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INTRODUCTION
A. Definition of sale
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
(144a!
"he definition in Art 14# brings about the creation of
two sets of obligations$ for the seller, (1! to transfer
ownership and (%! deliver possession of the sub&ect
matter' for the buyer$ to pay the price. (bligations,
as referred to in the Article, are obligations to give'
thus it may be the sub&ect of actions for specific
performance. (Villanueva)
B. )haracteristics of a contract of sale
1. Nominate * it has a peculiar name and form as
prescribed in the law
%. Consensual * it is founded upon and completed
by mere consent of the contracting parties
1
(See
Article 1475)
Art. 1475. "he contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the ob&ect of the contract and upon the price.
+rom that moment, the parties may reciprocally
demand performance, sub&ect to the provisions of the
law governing the form of contracts. (14,a!
-. Commutative * it is a contract in which each of
the contracting parties gives a thing of value and
receives an equivalent
4. Bilateral * it is a contract in which both the
contracting parties are bound to fulfill the obligations
reciprocally towards each other (i.e. the vendor
becomes bound to deliver the thing sold and the
vendee to pay the price for it!
1
QUIJADA V. CA: Sale being a consensual contract, is
perfected by mere consent, which is manifested the moment
there is a meeting of the minds as to the offer and acceptance
thereof on 3 elements: price, subject matter and terms of
payment. Ownership by the seller on the thing sold at the time of
perfection of the contract of sale is not an element for its
perfection. What the law requires is that the seller has the right to
transfer ownership at the time the thing sold is delivered.
. Onerous * as opposed to gratuitous, because
the thing is sold in consideration of a price and
vice versa
.. Princial * it can stand on its own' unli/e an
accessory contract
). 0inds of a contract of sale
1. A!solute * where the sale is not sub&ect to
any condition whatsoever and where title passes
to the buyer upon the delivery of the thing sold.
%. Con"itional * where the sale contemplates a
contingency and in general, where the contract is
sub&ect to certain conditions (usually the full
payment of the purchase price!. )onditions are
attached to the contract' the title will only pass
once the conditions have been fulfilled.
D. 1ale as distinguished from other contracts
1. sale vs. contract #or a iece o# $or%
&
Art. 14'7. A contract for the delivery at a
certain price of an article which the vendor in the
ordinary course of his business manufactures or
procures for the general mar/et, whether the
same is on hand at the time or not, is a contract
of sale, but if the goods are to be manufactured
specially for the customer and upon his special
order, and not for the general mar/et, it is a
contract for a piece of wor/. (n!
Art. 171(. By the contract for a piece of wor/
the contractor binds himself to e2ecute a piece of
wor/ for the employer, in consideration of a
certain price or compensation. "he contractor
may either employ only his labor or s/ill, or also
furnish the material. (1##a!
Art. 1714. 3f the contractor agrees to produce
the wor/ from material furnished by him, he
shall deliver the thing produced to the employer
and transfer dominion over the thing. "his
contract shall be governed by the following
articles as well as by the pertinent provisions on
2
CELESTINO V. COLLECTOR: factory which habitually
ma!es sash, windows and doors, and sells the goods to the
public is a manufacturer. "he fact that the windows and
doors are made by it only when customers place their
orders and according to such form or combination as suit
the fancy of the purchasers does not alter the nature of the
establishment#
COMMISSIONER V. ENGINEERING: "he test of a
contractor is that he renders service in the course of an
independent occupation, representing the will of his
employer only as to the result of his wor!, and not as to the
means by which it is accomplished.
1
Law on Sales
warranty of title and against hidden defects and the
payment of price in a contract of sale. (n!
Art. 1715. "he contract shall e2ecute the wor/ in
such a manner that it has the qualities agreed upon
and has no defects which destroy or lessen its value
or fitness for its ordinary or stipulated use. 1hould the
wor/ be not of such quality, the employer may
require that the contractor remove the defect or
e2ecute another wor/. 3f the contract fails or refuses
to comply with this obligation, the employer may
have the defect removed or another wor/ e2ecuted,
at the contractor4s cost. (n!
a! 3n a contract for wor/, labor or materials or for a
piece of wor/, the thing transferred is one not in
e2istence and which never would have e2isted but for
the order of the party desiring to acquire it' while in a
contract of sale, the thing transferred is one which
would have e2isted and been the sub&ect of sale to
some other person, even if the order had not been
given. (De Leon)
b! "his follows the 5assachusetts 6ule$ a contract for
the delivery at a certain price of an article which the
vendor, in the ordinary course of his business,
manufactures or procures for the general mar/et,
whether the same is on hand at the time or not, is a
contract of sale. But if the goods are to be
manufactured specially for the customer and upon his
special order and not for the general mar/et, it is a
contract for a piece of wor/. (Baviera)
&. sale vs. a)enc* to !u* an" sell
(
Art. 14''. 3n construing a contract containing
provisions characteristic of both the contract of sale
and of the contract of agency to sell, the essential
clauses of the whole instrument shall be considered.
(n!
(. sale vs. !arter or e+c,an)e
Art. 14'8. 3f the consideration of the contract
consists partly in money, and partly in another thing,
the transaction shall be characteri7ed by the manifest
intention of the parties. 3f such intention does not
clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration
3
QUIROGA V. PARSONS: $n the contract in the instant case,
what was essential, constituting its cause and subject matter, was
that the plaintiff was to furnish the defendant with the beds which
the latter might order, at the stipulated price, and that the
defendant was to pay this price in the manner agreed upon.
"hese are precisely the essential features of a contract of
purchase and sale. "here was the obligation on the part of the
plaintiff to supply the beds, and, on that of the defendant, to pay
their price. "hese features e%clude the legal conception of an
agency or older to sell whereby the mandatory or agent receives
the thing to sell it, and does not pay its price, but delivers to the
principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it,
e2ceeds the amount of the money or its
equivalent' otherwise, it is a sale. (144.a!
Art. 1'(8. By the contract of barter or e2change
one of the parties binds himself to give one thing
in consideration of the other4s promise to give
another thing. (1-#a!
Art. 1'(-. 3f one of the contracting parties,
having received the thing promised him in
barter, should prove that it did not belong to the
person who gave it, he cannot be compelled to
deliver that which he offered in e2change, but he
shall be entitled to damages. (1-8a!
Art. 1'4.. (ne who loses by eviction the thing
received in barter may recover that which he
gave in e2change with a right to damages, or he
may only demand an indemnity for damages.
9owever, he can only ma/e use of the right to
recover the thing which he has delivered while
the same remains in the possession of the other
party, and without pre&udice to the rights
acquired in good faith in the meantime by a third
person. (14,a!
Art. 1'41. As to all matters not specifically
provided for in this "itle, barter shall be
governed by the provisions of the preceding "itle
relating to sales. (141a!
4. sale vs. "acion en a)o
Art. 1&45. Dation in payment, whereby property
is alienated to the creditor in satisfaction of a
debt in money, shall be governed by the law of
sales. (n!
Dacion /n Pa)o 0ale
:resupposes a
pree2isting debt ;
e2tinguishes the debt
(bligations are
created from the
perfection of the
contract
:rice is the value of the
thing given
+i2ing of the price is
more freely agreed
upon
(Manresa)
5. sale vs. "onation
Art. 7&5. Donation is an act of liberality
whereby a person disposes gratuitously of a
thing or right in favor of another, who accepts it.
<nder Art 14=1, when the price of the contract of
sale is simulated, the sale may be void but the
act may be shown to have been in reality a
donation 2 2 2 (n the other hand, a purported
donation may have other considerations placed
on the donee, thus it becomes critical to
2
determine what rule applies (law on sales or law on
donations! (Villanueva)
'. summation1 tests to "etermine t,e nature o#
t,e contract
4 Tests 0ale 2 o!3ect1
trans#er o#
o$ners,i
Piece o#
4or% 2
o!3ect1
service
5mental6
,*sical
la!or7
1. >ature of
business
(rdinary ?2tra@
ordinary
%. ?2istence
of thing
Does not Depends on
order
-. 5ar/et Aeneral 1pecific
)lientele
4. 1tatute of
frauds
)overed >ot covered
4 Tests 5!ut
t,e ultimate
test is1
intention o#
t,e arties7
0ale A)enc* to 0ell
1. 6is/ of Boss Borne by
seller
Borne by
principal, not
agent
%. :ayment Buyer :rincipal, not
agent
-. ?2clusive
Dealership
6emittance test
4. 6eturn of
unsold goods
>one 5andatory
0ale Barter
1. 3ntention of
parties
%. Calue of
thing vs. Calue
of money
5oney D
thing
"hing D
5oney
& Tests 0ale Dacion /n Pa)o
1. Debt >one :re@e2isting
%. 1tage of
contract
:erfection ?2tinguishment
II. PARTI/0 TO A CONTRACT O8 0A9/
A. )apacity of parties
Art. 148-. All persons who are authori7ed in this
)ode to obligate themselves, may enter into a
contract of sale, saving the modifications contained in
the following articles.
Ehere necessaries are those sold and delivered
to a minor or other person without capacity to
act, he must pay a reasonable price therefor.
>ecessaries are those referred to in Article %8,.
(14=a!
Art. 14-.. "he husband and the wife cannot
sell property to each other, e2cept$
(1! Ehen a separation of property was agreed
upon in the marriage settlements' or
(%! Ehen there has been a &udicial separation or
property under Article 181. (14#a!
Art. 14-1. "he following persons cannot acquire
by purchase, even at a public or &udicial auction,
either in person or through the mediation of
another$
(1! "he guardian, the property of the person or
persons who may be under his guardianship'
(%! Agents, the property whose administration or
sale may have been entrusted to them, unless
the consent of the principal has been given'
(-! ?2ecutors and administrators, the property of
the estate under administration'
(4! :ublic officers and employees, the property
of the 1tate or of any subdivision thereof, or of
any government@owned or controlled
corporation, or institution, the administration of
which has been intrusted to them' this provision
shall apply to &udges and government e2perts
who, in any manner whatsoever, ta/e part in the
sale'
(! Fustices, &udges, prosecuting attorneys,
cler/s of superior and inferior courts, and other
officers and employees connected with the
administration of &ustice, the property and rights
in litigation or levied upon an e2ecution before
the court within whose &urisdiction or territory
they e2ercise their respective functions' this
prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with
respect to the property and rights which may be
the ob&ect of any litigation in which they may
ta/e part by virtue of their profession.
(.! Any others specially disqualified by law.
(148a!
Art. 14-&. "he prohibitions in the two preceding
articles are applicable to sales in legal
redemption, compromises and renunciations. (n!
1. a!solute incaacit*
3
"hose who have the legal capacity to give consent to
contracts may validly enter into a contract of sale,
unless specifically prohibited by law. 9owever, when
necessaries are sold and delivered to a minor or other
incapacitated person, the latter must pay a
reasonable price therefore. >ecessaries are those
indispensable for sustenance, clothing, dwelling,
education, and medical treatment.
&. relative incaacit*
a) married persons (as regards contracts wit tird
parties)
Art. 7(. ?ither spouse may e2ercise any legitimate
profession, occupation, business or activity without
the consent of the other. "he latter may ob&ect only
on valid, serious, and moral grounds.
3n case of disagreement, the court shall decide
whether or not$
(1! "he ob&ection is proper' and
(%! Benefit has occurred to the family prior to the
ob&ection or thereafter. 3f the benefit accrued prior to
the ob&ection, the resulting obligation shall be
enforced against the separate property of the spouse
who has not obtained consent.
"he foregoing provisions shall not pre&udice the rights
of creditors who acted in good faith. (11=a!
Art. -'. "he administration and en&oyment of the
community property shall belong to both spouses
&ointly. 3n case of disagreement, the husband4s
decision shall prevail, sub&ect to recourse to the court
by the wife for proper remedy, which must be availed
of within five years from the date of the contract
implementing such decision.
3n the event that one spouse is incapacitated or
otherwise unable to participate in the administration
of the common properties, the other spouse may
assume sole powers of administration. "hese powers
do not include disposition or encumbrance without
authority of the court or the written consent of the
other spouse. 3n the absence of such authority or
consent, the disposition or encumbrance shall be
void. 9owever, the transaction shall be construed as
a continuing offer on the part of the consenting
spouse and the third person, and may be perfected as
a binding contract upon the acceptance by the other
spouse or authori7ation by the court before the offer
is withdrawn by either or both offerors. (%,.a!
