Law on Sales Atty. M.P.

Bravo

Definition
By the CONTRACT OF SALE one of the contracting parties (seller or vendor) obligates himself to transfer the ownership of, and to deliver a
determinate thing, and the other (buyer or vendee) to pay therefore a price certain in money or its equivalent.

Characteristics
1. Consensual – perfected by mere meeting of the minds even without delivery yet.
2. Onerous – for a valuable consideration which is the price.
3. Nominate – designated by a special name in the Civil Code
4. Principal – can stand along by itself.
5. Bilateral reciprocal – both parties are bound by obligations dependent upon each other.
6. Commutative – the values exchanged are almost equivalent to each other.

a. Essential Elements
1. Consent or meeting of the minds (to transfer ownership in exchange for payment of the price)
2. Subject matter (must be specific or determinate)
3. Cause or consideration (money or equivalent)

b. Natural Element, or those which are deemed to exist in the contract unless excluded.
1. Warranty against eviction.
2. Warranty against hidden defects.

c. Accidental Elements, or those present only if stipulated, such as time and place of payment.

Stages in a contract of sale

a. Preparation – when negotiation is in progress.
b. Perfection – meeting of minds, birth of the contract.
c. Consummation – when the object is delivered and the price is paid, this is the death of the contract.

Perfection of a contract of sale should not, however, be confused with its consummation. Sale by itself does not transfer or affect ownership;
the most that sale does is to create the obligation to transfer ownership. (Flancia vs. Court of Appeals, 457 SCRA 224)

Kinds of Sale
a. General Classifications.
1. Absolute Sale – no condition attached.
2. Conditional Sale – the sale is subject to a contingent event. Example, ale with a right to repurchase; sale of things having a
potential existence; sale of future harvest of designated parcel of land; or sale of a residential house, except the “furniture’s
inside”.

b. Other classifications.
1. As to the nature of the subject matter.
a. Sale of real or immovable property.
b. Sale of personal or movable property.
2. Whether the subject is tangible or intangible.

c. Sale of right (assignment of right or a credit, or a sale of copyright, trademark or goodwill). If the object is tangible, it is called chose
in possession; if the object is intangible, it is referred to as chose in action.

3. Validity or defect of the transaction:

a. Valid sale d. Unenforceable or validable sale.
b. Rescissible sale e. Void sale
c. Voidable sale

4. Legality of the object:

a. Sale of a licit object b. Sale of an illicit object

5. As to whether wholesale or retail:

a. Wholesale – when the goods are resold by the buyer for a profit, the goods being unaltered when resold, and usually in large
quantity.
b. Retail – when the goods are sold directly to the general public and usually in small quantity.

6. As to the payment of the price:

a. Cash Sales b. Installment sales c. Straight terms

7. Proximate inducement for the sale:

a. Sale by sample b. Sale by description c. Sale by sample and description

Sale distinguished from other contracts.

Sale (S) vs. Agency to Sell (A)
1. S – title to the goods is transferred t the buyer upon delivery of the thing.
A – title to the goods does not pass to the buyer

2. S – the buyer is required to pay the price

A – if agent is able to sell he delivers the price to the principal

3. S – buyer generally cannot return the object.

A – if unable to sell, the seller’s agent, can still return the object to the seller
Sale (S) vs. Contract for a place of Work (P)
1. S – object is either already available, or if not, it is ordered in the ordinary course of business
P – object is manufactured especially for the person ordering and not fro the general market.

2. S – risk of loss between the time of perfection of contract and the delivery is borne by the
seller.
P – risk of loss between the time of perfection of the contract and the delivery is borne by
worker.

Sale (S) vs. Contract to Sell (C)

1. S – failure to pay puts an end to the transaction (resolutory)
C – failure to pay is a suspensive condition

2. S – title to the goods is transferred to the buyer upon delivery

C – ownership is retained by seller until some future time when conditions are complied with.

3. S –risk of loss is on the buyer

C – risk of loss is on the seller

From barter –
In sale, the consideration is in money; while in barter, the consideration is another thing, or the exchange of two things.

From dacion en pago –

1. In sale, there is no pre-existing credit; while in dation, there is pre-existing credit.
2. In sale, obligation is created; while in dacion en pago, the obligation is extinguished.
3. In sale, the consideration or the cause of the contract id the price; while in dation, the cause is he extinguishment of the debtor’s
obligation.

From lease –
In sale, the seller transfers ownership to the buyer; while in lease, what is merely transferred is only the use and possession of the thing
leased to the lessee.

Requisites for the subject matter

1. Determinate
2. Licit (lawful) – within the commerce of man (otherwise the sale is void)
3. Seller has a right to transfer ownership thereof at the time of delivery for “nobody can give what he does not have” (nemo dat quod
non habet).

