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CHAPTER 1: INTRODUCTION
CHARACTERISTICS OF CONTRACT OF SALE:
CONTRACT OF SALE – One of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other 1. Nominate - law gave it a name
to pay therefor a price certain in money or its equivalent. A contract of sale
may be absolute or conditional. 2. Principal - can stand on its own; unlike accessory contract
ESSENTIAL REQUISITES OF A CONTRACT OF SALE 6. Consensual – meeting of minds makes a perfect contract of sale but
needs delivery to consummate.
1. consent
7. Title & not a mode – title gives rise to an obligation to transfer; it is a
2. subject matter mode w/c actually transfers ownership
2. perfection – by mere consent; performance may be demanded (specific a. contract for delivery of an article which the vendor in the
performance) ordinary course of business manufactures or procures for
general market (whether on hand or not) – sale
3. consummation
b. goods are to be manufactured specially for a customer and
DISTINGUISHED FROM OTHER CONTRACTS: upon special order and not for the general market – contract for
piece of work.
1. Donation
jurisprudence:
donation is gratuitous; sale is onerous
a. Timing test – under art 1467; Inchausti; whether the thing
donation is formal contract; sale is consensual transferred would have never existed but for the order –
contract for piece of work (abandoned)
donation is governed by law on donation; sale is governed by law b. Habituality test – enunciated in Celestino v CIR; contract of sale
on sales if manufacturer engages in activity without need to employ
extraordinary skills and equipment; contract for piece of work is
2. Barter sale of service; contract of sale is sale of things.
in barter, the consideration is the giving of a thing; in sale, it is c. Nature of the object test – enunciated in EEI v CIR; each
giving of money as payment product’s nature of execution differs from the others; products
are not ordinary products of manufacturer.
both are governed by law on sales; both are species of the genus
sales main factor in decision of the SC: essence of why parties enter
into it:
if consideration consists party in money & partly by thing – look at
manifest intention; a. essence is object – contract of sale
if intention is not clear (1468): b. essence is service – contract for piece of work
a. value of thing is equal or less than amount of money – sale 4. Agency to sell
b. value of thing is more than amount of money – barter in sale, buyer pays for price of object; in agency to sell, agent not
obliged to pay for price, merely obliged to deliver price received
3. Contract for piece of work from buyer.
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in sale, buyer becomes owner of thing; in agency; principal remains lease with option to buy: really a contract of sale but designated as
owner even if object delivered to agent lease in name only; it is a sale by installments
5. Dacion en pago
6. Lease
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1. Natural Persons ii. avoid situation where dominant spouse takes advantage of
the other
2. Juridical Persons- Corporation/Partnership/Associations/Cooperatives
iii. avoid circumvention on prohibition of donation between
Status of contract: valid spouses
status of contract: VOIDABLE only, therefore ratifiable 3. OTHERS PER SPECIFIC PROVISIONS OF LAW
remedy is action for annulment (with partial restitution in so far as a. Guardian with regard to property of ward during period of
the minor is benefited) guardianship
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2. VOIDABLE (PER CIVIL CODE) – agent; VALID if with consent b. Law is a noble profession
TWO GROUPS OF PARTIES PROHIBITED FROM ENGAGING IN CONTRACT OF c. 2 Masters – 2 interest; one cannot serve 2 masters at the same
SALE: time
1. Guardian / Agent / Executors – ratifiable in the sense that only private Exception: CONTINGENT FEE ARRANGEMENT
wrong is involved
a. Amount of legal fees is based on a value of property involved
2. Public Officials / Officers of Court – not ratifiable in the sense that in litigation
public wrong is concerned
Not a sale but service contract
GUARDIAN/AGENT/ADMINISTRATOR
I give that you may do (innominate contract) so has to be
1. Legal status of contract: VOID (case law) governed by law on sales but because of public policy,
considered VALID
2. Direct or indirect
Reason why contingent fee is followed:
3. If mediator – no need to prove collusion; inutile
i. constitutional prohibition v. impairment of contract
4. Even if court approved sale ii. subject to control of courts (may be reduced if
unconscionable or nullified)
5. Reason: fiduciary relationship is based on trust
iii. canons of legal ethics
ATTORNEYS
iv. higher public policy litigants
REQUISITES:
CHAPTER 3: SUBJECT MATTER OF SALE
1. Lawyer-client relationship exists
TO BE A VALID & BINDING SUBJECT MATTER, THE FOLLOWING MUST CONCUR:
2. Subject matter – property in litigation (all types)
1. Existing, Future & Contingent
3. Duration – while in litigation (from filing of complaint to final judgment);
may be future litigation 2. Licit
Reason: due to public policy; ground for malpractice 3. Determinate or determinable