Art. 1&4. "he administration and en&oyment of the
con&ugal partnership shall belong to both spouses
&ointly. 3n case of disagreement, the husband4s
decision shall prevail, sub&ect to recourse to the court
by the wife for proper remedy, which must be availed
of within five years from the date of the contract
implementing such decision.
3n the event that one spouse is incapacitated or
otherwise unable to participate in the
administration of the con&ugal properties, the
other spouse may assume sole powers of
administration. "hese powers do not include
disposition or encumbrance without authority of
the court or the written consent of the other
spouse. 3n the absence of such authority or
consent, the disposition or encumbrance shall be
void. 9owever, the transaction shall be
construed as a continuing offer on the part of the
consenting spouse and the third person, and
may be perfected as a binding contract upon the
acceptance by the other spouse or authori7ation
by the court before the offer is withdrawn by
either or both offerors. (1.a!
!) married persons (as regards contracts
!etween spouses)
Art. 87. ?very donation or grant of gratuitous
advantage, direct or indirect, between the
spouses during the marriage shall be void,
e2cept moderate gifts which the spouses may
give each other on the occasion of any family
re&oicing. "he prohibition shall also apply to
persons living together as husband and wife
without a valid marriage. (1--a!
Art. 14-.. "he husband and the wife cannot sell
property to each other, e2cept$
(1! Ehen a separation of property was agreed
upon in the marriage settlements' or
(%! Ehen there has been a &udicial separation or
property under Article 181. (14#a!
"here is a potential circumvention of the policy
of the law if sales between spouses are allowed if
there was a &udicial separation of property, since
undue influence is not completely erased by the
separation of property. "his prohibition also
applies to common@law unions
4
. (Villanueva)
c) special dis"uali#ications (see Articles 1481 and
148% in the previous page!
1! 3t is immaterial that no damage is
suffered by the owner. "he contract is
4
CALIMLIM-CANULLAS V. FORTUN: &if transfers or
conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal
partnership. $t was also designed to prevent the e%ercise of
undue influence by one spouse over the other, as well as to
protect the institution of marriage, which is the cornerstone
of family law. "he prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise,
'the condition of those who incurred guilt would turn out to
be better than those in legal union.'
4
void as the law see/s to prevent said persons
from being tempted to ta/e advantage of
their position. "hey occupy a position of
trust and confidence in relation to the
property under their administration or
&urisdiction.
%! Agents can not buy the property of their
principal& without the consent of the latter.
B6(0?61, however, do not come within the
prohibition, as their authority consists merely
in loo/ing for a buyer or seller, and to bring
the latter and his principal together to
consummate the transaction. (f course,
after the agency is terminated, the agent can
buy the property of the principal, which was
formerly under his administration.
-! Although e2ecutors and administrators can
not buy the property under their
administration, an e2ecutor may buy the
hereditary rights of an heir to the estate
under his administration, because the buyer,
in such case, can not get the share of the
heir in the estate until after the
administration is ended.
4! Eith regard to the lawyers, the prohibition
does not apply to other properties of the
client, nor to assignments of the property
formerly in litigation when such assignment
will ta/e effect only after final &udgment
(compensation of lawyers payable on a
contingent basis, unless unconscionable!.
1. Imlie" $arrant* o# title
Art 1547. 3n a contract of sale, unless a contrary
intention appears, there is$
(1! An implied warranty on the part of the seller that
he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from
that time have and en&oy the legal and peaceful
possession of the thing'
(%! An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge or
encumbrance not declared or /nown to the buyer.
"his Article shall not, however, be held to render
liable a sheriff, auctioneer, mortgagee, pledgee, or
other person professing to sell by virtue of authority
in fact or law, for the sale of a thing in which a third
person has a legal or equitable interest. (n!
Art 1548. ?viction shall ta/e place whenever by a
final &udgment 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.
"he vendor shall answer for the eviction even though
nothing has been said in the contract on the sub&ect.
"he contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor. (14=a!
Art 1549. "he vendee need not appeal from the
decision in order that the vendor may become liable
for eviction. (n!
Art 1550. Ehen adverse possession had been
commenced before the sale but the prescriptive
period is completed after the transfer, the vendor
shall not be liable for eviction. (n!
Art 1551. 3f the property is sold for nonpayment of
ta2es due and not made /nown to the vendee before
the sale, the vendor is liable for eviction. (n!
Art 1552. "he &udgment debtor is also responsible
for eviction in &udicial sales, unless it is otherwise
decreed in the &udgment. (n!
.
that which is stated absolutely false.
55
56
SANTIAGO LAND * CA: lthough in voluntary sales or
transaction, the vendor can be e%pected to defend his title
because of his warranty to the vendees: no such obligation is
owed by the owner whose land is sold at e%ecution sale.
Art 1553. Any stipulation e2empting the vendor
from the obligation to answer for eviction shall
be void, if he acted in bad faith. (14=.!
Art 1554. 3f the vendee has renounced the right
to warranty in case of eviction, and eviction
should ta/e place, the vendor shall only pay the
value which the thing sold had at the time of the
eviction. 1hould the vendee have made the
waiver with /nowledge of the ris/s of eviction
and assumed its consequences, the vendor shall
not be liable. (14==!
Art 1555. Ehen the warranty has been agreed
upon or nothing has been stipulated on this
point, in case eviction occurs, the vendee shall
have the right to demand of the vendor$
(1! "he return of the value which the thing sold
had at the time of the eviction, be it greater or
less than the price of the sale'
(%! "he income or fruits, if he has been ordered
to deliver them to the party who won the suit
against him'
(-! "he costs of the suit which caused the
eviction, and, in a proper case, those of the suit
brought against the vendor for the warranty'
(4! "he e2penses of the contract, if the vendee
has paid them'
(! "he damages and interests, and ornamental
e2penses, if the sale was made in bad faith.
(14=#!
Art 1556. 1hould the vendee lose, by reason of
the eviction, a part of the thing sold of such
importance, in relation to the whole, that he
would not have bought it without said part, he
may demand the rescission of the contract' but
with the obligation to return the thing without
other encumbrances that those which it had
when he acquired it.
9e may e2ercise this right of action, instead of
enforcing the vendor4s liability for eviction.
"he same rule shall be observed when two or
more things have been &ointly sold for a lump
sum, or for a separate price for each of them, if
it should clearly appear that the vendee would
not have purchased one without the other.
(14=8a!
40
Art 1557. "he warranty cannot be enforced until a
final &udgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.
(14#,!
Art 1558. "he vendor shall not be obliged to ma/e
good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee.
(14#1a!
Art 1559. "he defendant vendee shall as/, within the
time fi2ed in the 6ules of )ourt for answering the
complaint, that the vendor be made a co@defendant.
(14#%a!
2. Imlie" $arrant* a)ainst ,i""en
encum!rances or "e#ects
57
Art 1561. "he vendor shall be responsible for
warranty against the hidden defects which the thing
sold may have, should they render it unfit for the use
for which it is intended, or should they diminish its
fitness for such use to such an e2tent that, had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price for it'
but said vendor shall not be answerable for patent
defects or those which may be visible, or for those
which are not visible if the vendee is an e2pert who,
by reason of his trade or profession, should have
/nown them. (14#4a!
Art 1562. 3n a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows$
(1! Ehere the buyer, e2pressly or by implication,
ma/es /nown to the seller the particular purpose for
which the goods are acquired, and it appears that the
buyer relies on the seller4s s/ill or &udgment (whether
he be the grower or manufacturer or not!, there is an
implied warranty that the goods shall be reasonably
fit for such purpose'
(%! Ehere the goods are brought by description from
a seller who deals in goods of that description
(whether he be the grower or manufacturer or not!,
57
MOLES * IAC : &we have to consider the rule on redhibitory
defects contemplated in rticle (,0( of the .ivil .ode.
redhibitory defect must be an imperfection or defect of such
nature as to engender a certain degree of importance. n
imperfection or defect of little consequence does not come within
the category of being redhibitory.
INVESTMENTS AND DEV$T INC. * CA: E$mplied warranty
against hidden faults or defects under rt (,)3 of the .ivil .ode
cover only those that ma!e the object of the sale unfit for the use
for which it was intended at the time of the sale, and that in the
sale of agricultural land, the e%isting tenancy relationship
pertaining thereto cannot be considered as hidden fault or defect.
there is an implied warranty that the goods shall
be of merchantable quality. (n!
Art 1563. 3n the case of contract of sale of a
specified article under its patent or other trade
name, there is no warranty as to its fitness for
any particular purpose, unless there is a
stipulation to the contrary. (n!
Art 1564. An implied warranty or condition as to
the quality or fitness for a particular purpose
may be anne2ed by the usage of trade. (n!
Art 1565. 3n the case of a contract of sale by
sample, if the seller is a dealer in goods of that
/ind, there is an implied warranty that the goods
shall be free from any defect rendering them
unmerchantable which would not be apparent on
reasonable e2amination of the sample. (n!
Art 1566. "he vendor is responsible to the
vendee for any hidden faults or defects in the
thing sold, even though he was not aware
thereof.
"his provision shall not apply if the contrary has
been stipulated, and the vendor was not aware
of the hidden faults or defects in the thing sold.
(14#!
Art 1567. 3n the cases of Articles 1.1, 1.%,
1.4, 1. and 1.., the vendee may elect
between withdrawing from the contract and
demanding a proportionate reduction of the
price, with damages in either case. (14#.a!
Art 1568. 3f the thing sold should be lost in
consequence of the hidden faults, and the
vendor was aware of them, he shall bear the
loss, and shall be obliged to return the price and
refund the e2penses of the contract, with
damages. 3f he was not aware of them, he shall
only return the price and interest thereon, and
reimburse the e2penses of the contract which
the vendee might have paid. (14#=a!
Art 1569. 3f the thing sold had any hidden fault
at the time of the sale, and should thereafter be
lost by a fortuitous event or through the fault of
the vendee, the latter may demand of the
vendor the price which he paid, less the value
which the thing had when it was lost.
3f the vendor acted in bad faith, he shall pay
damages to the vendee. (14##a!
Art 1570. "he preceding articles of this
1ubsection shall be applicable to &udicial sales,
e2cept that the &udgment debtor shall not be
liable for damages. (14#8a!
41
Art 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after si2
months, from the delivery of the thing sold. (148,!
Barranties in sale o# animals
Art 1577. "he redhibitory action, based on the faults
or defects of animals, must be brought within forty
days from the date of their delivery to the vendee.
"his action can only be e2ercised with respect to
faults and defects which are determined by law or by
local customs. (148.a!
Art 1578. 3f the animal should die within three days
after its purchase, the vendor shall be liable if the
disease which cause the death e2isted at the time of
the contract. (148=a!
Art 1579. 3f the sale be rescinded, the animal shall
be returned in the condition in which it was sold and
delivered, the vendee being answerable for any in&ury
due to his negligence, and not arising from the
redhibitory fault or defect. (148#!
Art 1580. 3n the sale of animals with redhibitory
defects, the vendee shall also en&oy the right
mentioned in article 1.=' but he must ma/e use
thereof within the same period which has been fi2ed
for the e2ercise of the redhibitory action. (1488!
Sale !' sample or description
Art 1481. 3n the contract of sale of goods by
description or by sample, the contract may be
rescinded if the bul/ of the goods delivered do not
correspond with the description or the sample, and if
the contract be by sample as well as description, it is
not sufficient that the bul/ of goods correspond with
the sample if they do not also correspond with the
description.
"he buyer shall have a reasonable opportunity of
comparing the bul/ with the description or the
sample. (n!
Art 1565. 3n the case of a contract of sale by
sample, if the seller is a dealer in goods of that /ind,
there is an implied warranty that the goods shall be
free from any defect rendering them unmerchantable
which would not be apparent on reasonable
e2amination of the sample. (n!
