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There may be a sale against the will of the owner in case of expropriation and the three different kinds of sale under
the law ordinary execution sale, judicial foreclosure sale, and extra-judicial foreclosure sale.
2. Object or subject matter refers to the determinate thing which is the object of the contract;
Even a future thing not existing at the time the contract is entered into may be the object of sale, provided it has a
potential or possible existence, that is, it is reasonably certain to come into existence as the natural increment or usual
incident of something in existence already belonging to the seller, and the tile will vest the buyer the moment the thing
comes into existence (Art. 1461).
Emptio rei speratae
Rei spetae
(sale of thing expected)
the sale of a thing not yet in existence, subject to the
the sale of hope itself that the thing will come into
condition that the thing will exist and on failure of the
existence, where it is agreed that the buyer will pay the price
condition, the contract becomes ineffective and hence, the
even if the thing does not eventually exist;
buyer has not obligation to pay the price;
the future thing is certain as to itself but uncertain as to like the sale of a sweepstake ticket, it is not certain that the
its quantity and quality;
thing itself (winning a prize) will exist, much less it quantity
and quality;
contract deals with a future thing;
contract relates to a thing which exists or is present the
hope or expectancy;
sale is subject to the condition that the thing should produces effect even though the thing does not come into
exist, so that if it does not, there will be no contract by
existence because the object of the contract is the hope
reason of the absence of an essential element.
itself, unless it is a vain hope or expectancy (like the sale of a
falsified sweepstakes ticket which can never win).
3. Cause or consideration refers to the price certain in money or its equivalent.
Natural Elements those which are deemed to exist in certain contracts, in the absence of any contrary stipulations, like warranty
against eviction;
Accidental Elements those which may be present or absent depending on the stipulations of the parties, like conditions, interest,
penalty, time or place of payment.
Contract to Sell
Transfer of title:
Under the Statute of Frauds (Art. 1403 [2, a, d, e].) of the Civil Code, the following contracts must be in writing to be
enforceable:
(a) sale of personal property at a price not less than P500;
(b)
sale of real property or an interest therein regardless of the price involved; and
(c) sale of property not to be performed within a year from the date thereof regardless of the nature of the property and the price
involved.
The Statute Frauds specifies three (3) ways in which contracts of sales of goods within its terms may be made
binding:
(a) the giving of a memorandum;
(b)
acceptance and receipt of part of the goods (or things in action) sold and actual receipt of the same (Art. 1585); and
(c)
The Statute of Frauds is applicable only to executory contracts (where no performance, i.e., delivery and payment,
has as yet been made by both parties), and not to contracts which are totally consummated or partially performed [Vda.
De Espiritu vs. CFI of Cavite, 47 SCRA 354].
Recto Law (Art. 1484) Remedies of Vendor in Sale of Personal Property Payable in Installments:
(a) elect fulfillment upon the vendees failure to pay;
(b)
cancel the sale, if the vendee shall have failed to pay two or more installments;
(c)
foreclose the chattel mortgage, if one has been constituted, if the vendee shall have failed to pay two or more installments.
These remedies are alternative and are not to be exercised cumulatively or successively and the election of one is a
waiver of the right to resort to the others [Pacific Commerial Co. vs De la RAma, 62 Phil. 380; Nonato vs. IAC, 140 SCRA
255].
In transactions involving the sale of financing of real estate on installment payments, including residential
condominium apartments, the following are the rights given to the buyer who has paid at least two (2) years of
installments in case he defaults in the payment of succeeding payments
(a) to pay without additional interest the unpaid installments due within the total grace period earned by him fixed at the rate of
one-month grace period for every one year of installment payments made this right shall be exercised by him only once in every
five (5) years of the life of the contract and its extension, if any; and
(b) if the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property
equivalent to 50% of the total payments made and, after 5 years of installments, an additional 5% of every year but not to exceed
90% of the total payments made. [Sec. 3, RA 6552 or the Realty Installment Buyer Protection Act; see Layug vs. IAC, 67 SCRA
627].