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A resolutory condition that thing will come into existence Absence: VOID;
Non happening of condition: RESULUTORY: EXTINGUISH there is subject matter but intention regarding subject matter cannot be
THE CONTRACT ascertained – VOID
Remedy: can recover what has been paid Kinds of subject matter:
Every sale of future thing is subject to condition that they will Particularly designated or segregated from all others of the
come into existence same class
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4. Undivided share in mass of fungible goods (BUYER becomes Nominal consideration w/c is common law concept does not apply
co-owner) (P1.00)
3. Must be certain or ascertainable at the time of the perfection of the c. Sales with right to repurchase (raises presumption of equitable
contract mortgage) – Remedy is reformation
REAL CERTAIN
1. When price stated is one intended by the parties 1. Sufficient that it is fixed with reference to another thing certain
If fictitious: no intention with respect to price - VOID That thing will have on a definite day, or in a particular exchange or
market, or when an amount is fixed above or below the price on
If False/simulated: what appears in contract is not the true price such day, or in such exchange or market provided said amount be
certain
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If contract states that price is to be determined by 3rd party, contract Must be certain or at least ascertainable
is already perfected (there is just a suspensive condition – actual
fixing of price) Effect is absent: NO CONTRACT SITUATION
3rd party fixes price in bad faith or mistake – court remedy can be
made CHAPTER 5: FORMATION OF CONTRACT OF SALE
3rd party is unable or unwilling to fix price – parties have no cause of 3 STAGES IN LIFE OF A CONTRACT OF SALE
action
1. Policitacion/Negotiation Stage – offer is floated, acceptance is
Reason: floated but they do not meet; the time when parties indicate their
interest but no concurrence of offer & acceptance
a. suspensive condition does not happen yet – courts have no
jurisdiction 2. Perfection – concurrence of all requisites; meeting of the minds
b. enforceable contract has not yet arisen – court with no 3. Consummation – parties perform their respective undertakings
jurisdiction to create contract between parties
POLICITACION
Result: INEFFICACIOUS
1. offer is floated but not absolute
When price can not be determined in accordance with any of the
preceding rules, contract of sale in INEFFICACIOUS 2. acceptance is likewise floated but conditional
Deemed to be an essential requisite because it is part of the 2. offer floated with a period – without acceptance, extinguished when
presentation of the contract period has ended & maybe withdrawn at will by offeror; right to
withdraw must not be arbitrary otherwise, liable to damage under Art
Integral part of concept of price 19, 20, 21 of civil code
5. offer is floated & there is counter-offer – original offer is destroyed, d. period – as per contract; if period not provided – prescribes in 10
there is a new offer; can not go back to original offer years (written contract)
6. offer is floated – no authority of offeror to modify offer e. how exercised: notice of acceptance should be communicated to
offeror without actual payment as long as there is delivery of
7. offer is accepted absolutely – proceed to perfected stage payment in consummation stage
offer with a period but founded upon a separate consideration distinct Legal consequence:
from the price
a. option contract is valid
no presumption of consideration, needs to be proven
b. offeror can not withdraw offer until after expiry period
Characteristics:
c. subject to rescission, damages but not to specific performance
a. not the contract of sale by itself, distinct because this is not an obligation to give
to be perfected & give rise to action, the following must concur: c. not subject to rescission, damages
a. subject matter of sale must be agreed upon NEW RULE: Right of first refusal recognized
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New doctrine: may be subject to specific performance Qualified acceptance – merely a counter-offer which needs to
be absolutely accepted to give rise to perfected contract of sale
Effect of new doctrine: turned the world of policitacion upside down
because while valid option contract is not subject to specific Business ads are mere invitations to make an offer except when
performance, right of first refusal which does not even have a separate it appears to be otherwise
consideration may be subject to specific performance
Acceptance by letter/telegram – binds only at time it came to
knowledge of SELLER; prior thereto – offer may still be
withdrawn
OPTION CONTRACT & RIGHT OF FIRST REFUSAL DISTINGUISHED Must be exact terms to be considered absolute
Recognizes recovery of damage based on abuse of rights doctrine A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer or in other customary manner.
PERFECTION: OFFER & ACCEPTANCE
Until such announcement is made, any bidder may retract his bid; and
PERFECTION the auctioneer may withdraw the goods from the sale unless the auction
has been announced to be without reserve.