(. Imlie" $arrant* o# <ualit*
Art 1562. 3n a sale of goods, there is an implied
warranty or condition as to the quality or fitness of
the goods, as follows$
(1! Ehere the buyer, e2pressly or by implication,
ma/es /nown to the seller the particular purpose
for which the goods are acquired, and it appears
that the buyer relies on the seller4s s/ill or
&udgment (whether he be the grower or
manufacturer or not!, there is an implied
warranty that the goods shall be reasonably fit
for such purpose'
(%! Ehere the goods are brought by description
from a seller who deals in goods of that
description (whether he be the grower or
manufacturer or not!, there is an implied
warranty that the goods shall be of merchantable
quality. (n!
Art 1563. 3n the case of contract of sale of a
specified article under its patent or other trade
name, there is no warranty as to its fitness for
any particular purpose, unless there is a
stipulation to the contrary. (n!
Art 1564. An implied warranty or condition as to
the quality or fitness for a particular purpose
may be anne2ed by the usage of trade. (n!
Art. 1599. Ehere there is a breach of warranty
by the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against
the seller, the breach of warranty by way of
recoupment in diminution or e2tinction of the
price'
(%! Accept or /eep the goods and maintain an
action against the seller for damages for the
breach of warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty'
(4! 6escind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
them to the seller and recover the price or any
part thereof which has been paid.
Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other
remedy can thereafter be granted, without
pre&udice to the provisions of the second
paragraph of Article 1181.
Ehere the goods have been delivered to the
buyer, he cannot rescind the sale if he /new of
the breach of warranty when he accepted the
goods without protest, or if he fails to notify the
seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as
42
good condition as they were in at the time the
ownership was transferred to the buyer. But if
deterioration or in&ury of the goods is due to the
breach or warranty, such deterioration or in&ury shall
not prevent the buyer from returning or offering to
return the goods to the seller and rescinding the sale.
Ehere the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods.
3f the price or any part thereof has already been paid,
the seller shall be liable to repay so much thereof as
has been paid, concurrently with the return of the
goods, or immediately after an offer to return the
goods in e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for
the seller, but sub&ect to a lien to secure payment of
any portion of the price which has been paid, and
with the remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality, such
loss, in the absence of special circumstances showing
pro2imate damage of a greater amount, is the
difference between the value of the goods at the time
of delivery to the buyer and the value they would
have had if they had answered to the warranty. (n!
4. A""itional $arranties in sale o#
consumer ro"ucts
Art. 68, RA 7394. Additional 9rovisions on
Barranties% @ 3n addition to the )ivil )ode provisions
on sale with warranties, the following provisions shall
govern the sale of consumer products with warranty$
(a! $erms o# e,press warrant'. @ Any seller or
manufacturer who gives an e2press warranty shall$
(1! set forth the terms of warranty in clear and
readily understandable language and clearly identify
himself as the warrantor'
(%! identify the party to whom the warranty is
e2tended'
(-! state the products or parts covered'
(4! state what the warrantor will do in the event
of a defect, malfunction of failure to conform to the
written warranty and at whose e2pense'
(! state what the consumer must do to avail of
the rights which accrue to the warranty' and
(.! stipulate the period within which, after notice
of defect, malfunction or failure to conform to the
warranty, the warrantor will perform any obligation
under the warranty.
(b! +,press warrant' 5 operative #rom moment o#
sale% @ All written warranties or guarantees issued by
a manufacturer, producer, or importer shall be
operative from the moment of sale.
(1! Sales )eport% @ All sales made by
distributors of products covered by this Article
shall be reported to the manufacturer, producer,
or importer of the product sold within thirty (-,!
days from date of purchase, unless otherwise
agreed upon. "he report shall contain, among
others, the date of purchase, model of the
product bought, its serial number, name and
address of the buyer. "he report made in
accordance with this provision shall be
equivalent to a warranty registration with the
manufacturer, producer, or importer. 1uch
registration is sufficient to hold the
manufacturer, producer, or importer liable, in
appropriate cases, under its warranty.
(%! 2ailure to ma/e or send report% @ +ailure
of the distributor to ma/e the report or send
them the form required by the manufacturer,
producer, or importer shall relieve the latter of
its liability under the warranty$ 9rovided.
owever. "hat the distributor who failed to
comply with its obligation to send the sales
reports shall be personally liable under the
warranty. +or this purpose, the manufacturer
shall be obligated to ma/e good the warranty at
the e2pense of the distributor.
(-! )etail% @ "he retailer shall be subsidiarily
liable under the warranty in case of failure of
both the manufacturer and distributor to honor
the warranty. 3n such case, the retailer shall
shoulder the e2penses and costs necessary to
honor the warranty. >othing therein shall
prevent the retailer from proceeding against the
distributor or manufacturer.
(4! +n#orcement o# warrant' or guarantee% @
"he warranty rights can be enforced by
presentment of a claim. "o this end, the
purchaser needs only to present to the
immediate seller either the warranty card of the
official receipt along with the product to be
serviced or returned to the immediate seller. >o
other documentary requirement shall be
demanded from the purchaser. 3f the immediate
seller is the manufacturer4s factory or showroom,
the warranty shall immediately be honored. 3f
the product was purchased from a distributor,
the distributor shall li/ewise immediately honor
the warranty. 3n the case of a retailer other than
the distributor, the former shall ta/e
responsibility without cost to the buyer of
presenting the warranty claim to the distributor
in the consumer4s behalf.
(! )ecord o# purcases% @ Distributors and
retailers covered by this Article shall /eep a
record of all purchases covered by a warranty or
guarantee for such period of time corresponding
to the lifetime of the product4s respective
warranties or guarantees.
(.! 7ontrar' stipulations* null and void% @ All
covenants, stipulations or agreements contrary
to the provisions of this Article shall be without
legal effect.
43
(c! Designation of warranties. @ A written warranty
shall clearly and conspicuously designate such
warranty as$
(1! C2ull warrant'C if the written warranty meets
the minimum requirements set forth in paragraph
(d!' or
(%! CLimited warrant'C if the written warranty
does not meet such minimum requirements.
(d! Minimum standards #or warranties% @ +or the
warrantor of a consumer product to meet the
minimum standards for warranty, he shall$
(1! remedy such consumer product within a
reasonable time and without charge in case of a
defect, malfunction or failure to conform to such
written warranty'
(%! permit the consumer to elect whether to as/
for a refund or replacement without charge of such
product or part, as the case may be, where after
reasonable number of attempts to remedy the defect
or malfunction, the product continues to have the
defect or to malfunction.
"he warrantor will not be required to perform the
above duties if he can show that the defect,
malfunction or failure to conform to a written
warranty was caused by damage due to unreasonable
use thereof.
(e! Duration o# warrant'% @ "he seller and the
consumer may stipulate the period within which the
e2press warranty shall be enforceable. 3f the implied
warranty on merchantability accompanies an e2press
warranty, both will be of equal duration.
Any other implied warranty shall endure not less
than si2ty (.,! days nor more than one (1! year
following the sale of new consumer products.
(f! Breac o# warranties% *
(1! 3n case of breach of e2press warranty, the
consumer may elect to have the goods repaired or its
purchase price refunded by the warrantor. 3n case the
repair of the product in whole or in part is elected,
the warranty wor/ must be made to conform to the
e2press warranty within thirty (-,! days by either the
warrantor or his representative. "he thirty@day
period, however, may be e2tended by conditions
which are beyond the control of the warrantor or his
representative. 3n case the refund of the purchase
price is elected, the amount directly attributable to
the use of the consumer prior to the discovery of the
non@conformity shall be deducted.
(%! 3n case of breach of implied warranty, the
consumer may retain in the goods and recover
damages, or re&ect the goods, cancel and contract
and recover from the seller so much of the purchase
price as has been paid, including damages.
). B<P?6N1 EA3C?6 3> )A1? (+ B6?A)9 (+
EA66A>"P
Art. 1599. ,,, Ehere the goods have been
delivered to the buyer, he cannot rescind the
sale if he /new of the breach of warranty when
he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time
of the election to rescind, or if he fails to return
or to offer to return the goods to the seller in
substantially as good condition as they were in
at the time the ownership was transferred to the
buyer. But if deterioration or in&ury of the goods
is due to the breach or warranty, such
deterioration or in&ury shall not prevent the
buyer from returning or offering to return the
goods to the seller and rescinding the sale. ,,,
EII. BR/AC? O8 CONTRACT0
A. 1AB? (+ A((D1
1. Reme"ies o# t,e 0eller
Action #or te price
Art 1595. Ehere, under a contract of sale, the
ownership of the goods has passed to the buyer
and he wrongfully neglects or refuses to pay for
the goods according to the terms of the contract
of sale, the seller may maintain an action against
him for the price of the goods.
Ehere, under a contract of sale, the price is
payable on a certain day, irrespective of delivery
or of transfer of title and the buyer wrongfully
neglects or refuses to pay such price, the seller
may maintain an action for the price although
the ownership in the goods has not passed. But
it shall be a defense to such an action that the
seller at any time before the &udgment in such
action has manifested an inability to perform the
contract of sale on his part or an intention not to
perform it.
Although the ownership in the goods has not
passed, if they cannot readily be resold for a
reasonable price, and if the provisions of article
18., fourth paragraph, are not applicable, the
seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them,
may notify the buyer that the goods are
thereafter held by the seller as bailee for the
buyer. "hereafter the seller may treat the goods
as the buyer4s and may maintain an action for
the price. (n!
Action #or damages
Art 1596. Ehere the buyer wrongfully neglects
or refuses to accept and pay for the goods, the
seller may maintain an action against him for
damages for nonacceptance.
44
"he measure of damages is the estimated loss
directly and naturally resulting in the ordinary course
of events from the buyer4s breach of contract.
Ehere there is an available mar/et for the goods in
question, the measure of damages is, in the absence
of special circumstances showing pro2imate damage
of a different amount, the difference between the
contract price and the mar/et or current price at the
time or times when the goods ought to have been
accepted, or, if no time was fi2ed for acceptance,
then at the time of the refusal to accept.
3f, while labor or e2pense of material amount is
necessary on the part of the seller to enable him to
fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to
proceed no further therewith, the buyer shall be liable
to the seller for labor performed or e2penses made
before receiving notice of the buyer4s repudiation or
countermand. "he profit the seller would have made
if the contract or the sale had been fully performed
shall be considered in awarding the damages. (n!
3. )escission
Art 1597. Ehere the goods have not been delivered
to the buyer, and the buyer has repudiated the
contract of sale, or has manifested his inability to
perform his obligations thereunder, or has committed
a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to
do to the buyer. (n!
&. Reme"ies o# t,e Bu*er
1% Speci#ic per#ormance
Art 1598. Ehere the seller has bro/en a contract to
deliver specific or ascertained goods, a court may, on
the application of the buyer, direct that the contract
shall be performed specifically, without giving the
seller the option of retaining the goods on payment of
damages. "he &udgment or decree may be
unconditional, or upon such terms and conditions as
to damages, payment of the price and otherwise, as
the court may deem &ust. (n!
0% Breac o# warrant'
Art. 1599. Ehere there is a breach of warranty by
the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against the
seller, the breach of warranty by way of recoupment
in diminution or e2tinction of the price'
(%! Accept or /eep the goods and maintain an
action against the seller for damages for the
breach of warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty'
(4! 6escind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
them to the seller and recover the price or any
part thereof which has been paid.
Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other
remedy can thereafter be granted, without
pre&udice to the provisions of the second
paragraph of Article 1181.
Ehere the goods have been delivered to the
buyer, he cannot rescind the sale if he /new of
the breach of warranty when he accepted the
goods without protest, or if he fails to notify the
seller within a reasonable time of the election to
rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as
good condition as they were in at the time the
ownership was transferred to the buyer. But if
deterioration or in&ury of the goods is due to the
breach or warranty, such deterioration or in&ury
shall not prevent the buyer from returning or
offering to return the goods to the seller and
rescinding the sale.
Ehere the buyer is entitled to rescind the sale
and elects to do so, he shall cease to be liable for
the price upon returning or offering to return the
goods. 3f the price or any part thereof has
already been paid, the seller shall be liable to
repay so much thereof as has been paid,
concurrently with the return of the goods, or
immediately after an offer to return the goods in
e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale
and elects to do so, if the seller refuses to accept
an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the
goods as bailee for the seller, but sub&ect to a
lien to secure payment of any portion of the
price which has been paid, and with the
remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality,
such loss, in the absence of special
circumstances showing pro2imate damage of a
greater amount, is the difference between the
value of the goods at the time of delivery to the
buyer and the value they would have had if they
had answered to the warranty. (n!