(c) The buyer has the right to sell his right or assign the same before actual cancellation of the contract and to pay in advance any
unpaid installment anytime without interest and to have such full payment of the purchase price annotated in the certificate of title
covering the property.
II.
CAPACITY TO BUY OR SELL
Persons Who May Enter Into a Contract of Sale
As a general rule, all persons, whether natural or juridical, who can bind themselves, have the legal capacity to buy and sell.
Persons Who Are Incapacitated to Enter Into a Contract of Sale
1. Absolute Incapacity pertains to persons who cannot bind themselves
(a) Minor
(b)
(c)
Contracts entered into by a minor and other incapacitated persons arevoidable. However, where the necessaries
are sold and delivered to him (without the intervention of the parent or guardian), he must pay a reasonable price therefor.
The contract is therefore valid, but the minor has the right to recover any excess above a reasonable value paid by him.
Sale of real property by minors who have already passed the ages of puberty and adolescence and are now in the
adult age, when they pretended to have already reached their majority, while in fact they have not, is valid, and they
cannot be permitted afterwards to excuse themselves from compliance with the obligations assumed by them or to seek
their annulment. This is in accord with the doctrine of estoppel[Mercado and Mercado vs. Espiritu, 37 Phil. 265].
2. Relative Incapacity where it exists only with reference to certain persons or class of property (Art. 1490-1491). The
prohibition extends to sales by virtue of legal redemption, compromises, and renunciations.
(a) Husband and wife to each other except when a separation of property was agreed upon in the marriage settlements, or when
there has been a judicial separation of property
(b)
(c)
Agents as to the property whose administration or sale has been entrusted to them, unless consent of the principal is given
(d)
(e) Public officers and employees as to the property of the State or any subdivision thereof, or of the government-owned or
controlled corporations, the administration of which is entrusted to them
(f)
Judges and government experts who take part in the sale of the property and rights under litigation
The prohibition is based on the fiduciary relationship (based on trust), to prevent fraud and undue and improper
influence.
With respect to (b) to (d), the sale shall only be voidable because in such cases only private interests are affected.
The defect can be cured by ratification by the seller. With respect to (e) and (f), the sale shall be null and void, public
interests being involved therein.
(g) Aliens who are disqualified to purchase private agricultural lands under Art. XII, Secs. 3 and 7 of the Constitution
(h) Unpaid seller having a right of lien or having estopped the goods in transitu
(i)
Officer holding the execution or his deputy
III.
EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST
Where the thing is entirely lost at the time of perfection, the contract is inexistent and void because there is no
object. There being no contract, there is no necessity to bring an action for annulment.
Where the thing is only partially lost, the vendee may elect between withdrawing from the contract and demanding
the remaining part, paying its proportionate price.
The thing is lost when it perishes or goes out of commerce or disappears in such a way that its existence is unknown
or it cannot be recovered.
IV.
OBLIGATIONS OF THE VENDOR
Principal Obligations of the Vendor
to transfer the ownership of the determinate thing sold (Art. 1495);
The vendor need not be the owner of the thing at the time of perfection of the contract; it is sufficient that he has a
right to transfer the ownership thereof at the time it is delivered (Art. 1459).
If the seller promised to deliver at a stipulated period and such period is of the essence of the contract but did not
comply with his obligation on time, he has no right to demand payment of the price. The vendee-buyer is fact may ask for
the rescission or resolution of the sale.
If the failure of the seller to deliver on time is not due to his fault, as when it was the buyer who failed to supply the
necessary credit for the transportation of the goods, delay on the part of the seller may be said to be sufficiently excused.
to deliver the thing, with its accessions and accessories, if any, in the condition in which they were upon the perfection of the
contract (Art. 1537);
to warrant against eviction and against hidden defects (Arts. 1495, 1547);
to take care of the thing, pending delivery, with proper diligence (Art. 1163);
to pay for the expenses of the deed of sale, unless there is a stipulation to the contrary (Art. 1487).
