
restrictions,theincidentsofacondominiumgrant
areasfollows:

1. The boundary of the unit granted are
the interior surfaces of the perimeter
walls, floors, ceilings, windows and
doorsthereof.

Note: The following are not part of
theunitbearingwalls,columns,
floors, roofs, foundations and
other common structural
elementsofthebuilding:

a. lobbies, stairways, hallways,
and other areas of common
use,
b. elevator equipment and shafts,
centralheating,
c. centralrefrigerationandcentral
air‐conditioningequipment,
d. reservoirs, tanks, pumps and
other central services and
facilities,
e. pipes, ducts, flues, chutes,
conduits,wiresandotherutility
installations, wherever located,
excepttheoutletsthereofwhen
locatedwithintheunit.

2.
There shall pass with the unit, as an
appurtenance thereof, an exclusive
easement for the use of the air space
encompassed by the boundaries of the
unit as it exists at any particular time
andastheunitmaylawfully be altered
orreconstructedfromtimetotime.

Note: Such easement shall be
automatically terminated in any air
spaceupondestructionoftheunitas
torenderituntenantable.

3.
4.
Note: Whenever the common areas in a
condominium project are held by a
condominium
corporation,
such
Common areas are held in common by
the holders of units, in equal shares,
one for each unit, unless otherwise
provided.

A non‐exclusive easement for ingress,
egress and support through the
common areas is appurtenant to each
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
0
the
0
273
UST GOLDEN NOTES 2011

5.
6.
7.
unitandthecommonareasaresubject
tosucheasements.

Each condominium owner shall have
theexclusiverighttopaint,repaint,tile,
wax, paper or otherwise refinish and
decoratetheinnersurfacesofthewalls,
ceilings, floors, windows and doors
boundinghisownunit.

Each condominium owner shall have
the exclusive right to mortgage, pledge
or encumber his condominium and to
havethesameappraisedindependently
of the other condominiums but any
obligation
incurred
by
such
condominiumownerispersonaltohim.

GR: Each condominium owner has also
the absolute right to sell or dispose of
hiscondominium.
XPN: If the master deed contains a
requirement that the property be first
offered to the condominium owners
within a reasonable period of time
before the same is offered to outside
parties;

Q: May common areas be divided through
judicialpartition?

A:
GR: Common areas shall remain
undivided,andthereshallbe nojudicial
partitionthereof.

XPN: Where several persons own
condominiums in a condominium
project, an action may be brought by
one or more such persons for partition
thereofbysaleofthe entireproject,as
if the owners of all of the
condominiumsinsuch projectwereco‐
ownersoftheentireprojectinthesame
proportion as their interests in the 
commonareas:

Note: However, a partition shall be
madeonlyuponashowingthat:

1. three years after damage or
destruction to the project which
renders material part thereof unit
for its use prior thereto, the
project has not been rebuilt or
repaired substantially to its state
priortoitsdamageordestruction,
or
274
2.
3.
4.
5.

damage or destruction to the
project has rendered one‐half or
more of the units therein
untenantable
and
that
condominium owners holding in
aggregatemorethanthirtypercent
interest in the common areas are
opposedto repairorrestoration of
theproject;or

theprojecthasbeeninexistencein
excess of fifty years, that it is
obsolete and uneconomic, and
that condominium owners holding
in aggregate more than fifty
percent interest in the common
areas are opposed to repair or
restoration or remodeling or
modernizingoftheproject;or

the project or a material part
thereof has been condemned or
expropriated and that the project
is no longer viable, or that the
condominium owners holding in
aggregate more than seventy
percent interest in the common
areasareopposedtocontinuation
of the condominium regime after
expropriation or condemnation of
amaterialportionthereof;or

theconditionsforsuchpartitionby
sale set forth in the declaration of
restrictions, duly registered in
accordance with the terms of the
Act,havebeenmet.

Q: What is the rule regarding issuance of
certificateoftitlewheretheenabling ormaster
deed provides that the land included within a
condominium project are to be owned in
commonbythecondominiumownerstherein?