45
Art 1571. Actions arising from the provisions of the
preceding ten articles shall be barred after si2
months, from the delivery of the thing sold. (148,!
:% )escission
Art. 1599. Ehere there is a breach of warranty by
the seller, the buyer may, at his election$
(1! Accept or /eep the goods and set up against the
seller, the breach of warranty by way of recoupment
in diminution or e2tinction of the price'
(%! Accept or /eep the goods and maintain an action
against the seller for damages for the breach of
warranty'
(-! 6efuse to accept the goods, and maintain an
action against the seller for damages for the breach
of warranty'
(4! 6escind the contract of sale and refuse to receive
the goods or if the goods have already been received,
return them or offer to return them to the seller and
recover the price or any part thereof which has been
paid.
Ehen the buyer has claimed and been granted a
remedy in anyone of these ways, no other remedy
can thereafter be granted, without pre&udice to the
provisions of the second paragraph of Article 1181.
Ehere the goods have been delivered to the buyer,
he cannot rescind the sale if he /new of the breach of
warranty when he accepted the goods without
protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the
seller in substantially as good condition as they were
in at the time the ownership was transferred to the
buyer. But if deterioration or in&ury of the goods is
due to the breach or warranty, such deterioration or
in&ury shall not prevent the buyer from returning or
offering to return the goods to the seller and
rescinding the sale.
Ehere the buyer is entitled to rescind the sale and
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods.
3f the price or any part thereof has already been paid,
the seller shall be liable to repay so much thereof as
has been paid, concurrently with the return of the
goods, or immediately after an offer to return the
goods in e2change for repayment of the price.
Ehere the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee for
the seller, but sub&ect to a lien to secure payment of
any portion of the price which has been paid, and
with the remedies for the enforcement of such
lien allowed to an unpaid seller by Article 1%..
(! 3n the case of breach of warranty of quality,
such loss, in the absence of special
circumstances showing pro2imate damage of a
greater amount, is the difference between the
value of the goods at the time of delivery to the
buyer and the value they would have had if they
had answered to the warranty. (n!
B. 1AB? (+ 355(CABB?1 A>D "93>A1 ("9?6
"9A> A((D1
Art 1191. "he power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
"he in&ured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. 9e
may also see/ rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
"he court shall decree the rescission claimed,
unless there be &ust cause authori7ing the fi2ing
of a period.
"his is understood to be without pre&udice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1-# and 1-##
and the 5ortgage Baw. (11%4!
Art. 1192. 3n case both parties have committed
a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the
courts. 3f it cannot be determined which of the
parties first violated the contract, the same shall
be deemed e2tinguished, and each shall bear his
own damages. (n!
Art 1385. 6escission creates the obligation to
return the things which were the ob&ect of the
contract, together with their fruits, and the price
with its interest' consequently, it can be carried
out only when he who demands rescission can
return whatever he may be obliged to restore.
>either shall rescission ta/e place when the
things which are the ob&ect of the contract are
legally in the possession of third persons who did
not act in bad faith.
3n this case, indemnity for damages may be
demanded from the person causing the loss.
(1%8!
46
Art 1591. 1hould the vendor have reasonable
grounds to fear the loss of immovable property sold
and its price, he may immediately sue for the
rescission of the sale.
1hould such ground not e2ist, the provisions of Article
1181 shall be observed. (1,-!
). 1AB? (+ 5(CABB?1 (> 3>1"ABB5?>"
#
Art 1484. 3n a contract of sale of personal property
the price of which is payable in installments, the
vendor may e2ercise any of the following remedies$
(1! ?2act fulfillment of the obligation, should the
vendee fail to pay'
(%! )ancel the sale, should the vendee4s failure to pay
cover two or more installments'
(-! +oreclose the chattel mortgage on the thing sold,
if one has been constituted, should the vendee4s
failure to pay cover two or more installments. 3n this
case, he shall have no further action against the
purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void. (144@
A@a!
8
58
LEV! * GERVACIO: .. rt (),) is aimed at sales where the
price is payable in several installments. cash payment +in sales
with two installments- cannot be considered as a payment in
installments, and even if it can be so considered, still the law
does not apply, for it requires nonpayment of two or more
installments in order that its provisions may be invo!ed. $n this
case, only one installment was unpaid.
59
TAJANLANGIT * SOUTHERN MOTORS: $t is true that there
was a chattel mortgage on the goods sold, but Southern ;otors
elected to sue the note e%clusively N +o eEa0+ .5l.,ll-en+ o. +/e
oDl,Ca+,on +o 3a4. $t had the right to select among the three
remedies established in rt ()1). $n choosing to sue on the note,
it was not thereby limited to the proceeds of the sale, on
e%ecution, of the mortgaged good.
FILINVEST * CA: "he remedies $5 ()1) are al+e2na+,*e and not
cumulative. 7ence, the e%ercise of one bars the e%ercise of the
others.
NONATO * IAC: "he corporation is barred from e%acting
payment from 5onato of the balance of the price of the vehicle
when it had already repossessed it.
CRU * FILIPINAS INVESTMENTS: "he vendor of personal
property sold on installment basis is precluded, after foreclosing
the chattel mortgage on the thing sold, from having a recourse
against the additional security put up by a third party to guarantee
the purchaserGs performance of his obligation.
NORTHERN MOTORS * SAPINOSO: What rt ()1) +3-
prohibits is Efurther action against the purchaser to recover any
unpaid balance of the price#F and although this .ourt has
construed the word EactionF to mean Eany judicial or e%trajudicial
proceeding by virtue of which the vendor may lawfully be enabled
to e%act recovery of the supposed unsatisfied balance of the
Art 1485. "he preceding article shall be applied
to contracts purporting to be leases of personal
property with option to buy, when the lessor has
deprived the lessee of the possession or
en&oyment of the thing. (144@A@a!
Art 1486. 3n the case referred to in two
preceding articles, a stipulation that the
installments or rents paid shall not be returned
to the vendee or lessee shall be valid insofar as
the same may not be unconscionable under the
circumstances. (n!
Art 1533. Ehere the goods are of perishable
nature, or where the seller e2pressly reserves
the right of resale in case the buyer should ma/e
default, or where the buyer has been in default
in the payment of the price for an unreasonable
time, an unpaid seller having a right of lien or
having stopped the goods in transitu may resell
the goods. 9e shall not thereafter be liable to the
original buyer upon the contract of sale or for
any profit made by such resale, but may recover
from the buyer damages for any loss occasioned
by the breach of the contract of sale.
Ehere a resale is made, as authori7ed in this
article, the buyer acquires a good title as against
the original buyer.
3t is not essential to the validity of resale that
notice of an intention to resell the goods be
given by the seller to the original buyer. But
where the right to resell is not based on the
perishable nature of the goods or upon an
e2press provision of the contract of sale, the
giving or failure to give such notice shall be
relevant in any issue involving the question
whether the buyer had been in default for an
unreasonable time before the resale was made.
purchase price from the purchaser or his privy,F there is no
occasion at this stage to apply the restrictive provision of
the said article because there has not yet been a
foreclosure sale resulting in a deficiency. "he payment of
the sum of C(,9,6 of Sapinoso was a voluntary act on his
part and did not result from a Efurther actionF instituted by
5orthern ;otors.
When the seller assigns his credit to another person, the
latter is li!ewise bound by the same law. ccordingly, when
the assignee forecloses on the mortgage, there can be no
further recovery of the deficiency,
and the sellerImortgagee
is deemed to have renounced any right thereto.
47
BORBON * SERVICE-#IDE SPECIALIST:
3t is not essential to the validity of a resale that notice
of the time and place of such resale should be given
by the seller to the original buyer.
"he seller is bound to e2ercise reasonable care and
&udgment in ma/ing a resale, and sub&ect to this
requirement may ma/e a resale either by public or
private sale. 9e cannot, however, directly or indirectly
buy the goods. (n!
Ehen the seller assigns his credit to another person,
the latter may li/ewise avail of the remedies under
Art 14#4 (assuming case is one of sale of movables
on installment!. 3f the remedy chosen is rescission, a
stipulation in the contract that the installments paid
shall not be returned to the vendee is valid insofar as
the same may not be unconscionable under the
circumstances (Cillanueva citing Delta 5otor v. >iu
0im Duan, %1- 1)6A %8!
D. 1AB? (+ 355(CABB?1 (> 3>1"ABB5?>"
1. Anticiator* !reac,
Art 1591. 1hould the vendor have reasonable
grounds to fear the loss of immovable property sold
and its price, he may immediately sue for the
rescission of the sale.
1hould such ground not e2ist, the provisions of Article
1181 shall be observed. (1,-!
2. PD -576 0ection &( I &4
'.
PD 957, Sec 23. 4on52or#eiture o# 9a'ments% 8 >o
installment payment made by a buyer in a subdivision
or condominium pro&ect for a lot or unit he contracted
to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the
owner or developer, desists from further payment
due to the failure of the owner or developer to
develop the subdivision or condominium pro&ect
according to the approved plans and within the time
limit for complying with the same. 1uch buyer may,
at his option, be reimbursed the total amount paid
including amorti7ation interests but e2cluding
60
CASA FILIPINAS REALT! * OP: C8 *,3 to stem the tide of
Efraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers and operators, such as
failure to deliver titles to buyers or titles free from liens and
encumbrances. Should the notice requirement in Sec 93 be
construed as required to be given before a buyer desists from
further paying, the intent of the law to protect subdivision lot
buyers will tend to be defeated.
BRIC"TO#N DEV$T * TIERRA: When a grace period is
provided for in the contract of sale, it should be construed as a
right, not an obligation of the debtor, and when unconditionally
conferred, the grace period is effective without further need of
demand either calling for the payment of the obligation or for
honoring the right.
delinquency interests, with interest thereon at
the legal rate.
PD 957, Sec 24. 2ailure to pa' installments% 8
"he rights of the buyer in the event of his failure
to pay the installments due for reasons other
than failure of the owner or developer to develop
the pro&ect shall be governed by 6epublic Act >o.
.%
3. RA '55& F;ace"a 9a$G1 0ale o#
Resi"ential Realt* on Installment
'1
4. Rescission on 0ale on NonH
Resi"ential Realt* on Installment
Art 1191. "he power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
"he in&ured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. 9e
may also see/ rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
"he court shall decree the rescission claimed,
unless there be &ust cause authori7ing the fi2ing
of a period.
"his is understood to be without pre&udice to the
rights of third persons who have acquired the
thing, in accordance with Articles 1-# and 1-##
and the 5ortgage Baw. (11%4!
Art 1592. 3n the sale of immovable property,
even though it may have been stipulated that
upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right
ta/e place, the vendee may pay, even after the
e2piration of the period, as long as no demand
for rescission of the contract has been made
upon him either &udicially or by a notarial act.
After the demand, the court may not grant him
a new term. (1,4a!
61
MCLAUGHLIN * CA: Sec ) of A 0,,9 provides: E$n
case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less
than si%ty days from the date the installment became due.
$f the buyer fails to pay the installments due at the
e%piration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the
notice of the cancellation or the demand for rescission of
the contract by a notarial act.F Jlores tendered the
managerGs chec! after (3 days, which is well within the 36I
day period. 7owever, Jlores did not follow tender of
payment with consignation. Since ;cKaughlin refused to
accept the tender of payment, it was incumbent upon Jlores
to deposit the amount in court.
48
EI=. /ETIN>UI0?;/NT O8 T?/ 0A9/
Art. 1600. 1ales are e2tinguished by the same
causes as all other obligations, by those stated in the
preceding articles of this "itle, and by conventional or
legal redemption. (1,.!
Art. 1231. (bligations are e2tinguished$
(1! By payment or performance$
(%! By the loss of the thing due$
(-! By the condonation or remission of the debt'
(4! By the confusion or merger of the rights of
creditor and debtor'
(! By compensation'
(.! By novation.
(ther causes of e2tinguishment of obligations, such
as annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere
in this )ode. (11.a!
A. )(>C?>"3(>AB 6?D?5:"3(>
)onventional redemption A the vendor reserves the
right to repurchase the thing sold, with the obligation
of returning the price of the sale the e2penses of the
contract, the necessary and useful e2penses made on
the thing, and other payments made by reason of the
sale.