Delivery or Tradition
Tradition or delivery is a derivative mode of acquiring ownership by virtue of which one has the right and intention to alienate a
corporeal thing, transmits it by virtue of a just title to one who accepts the same.
Duty to Deliver at Execution Sale: a judgment debtor is not obliged to deliver right away; he has one (1) year within
which to redeem the property.
Kinds of Delivery or Tradition
1.
Actual or Real (Art. 1497) the thing sold is placed in the control and possession of the vendee or his agent. This
involves the physical delivery of the thing and is usually done by the passing of a movable thing from hand to hand.
2.
Legal or Constructive (Arts. 1498-1501) through the execution of a public instrument
Legal formalities applies to real and personal properties, where the delivery is made through the execution of a public document;
Traditio simbolica to effect delivery, the parties make use of a token symbol to represent the thing delivered;
Traditio longa manu movable property is delivered by mere consent by the contracting parties if the thing sold cannot be
transferred to the possession of the vendee at the time of the sale;
Traditio brevi manu the vendee already has the possession of the thing sold by virtue of another title as when the lessor sells the
thing leased to the lessee;
Constitotum possessorium the vendor continues in possession of the property sold not as owner but in some other capacity (e.g.,
as tenant of the vendee).
3. Quasi-Traditio (Art. 1501) delivery of rights, credits or incorporeal real property, made by placing the titles of ownership in
the hands of the vendee or lawyer, by execution of a public instrument, or by allowing the vendee to use his rights as new owner
with the consent of the vendor.
(a)
(b)
(c)
There must be the intention to deliver the thing for purposes of ownership.
(c)
(d) the seller must either actually take possession of the goods sold or give notice of his claim to the carrier or other person in
possession;
(e)
the seller must surrender the negotiable document of title, if any, issued by the carrier or bailee; and
(f)
the seller must bear the expenses of delivery of the goods after the exercise of the right.
3. A right of resale
4. A right to rescind the sale
Rules in case of loss, deterioration, or improvement of thing before delivery
1.
If the thing is lost without the fault of the debtor, the obligation shall be extinguished.
2.
If the thing is lost through the fault of the debtor, he shall be obliged to pay damages, if is understood that the thing is
lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot
be recovered.
3.
When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor.
4.
If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and
its fulfillment, with indemnity for damages in either case.
5.
If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor.
6.
If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.
Rules as to preference of ownership in case of double sale
1.
If the property sold is movable, the ownership shall be acquired by the vendee who first takes possession in good
faith [Villa Rey Transit, Inc. vs Ferrer, 25 SCRA 861].
2.
If the property sold is immovable, the ownership shall belong to:
(a) the vendee who first registers the sale in good faith in the Registry of Deeds has preferred right over another vendee who has
not registered his title even if the latter is in actual possession of the immovable property governed by the principle prius tempore,
patior jure (first in time, stronger in right) knowledge by the first buyer of the second sale cannot defeat the first buyers right
except when the second first registers in good faith the second sale;
(b)
in the absence of registration, the vendee who first takes possession in good faith; and
(c) in the absence of both registration and possession, the vendee who presents the oldest title (who first bought the property) in
good faith.
Article 1544 has no application to lands not registered with the Torrens system.
V. CONDITION AND WARRANTIES
Condition means an uncertain event or contingency on the happening of which the obligation (or right) of the contract depends.
Warranty is a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale,
having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts
are or shall be as he then represents them.
If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either (1) refuse to
proceed with the contract, or (2) proceed with the contract, waiving the performance of the condition.
If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by the
other party as a breach of warranty.
Implied warranty as to sellers title (Art. 1548) that the seller guarantees that he has a right to sell the thing sold and to transfer
ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.