A:TheRegisterofDeedsmay,attherequestofall
the condominiumownersanduponsurrenderof
all their "condominium owner's" copies, cancel
thecertificatesoftitleof  thepropertyandissuea
new one in the name of said condominium
ownersaspro‐indivisoco‐ownersthereof.

Q: How are deeds, declarations or plans for a
condominiumprojectconstrued?

A:
1. Liberally, to facilitate the  operation of
theproject
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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2.
Provisions shall be presumed to be
independentandseverable.

DECLARATIONOFRESTRICTIONS

Q: When should a declaration of restrictions be
registeredandwhatistheeffectofsuch?

A: The owner of a project shall, prior to the
conveyanceofany condominiumtherein,register
a declaration of restrictions relating to such
project.

Such restrictionsshall constitutealienuponeach
condominium in the project, and shall insure to
andbindallcondominiumownersintheproject.

Note: Such liens, unless otherwise provided,
may be enforced by any condominium
ownerintheprojectorby themanagement
bodyofsuchproject.

Q: What should a declaration of restrictions
provide?

A: The declarationof restrictions shall provide for
themanagementof theprojectby anyoneof the
followingmanagementbodies:
1. acondominiumcorporation,
2. an association of the condominium
owners,
3. a board of governors elected by
condominiumowners,or
4. a management agent elected by the
owners or by the board named in the
declaration.
5. votingmajorities,
6. quorums,
7. notices,
8. meetingdate,and
9. other rules governing such body or
bodies.

Q: What may a declaration of restrictions
provide?

A: Such declaration of restrictions, among other
things,mayalsoprovide:

1. Astoanysuchmanagementbody;
a. For the powers thereof, including
powertoenforcetheprovisionsof
thedeclarationsofrestrictions;
b. For maintenance of insurance
policies, insuring condominium
owners against loss by fire,
casualty, liability, workmen's
compensation and other insurable
c.
d.
e.
f.
g.
h.
i.
2.
3.
4.
risks, and for bonding of the
members of any management
body;
Provisionsformaintenance,utility,
gardening and other services
benefiting the common areas, for
the employment of personnel
necessary for the operation of the
building,andlegal,accounting and
other professional and technical
services;
Forpurchaseofmaterials, supplies
and the like needed by the
commonareas;
For payment of taxes and special
assessmentswhichwouldbealien
upontheentireprojectorcommon
areas,andfordischargeof any lien
orencumbranceleviedagainstthe
entire project or the common
areas;
For reconstruction of any portion
or portions of any damage to or
destructionoftheproject;
The manner for delegation of its
powers;
For entry byitsofficersandagents
into any unit when necessary in
connection with the maintenance
or construction for which such
bodyisresponsible;
For a power of attorney to the
management body to sell the
entireprojectforthebenefitofall
of the owners thereof when
partition of the project may be
authorized under Section 8 of the
Condominium Act, which said
power shall be binding upon all of
the
condominium
owners
regardlessofwhethertheyassume
the obligations of the restrictions
ornot.

The manner and procedure for
amending such restrictions:Provided,
Thatthevoteofnotlessthanamajority
ininterestoftheownersisobtained.
For independent audit of the accounts
ofthemanagementbody;
For reasonable assessments to meet
authorized
expenditures,
each
condominium unit to be assessed
separately for its share of such
expenses in proportion (unless
otherwise provided) to its owners
fractional interest in any common
areas;
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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
5.
6.
For the subordination of the liens
securing such assessments to other
liens either generally or specifically
described;
For conditions, other than those
providedforinSections8and13ofthe
Act,uponwhich partitionofthe project
and dissolution of the condominium
corporationmaybemade.

Note:Suchrighttopartitionordissolution
maybeconditionedupon:
a. failure of the condominium owners
torebuildwithinacertainperiod;
b. specified inadequacy of insurance
proceeds;
c. specified percentage of damage to
thebuilding;
d. adecisionofanarbitrator;or
e. upon any other reasonable
condition.

Q:WhatisthedutyoftheRegister ofDeedsas
regardsthisdeclarationofrestrictions?