.%
Distinguished from equitable mortgage
?quitable mortgage * one which, although lac/ing in
some formality or other requisites demanded by a
statute, nevertheless reveals the intention of the
parties to charge real property as a security for
debt, and contains nothing impossible or contrary
to law
Badges of an equitable mortgage
.-
Art. 1602. "he contract shall be presumed to be an
equitable mortgage, in any of the following cases$
62
VILLARICA * CA: "he right of repurchase is not a right granted
the vendor by the vendee in a subsequent instrument, but is a
right reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract.
TORRES * CA: Jor a sale to be one a retro, it is necessary that
the right be reserved in the same contract
63
CLARAVALL * CA: "he urgent necessity for money of the
apparent vendor, the inadequacy of the consideration for the
supposed sale, and the e%tension of the period of redemption are
circumstances which are indicative that the contract is an
equitable mortgage.
(1! Ehen the price of a sale with right to
repurchase is unusually inadequate'
(%! Ehen the vendor remains in possession as
lessee or otherwise'
(-! Ehen upon or after the e2piration of the
right to repurchase another instrument
e2tending the period of redemption or granting a
new period is e2ecuted'
(4! Ehen the purchaser retains for himself a part
of the purchase price'
(! Ehen the vendor binds himself to pay the
ta2es on the thing sold'
(.! 3n any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment of
a debt or the performance of any other
obligation. 3n any of the foregoing case, any
money, fruits, or other benefit to be received by
the vendees as rent or otherwise shall be
considered as interest which shall be sub&ect to
the usury laws.
A contract shall be construed as an equitable
mortgage when any of the circumstance in Art.
1.,% is present.
6eason for the rule$ "o curtail the practice of
creditors in ma/ing their agreement of mortgage
appear in the form of a sale with pacto de retro,
in order to circumvent the prohibition of pactum
commissorium in pledge and mortgage (Art.
2208. "he creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose
of them. Any stipulation to the contrary is null
and void! >!ecause in ma/ing it appear a pacto
de retro sale. te creditors can do awa' wit
#oreclosure proceedings?
6emedy$ reformation of the instrument Jmust be
brought within 1, yearsQ
1! 3f the agreement is construed to be an
equitable mortgage, any money or other
benefit received as Orents,K shall be
considered as Ointerest.K
%! Ehere the agreement is upheld as a
pacto de retro sale, the vendor may still
e2ercise the right within -, days from the
time the &udgment becomes final.
Distinguished from option to buy
.4
64
ADIARTE * TUMANENG: n agreement to repurchase
becomes an option to buy when entered into after the time
to redeem stipulated had already e%pired, because then the
vendee a retro became the absolute owner of the thing
sold, and the subsequent grant of the right to repurchase is
49
Right of rede!tio" #!tio" to b$%
>ot a separate
contract, but merely
part of a main contract
of sale' cannot e2ist
unless reserved at the
time of the perfection
of the main contract of
sale
:rincipal contract and
may be created
independent of another
contract
>eed not have
separate consideration
in order to be valid and
effective
5ust have a
consideration separate
and distinct from
purchase price
5ay not be beyond the
1, year period
5ay be beyond the 1,
year period
6equires tender of
payment of amount
required by law,
including consignment
thereof if tender
cannot be made
effectively
5ay be e2ercised by
notice
:eriod of redemption
Art. 1606. "he right referred to in Article 1.,1, in
the absence of an e2press agreement, shall last four
years from the date of the contract.
1hould there be an agreement, the period cannot
e2ceed ten years.
9owever, the vendor may still e2ercise the right to
repurchase within thirty days from the time final
&udgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase. (1,#a!
A?>?6AB 6<B?$ :eriod starts running at the date of
the e2ecution of the contract.
?G)?:"3(>$ when there is a suspensive condition.
4% wen no period agreed
upon
period$ 4 years from the date of the contract
5. wen period agreed
upon
;5
a new agreement.
65
TA!AO * DULA!: lthough the stipulation as to the period
may be unclear or void, a period of redemption was agreed upon.
"hus, it is the (6Iyear period that applies, not the )Iyear period.
BALU!OT * VENEGAS: "he object of the sale cannot be
repurchased during the first (6 years.
"he stipulation is void and against public policy.
"he period is binding and it may also be
e2tended, as long as it does not e2ceed 1,
years. 6eason for limitation$ A pacto de retro is a
suspension of title and it is against public
interest to permit such uncertainty to continue
for a long time.
?2ercise of the right to redeem
..
a! A vendor must manifest his right to redeem in
writing. "his must be accompanied with an
actual or simultaneous tender of payment of the
redemption price.
)edemption price * includes the amount of
the sale, the e2penses of the contract and
other legitimate payments made by the
vendee by reason of such sale, and the
necessary and useful e2penses made on the
thing by the vendee.
b! 3t is only when the vendee flatly refused that
tender of payment is not necessary.
)onsignation of the redemption price in court is
not necessary to preserve the right. 3n the
absence of the vendee a retro, the right may be
e2ercised by filing a suit against him and
consigning the amount in court.
"he e2ercise of redemption is not limited only to
the total redemption price enumerated in Art
1.1. of the )), since said legal provision is not
restrictive nor e2clusive. 3t includes other
stipulations which may have been agreed upon
(Villanueva citing Solid Domes v% 7A. 075 S7)A
0;7)
a% !' wom e,ercised
Art. 1610. "he creditors of the vendor cannot
ma/e use of the right of redemption against the
vendee, until after they have e2hausted the
property of the vendor. (11%!
Art. 1611. 3n a sale with a right to repurchase,
the vendee of a part of an undivided immovable
who acquires the whole thereof in the case of
article 48#, may compel the vendor to redeem
BANDONG * A5s+2,a : "he provisions of the contract,
whereby the parties undertoo! by e%press agreement to
secure to the vendors a right to repurchase in the month of
;arch of any year after the date of the contract, were valid
and binding upon the parties for a period of ten years from
the date of the contract but wholly without force and effect
thereafter.
66
GARGOLLO * DUERO: "he vendor a retro is not given
the option to require the vendee a retro to remove the
useful improvement, but must pay for the useful
improvements introduced by the vendee a retro# otherwise,
the latter may retain possession of the thing until
reimbursement is made.
50
the whole property, if the latter wishes to ma/e use
of the right of redemption. (11-!
Art. 1612. 3f several persons, &ointly and in the same
contract, should sell an undivided immovable with a
right of repurchase, none of them may e2ercise this
right for more than his respective share.
"he same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case
each of the latter may only redeem the part which he
may have acquired. (114!
Art. 1613. 3n the case of the preceding article, the
vendee may demand of all the vendors or co@heirs
that they come to an agreement upon the purchase of
the whole thing sold' and should they fail to do so,
the vendee cannot be compelled to consent to a
partial redemption. (11!
a! Eho may redeem
1.Cendor
%. 9is heirs or assigns
-. 9is agent
b! "he creditors of the vendor cannot ma/e use of the
right of redemption against the vendee, until after
they have e2hausted the property of the vendor.
b! 3f several persons, &ointly and in the same
contract, should sell an undivided immovable with a
right of repurchase, none of them may e2ercise this
right for more than his respective share. "he same
rule shall apply if the person who sold an immovable
alone has left several heirs.
c! Ehen the co@owners of an indivisible immovable, in
order to end the co@ownership, sold their interests
absolutely to the same person who previously bought
the share of a co@owner sub&ect to a right of
redemption, the latter can be compelled to redeem
the whole property.
b. from whom to redeem
Art. 1615. 3f the vendee should leave several heirs,
the action for redemption cannot be brought against
each of them e2cept for his own share, whether the
thing be undivided, or it has been partitioned among
them.
But if the inheritance has been divided, and the thing
sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the
whole. (11=!
Art. 1608. "he vendor may bring his action against
every possessor whose right is derived from the
vendee, even if in the second contract no mention
should have been made of the right to repurchase,
without pre&udice to the provisions of the
5ortgage Baw and the Band 6egistration Baw
with respect to third persons. (11,!
+rom whom to redeem
1. Cendee a retro
%. 9is heirs or assigns
-. 9is agent
c. effect of redemption
Art. 1617. 3f at the time of the e2ecution of the
sale there should be on the land, visible or
growing fruits, there shall be no reimbursement
for or prorating of those e2isting at the time of
redemption, if no indemnity was paid by the
purchaser when the sale was e2ecuted.
1hould there have been no fruits at the time of
the sale and some e2ist at the time of
redemption, they shall be prorated between the
redemptioner and the vendee, giving the latter
the part corresponding to the time he possessed
the land in the last year, counted from the
anniversary of the date of the sale. (118a!
Art. 1618. "he vendor who recovers the thing
sold shall receive it free from all charges or
mortgages constituted by the vendee, but he
shall respect the leases which the latter may
have e2ecuted in good faith, and in accordance
with the custom of the place where the land is
situated. (1%,!
a! "he vendor can e&ect a lessee only after the
e2piration of the period of lease or of the period
for redemption.
b! "he vendor a retro is entitled to the return of
the thing with damages for the use and
occupation if the same.
d. effect of non@redemption
Art. 1607. 3n case of real property, the
consolidation of ownership in the vendee by
virtue of the failure of the vendor to comply with
the provisions of article 1.1. shall not be
recorded in the 6egistry of :roperty without a
&udicial order, after the vendor has been duly
heard. (n!
Art. 1606. & & &
9owever, the vendor may still e2ercise the right
to repurchase within thirty days from the time
final &udgment was rendered in a civil action on
51
the basis that the contract was a true sale with right
to repurchase.
.=
a! "he ownership of the vendee becomes absolute
and irrevocable by operation of law.
b! "he vendee is not entitled to recover damages by
virtue of non@redemption, notwithstanding a
stipulation in the contract for payment of damages.
B. B?AAB 6?D?5:"3(>
Begal redemption * right to be subrogated, upon the
same terms and conditions stipulated in the contract,
in the place of one who acquires a thing by purchase
or dation in payment, or by any other transaction
whereby ownership is transmitted by onerous title.
Ehen period of legal redemption begins
Art. 1623. "he right of legal pre@emption or
redemption shall not be e2ercised e2cept within thirty
days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. "he
deed of sale shall not be recorded in the 6egistry of
:roperty, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all
possible redemptioners.
"he right of redemption of co@owners e2cludes that of
ad&oining owners. (1%4a!
.#
Baches seems to be a special e2ception to notice rule
under Art 1.%-. (Cillanueva citing Alon7o v. 3A)!
1. Re"emtion amon) coHo$ners
67
ABILLA * GABONSENG: "he applicability of rticle (060
rests on the bona fide intent of the vendor a retro, i.e., respondent
in this case. $f he honestly believed that the transaction was an
equitable mortgage, the said article applies and he can still
repurchase the property within thirty days from finality of the
judgment declaring the transaction as a sale with pacto de retro.
Carenthetically, it matters not what the vendee intended the
transaction to be.
68
(
HERMOSO * CA : $t was error for the respondent court to rule
that the right of the petitioner to redeem the alienated share had
long proscribed. "his finding fails to ta!e into account that the
period of legal redemption is not a prescriptive period. $t is a
condition precedent to the e%ercise of the right of redemption. $t
is a period set by law to restrict the right of the person e%ercising
the right of legal redemption. I+ ,s no+ one o. 32es02,3+,on. While
the law requires that the notice must be in writing, it does not
state any particular form thereof, so long as the reasons for a
written notice are present. "he records of the case show that the
sale of the brothersG share was deliberately hidden from the
petitioners. Jor sometime after the sale, the petitioners were
ignorant about its e%ecution. When they somehow heard rumors
about it, they had to ta!e one step after another to find out if the
information was true.
Art. 1620. A co@owner of a thing may e2ercise
the right of redemption in case the shares of all
the other co@owners or of any of them, are sold
to a third person. 3f the price of the alienation is
grossly e2cessive, the redemptioner shall pay
only a reasonable one.