Sale is a consensual contract, perfected by meeting of minds regarding
subject matter & price
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Place of perfection: where the meeting of minds happen; when Reason: purposes of convenience only & not for validity &
acceptance sent by mail, perfection is deemed where the offer is made enforceability; cause of action is granted to sue & compel other
party to execute the document
Performance has nothing to do with perfection stage
2. When form is important for validity; exception by specific provision
EARNEST MONEY of law;
1. money given as part of purchase price a. power to sell a piece of land granted to an agent – otherwise VOID
2. its acceptance is proof that contract of sale exists b. sale of large cattle; must also be registered with Municipal treasurer
nothing in law prevents parties from treating earnest money – otherwise VOID
differently
c. sale of land by non-Christian if not approved by Governor – VOID
old concept: subject to forfeiture when BUYER backs out
3. When form is important for enforceability (STATUTE OF FRAUDS)
new concept: can not be forfeited – part of purchase price; must be
restored a. sale to be performed 1 year after
qualification: if old concept is stipulated – VALID b. Agreement to sell things with value of 500 and up
presumption of perfection of contract of sale and such earnest c. Sale of real property or any interest therein
money as part of purchase price is disputable
Exception:
FORM OF SALES
i. When there is a note or memorandum in writing & subscribed to
1. Form not important in validity of sale by party or his agent (contains essential terms of the contract)
Sale being consensual, may be oral or written, perfected by mere ii. When there has been partial performance/execution (seller
consent as to price & subject matter delivers with intent to transfer title/receives price)
If particular form is required under the statute of frauds: iii. when there has been failure to object to presentation of
evidence (oral)
a. valid & binding between parties - constitutes waiver
3. Symbolic delivery
Nature of diligence required: diligence of a good father of the family
unless other requirement is stipulated As to movables – ex: delivery of the keys to a car
Consequence: Seller will be guilty of breach if thing is lost through his
fault 4. Constitutum possessarium
DELIVERY OF THE THING at the time of perfection of contract, seller continues to hold
possession merely as a holder
Transfer ownership (tradicion)
5. Execution:
– twin obligation:
Exception:
1. transfer title(ownership) – SELLER must be owner of thing at the
time of consummation to validly transfer title a. when there is stipulation to contrary, execution does not
produce effect of delivery
2. delivery of the thing
b. when at the time of execution of instrument, subject matter was
Different kinds of delivery: not subject to control of the seller
1. Traditio Longa Manu Effect when 2 requisites do not concur: no constructive delivery; no
compliance on part of SELLER to deliver
Delivery of thing by mere agreement; when SELLER points to the Even when thing is mortgaged, seller can still deliver because
property without need of actually delivering naked title still belongs to him & can still do acts of ownership
including conveyance
2. Traditio Brevi Manu
6. Negotiable documents of title & non negotiable instruments
Before contract of sale, the would be buyer was already in
possession of the would be subject matter of sale (ex: as lessee) transferee acquires title of transferor
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when delivered without negotiation, it is a mere assignment b. when buyer pays seller the price – from moment the vessel is at
port of destination, there is already delivery to buyer.
7. Intangibles/ incorporeal property
COMPLETENESS OF DELIVERY
through public instrument
1. MOVABLES – delivery of thing plus accessories & accessions in the
execution is equivalent to delivery if from the deed, contrary does condition in which they were upon the perfection of the contract
not appear including the fruits
DELIVERY THROUGH CARRIER (2) when accepts & consumes before knowledge that buyer will
not perform contract in full, liable only for fair value of goods
1. FAS – FREE ALONG SIDE delivered
When goods delivered alongside the ship, there is already b. LARGER – buyer has 3 options;
delivery to the buyer (twin effects deemed fulfilled)
i. accept per contract & reject the rest
2. FOB - FREE ON BOARD ii. accept the whole – pay price stipulated
a. Shipment – when goods are delivered at ship at point of shipment; iii. reject whole if subject matter is indivisible
delivery to carrier by placing goods on vessel is delivery to buyer
c. MIXED WITH GOODS OF DIFFERENT DESCRIPTION – buyer
b. Destination – when goods reach the port even if not disembarked has 2 options:
yet from the vessel, there is delivery to the buyer
i. accept good w/c are in accordance with contract & reject the
3. CIF – COST, INSURANCE, FREIGHT rest
a. when buyer pays for services of carrier – delivery to carrier is ii. reject goods entirely – if indivisible