A:TheRegisterofDeedsshallenterandannotate
thedeclarationofrestrictionsuponthecertificate
of title covering the land included within the
project,ifthelandispatentedorregisteredunder
theLandRegistrationorCadastralActs.

POWERSOFANDRESTRICTIONSUPON
MANAGEMENTBODY

Q:Whataretherestrictionsimposedbythelaw
upon corporations which is also the
managementbodyofthecondominiumproject?

A:Therestrictionsareasfollows:

1. The corporate purposes of such a
corporationshallbelimitedtothe:
a. holding of the common areas,
either in ownership or any other
interestinrealpropertyrecognized
bylaw,
b. managementoftheproject,and
c. to such other purposes as may be
necessary,incidentalorconvenient
to the accomplishment of said
purposes.
2. Thearticlesofincorporationorby‐laws
ofthecorporationshallnotcontainany
provision contrary to or inconsistent
withthe:
a. provisionsoftheAct;
b. enablingormasterdeed;or
c. declaration of restrictions of the
project.
276
Q:Maythemanagementbodymayacquireand
hold, for the benefit of the condominium
owners, tangible and intangible personal
property and dispose of the same by sale or
otherwise?

A: Yes, unless otherwise provided for by the
declarationofrestrictions.
Note: The beneficial interest in such personal
property shall be owned by the condominium
owners in the same proportion as their respective
interestsinthecommonareas.

A transfer of a condominium shall transfer to the
transferee ownership of the transferor's beneficial
interestinsuchpersonalproperty.

CONDOMINIUMCORPORATIONS

Q:Whatisacondominiumcorporation?

A: A corporation specially formed for the
purpose,inwhichtheholdersofseparateinterest
shall automatically be members or shareholders,
to the exclusion of others, in proportion to the
appurtenant interest of their respective units in
thecommonareas.

Note: As regards title to the common areas,
including the land, or the appurtenant interests in
such areas, these may be held by a condominium
corporation.

Q: What is the term of a condominium
corporation?

A: Co‐terminus with the duration of the
condominium project, the provisions of the
CorporationLawtothecontrarynotwithstanding.


Membership

Q:Whataretherulesregardingmembershipina
condominiumcorporation?

A: Membership in a condominium corporation,
regardless of whether it is a stock or non‐stock
corporation, shall not be transferable separately
from the condominium unit of which it is an
appurtenance.

Note:Whenamemberorstockholderceasestoown
a unit in the project in which the condominium
corporation owns or holds the common areas, he
shall automatically cease to be a member or
stockholderofthecondominiumcorporation.

CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

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Q: May a condominium corporation sell,
exchange, lease or otherwise dispose of the
common areas owned or held by it in the
condominiumproject?

A:
GR:Duringitsexistence,itcannotdoso.

XPN: Ifauthorized  by the affirmative vote of
allthestockholdersormembers.

Q: Is the so called appraisal right under the
Corporation Code available to stockholders or
membersofacondominiumcorporation?

A:
GR:Notavailable.Thelawprovidesthat“the
by‐laws of a condominium corporation shall
provide that a stockholder or member shall
not be entitled to demand payment of his
sharesorinterestinthosecaseswheresuch
right is granted under the Corporation Law
xxx”

XPN:Ifsaidstockholderormemberconsents
tosellhisseparateinterestintheproject to
the corporation or to any purchaser of the
corporation'schoicewhoshallalso buyfrom
the corporation the dissenting member or
stockholder'sinterest.

superior rights of the corporation
creditors.

Note: Such transfer or conveyance shall
be deemed to be a full liquidation of the
interest ofsuch membersor stockholders
inthecorporation.
2.

After such transfer or conveyance, the
provisions of this Act governing
undivided co‐ownership of, or
undivided interest in, the common
areas in condominium projects shall
fullyapply.

Q: When may voluntary dissolution of a
condominiumcorporationbeallowed?