1hould two or more co@owners desire to e2ercise
the right of redemption, they may only do so in
proportion to the share they may respectively
have in the thing owned in common. (1%%a!
a! Ehen the right may be e2ercised$ when a
share of a co@owner is sold to a third person,
who is a stranger.
b! "hrust of the law$ to reduce the number of
co@owners until the community is done away
with.
c! Ehen the right is not available
1! Ehere the share of the co@owner is sold
to another co@owner
%! Ehere the share of a co@owner was
merely mortgaged
d! 1hould two or more co@owners desire to
e2ercise the right, they may only do so in
proportion to the share they may respectively
have in the thing owned in common.
&. Re"emtion amon) a"3oinin) o$ners
"he law distinguishes between rural and urban
lands. "he distinction is based on the character
of the community or vicinity in which it is found.
"his is to encourage the ma2imum development
and utili7ation of lands.
a% )ural lands
Art. 1621. "he owners of ad&oining lands shall
also have the right of redemption when a piece
of rural land, the area of which does not e2ceed
one hectare, is alienated, unless the grantee
does not own any rural land.
"his right is not applicable to ad&acent lands
which are separated by broo/s, drains, ravines,
roads and other apparent servitudes for the
benefit of other estates.
3f two or more ad&oining owners desire to
e2ercise the right of redemption at the same
time, the owner of the ad&oining land of smaller
area shall be preferred' and should both lands
have the same area, the one who first requested
the redemption. (1%-a!
a! Ehen the right may be e2ercised$ when a
piece of rural land not e2ceeding 1 ha., is
52
alienated Junless the grantee does not own any rural
landQ
b! "hrust of the law
1. to prevent the rural land not e2ceeding 1 ha.
from passing into the hands of a person other
than the ad&acent owners who can ma/e use of
the alienated property for the development of
their own lands
%. to consolidate scattered small agricultural
lands under one ownership
c! Ehen the right is not available
o Ad&acent lands which are separated by
broo/s, drains, ravines, roads and other
apparent servitudes for the benefit of other
estates >!ecause owners cannot !e said to
!e ad&oining owners an'more?
d! 3f two or more ad&oining owners desire to e2ercise
the right of redemption at the same time, the owner
of the ad&oining land of smaller area shall be
preferred' and should both lands have the same area,
the one who first requested the redemption.
!% <r!an lands
;-
Art. 1622. Ehenever a piece of urban land which is
so small and so situated that a ma&or portion thereof
cannot be used for any practical purpose within a
reasonable time, having been bought merely for
speculation, is about to be re@sold, the owner of any
ad&oining land has a right of pre@emption at a
reasonable price.
3f the re@sale has been perfected, the owner of the
ad&oining land shall have a right of redemption, also
at a reasonable price.
Ehen two or more owners of ad&oining lands wish to
e2ercise the right of pre@emption or redemption, the
owner whose intended use of the land in question
appears best &ustified shall be preferred. (n!
a! Ehen the right may be e2ercised$ when a piece of
urban land which is so small and so situated that a
ma&or portion thereof cannot be used for any practical
purpose within a reasonable time, having been
bought merely for speculation, is about to be resold
b! "hrust of the law$ to discourage speculation in real
estate and aggravate the housing problem.
c! Ehen the right is not available$ Ehen the urban
land is transferred under an Oe2changeK of properties
>!ecause tere is no resale?
71
69
ORTEGA * ORCINE "he term EurbanF in rt. (099 does not
necessarily refer to the nature of the land itself but to the
character of the community or vicinity in which it is found.
70
SEN PO E" MAR"ETING *. MARTINE:
d! Ehen two or more owners of ad&oining lands
wish to e2ercise the right of pre@emption or
redemption, the owner whose intended use of
the land in question appears best &ustified shall
be preferred.
Assignment of a chose in action
Art. 1634. Ehen a credit or other incorporeal
right in litigation is sold, the debtor shall have a
right to e2tinguish it by reimbursing the assignee
for the price the latter paid therefor, the &udicial
costs incurred by him, and the interest on the
price from the day on which the same was paid.
A credit or other incorporeal right shall be
considered in litigation from the time the
complaint concerning the same is answered.
"he debtor may e2ercise his right within thirty
days from the date the assignee demands
payment from him. (1-!
a! Ehen the right may be e2ercised$ when a
credit or other incorporeal right in litigation is
sold.
b! "hrust of the law$ to discourage speculation in
lawsuits which would ma/e the courts an
instrument for profit.
c! Ehen the right is not available >!ecause te
assignee as a valid interest in te rigt or
propert' assigned?
1. Ehen the assignment of a credit was
made before any litigation
%! Assignments made to a co@heir or co@
owner of the credit, to a creditor in payment
of his credit, to the possessor of a tenement
or land which is sub&ect to the assigned
credit. (Art% 1;:5)
6edemption of homestead
'A 141. Sec. 119. ?very conveyance of land
acquired under a free patent or homestead,
when proper, shall be sub&ect to repurchase by
the applicant, his widow or legal heirs within
years from the date of conveyance.
a! Eho may redeem
1. the applicant
%. his widow
-. legal heirs
rticle (099 is not applicable to a lessee trying to buy the
land he is leasing.
53
b! :eriod of redemption$ within years from the date
of conveyance
6edemption in ta2 sales
()R' of 1997. Sec. 215. 2or#eiture to (overnment
#or Bant o# Bidder% * 3n case there is no bidder for
real property e2posed for sale as herein above
provided or if the highest bid is for an amount
insufficient to pay the ta2es, penalties and costs, the
3nternal 6evenue (fficer conducting the sale shall
declare the property forfeited to the Aovernment in
satisfaction of the claim in question and within two
(%! days thereafter, shall ma/e a return of his
proceedings and the forfeiture which shall be spread
upon the records of his office. 3t shall be the duty of
the 6egister of Deeds concerned, upon registration
with his office of any such declaration of forfeiture, to
transfer the title of the property forfeited to the
Aovernment without the necessity of an order from a
competent court.
Eithin one (1! year from the date of such forfeiture,
the ta2payer, or any one for him may redeem said
property by paying to the )ommissioner or the
latter4s 6evenue )ollection (fficer the full amount of
the ta2es and penalties, together with interest
thereon and the costs of sale, but if the property be
not thus redeemed, the forfeiture shall become
absolute.
Eho may redeem
1. the delinquent ta2payer
%. anyone for him
:eriod of redemption$ within 1 year from the date of
sale
6edemption by a &udgment debtor
R$+es of 'i,i+ Proced$re. R$+e 39. Sec. 27. Bo
ma' redeem real propert' so sold%
6eal property sold as provided in the last preceding
section, or any part thereof sold separately, may be
redeemed in the manner hereinafter provided, by the
following persons$
(a! "he &udgment obligor, or his successor in
interest in the whole or any part of the property'
(b! A creditor having a lien by virtue of an
attachment, &udgment or mortgage on the property
sold, or on some part thereof, subsequent to the lien
under which the property was sold. 1uch redeeming
creditor is termed a redemptioner.
a! Eho may redeem
1. the &udgment obligor
%. his successors@in@interest
-. creditor having a lien by virtue of an
attachment
:eriod of redemption$ within 1 year from the
date of registration of the certificate of sale
6edemption in e2tra&udicial foreclosure of
mortgages
Act (o. 3135. Sec. 6. 3n e2tra&udicial
foreclosure of mortgage, the debtor, his
successors@in@interest, any &udicial or &udgment
creditor of said debtor, or any &unior
encumbrancer may redeem the property within 1
year from the date of the sale. >$is provision is
ta/en #rom Baviera onl'8 not sure i# tis is te
e,act wording o# te law%?
a! Eho may redeem
1. the debtor
%. his successors@ in@interest
-. &udicial creditorL&udgment creditor of the
debtor
4. any person having a lien on the property
:eriod of redemption$ within 1 year from the
date of the sale
6edemption in &udicial foreclosure of mortgages
RA 8791 ($e (eneral Ban/ing o# Law o# 0111).
Sec. 47. 2oreclosure o# )eal +state Mortgage. @
3n the event of foreclosure, whether &udicially or
e2tra@&udicially, of any mortgage on real estate
which is security for any loan or other credit
accommodation granted, the mortgagor or
debtor whose real property has been sold for the
full or partial payment of his obligation shall
have the right within one year after the sale of
the real estate, to redeem the property by
paying the amount due under the mortgage
deed, with interest thereon at rate specified in
the mortgage, and all the costs and e2penses
incurred by the ban/ or institution from the sale
and custody of said property less the income
derived therefrom. 9owever, the purchaser at
the auction sale concerned whether in a &udicial
or e2tra@&udicial foreclosure shall have the right
to enter upon and ta/e possession of such
property immediately after the date of the
confirmation of the auction sale and administer
the same in accordance with law. Any petition in
court to en&oin or restrain the conduct of
foreclosure proceedings instituted pursuant to
this provision shall be given due course only
upon the filing by the petitioner of a bond in an
amount fi2ed by the court conditioned that he
will pay all the damages which the ban/ may
suffer by the en&oining or the restraint of the
foreclosure proceeding.
54
>otwithstanding Act -1-, &uridical persons whose
property is being sold pursuant to an e2tra&udicial
foreclosure, shall have the right to redeem the
property in accordance with this provision until, but
not after, the registration of the certificate of
foreclosure sale with the applicable 6egister of Deeds
which in no case shall be more than three (-! months
after foreclosure, whichever is earlier. (wners of
property that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain their
redemption rights until their e2piration.
A?>?6AB 6<B?$ >o right to redeem is granted to the
debtor@mortgagor when there has been &udicial
foreclosure of real estate mortgage.
?G)?:"3(>$ Ehen the mortgagee is a ban/ or a
ban/ing institution.
Begal right to redeem under the Agrarian 6eform
)ode
RA 3844. Sec. 12. LesseeEs )igt o# )edemption%@3n
case the landholding is sold to a third person without
the /nowledge of the agricultural lessee, the latter
shall have the right to redeem the same at a
reasonable price and consideration' :rovided, "hat
the entire landholding sold must be redeemed$
:rovided, further, "hat where there are two or more
agricultural lessees, each shall be entitled to said
right of redemption only to the e2tent of the area
actually cultivated by him. "he right of redemption
under this 1ection may be e2ercised within two years
from the registration of the sale. and shall have
priority over any other right of legal redemption.
a! Eho may redeem$ the lessee who has no
/nowledge of the sale to a third person
b! :eriod of redemption$ within % years from the
registration the sale
c! )onditions for redemption* the entire landholding
sold must be redeemed
d! where there are two or more agricultural lessees,
each shall be entitled to said right of redemption only
to the e2tent of the area actually cultivated by him
E=. BU9D 0A9/0 9A4
71
A'- (#. 3952. An act to re)ulate t,e sale6
trans#er6 mort)a)e or assi)nment o# )oo"s6
$ares6 merc,an"ise6 rovisions or materials6 in
!ul%6 an" rescri!in) enalties #or t,e violation
o# t,e rovisions t,ereo#.
71
LI#ANAG * MENGHRAJ: "he constitutional right to dispose
freely of oneGs property is not absolute. "he creditor should be
protected in his rights against the debtor. "he State, in the
e%ercise of its police power, see!s to protect such creditor
against insolvent and fraudulent vendors
Sec 1. "his Act shall be /nown as C$e Bul/
Sales Law%C
Sec. 2. Sale and trans#er in !ul/% T Any sale,
transfer, mortgage or assignment of a stoc/ of
goods, wares, merchandise, provisions, or
materials otherwise than in the ordinary course
of trade and the regular prosecution of the
business of the vendor, mortgagor, transferor, or
assignor, or sale, transfer, mortgage or
assignment of all, or substantially all, of the
business or trade theretofore conducted by the
vendor, mortgagor, transferor, or assignor, or of
all, or substantially all, of the fi2tures and
equipment used in and about the business of the
vendor, mortgagor, transferor, or assignor, shall
be deemed to be a sale and transfer in bul/, in
contemplation of this Act$ :rovided, however,
"hat if such vendor, mortgagor, transferor or
assignor, produces and delivers a written waiver
of the provisions of this Act from his creditors as
shown by verified statements, then, and in that
case, the provisions of this section shall not
apply.