Implied warranty against hidden defects or unknown encumbrance (Art. 1562) that the seller guarantees that the thing sold is
reasonably fit for the known particular purpose for which it was acquired by the buyer or, where it was bought by description, that it
is of merchantable quality.
Essential elements of warranty against eviction
1.
the vendee is deprived in whole or in part of the thing purchased;
2.
the vendee is so deprived by virtue of a final judgment ;
3.
the judgment is based on a right prior to the sale or an act imputable to the vendor;
4.
the vendor was summoned in the suit for eviction at the instance of the vendee; and
5.
there is no waiver on the part of the vendee.
Kinds of waiver of eviction
1.
Consciente the waiver is voluntarily made by the vendee without the knowledge and assumption of the risks of
eviction. If the waiver was only conscious, the vendor shall pay only the value which the thing sold had at the time of
eviction this is a case of solution indebiti the effect is to deprive the purchaser of the benefits mentioned in Nos. 2, 3,
4 and 5 of Article 1555.
2.
Intencionada the waiver is made by the vendee with knowledge of the risks of eviction and assumption of its
consequence. The vendor is exempted from the obligation to answer for eviction, provided he did not act in bad
faith [Andaya vs. Manansala, 107 Phil. 1151].
Rights of the vendee against the vendor in case eviction occurs (Art. 1555)
1.
return of the value of the thing sold at the time of eviction;
2.
income or fruits if he has been ordered to deliver them to the party who won the suit against him;
3.
costs of the suit;
4.
expenses of the contract;
5.
damages and interests and ornamental expenses if the sale was made in bad faith.
Redhibition
Redhibitory action
Redhibitory vice or defect
an action instituted to avoid a sale on a defect in the article sold against
the avoidance of a sale on account account of some vice or defect in the
which defect the seller is bound to
of some vice or defect in the thing
thing sold which renders its use
warrant. The vice or defect must
sold, which renders its use
impossible, or so inconvenient and
constitute an imperfection, a defect in its
impossible, or so inconvenient and imperfect that it must be supposed that nature, of certain importance; and a
imperfect that it must be supposed the buyer would not have purchased it
minor defect does not five rise to
that the buyer would not have
had he known of the vice. The object is redhibition. The mere absence of a
purchased it had he known of the
the rescission of the contract. If the objectcertain quality in the thing sold which
vice.
is to procure the return of a part of the
the vendee thought it to contain is not
purchase price paid by the vendee, the necessarily a redhibitory defect. One
remedy is known as accion
thing is that is positively suffers from
minoris orestimatoris.
certain defects.
Doctrines of caveat venditor and caveat emptor
Caveat venditor
Caveat emptor
(Let the buyer beware)
(Let the seller beware)
the vendor is liable to the vendee for any hidden faults applies in sheriffs sale, sales of animals, and tax sales, for
or defects in the thing sold, even though he was not aware there is no warranty of title or quality on the part of the seller
thereof (Art. 1566).- Based on the principle that a sound in such sales.
price warrants a sound article.
Also applies in double sales of property where the issue is
The vendee is obliged to (1) accept delivery; and (2) pay the price of the thing sold.
should the vendor give security for the return of the price; or
(c)
(d)
VII.
ACTIONS FOR THE BREACH OF CONTRACT OF SALE OF GOODS
Goods include all chattels personal but not things in action or money of legal tender in the Philippines. The term includes growing
fruits or crops.
Actions available for breach of the contract of sale of goods:
Action by the seller for payment of the price (Art. 1595)
Action by the seller for damages for non-acceptance of the goods (Art. 1596)
Action by the seller for rescission of the contract for breach thereof (Art. 1597)
Action by the buyer for specific performance (Art. 1598)
Action by the buyer for rescission or damages for breach of warranty (Art. 1599)
Remedies allowed to the buyer when the seller has been guilty of a breach of promise or warranty (Art. 1599):
1
Recoupment accept the goods and set up the sellers breach to reduce or extinguish the price.The theory of
recoupment is that the sellers damages are cut down to an amount which will compensate him for the value of what
he has given.