delivery to buyer; carrier is agent of the buyer
2. IMMOVABLES
Not applicable to judicial sales 1. Sample – goods must correspond with sample shown
b. sold for lump sum 2. Description – goods must correspond with description or sample
When price per unit not indicated Effect if there is no compliance: RESCISSION may be availed of
by the buyer
If area delivered is either greater or lesser – price will not be
adjusted accordingly OBLIGATION OF BUYER
1. follow stipulation in contact, or Buyer is obligated to pay price according to terms agreed upon –
regarding time, place & amount
2. follow usage in trade, or
If payment of interest is stipulated – must pay; if amount of interest
3. seller’s place of business or his residence not mentioned – apply legal rate
4. specific goods – place where the thing is When buyer defaults – constitutes breach: subject to specific
performance/rescission & damages; interest to be paid also from
5. at reasonable hour default
there is acceptance when: When does it apply: when not all requisites embodied in 1544 concur
b. When delivered & does any act inconsistent with ownership of Requisites;
seller
1. exactly same subject matter
c. Retains without intimating to seller that he has rejected
2. exactly same immediate seller
Sale of Goods on installment:
3. buyers represent conflicting interest
a. Goods must be delivered in full, except when stipulated
4. both sales are valid
b. When not examined by buyer – not accepted until examined or
at least had reasonable time to examine RULES ACCORDING TO 1544:
GOOD FAITH
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1. one who buys property without notice that another person has a right or
interest in such property 2 FUNCTIONS
2. one who has paid price before notice that another has claim or interest 1. evidence of existence & possession of goods described therein
lis pendens – notice that subject matter is in litigation 2. medium by which seller is able to transfer possession of goods
POSSESSION 1. negotiable
3. if sale 1 occurs when land is not yet registered & sale 2 is done when 1. Negotiation gives better right than assignment
land is already registered – apply FIRST IN TIME, PRIORITY IN
RIGHT NEGOTIATION ASSIGNMENT
CHAPTER 7: DOCUMENTS OF TITLE transferor/holder acquires title to acquires title to goods against transferor
goods
DOCUMENTS OF TITLE
bailee has direct obligation to acquires right to notify bailee so that he
not creation of law but by merchants to allow them to deal with holder as if directly dealt with acquires obligation of bailee to hold
merchandise without having to physically carry them around him goods for him
pertains to specific type of movables only : GOODS 2. Assignee takes document with defects of the assignor
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4. he has right to transfer title to goods and goods are merchantable/fit law on estoppel further bolsters it: title passes by operation of law to
grantee when person who is not owner of the goods sold delivers it
RULES OF LEVY/GARNISHMENT OF GOODS COVERED BY DOCUMENTS OF and later on acquires title thereto
TITLE
since valid, action to annul is improper; there is already a perfected
1. Non negotiable contract
a. Document is first surrendered What is void is the transfer of title/ ownership did not pass
b. Document is pounded by court Effect: buyer acquired no better right than transferor
CHAPTER 8: SALE BY NON-OWNER OR BY ONE HAVING a. co-owner sells whole property prior to partition – sale of
VOIDABLE TITLE property itself is void but valid as to his spiritual share
1. SALE BY NON-OWNER
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General Rule: Sale by non-owner, buyer acquires no better title b. In good faith
than seller had.
Exception:
Exception:
a. Owner lost movable – owner can recover w/o reimbursing price
a. owner by his conduct is precluded from denying seller’s
authority (ESTOPPEL) b. Owner is unlawfully deprived – owner can recover w/o reimbursing
price
b. contrary is provided for in recording laws (PD 1529)
Exception to Exception:
c. sale is made under statutory power of sale or under order of a
court of competent jurisdiction a. movable is bought at public sale – owner can only recover after
reimbursing price
d. sale is made in a merchant’s store in accordance with code of
commerce & special laws b. acquired in good faith & for value from auction
Perfection Stage
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Risk of loss passes at perfection (even if Res perit domino; owner 4. After delivery
ownership has not yet been transferred) bears risk of loss
Res perit domino
*Legal consequences from point of perfection are the same in both Owner is buyer so buyer bears risk of loss
legal systems: upon perfection of an unconditional contract of sale
involving specific or determinate subject matter, the risk of loss Delivery extinguishes ownership vis-a-vis the seller & creates a new
deterioration and the benefits of fruits and improvements, were fro the one in favor of the buyer
account of the buyer.
WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS CHAPTER 10: REMEDIES OF PARTIES FOR BREACH OF
CONTRACT OF SALE
1. Before perfection
SUBJECT MATTER: MOVABLES (IN GENERAL)
Res perit domino
REMEDIES OF UNPAID SELLER
Owner is seller so seller bears risk of loss
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Any man may not take law in his own hands, must seek remedy c. buyer becomes insolvent
through courts
When part of goods delivered, may still exercise right on goods
Exception: undelivered
2. SPECIAL REMEDIES a. seller delivers goods to carrier for transmission to buyer without
reserving ownership in goods or right to possess them
Requisites:
b. buyer or his agent lawfully obtains possession of goods
1. Subject matter – goods
c. waiver
2. Seller is unpaid – not completely paid or received negotiable
instrument under a condition & condition has been breached by loses lien when he parts with goods (still has stoppage in transitu)
reason of dishonor
notice by seller to buyer not essential
3. Physical possession is with seller
STOPPAGE IN TRANSITU
1. possessory lien
2. stoppage in transitu Requisites:
3. special right of re-sale Can only be exercised when the 2 prior
rights 1. Goods are in transit
4. special right to rescind have been exercised
When goods are in transit
POSSESSORY LIEN
From the time goods are delivered to carrier for purpose of
Seller not bound to deliver if buyer has not paid him the price transmission to buyer
Right to retain; cannot be availed when seller does not have custody Goods rejected by buyer & carrier continues to possess
them
Exercisable only in following circumstances:
When goods no longer in transit
a. goods sold without stipulation as to credit
Reached point of destination
b. goods sold on credit but term of credit has expired
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Before reaching destination, buyer obtains delivery of the why special – ownership of goods already with buyer but seller may
goods still rescind; ownership is destroyed even without court intervention but
in ordinary sale, need to go to court to destroy transfer of ownership
Goods are supposed to have been delivered to buyer but
carrier refused Requisites:
2. Shown by seller that buyer is insolvent (failure to pay when 1. Expressly stipulated
debts become due )
2. Buyer is in default for unreasonable time
How is right exercised:
Notice needed to be given by seller to buyer
a. Obtain actual possession of goods
REMEDIES OF BUYER
b. Give notice of claim to carrier / bailee in possession thereof
When Seller fails to deliver, buyer may seek SPECIFIC
Notice by seller to buyer is not required; notice to carrier is PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN
essential GOODS ON PAYMENT OF DAMAGES
why special – there are things which seller cannot do in ordinary sale: If buyer chooses foreclosure, no further action against buyer to
recover any unpaid balance of the price
1. ownership is with buyer but seller can sell goods
When is the law applicable: Sale on movables by installment
2. title accorded to buyer is destroyed even without court intervention
Sale on installment: payment by several partial payments in small
SPECIAL RIGHT TO RESCIND amount
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FORECLOSURE
Rationale of the law: Buyer is lulled into thinking that he could
afford because of small amounts per installment & at the same time Barring effect on recovery of balance
remedy abuse of commercial houses
Extent of barring effect: purchase price
Nature of remedies: alternative & not cumulative
Exception: mortgagor refuses to deliver property to effect foreclosure,
Coverage: sale & financing transaction & contracts of lease with recover also expenses incurred in attorneys fees, etc. (Perverse Buyer-
option to purchase Mortgagor)
If already chose specific performance, can no longer choose other 1. Anticipatory breach
remedies
Seller has reasonable grounds to fear loss of immovable sold & its
Except: after choosing, it has become impossible, rescission may be price – sue for RESCISSION
pursued
2. Non – payment of price
RESCISSION
RESCISSION
When chosen, there is correlative obligation to restitute
REMEDIES OF BUYER
But stipulation that installments paid are forfeited are valid if not
unconscionable 1. Disturbed in possession or with reasonable grounds to fear
disturbance
Deemed chosen when:
SUSPEND PAYMENT
a. Notice of rescission is sent
2. In case of subdivision or condo projects
b. Takes possession of subject matter of sale
If real estate developer fails to comply with obligation according to
c. Files action for rescission approved plan:
a) RESCIND
Barring effect on recovery of balance
b) SUSPEND PAYMENT UNTIL SELLER COMPLIES
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IMMOVABLES (BY INSTALLMENT) Cancellation to be effected 30 days from notice & upon
payment of cash surrender value
1592 – Applies only to contract of sale
2. Buyer paid less than 2 years installment
Maceda Law – applies to COS & CTS & Financing
a. 1st Grace period is 60 days from date installment became due
MACEDA LAW
b. 2nd grace period of 30 days from notice of cancellation/demand
Coverage:REAL ESTATE – defined space vs. CONDO – not defined for rescission
space (w/ common areas)
buyer can still pay within the 30 day period
1. contract of sale with interest
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e. Have full payment annotated in certificate of title CONTRACT OF SALE – RESCISSION IS APPLICABLE
principal remedy, retaliatory subsidiary remedy – cannot be instituted CHAPTER 12: CONDITION & WARRANTIES
vs. unjust party except when other remedies exhausted
A. CONDITION