Sec. 3. Statement o# creditors% T 3t shall be the
duty of every person who shall sell, mortgage,
transfer, or assign any stoc/ of goods, wares,
merchandise, provisions or materials in bul/, for
cash or on credit, before receiving from the
vendee, mortgagee, or his, or its agent or
representative any part of the purchase price
thereof, or any promissory note, memorandum,
or other evidence therefor, to deliver to such
vendee, mortgagee, or agent, or if the vendee,
mortgagee, or agent be a corporation, then to
the president, vice@president, treasurer,
secretary or manager of said corporation, or, if
such vendee or mortgagee be a partnership firm,
then to a member thereof, a written statement,
sworn to substantially as hereinafter provided, of
the names and addresses of all creditors to
whom said vendor or mortgagor may be
indebted, together with the amount of
indebtedness due or owing, or to become due or
owing by said vendor or mortgagor to each of
said creditors, which statement shall be verified
by an oath to the following effect$
:93B3::3>? 31BA>D1
:6(C3>)? (6 )3"P (+ UUUUUUUUUUUUUUUUUV
Before me, the undersigned authority, personally
appeared UUUUUUUUUUUUUUUUUU (vendor,
mortgagor, agent or representative, as the case
may be!, bearing cedula >o. UUUUUUUUUUUU
issued at UUUUUUUUUUU on the day of
UUUUUUUUUUUUU who, by me being first duly
sworn, upon his oath, deposes and states that
the foregoing statement contains the names of
all of the creditors of UUUUUUUUUUUUUUUU
(vendor, or mortgagor! together with their
55
addresses, and that the amount set opposite each of
said respective names, is the amount now due and
owing, and which shall become due and owing by
UUUUUUUUUUUUU (vendor or mortgagor! to such
creditors, and that there are no creditors holding
claims due or which shall become due, for or on
account of goods, wares, merchandise, provisions or
materials purchased upon credit or on account of
money borrowed, to carry on the business of which
said goods, wares, merchandise, provisions or
materials are a part, other than as set forth in said
statement.
UUUUUUUUUUUUUUUUUUUUUU
1ubscribed and sworn to before me this UUUUUUUUUU
day of UUUUUUUUU, 18UUUU, at UUUUUUUUUUUUU.
Sec. 4. 2raudulent and void sale. trans#er or
mortgage% T Ehenever any person shall sell,
mortgage, transfer, or assign any stoc/ of goods,
wares, merchandise, provisions or materials, in bul/,
for cash or on credit, and shall receive any part of the
purchase price, or any promissory note, or other
evidence of indebtedness for said purchase price or
advance upon mortgage, without having first
delivered to the vendee or mortgagee or to his or its
agent or representative, the sworn statement
provided for in section three hereof, and without
applying the purchase or mortgage money of the said
property to the pro rata payment of the bona fide
claim or claims of the creditors of the vendor or
mortgagor, as shown upon such sworn statement, he
shall be deemed to have violated this Act, and any
such sale, transfer or mortgage shall be fraudulent
and void.
Sec. 5. @nventor'% T 3t shall be the duty of every
vendor, transferor, mortgagor, or assignor, at least
ten days before the sale, transfer or e2ecution of a
mortgage upon any stoc/ of goods, wares,
merchandise, provisions or materials, in bul/, to
ma/e a full detailed inventory thereof and to preserve
the same showing the quantity and, so far as is
possible with the e2ercise of reasonable diligence, the
cost price to the vendor, transferor, mortgagor or
assignor of each article to be included in the sale,
transfer or mortgage, and notify every creditor whose
name and address is set forth in the verified
statement of the vendor, transferor, mortgagor, or
assignor, at least ten days before transferring
possession thereof, personally or by registered mail,
of the price, terms conditions of the sale, transfer,
mortgage, or assignment.
Sec. 6. Any vendor, transferor, mortgagor or
assignor of any stoc/ of goods, wares, merchandise,
provisions or materials, in bul/, or any person acting
for, or on behalf of any such vendor, transferor,
mortgagor, or assignor, who shall /nowingly or
willfully ma/e, or deliver or cause to be made or
delivered, a statement, as provided for in section
three hereof, which shall not include the names of all
such creditors, with the correct amount due and to
become due to each of them, or shall contain
any false or untrue statement, shall be deemed
to have violated the provisions of this Act.
Sec. 7. 3t shall be unlawful for any person, firm
or corporation, as owner of any stoc/ of goods,
wares, merchandise, provisions or materials, in
bul/, to transfer title to the same without
consideration or for a nominal consideration
only.
Sec. 8. >othing in this Act contained shall apply
to e2ecutors, administrators, receivers,
assignees in insolvency, or public officers, acting
under &udicial process.
Sec. 9. "he sworn statement containing the
names and addresses of all creditors of the
vendor or mortgagor provided for in section
three of this Act, shall be registered in the
Bureau of )ommerce. +or the registration of
each such sworn statement a fee of five pesos
shall be charged to the vendor or mortgagor of
the stoc/ of goods, wares, merchandise,
provisions or materials, in bul/.
Sec. 10. "he provisions of this Act shall be
administered by the Director of the Bureau of
)ommerce and 3ndustry, who is hereby
empowered, with the approval of the
Department 9ead, to prescribe and adopt from
time to time such rules and regulations as may
be deemed necessary for the proper and efficient
enforcement of the provisions of this Act.
Sec. 11. Any person violating any provision of
this Act shall, upon conviction thereof, be
punished by imprisonment not less than si2
months, nor more than five years, or fined in
sum not e2ceeding five thousand pesos, or both
such imprisonment and fine, in the discretion of
the court.
Sec. 12. "his Act shall ta/e effect on its
approval.
A. RA (-5&
Sec. 2. Any sale, transfer, mortgage or
assignment of a stoc/ of goods, wares,
merchandise, provisions, or materials otherwise
than in the ordinary course of trade and the
regular prosecution of the business of the
vendor, mortgagor, transferor, or assignor, or
any sale, transfer, mortgage or assignment of
all, or substantially all, of the business or trade
theretofore conducted by the vendor, mortgagor,
transferor, or assignor, or of all, or substantially
all, of the fi2tures and equipment used in and
about the business of the vendor, mortgagor,
transferor or assignor, shall be deemed to be a
sale and transfer in bul/, in contemplation of this
56
Act$ :rovided, however, that if such vendor,
mortgagor, transferor or assignor produces and
delivers a written waiver of the provisions of this Act
from his creditors as shown by verified statements,
then, and in that case, the provisions of this section
shall not apply.
a! "hrust of the law$ to protect persons who e2tended
credit to merchants, relying on the fact that their
stoc/ of merchandise was not to be sold in bul/, but
/ept up and replenished from time to time (with the
e2tension of credit comes the presupposition of
continuance in the business of merchandising!
"ypes of transactions covered
=%
1. any sale, transfer, mortgage or assignment
of a stoc/ of goods, wares, merchandise,
provisions or materials otherwise than in the
ordinary course of trade and the regular
prosecution of the business
%. any sale, transfer, mortgage or assignment
of all, or substantially all, of the business or
trade theretofore conducted by the vendor,
etc.
-. any sale, transfer, mortgage or assignment
of all, or substantially all, of the fi2tures and
equipment used in and about the business of
the vendor, etc.
1toc/ * common use when applied to goods in a
mercantile house refers to those which are /ept for
sale
B. )(5:B3A>)? 6?M<36?5?>"
a! delivery of the list of creditors to the vendee or
mortgagee before receiving the consideration
b! application of the consideration to the pro@rata
payment of the claims of creditors appearing in the
list
c! preparation of a full, detailed inventory of the
goods sold or mortgaged
d! notification to creditors at least 1, days before
delivery
). ?++?)"1 (+ >(>@)(5:B3A>)?
a! 3f the purchase or mortgage money is not applied
pro5rata to the payment of the bona fide claims of the
creditors of the vendorLmortgagor, the sale, transfer,
or mortgage shall be fraudulent and void.
72
PEOPLE * #ONG: "he object of the sale in this case is not
covered by the provision alleged to have been infringed. WongGs
business was a foundry shop that manufactures iron wor!s and
processes or casts metals;erchandise N something that is sold
everday and is constantly going out of the store and being
replaced by other goods.
b! "he law penali7es any intentional omission of
the names of the creditors in the required list,
with the correct amount due or to become due,
or any false or untrue statement therein. "he law
also penali7es any transfer of title in bul/,
without consideration or for a nominal
consideration only
:?>AB"P1 . months * years imprisonment' fine
of W :,,,,' or both' penalty imposable to the
debtor
E=I. R/TAI9 TRAD/ 9IB/RA9IJATION ACT
RA 8762. An act li!eraliKin) t,e retail tra"e
!usiness6 reealin) #or t,e urose RA
118.6 as amen"e"6 an" #or ot,er uroses.
Sec. 1. $itle% @ "his Act shall be /nown as the
C)etail $rade Li!erali=ation Act o# 0111%C
Sec. 2. Declaration o# 9olic'% 5 3t is the policy of
the 1tate to promote consumer welfare in
attracting, promoting and welcoming productive
investments that will bring down prices for the
+ilipino consumer, create more &obs, promote
tourism, assist small manufacturers, stimulate
economic growth and enable :hilippine goods
and services to become globally competitive
through the liberali7ation of the retail trade
sector.
:ursuant to this policy, the :hilippine retail
industry is hereby liberali7ed to encourage
+ilipino and foreign investors to forge an efficient
and competitive retail trade sector in the interest
of empowering the +ilipino consumer through
lower prices, higher quality if goods, better
services and wider choices.
Sec. 3. De#inition% 5 As used in this Act$
(1! C)etail $radeC shall mean any act, occupation
or calling of habitually selling direct to the
general public merchandise, commodities or
goods for consumption, but the restriction of this
law shall not apply to the following$
(a! 1ales by a manufacturer, processor, laborer,
or wor/er, to the general public the products
manufactured, processed or produced by him if
his capital does not e2ceed (ne 9undred
"housand :esos (:1,,,,,,.,,!'
(b! 1ales by a farmer or agriculturist selling the
products of his farm'
(c! 1ales in restaurant operations by a hotel
owner or inn@/eeper irrespective of the amount
of capital$ 9rovided, that the restaurant is
incidental to the hotel business' and
57
(d! 1ales which are limited only to products
manufactured, processed or assembled by a
manufacturer through a single outlet, irrespective of
capitali7ation.
(%! CDig5end or lu,ur' goodsC shall refer to goods
which are not necessary for life maintenance and
whose demand is generated in large part by the
highest income groups. Bu2ury goods shall include,
but are not limited to, products such as$ &ewelry,
branded or designer clothing and footwear, wearing
apparel, leisure and sporting goods, electronics and
other personal effects.
Sec. 4. $reatment o# 4atural5Born 7iti=en Bo Das
Lost Dis 9ilippine 7iti=ensip% 5 A natural@born citi7en
of the :hilippines who has lost his :hilippine
citi7enship but who resides in the :hilippines shall be
granted the same rights as +ilipino citi7ens for
purposes of this Act.
Sec. 5. 2oreign +"uit' 9articipation% 5 +oreign@owned
partnerships, associations and corporations formed
and organi7ed under the laws of the :hilippines may,
upon registration with the 1ecurities and ?2change
)ommission (1?)! and the Department of "rade and
3ndustry (D"3! or in case of foreign@owned single
proprietorships, with the D"3, engage or invest in the
retail trade business, sub&ect to the following
categories$
7ategor' A @ ?nterprises with paid@up capital of the
equivalent in :hilippine :esos of less than "wo 5illion
+ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! shall be reserved e2clusively for
+ilipino citi7ens and corporations wholly@owned by
+ilipino citi7ens.
7ategor' B @ ?nterprises with a minimum paid@up
capital of the equivalent in :hilippine :esos of "wo
5illion +ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! may be wholly owned by
foreigners e2cept for the first two (%! years after the
effectivity of this Act wherein foreign participation
shall be limited to not more than (.,R! of total
equity.
7ategor' 7 @ ?nterprises with a paid@up capital of the
equivalent in :hilippine :esos of 1even 5illion +ive
9undred "housand <1 Dollars (<1X=,,,,,,,.,,! or
more maybe wholly owned by foreigners$ 9rovided.
owever. that in no case shall the investments for
establishing a store in )ategories B and ) be less
than the equivalent in :hilippine :esos of ?ight
9undred "hirty "housand <1 Dollars
(<1X#-,,,,,.,,!.