A:Acondominiumcorporationmaybevoluntarily
dissolvedonly:
1. when the enabling or the master deed
of the project in which the
condominium corporation owns or
holdsthecommonareaisrevoked;and
2. uponashowingthat:
a. three years after damage or
destructiontotheprojectinwhich
the corporation owns or holds the
common areas, which damage or
destructionrendersamaterial part
thereof unfit for its use prior
thereto, the project has not been
rebuilt or repaired substantially to
its state prior to its damage or
destruction;or

b. damage or destruction to the
project has rendered one‐half or
more of the units therein
untenantable and that more than
thirty percent of the members of
the corporation, if non‐stock, or
the shareholders representing
more than thirty percent of the
capital stock entitled to vote, if a
stock corporation, are opposed to
therepair orreconstruction of the
project,or

c. theprojecthasbeeninexistencein
excess of fifty years, that it is
obsolete and uneconomical, and
thatmore thanfifty percentofthe
members of the corporation, if
non‐stock, or the stockholders
representing more than fifty
percent of the capital stock
entitled to vote, if a stock
corporation, are opposed to the
Note: In case of disagreement as to price, the
procedure set forth in the appropriate
provision of the Corporation Law for valuation
ofsharesshallbefollowed.

The corporation shall have two years within
which to pay for the shares or furnish a
purchaserofitschoicefromthetimeofaward.

All expenses incurred in the liquidation of the
interest of the dissenting member  or
stockholdershallbebornebyhim.


DissolutionandLiquidation

Q: What is the effect of involuntary dissolution
of a condominium corporation for any of the
causesprovidedbylaw?

A:
1. The common areas owned or held by
the corporation shall, by way of
liquidation, be transferred pro‐indiviso
andinproportiontotheirinterestin the
corporation to the members or
stockholders thereof, subject to the
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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
repairorrestorationorremodeling
ormodernizingoftheproject;or

d.
e.
the project or a material part
thereof has been condemned or
expropriated and that the project
is no longer viable, or that the
members holding in aggregate
more than seventy percent
interest in the corporation, if non‐
stock, or the stockholders
representing more than seventy
percent of the capital stock
entitled to vote, if a stock
corporation, are opposed to the
continuation of the condominium
regime after expropriation or
condemnation of a material
portionthereof;or

the conditions for such a
dissolution set forth in the
declaration of restrictions of the
project in which the corporation
owns or holds the common areas,
havebeenmet.

Note: action for voluntary dissolution is that under
Rule104oftheRulesofCourt.

Q: May the members or stockholders of a
condominium corporation dissolve such
corporation?

A: Yes, by the affirmative vote of all the
stockholdersormembersthereofata general or
special meeting duly called for the
purpose:Provided, that all the requirements of
Section 62 of the Corporation Law are complied
with.

Q: What is the consequence of voluntary
dissolutionofacondominiumcorporation?

A:
GR:Thecorporationshallbedeemedtohold
apowerofattorneyfromallthemembersor
stockholders to sell and dispose of their
separateinterestsintheproject.
XPN: Unless otherwise provided for in the
declarationofrestrictions

Q: How is a condominium corporation
liquidated?

A:Liquidationofthecorporationshallbeeffected
byasaleoftheentireprojectasifthecorporation
ownedthewholethereof,subjectto therights of
278
the corporate and of individual condominium
creditors.

Q:WhatshouldtheCourtdoif,inanactionfor
partition of a condominium project or for the
dissolution of condominium corporation on the
ground that the project or a material part
thereof has been condemned or expropriated,
theCourtfindsthat theconditionsprovidedfor
intheCondominiumActor inthedeclarationof
restrictionshavenotbeenmet?

A: The Court may decree a reorganization of the
project,declaringwhichportionorportionsofthe
projectshallcontinueasa condominiumproject,
the owners thereof, and the respective rights of
said remaining owners and the just
compensation,ifany,thatacondominium owner
may be entitled to due to deprivation of his
property.

Note: Upon receipt of a copy of the decree, the
RegisterofDeedsshallenterandannotatethesame
onthepertinentcertificateoftitle.

Assessment,NoticethereofandLienCreated

Q: If real property has been divided into
condominiums, how will it be assessed for
taxationpurposes?