mutual restitution mutual restitution
When a contract contains a condition, the non-happening of which
Nature: Judicial would not constitute a breach but extinguishes the obligation
Extra judicial Rescission However, if party to the sales contract has promised that the condition
should happen or be performed, the non-performance of which may be
allowed if stipulated; burden to sue shifts to party who does treated by parties as breach
not like rescission
CONDITION WARRANTY
court still has final say as to propriety of rescission Purports to existence of Purports to performance of obligation
obligation
Forfeiture of amounts valid being in nature of penal clause
Condition must be stipulated to Need not be stipulated; may form part
CONTRACT OF SALE CONTRACT TO SELL form part of the obligation of obligation by provision of law
Governed by genus SALE Governed by genus SALE
Ownership passes because of Ownership passes upon full payment May attach itself to obligation of Relates to the subject matter itself or to
tradition seller to deliver possession & obligation of the seller as to the subject
Non-payment is resolutory Non payment is suspensive; non- transfer ownership matter of the sale
condition which may be basis of payment extinguishes contract to sell
breach B. EXPRESS WARRANTIES ( REQUISITES )
Perfection gives rise to reciprocal Perfection gives rise to reciprocal
demandable obligation suspensive conditional obligation 1. it must be an affirmation of fact or any promise by seller relating to
the subject matter of sale
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3. buyer purchases the subject matter relying thereon no appeal needed nor a need for buyer to resist eviction for right
to accrue; it is enough that the aforementioned requisites are
when breached, seller is liable for damages complied with
not applicable to sheriff, auctioneer, mortgagee, pledgee LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole
2. warranty against eviction subject matter)
implied, unless contrary provision appears in contract 1. value of thing at time of eviction ( be it greater/lesser than price
of sale )
when ownership is transferred, buyer shall enjoy the legal and
peaceful possession of the thing 2. value of income of fruits
REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION: 3. costs of suit which caused the eviction
1. buyer is evicted in whole or in part from the subject 4. expenses of contract if buyer paid for them
matter of sale
5. damages & interests and ornamental expenses if sale was
2. there is a final judgement made in bad faith
3. basis of eviction is a right prior to sale or an act RIGHTS OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT
imputable to vendor MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN
RELATION FOR THE WHOLE:
1. rescission
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3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) requisites: a. seller is aware – seller should return price & refund
expenses of contract with damages
a. immovable sold is encumbered with non–apparent burden or
servitude not mentioned in the agreement b. seller is not aware - seller should return price and interest &
refund expenses ( no damages )
b. nature of non–apparent servitude or burden is such that it must
be presumed that the buyer would not have acquired it had he buyer may elect between withdrawing from contract or
been aware thereof demanding proportionate reduction of price with damages in
either case
when breach of warranty exist: buyer may ask for rescission or
indemnity applicable to judicial sale except that judgment debtor not liable
for damages
warranty not applicable when non – apparent burden or
servitude is recorded in the Registry of Property – unless there action to prescribe 6 months from delivery of subject matter
is express warranty that the thing is free from all burdens &
encumbrances 5. DEFECTS ON ANIMALS
4. WARRANTY AGAINST HIDDEN DEFECTS
even in the case of professional inspection but hidden defect is of
SELLER does not warrant patent defect; caveat emptor such nature that expert knowledge is not sufficient to discover it -
defect shall be considered as REDHIBITORY
Except when hidden
if vet fails to discover through ignorance or bad faith he is liable for
a. subject matter may be movable or immovable damages
b. nature of hidden defect is such that it should render the a. sale of animals on teams (2 or more)
subject matter unfit for the use of which it was intended or
should diminish its fitness when only one is defective, only one is redhibited & not the
others
c. had the buyer been aware, he would not have acquired it or
would have given a lower price exception: when it appears buyer would not have purchased
the team without the defective one
when defect is visible or even if not visible but buyer is an
expert by reason of his trade or profession, seller is not liable apply to sale of other things
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b. sale of animals at fair or public auction measure of damage: difference between value of goods at
time of delivery and value they would have had if they had
no warranty against hidden defects answered to the warranty
d. sale of unfit animals If seller is a dealer in goods of that kind, there is an implied
warranty that the goods shall be free from defect rendering
void if use / service for which they are acquired has been them unmerchantable which would not be apparent on
stated in the contract and they are found to be unfit therefor reasonable examination of the sample
buyer may elect between withdrawing from sale and but effect depends on good faith or bad faith on the part of the seller.