ART. 1459. The thing must be illicit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.

ART. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made
determinate without the necessity of a new or further agreement between the parties.

Future or potential things

Examples: vinegars that a coconut tree will produce; wool that may thereafter grow upon a sheep.

1. They may be the object of a sale, provided that at the time of perfection, they are already in a sense “determinate”. A thing is
determinate when it is particularly designated or physically segregated from all others of the same class.
2. Sale of the expected thing or thing having potential existence (emptio rei sperati) is subject to condition that the thing will come
into existence. If they do not materialize, the sale is not effective.
3. Sale of mere hope or expectancy (emptio spei) is valid. It does not matter whether the expected thing materialized or not. E.g sale of
lotto ticket.
4. Sale of vain hope or expectancy is void. E.g. sale of raffle ticket which had already been raffled.

Emptio sperati (R) vs. Emptio Spei (S)

1. R – sale of a thing having potential existence
S – sale of a mere hope or expectancy

2. R – uncertainty is on the quantity and quality but not on the existence of the thing.
S – uncertainty is with regard to the existence of the thing.

3. R – contract deals with a future thing

S – contract deals with a present thing – the hope or expectancy

4. R – sale is subject to condition that the thing should exist and if it does not, there is no contract
due to lack of an essential requisite.
S – sale produces effects even though the thing itself does not come into existence, since the
subject matter is the hope itself.

Sale of fungible goods

There may be a sale of an undivided share of a specific mass of fungible goods, though the seller purports to sell and the buyer to
buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is
undetermined.

Rules:
1. If the mass contains less than the quantity – the buyer becomes the owner of the whole mass and the seller is bound to make good
the deficiency unless the contrary appears.
2. If the mass contains more than the quantity – the buyer becomes owner in common of such share to the extent of his purchase.

Rules on sale and barter

Rules to be applied in a contract where consideration is partly money and partly goods:
Rule 1 – Intention of the parties must be determined.
Rule 2 – If intent does not clear appear:
a. If the thing is more valuable than the money – Barter
b. If 50 – 50 – Sale
c. If the thing is less valuable than the money – Sale

ART. 1462. The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to
be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called “future goods”.
There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.

1. Kinds of goods which may be the object of sale.

a. Present goods – goods owned or possessed by the seller at the time of the perfection of sale.
b. Future goods – goods to be manufactured, raised or acquired by the seller after the perfection of the sale, or whose
acquisition depends upon a contingency which may or may not happen.

ART. 1463. The sole owner of a thing may sell an undivided interest therein.

Sale of an undivided interest.

Examples:
1. S owns a specific house. He sold one-third (1/3) of the house to B. S and B become co-owners of the property, S for 2/3, while B 1/3.
2. S owns a parcel of land measuring 900 square meters. S may sell 1/3 to B, and retain 2/3 of the property. After they become co-
owners of the property. Later, the parties may also agree to divide the property in which case S becomes the absolute owner of 2/3
and B 1/3.

ART. 1464. In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and
the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in
the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure
bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer
becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a
contrary intent appears.

1. Sale of share in a specific mass.

Example: S is the owner of C4 rice stored in his bodega, the exact number of cavans still unknown. B buys 100 cavans. If the content of
the bodega is 150 cavans, B becomes a co-owner of 2/3 of the entire mass. If, however, the mass contains only 90 cavans, S must apply
the deficit of 10 cavans of the same kind and quality.

2. Exchange of foreign currency.

If I were to change Australian dollars for Philippine pesos at the PNB at the prevailing rate of exchange, the transaction is to be
considered a contract of sale, and not a barter.

Price defined
The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price of
the sale.

Requisites of the price

a. It must be certain
b. It must be real, not fictitious
c. As a rule, not inferior to the value of the thing.

Instances when the price is certain

a. When it is stipulated.
b. When it is with reference to another thing which is certain. d. When it is fixed by the court.
c. When it is fixed by a third person.

Certainty of the price

The price must be certain otherwise there is no consent between the parties. The price is still considered certain in the following
cases:

1. If it be certain with reference to another thing certain.

Ex. The full tuition fee of a complete review at ARTS CPA Review from May to October 2008.

2. If the determination of the price is left to the judgment of a specified person or persons.
Ex. The assessed value of a 100 square meter long Abella St., Naga City the amount of which
is to be determined by the City Assessor’s Office of Naga City.

3. If it is the price which the object would have on a definite day.

Ex. The price of ABC Corporation shares in the Philippine Stock Exchange at 3:00 in the
afternoon of October 1, 2008.

Case 2
Salambao sold a second hand photocopying machine to Bartolina. It was agreed that Bartolina would fix the price five days after. Is the sale
perfected?