7ategor' D @ ?nterprises speciali7ing in high@end or
lu2ury products with a paid up capital of the
equivalent in :hilippine :esos of "wo 9undred +ifty
"housand <1 Dollars (<1X%,,,,,.,,! per store
may be wholly@owned by foreigners.
"he foreign investor shall be required to maintain
in the :hilippines, the full amount of the
prescribed minimum capital. <nless the foreign
investor has notified the 1?) and the D"3 of its
intention to repatriate its capital and cease
operations in the :hilippines. "he actual use in
:hilippine operations of the inwardly remitted
minimum capital requirements shall be
monitored by the 1?).
+ailure retail stores shall secure a certification
from the Bang/o 1entral ng :ilipinas (B1:! and
the D"3, which will verify or confirm inward
remittance of the minimum required capital
investment.
Sec. 6. 2oreign @nvestors Ac"uiring Sares o#
Stoc/ o# Local )etailers% 5 +oreign 3nvestors
acquiring shares from e2isting retail stores
whether or not publicly listed whose net worth is
in e2cess of the peso equivalent of "wo 5illion
+ive 9undred "housand <1 Dollars
(<1X%,,,,,,,.,,! may purchase only up to a
minimum of si2ty percent (.,R! of the equity
thereof within the first two (%! years from the
effectivity of this Act and thereafter, they may
acquire the remaining percentage consistent with
the allowable foreign participation as herein
provided.
Sec. 7. 9u!lic 3##ering o# Sares o# Stoc/% 5 All
retail trade enterprises under )ategories B and )
in which foreign ownership e2ceeds eighty
percent (#,R! of equity shall offer a minimum of
thirty percent (-,R! of their equity to the public
through any stoc/ e2change in the :hilippines
within eight (#! years from their start of
operations.
Sec. 8. Fuali#ications o# 2oreign )etailers% 5 >o
foreign retailer shall be allowed to engage in
retail trade in the :hilippines unless all the
following qualifications are met$
(a! A minimum of "wo 9undred 5illion <1
Dollars (<1X%,,,,,,,,,,.,,! net worth in its
parent corporation for )ategories B and ), and
+ifty 5illion <1 Dollars (<1X,,,,,,,,,.,,! net
worth in its parent corporation for )ategory D'
(b! +ive (! retailing branches or franchises in
operation anywhere around the world unless
such retailers has at least one (1! store
capitali7ed at a minimum of "wenty@+ive 5illion
<1 Dollars (<1X%,,,,,,,,.,,!'
(c! +ive (!@year trac/ record in retailing' and
58
(d! (nly nationals from, or &udicial entities formed or
incorporated in, countries which allow the entry of
+ilipino retailers, shall be allowed to engage in retail
trade in the :hilippines.
"he D"3 is hereby authori7ed to pre@qualify all foreign
retailers, sub&ect to the provisions of this Act, before
they are allowed to conduct business in the
:hilippines.
"he D"3 shall /eep a record of qualified foreign
retailers who may, upon compliance with law,
establish retail stores in the :hilippines. 3t shall
ensure that the parent retail trading company of the
foreign investor complies with the qualifications on
capitali7ation and trac/ record prescribed in this
section.
"he 3nter@Agency )ommittee on "ariff and 6elated
5atters of the >ational ?conomic Development
Authority (>?DA! Board shall formulate and regularly
update a list of foreign retailers of high@end or lu2ury
goods and render an annual report on the same to
)ongress.
Sec. 9. 9romotional o# Locall' Manu#actured
9roducts% 5 +or ten (1,! years after the effectivity of
this Act, at least thirty percent (-,R! of the
aggregate cost of the stoc/ inventory of foreign
retailers falling under )ategories B and ) and ten
percent (1,R! for )ategory D, shall be made in the
:hilippines.
Sec. 10. 9roi!ited Activities o# Fuali#ied 2oreign
)etailers% 5 Mualified foreign retailers shall not be
allowed to engage in certain retailing activities
outside their accredited stores through the use of
mobile or rolling stores or carts, the use of sales
representatives, door@to@door selling, restaurants and
sari@sari stores and such other similar retailing
activities$ 9rovided. that a detailed list of prohibited
activities shall hereafter be formulated by the D"3.
Sec. 11. @mplementing Agenc'A )ules and
)egulations% 5 "he monitoring and regulation of
foreign sole proprietorships, partnerships,
associations or corporations allowed to engage in
retail trade shall be the responsibility of the D"3. "his
shall include resolution of conflicts.
"he D"3, in coordination with the 1?), the >?DA and
the B1:, shall formulate and issue the implementing
rules and regulations necessary to implement this Act
within ninety (8,! days after its approval.
Sec. 12. 9enalt' 7lause% 5 Any person who shall be
found guilty of violation of any provision of this Act
shall be punished by imprisonment of not less than
si2 (.! years and one (1! day but not more than eight
(#! years, and a fine of not less than (ne 5illion
:esos (:1,,,,,,,,.,,! but not more than
"wenty 5illion :esos (:%,,,,,,,,,.,,!.
3n the case of associations, partnerships or
corporations, the penalty shall be imposed upon
its partners, president, directors, managers and
other officers responsible for the violation. 3f the
offender is not a citi7en of the :hilippines, he
shall be deported immediately after service of
sentence. 3f the +ilipino offender is a public
officer or employee, he shall, in addition to the
penalty prescribed herein, suffer dismissal and
permanent disqualification from public office.
Sec. 13. )epealing 7lause% 5 6epublic Act >o.
11#,, as amended, is hereby repealed. 6epublic
Act >o. -,1#, as amended, and all other laws,
e2ecutive orders, rules and regulations or parts
thereof inconsistent with this Act are repealed or
modified accordingly.
Sec. 14. Separa!ilit' 7lause% 5 3f any provision
of this Act shall be held unconstitutional, the
other provisions not otherwise affected thereby
shall remain in force and effect.
Sec. 15. +##ectivit'% 5 "his Act shall ta/e effect
fifteen (1! days after its approval and
publication in at least two (%! newspapers of
general circulation in the :hilippines.
A. 1)(:? A>D D?+3>3"3(> (+ 6?"A3B
"6AD?
=-
6etail "rade * any act, occupation or calling of
habitually selling direct to the general public
merchandise, commodities or goods for
consumption
?G)?:"$
1. sales by a manufacturer, processor,
laborer or wor/er of products made by
him if his capital is less than or equal to
1,,,,,, pesos
%. sales by a farmer or agriculturist of the
products of his farm
-. sales limited only to products
manufactured, processed or assembled
by the manufacturer in a single outlet
irrespective of capitali7ation
a! OAeneral publicK $ activities of seller must be
such that the target clientele are not only a
particular person or group of persons.
73
"ING * HERNAE :
"here is no distinction between
control and nonIcontrol positions with respect to
employment of aliens. "he Aetail "rade Kaw read in
connection with the ntiI8ummy ct see!s a complete ban
on aliens.
59
b! 1?) (pinion >o. 11, series of %,,-$ ?ngaging in
the selling of merchandise as an incident to the
primary purpose of a corporation does not constitute
retail trade (e.g., operation of pharmacy by a
hospital! within the purview of the Act (Villanueva!
B. 63A9"1 (+ +(65?6 >A"<6AB@B(6>
+3B3:3>(1
>atural@born +ilipinos who have lost their citi7enship
!ut wo reside in te 9ilippines shall be given the
same rights as +ilipino citi7ens with respect to this
law.
C. )A"?A(63?1 (+ 6?"A3B "6AD?
?>"?6:631?1 (1ec. !
D. 9(E AB3?>1 5AP 3>C?1" 3> 6?"A3B "6AD?
3> "9? :93B3::3>?1 (1ec. #!
?. 6<B?1 (> +(6?3A> 6?"A3B?61 3> "9?
:93B3::3>?1
F. :?>AB"P )BA<1? (1ec. 1%!
'A 108 (Anti5Dumm' Act). An act to unis, acts
o# evasion o# t,e la$s on t,e nationaliKation o#
certain ri),ts6 #ranc,ises or rivile)es.
Sec. 1. 9enalt' T 3n all cases in which any
constitutional or legal provisions requires :hilippine or
any other specific citi7enship as a requisite for the
e2ercise or en&oyment of a right, franchise or
privilege, any citi7en of the :hilippines or of any other
specific country who allows his name or citi7enship to
be used for the purpose of evading such provision,
and any alien or foreigner profiting thereby, shall be
punished by imprisonment for not less than five nor
more than fifteen years, and by a fine of not less than
the value of the right franchise or privilege, which is
en&oyed or acquired in violation of the provisions
hereof but in no case less than :,,,.
"he fact that the citi7en of the :hilippines or of any
specific country charged with a violation of this Act
had, at the time of the acquisition of his holdings in
the corporations or associations referred to in section
two of this Act, no real or personal property, credit or
other assets the value of which shall at least be
equivalent to said holdings, shall be evidence of a
violation of this Act.
1
Sec. 2. Simulation o# minimum capital stoc/ T 3n all
cases in which a constitutional or legal provision
requires that, in order that a corporation or
association may e2ercise or en&oy a right, franchise or
privilege, not less than a certain per centum of its
capital must be owned by citi7ens of the :hilippines or
of any other specific country, it shall be unlawful to
falsely simulate the e2istence of such minimum stoc/
or capital as owned by such citi7ens, for the
purpose of evading said provision. "he president
or managers and directors or trustees of
corporations or associations convicted of a
violation of this section shall be punished by
imprisonment of not less than five nor more than
fifteen years, and by a fine not less than the
value of the right, franchise or privilege, en&oyed
or acquired in violation of the provisions hereof
but in no case less than :,,,.
%
Sec. 2*A. <nlaw#ul use. +,ploitation or
en&o'ment T Any person, corporation, or
association which, having in its name or under
its control, a right, franchise, privilege, property
or business, the e2ercise or en&oyment of which
is e2pressly reserved by the )onstitution or the
laws to citi7ens of the :hilippines or of any other
specific country, or to corporations or
associations at least si2ty per centum of the
capital of which is owned by such citi7ens,
permits or allows the use, e2ploitation or
en&oyment thereof by a person, corporation or
association not possessing the requisites
prescribed by a the )onstitution or the laws of
the :hilippines' or leases, or in any other way,
transfers or conveys said right, franchise,
privilege, property or business to a person,
corporation or association not otherwise qualified
under the )onstitution, or the provisions of the
e2isting laws' or in any manner permits or allows
any person, not possessing the qualifications
required by the )onstitution, or e2isting laws to
acquire, use, e2ploit or en&oy a right, franchise,
privilege, property or business, the e2ercise and
en&oyment of which are e2pressly reserved by
the )onstitution or e2isting laws to citi7ens of
the :hilippines or of any other specific country,
to intervene in the management, operation,
administration or control thereof, whether as an
officer, employee or laborer therein with or
without remuneration e2cept technical personnel
whose employment may be specifically
authori7ed by the 1ecretary of Fustice, and any
person who /nowingly aids, assists or abets in
the planning consummation or perpetration of
any of the acts herein above enumerated shall
be punished by imprisonment for not less than
five nor more than fifteen years and by a fine of
not less than the value of the right, franchise or
privilege en&oyed or acquired in violation of the
provisions hereof but in no case less than five
thousand pesos$ :rovided, however, "hat the
president, managers or persons in charge of
corporations, associations or partnerships
violating the provisions of this section shall be
criminally liable in lieu thereof$ :rovided, further,
"hat any person, corporation or association shall,
in addition to the penalty imposed herein, forfeit
such right, franchise, privilege, and the property
or business en&oyed or acquired in violation of
60
the provisions of this Act$ And provided, finally, "hat
the election of aliens as members of the board of
directors or governing body of corporations or
associations engaging in partially nationali7ed
activities shall be allowed in proportion to their
allowable participation or share in the capital of such
entities.
-
Sec. 2*.. Any violation of the provisions of this Act
by the spouse of any public official, if both live
together, shall be cause for the dismissal of such
public official.
4
Sec. 2*'. "he e2ercise, possession or control by a
+ilipino citi7en having a common@law relationship with
an alien of a right, privilege, property or business, the
e2ercise or en&oyment of which is e2pressly reserved
by the )onstitution or the laws to citi7ens of the
:hilippines, shall constitute a prima facie evidence of
violation of the provisions of 1ection %@A hereof.