A: Each condominium separately owned shall be
separatelyassessed,forpurposesofrealproperty
taxation and other tax purposes to the owners
thereof and the tax on each such condominium
shallconstitutealiensolelythereon.

Q:Whoshouldpayforanassessmentuponany
condominium made in accordance with a duly
registereddeclarationofrestrictions?

A: Itis an obligation of the owner thereof at the
timetheassessmentismade.

Q: What are the rules as regards the notice of
assessment?

A:Thenotice:
1. is to be registered with the Register of
Deeds of the city or province where
suchcondominiumprojectislocated.
2. shallstatethefollowing:
a. amount of such assessment and
suchotherchargesthereonasmay
beauthorizedbythedeclarationof
restrictions,
b. a description of the condominium
unit against which same has been
assessed,and
CIVILLAWTEAM:
ADVISER:ATTY.ELMERT.RABUYA ;SUBJECTHEAD:ALFREDOB.DIMAFELIXII;
ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ.
FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

0
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SALES
Q: What are the rules as regards labor
performedorservicesormaterialsfurnished?

A:
1. If with the consent of or at the request
ofacondominiumownerorhisagentor
hiscontractororsubcontractor:
GR:  it shall not be the basis of a lien
against the condominium of any other
condominiumowner
XPN: suchother owners haveexpressly
consented to or requested the
performanceofsuchlabor orfurnishing
ofsuchmaterialsorservices.

c.
3.
the name of the registered owner
thereof.
Such notice shall be signed by an
authorized representative of the
management body or as otherwise
provided in the declaration of
restrictions.

Q: What is the effect if the management body
causes a notice of assessment to be registered
withtheregisterofdeeds?

A: The amount of any such assessment plus any
other charges thereon, such as interest, costs
(including attorney's fees) and penalties, as such
may be provided for in the declaration of
restrictions,shallbeandbecomealien uponthe
condominiumassessed.

Note: Such express consent shall be
deemed to have been given by the
owner of any condominium in the
case of emergency repairs of his
condominiumunit.
Note: Effect of payment: Upon payment of said
assessment and charges or other satisfaction
thereof, the management body shall cause to be
registeredareleaseofthelien.

2.
If performed or furnished for the
commonareasandifdulyauthorizedby
themanagementbodyprovidedforina
declarationofrestrictionsgoverningthe
property: shall be deemed to be
performed or furnished with the
express consent of each condominium
owner.

Q: How may an owner of any condominium
removehiscondominiumfromalienagainsttwo
ormorecondominiumsoranypartthereof?

A: By payment to the holder of the lien of the
fraction of the total sum secured by such lien
whichisattributabletohiscondominiumunit.














Q:Whataretherulesasregardstheliencreated
incaseofunpaidassessments,etc?

A:
GR: Such lien shall be superior to all other
liens registered subsequent to the
registrationofsaidnoticeofassessment
XPNs:
1. realpropertytaxliensaresuperior;
2. whendeclarationofrestrictionsprovide
for the subordination thereof to any
otherliensandencumbrances.

Q: What is the rule as regards enforcement of
thelien?

A: Such liens may be enforced in the same
manner provided for by law for the judicial or
extra‐judicial foreclosure of mortgages of real
property.

Q: Can the management body bid in the
foreclosure sale based on the lien for unpaid
assessments?

A:
GR: No, the management body shall have
powertobidatforeclosuresale.

XPN: Unless otherwise provided for in the
declarationofrestrictions,

Note: The condominium owner shall have the
samerightofredemptionasincasesofjudicialor
extra‐judicialforeclosureofmortgages.
ACADEMICSC HAIR:LESTERJAY ALAN E.F LORESII 
UNIVERSITYOFSANTOTOMAS 
VICEC HAIRSFORACADEMICS : KARENJOY G.S ABUGO& JOHNHENRYC. MENDOZA
Facultad de Derecho Civil 
 VICECHAIRFORADMINISTRATIONAND FINANCE:J EANELLEC. LEE
VICEC HAIRSFOR LAY‐OUT AND DESIGN: E ARLLOUIE M. MASACAYAN& T HEENAC.MARTINEZ
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