No because the fixing of the price cannot be left to the discretion of one of the contracting parties.
However, if a price is fixed and accepted by the other the sale is perfected as of the date Salambao agreed to the price.

Determination of the price is left to the judgment of a 3rd person

1. If the 3rd person is unable or unwilling to fix the price – the contract shall be inefficacious unless the parties subsequently agree
upon the price.
 2. If the 3rd person acted in bad faith or by mistake – the court may fix the price.
3. If the 3rd person is prevented from fixing the price or terms by the fault of the seller or buyer – the party not in fault may have such
remedies against the party in fault as are allowed the seller or the buyer, as the case maybe.

Effect of gross inadequacy of the price

1. The sale is valid even if the price is very low.
2. However, it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.
3. If the price in a judicial sale is so inadequate as to shock the conscience of the court, it will be set aside.
4. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.

Sales contracts which must be in writing

1. Sales of real property- regardless of the value or price involved otherwise the sale is unenforceable.
2. Sales of personal property- if the price is P500 and above, it must be in writing to be inforceable.
3. To be performed only after more than one year- regardless of the amount involved and as to whether the property is real or
personal (otherwise it is unenforceable).

Effect of price fixed by third persons.

As a rule, the price fixed by a third person designated by the parties is binding between them, except:
a. When the third person is guilty of fraud.
b. When the third person committed mistake or error.
c. When the third person disregarded specific circumstances given him by the contracting parties.

Effect of bad faith or mistake by the third person.

If the third person or persons acted in bad faith or by mistake, the court may fix the price on the petition made by either the seller or buyer.

Binding effect if price is fixed by various third persons.

If there are several persons designated to fix the price, the decision of these persons must be unanimous, in the absence of an intention to be
bound by mere majority.

Price not paid in full.

There is a valid sale though the purchase price is not paid in full. The unpaid seller’s remedy is an action to collect the balance or rescind the
contract, within the time allowed by law. (Soliva vs. Villalba, G. R. No, 154017, December 8, 2003)

ART. 1470. Gross inadequacy of price does not affect a contract of sale except as it may indicate a defect in the consent, or that the parties
really intended a donation or some other act or contract.

1. Adequacy of the price.

Adequacy of the price is not necessary for the validity of the contract of sale. It is enough that there is a price and such price is
certain.

When no specific amount is stipulated.

When no specific amount is stipulated, the price is still considered certain:
a. If it be certain with reference to another thing certain.
Example: S offered for sale to B a specific ring, the price of which is the amount of the
tuition fee being charged by CPAR to the reviewees on cash basis.

b. If the determination of the price is left to the judgment of a specific person or persons.
Example: S offered for sale a specific pair of Converse shoes to B for P1,500. B countered the offer by offering X P1,000. Since the
parties cannot agree, both decided that “F” will fix the price for them. F agreed and told the parties to meet in between the offer and
counter offer. In this case, the price is certain because it is fixed by a third person agreed by the parties.

Inadequacy of price when there is right of redemption.

While in ordinary sales, when there is price is so inadequate and such inadequacy shock one’s conscience as to justify the court to interfere,
such does not follow when the law gives the owner the right to redeem, as when a sale is made a public auction upon the theory that the
lesser the price, the easier for the owner to effect the redemption. (A. Tolentino, C. C. Volume V)

ART. 1471. If the price is simulated, the sale is void ,but the act may be shown to have been in reality a donation, or some other act,or
contract.

Simulated price.
If the price in a contract of sale is simulated, the contract is valid as a donations or some other agreement, provided the requirements of
donations or other agreements are complied with. Hence, if these requirements do not exists, the contract is absolutely void, not merely
voidable.

Nature of the Contract and its perfection.

Sale is a consensual contract, perfected only by mere consent. The delivery of the thing and payment of the price is not essential for its
perfection. What is required is only the meeting of minds of both parties with respect to the object and cause which will constitute the
contract.

Time of perfection
1. Parties are face to face. – Contract is perfected the moment an offer is accepted without
conditions and qualifications.
Conditional acceptance is regarded as counter- offer. If negotiated thru phone, it is as if the
parties are face to face.
2. Contract is through correspondence or telegram. - There is perfection when the offeror receives
or has knowledge of the acceptance by offeree.
3. Contract is made subject to suspensive condition. – Perfected from the moment the condition is
fulfilled.