demanding proportionate reduction of price with damages in
either case 1. seller in bad faith & there is waiver against eviction – null & void
D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS 2. buyer without knowledge of a particular risk, made general
renunciation of warranty – not waiver but merely limits liability of
1. Warranty as to fitness & quality; seller in case of eviction (pay value of subject matter at time of
eviction)
requisites:
3. buyer with knowledge of risk of eviction assumed its
a. buyer makes known to seller the particular purpose for which consequences & made a waiver – vendor not liable (applicable
goods are acquired and it appears that the buyer relied on the only to waiver of warranty against eviction)
seller’s skill or judgment
when goods delivered to buyer, he cannot rescind sale if:
b. goods are bought by description from seller who deals in goods
of that description 1. he knew of the breach of warranty when he accepted goods
without protest
in case of sale of specified article under its patent or trade
name, no warranty unless there is a stipulation to the contrary 2. he fails to notify seller within reasonable time of election to
rescind
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S A L E S : MEMORY AID
CONVENTIONAL REDEMPTION
F. BUYER’S OPTION IN CASE OF BREACH OF WARRANTY seller reserved the right to repurchase thing sold
1. Accept goods & set up breach of warranty by way of recoupment in coupled with obligation to return price of the sale, expenses of contract
diminution or extinction of the price. & other legitimate payments and the necessary & useful expenses
made on the thing sold
2. Accept goods & maintain action against seller for damages
right is exercised only be seller in whom right is recognized in the
3. Refuse to accept goods & maintain action against seller for contract or by any person to whom right was transferred; must be in the
damages same contract
4. Rescind contract of sale & refuse to receive goods/return them OPTION TO PURCHASE
when already received.
right to repurchase the thing sold granted to the vendor in a separate
instrument from the deed of sale
CHAPTER 13: EXTINGUISHMENT
EQUITABLE MORTGAGE
GROUNDS:
a contract with right to repurchase is equitable mortgage if the
1. same grounds whereby obligations in general are extinguished: following requisites concur:
a. payment or performance
b. loss of the subject matter 1. price of sale with right to repurchase is unusually inadequate
c. condonation or remission
d. confusion or merger of rights of creditor and debtor 2. seller remains in possession as lessee or otherwise
e. compensation
f. novation 3. upon or after expiration of right to repurchase, another instrument
g. annulment extending the period of redemption or granting new period is
h. rescission executed
i. fulfillment of a resolutory condition
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S A L E S : MEMORY AID
4. buyer retains for himself a part of the purchase price 3. When period to redeem has expired & there has been a previous suit
5. seller binds himself to pay taxes on thing sold on the nature of the contract – seller still has 30 days from final
judgment on the basis that contract was a sale with pacto de retro:
6. real intention of parties is to secure the payment of a debt or rationale: no redemption due to erroneous belief that it is equitable
performance of other obligation mortgage which can be extinguished by paying the loan.
IN CASE OF DOUBT – IN DETERMINING WHETHER IT IS EQUITABLE 4. When period has expired & seller allowed the period of redemption to
MORTGAGE OR SALE A RETRO (WITH RIGHT OF REPURCHASE) – IT expire – seller is at fault for not having exercised his rights so should
SHALL BE CONSTRUED AS EQUITABLE MORTGAGE not be granted a new period
WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT EFFECT WHEN THERE IS NO REDEMPTION MADE:
1. language of the contract 1. jurisprudence before the NCC: buyer a retro automatically acquires full
ownership
2. conduct of parties – to reveal real intent
2. under present art 1607: there must be judicial order before ownership
REMEDY AVAILABLE TO VENDOR: ask for reformation of contract of real property is consolidated in the buyer a retro
1. Circumvention of usury law 1. Seller a retro must first pay the following:
2. Circumvention of prohibition against pactum commissorium – creditor a. the price of the thing sold
cannot appropriate the things given by way of pledge or mortgage;
remedy here is foreclosure b. expenses of the contract and other legitimate payments made by
reason of the sale
real intention of parties is that the pretended purchase price is money
loaned & to secure payment of the loan, sale with pacto de retro is c. necessary and useful expenses made on the thing sold
drawn up
2. Valid tender of payment is sufficient
PERIOD OF REDEMPTION
3. Mere sending of notice without valid tender is insufficient
1. No period agreed upon – 4 years from date of contract
4. Failure to pay useful & unnecessary expenses entitles vendee to retain
2. When there is agreement – should not exceed 10 years; if it exceeded, land unless actual reimbursement is made
valid only for the first 10 years.