2
Set-off or Counterclaim for damages accept the goods and maintain an action for damages for the breach of the
warranty. Both sides of the contract are enforced in the same litigation. The buyer (defendant) does not seek to
avoid his obligation under the contract but seeks to enforce the sellers (plaintiffs) obligation and to deduct it from his
3
4
VIII.
EXTINGUISHMENT OF SALE
Classification of modes or causes of extinguishing the contract of sale:
Common those causes which are also the means of extinguishing all other contracts like payment, loss of the thing, condonation,
etc. (Art. 1231).
Special those causes which are recognized by the law on sales (those covered by Arts. 1484, 1532, 1539, 1540, 1542, 1556,
1560, 1567, and 1591).
Extra-special conventional redemption and legal redemption.
Conventional Redemption
Legal Redemption
(Arts. 1601-1618)
(Arts. 1619-1623)
It is the right which the vendor reserves to himself, to
It is the right to be subrogated, upon the same terms and
reacquire the property sold provided her returns to the
conditions stipulated in the contract, in the place of one who
vendee the price of the sale, the expenses of the contract, acquires a thing by purchase or dation in payment, or by any
any other legitimate payments made therefore and the
other transaction whereby ownership is transmitted by
necessary and useful expenses made on the thing sold, and onerous title.
fulfills other stipulations which may have been agreed upon.
Nature:
Nature: (a) identical with conventional redemption, except
(a) it is purely contractual because it is a right created, not for the source of the right conventional redemption arises
by mandate of the law, but by virtue of an express
from the voluntary agreement of the parties; legal redemption
contract[Ordoez vs. Villaroman, 78 Phil. 116];
proceeds from law;
(b) it is an accidental stipulation and, therefore, its nullity (b) it is not predicated on proprietary right but on a bare
cannot affect the sale of itself since the latter might be
statutory privilege to be exercised only by the person named
entered into without said stipulation [Alojado vs. Lim
in the statute the statute does not make actual ownership
Siongco, 51 Phil. 339];
at the time of sale or redemption a condition precedent, the
(c) it is a real right when registered, because it binds third right following the person and not the property [Magno vs.
persons [Mortera vs. Martinez, 14 Phil. 541];
Viola and Sotto, 61 Phil. 80];
(d) it is a resolutory condition because when exercised, the (c) it is in the nature of a mere privilegecreated partly for
right of ownership acquired by the vendee is
reason of public policy and partly for the benefit and
extinguished[Aquino vs. Deal, 63 Phil. 582];
convenience of the redemptioner to afford him a way out of
(e) it is potestative because it depends upon the will of the what might be a disagreeable or inconvenient association
vendor;
into which he has been thrust it is intended to minimize co(f) it is a power or privilege, not an obligation, that the
ownership [Basa vs. Aguilar, 117 SCRA 128; Tan vs. CA, 172
vendor has reserved for himself [Ocampo vs. Potenciano,
SCRA 660].
CA 48 OG 2230];
(g) it is reserved at the moment of the perfection of the
Instances of Legal Redemption:
contract for if the right to repurchase is agreed upon
afterwards, there is only a promise to sell which produces
(a) Under the Civil Code, those found in Arts. 1620-1622,
different rights and effects and is governed by Art.
1634, and 1088;
1479 [Diamante vs. CA, 206 SCRA 52];
(h) the person entitled to exercise the right of redemption (b) Under special laws:
necessarily is the owner of the property sold and not any
(1) redemption by owner of real property sold for
third party[Gallar vs. Husain, 20 SCRA 186];
delinquent taxes period is within 1 year from date of sale;
(i)
it gives rise to reciprocal obligationthat of returning the (2) repurchase by homesteader of homestead sold under
price of sale and other expenses, on the part of the vendor, the Public Land Act period is 5 years [Tupas vs. Damasco,
and that of delivering the property and executing a deed of 132 SCRA 593];
sale therefore, on the part of the vendee [Pandaquilla vs.