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S A L E S : MEMORY AID
3. When rights of co-owners over an undivided thing is sold as regards to co-heirs has 1 month from receipt of notice in writing
their own share – vendee retro cannot compel one to redeem the whole
property 2. among co-owners
4. Should one of the co-heirs/co-owners succeed in redeeming the any or all of co-owners sells their shares to 3rd person
property – such vendor a retro shall be considered as trustee with
respect to the share of the other co-owners/co-heirs. any co-owner may exercise right of redemption by paying
reasonable price of property to the buyer
FRUITS
if 2 or more co-owners desire to exercise right of redemption, they
1. what controls is the stipulation between parties as regards the may only do so in proportion to the share they respectively have in
fruits; thing owned in common
2. if none:
a) at time of execution of the sale a retro there are visible or DISTINCTION BETWEEN RIGHT OF REDEMPTION OF CO-HEIRS FROM CO-
growing fruits – there shall be no pro-rating at time of OWNERS
redemption if no indemnity was paid by the vendee a retro
CO-HEIRS CO-OWNERS
b) at time of execution sale a retro there be no fruits but there
Heir may redeem for himself Co-owner may redeem property but even if
are fruits at time of redemption – pro-rated between vendor alone the hereditary right uses his own funds, redemption inures to
a retro & vendee a retro giving the vendee a retro a part sold by a co-heir the benefit of other co-owners
corresponding to the time he possessed the land.
Sale of hereditary right Sale of interest in particular property
LEGAL REDEMPTION
(1088) over no particular
object
right to be subrogated upon the same terms and conditions stipulated
in the contract, in the place of one who acquires the thing by purchase
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S A L E S : MEMORY AID
where piece of rural land has an area not exceeding 1 hectare, 2. deed of sale not to be recorded in Register of Deeds unless
adjoining owner has right to redeem unless grantee does not accompanied by affidavit of seller that he has given notice to all
own a rural land possible redemptioners
if 2 or more adjacent lot owners desire to exercise right to 3. GR: actual knowledge notwithstanding, written notice is still required.
redeem, owner of adjoining lot with smaller area shall be
preferred Exception: actual knowledge by co-heirs living in same land with
purchaser, or co-owner was middleman in sale to 3rd party, no need to give
if 2 or more adjacent lot owners desire to exercise right to written notice; period of redemption begins to run from actual knowledge
redeem & both have same lot area, one who first requested
shall be granted OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED
when piece of land is small & cannot be used for any practical Public Land Act
purpose & bought merely for speculation, owner of adjoining
land can redeem Land acquired under free patent homestead
2 or more owners of adjoining lot desire to exercise right to Subject to repurchase by wife, legal heirs within 5 years from date
redeem, owner whose intended use is best justified shall be of conveyance
preferred.
Granted by law, need not be stipulated
c. sale of credit in litigation
2. Redemption in tax sales
when a credit or other incorporeal right in litigation is sold,
debtor shall have a right to extinguish it by reimbursing the in case of tax delinquency/failure to pay tax assessments, property
assignee for the price the latter paid therefor plus judicial costs, is foreclosed
interest
delinquent payer has 1 year from date of sale to redeem by paying
debtor may exercise right within 30 days from the date assignee to the revenue District Officer the amount of tax delinquencies, &
demands payment from him interest or purchase price.
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S A L E S : MEMORY AID
Technical term but basically a sale includes all accessory rights such as guaranty, mortgage, pledge or
preference
WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE:
WARRANTIES
ASSIGNMENT SALE
Subject matter Intangibles Tangibles 1. against hidden defect - N/A because intangibles has no physical
existence
Form Consensual Consensual
Binding effect to Recorded in registry of No recording needed
2. existence & legality of credit - there is warranty except when
3rd persons property or in public instrument to such effect
expressly sold as a doubtful account
EFFECT OF ASSIGNMENT
3. solvency of debtor - no warranty, unless
1. lack of knowledge or consent of debtor not essential for validity but has
a. there is stipulation
legal effects
b. insolvency was prior to assignment & of common knowledge
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S A L E S : MEMORY AID
2. if in bad faith - expenses of contract & other legitimate payments plus 3. Sale of all or substantially all of fixtures & equipments
useful & necessary expenses
Should cover only merchants because creditors cannot get adequate
ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION security because goods are sold ordinarily in course of business
law would rather benefit the debtor of such credits rather than the one 1. with waiver of seller’s creditor
who merely speculates for profit
2. receiver, assignee in insolvency proceeding
when credit or incorporeal right in litigation is assigned or sold, debtor
has a right to extinguish it by reimbursing the assignee for the price the Duty of seller to perform the following when transaction is within
buyer paid plus interest the coverage of law
right to redeem to be exercised within 30 days from demand by 1. make sworn statement of listing of creditors
assignee for payment
2. delivery of sworn statement to buyer
RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING
INSTANCES 3. apply the proceeds pro-rata to claims of creditors shown in verified
(NOT CONSIDERED SPECULATIVE) statement
1. assignment of credit / incorporeal right to co-heir or co-worker 4. written advance disclosure to creditors
EFFECTS OF NON-COMPLIANCE
ANTI-DUMMY LAW
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