(3) redemption by judgment debtor or redemptioner or real
Gaza, 12 Phil. 663].
property sold on execution period is 12 months;
(4) redemption by mortgagor after mortgaged property has
been judicially foreclosed and sold period is 90 days but
before confirmation of sale by the court (in all cases of extrajudicial foreclosure sale, the mortgagor may redeem the
property within 1 year from the date of registration of the
sale);
Pre-emption
The sale to a third person has not yet been perfected
Narrower in scope may be exercised only where there is
a prospective resale of a small piece of urban land
originally bought by the prospective vendor merely for
speculation
3
Directed against the third person who bought the property
Directed against the prospective vendor who is about to
resell the property
4
Effect is to extinguish a contract that has already been Effect is to prevent the birth or perfection of a contract
perfected or even consummated
IX. ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
Assignment of credit a contract by which the owner of a credit transfers to another his rights and actions against a third person in
consideration of a price certain in money or its equivalent (Art. 1458).
Assignment of credit and other incorporeal rights are consensual, bilateral, onerous, and commutative or aleatory contracts. The
assignment involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time to the
assignee [Casabuena vs. CA, 286 SCRA 594].
It may be done gratuitously, but if done onerously, it is really a sale. Thus, the subject matter is the credit or right assigned; the
consideration is the price paid for the credit or right; and the consent is the agreement of the parties to the assignment of the credit
or right at the agreed price.
1
2
Redemption
The sale to a third person has already been perfected
Has a much broader scope
2
3
To affect third persons, the assignment must appear in a public instrument, and in case it involves real property, it is
indispensable that it be recorded in the Registry of Deeds [Lopez vs. Alvarez, 9 Phil. 28].
The assignee merely steps into the shoes of the assignor, the former acquiring the credit subject to defenses (fraud,
prescription, etc.) available to the debtor against the assignor. The assignee is deemed subrogated to the rights as
well as to the obligations of the seller. He cannot acquire greater rights than those pertaining to the assignor. [Koa vs
CA, 219 SCRA 541].
X. BARTER OR EXCHANGE
Barter a contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the part of
the latter to give things of the same kind, quantity, and quality.
The contract is perfected from the moment there is a meeting of the minds upon the things promised by each party in consideration
of the other. It is consummated from the time of mutual delivery by the contracting parties of things they promised.
Effect where the giver is not the lawful owner of the thing delivered: the aggrieved party cannot be compelled to deliver the thing he
has promised. He is entitled to claim damages (Art. 1639). [Biagtan vs. Viuda de Oller, 62 Phil. 933].
Remedy in case of eviction: the injured party is given the option to recover the property he has given in exchange with damages or
only claim an indemnity for damages. The right to recover is, however, subject to the rights of innocent third persons (Art. 1640).
XI. THE BULK SALES LAW
Purpose of the law (Act No. 3952) is to prevent the defrauding of creditors by the secret sale or disposal or mortgage in bulk of all or
substantially all of a merchants stock of goods.
The general scheme is to declare such bulk sales fraudulent and void as to creditors of the vendor, or presumptively so, unless
specified formalities are observed, such as the demanding and the giving of a list of creditors, the giving of actual and constructive
notice to such creditors, by record or otherwise, and the making of an inventory.
A sale and transfer in bulk under the Bulk Sales Law is any sale, transfer, mortgage, or assignment
(a) of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular
prosecution of the business; or
(b) of all or substantially all, of the business or trade; or
(c) of all or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor transferor, or assignor.
Acts punished by the law:
1.
knowingly or willfully making or delivering a statement as required by the Act which does not include the names of all
the creditors of the vendor, etc. with the correct amount due and to become due or which contains any false or untrue
statement; and
2.
transferring title to a any stock of goods, wares, merchandise, provisions or materials sold in bulk without
consideration of for a nominal consideration only.