Rules on action sales

1. Sales of separate lots by auction are separate sale.
 2. Sale is perfected by the fall of the hammer, or other customary manner. Before such announcement, the bidder may retract his bid and
the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.
3. Seller has a right to bid in the auction, provided:
a. such right was reserved and
b. notice was given that the sale is subject to a right to bid on behalf of the sell
4. Seller may employ others to bid from him, provided that the public has been notified that the auction is subject to the right to bid on
behalf of the seller.
5. Any sale whereby the seller employs “by bidders” or “puffers” – without notice may be treated as fraudulent by the buyer. Thus, the
buyer may annual the sale on the ground of vitiated consent.
“By bidders” or “puffers” are persons employed by the seller to bid in his behalf, for the purpose of raising the price, but said persons
are not in themselves bound by their bids.

Unilateral promise to buy or to sell

1. If not accepted by the offeree-does not produce any legal effect (known as policitacion).
2. If accepted by offeree- can still be withdrawn if not supported by any consideration. It is a mere offer to sale because it is not
binding until accepted.

Option to buy or to sell

It is an accepted unilateral promise to buy or to sell a determinate thing for a price certain.
1. Since the offer is supported by a consideration distinct from the price (option money), the acceptance of the promise will create a
binding force upon the promissory.
2. The privilege of demanding its performance exists only on the part of the oferee.
3. The promise cannot be compelled to buy or sell the thing.

Earnest money
Earnest money (arras) is money given to seller to show that the buyer is interested to buy. It is –
a. Part of the purchase price, and b. Proof of the perfection of the contract

Earnest money (E) vs. Option Money (o)

1. E- given only when contract is perfected
O-given to bind the offer in a unilateral promise to buy or to sell

2. E- part of purchase price

O- separate and distinct from purchase price

3. E- if sale is consummated, deductible on the purchase price

O- not deductible on the purchase price

Rights of unpaid seller are sale of personal property by installment (Recto Law)
1. Exact fulfillment of obligation should the vendee fails to pay (even if one installment only); or
2. Cancel the sale, should the vendee’s failure to pay cover two or more installments; or
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should vendee’s failure to pay cover two or more
installments. In 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.

Requisites to be effective against 3rd persons

1. Real Property – it must be registered in the Registry of Deeds of the place where the property is located. In a sale of land thru an
agent, the authority must be in writing. Otherwise, the sale is void.
2. Personal Property – must be in the possession (in good faith) of the buyer. In sale of large cattle, the sale must be in a public
instrument and there must be transfer of the certificate of registration.

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the
following remedies:
1. Exact fulfillment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendee’s failure to pay cover two or more installments;
3. Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more
installments. In 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.(1454- A –a)

Purpose of the law.

Undoubtedly, the principal object of Art. 1484 is to remedy the abuses committed in connection with the foreclosure of the chattel mortgages.
The law prevents mortgagee from seizing the mortgaged property, buying it as foreclosure sale for a low price and then bringing suit against
the mortgagor for a deficiency judgment. The almost invariable result of this procedure is that the mortgagor finds himself minus the
property and still owing practically the fully amount of the original indebtedness. (Bachrach Motor Co. Vs. Millan, 61 Phil. 409)

Requisites of this Article.

In order that the provisions of this article will apply, it must appear that there is a contract of sale of:
a. Personal Property
b. The price of the sale is payable in installment.
c. That there has been a failure to pay two or more installment.

The following therefore, are excluded from its coverage:

a. Sale of personal property on straight term or sale partly in cash and partly in term.
b. Sale of real property.

3. Remedies available to the vendor or seller

a. Specific performance.
b. Cancellation of the sale.
c. Foreclosure of the chattel mortgage.
These three remedies available to the vendor or seller who has sold property by installment plan, are alternative, not cumulative. The
exercise of one will exclude the other. This limitation applies also to contracts purposting to be leases of personal property with option to buy
as provided in Article 1585 of the Civil Code.

When fulfillment of the obligation is the remedy of the seller

Failure to pay one installment shall give the vendor the right of exacting fulfillment of the vendee's obligation. This means that upon failure of
the buyer to pay the first installment the seller can demand payment from him and upon failure to pay, the seller can file an action in court
for collection.

When cancellation is the remedy

To be able to cancel the sale, the buyer's failure to pay covers two or more installments. Be it noted that if the seller cancels the sale, his
obligation is to return to the buyer all installment paid unless there is a stipulation to the contrary. Should there be an agreement to return
the installment paid, such should not be unconscionable.

When foreclosure is the remedy

If a chattel mortgage is constituted on the thing sold, the mortgage can be foreclosed if the buyer fails to pay two or more installments. But if
the mortgage is foreclosed, the seller can no longer recover any unpaid balance of the price, and any agreement to the contrary is void and no
effect. The third paragraph of this Article is known to be the "Recto Law".

Illustrative Case:
S sold to B a specific car for P500,000 payable in four (4) equal installments.
1. If B defaulted in the payment of one of the installments, can S exact fulfillment of the obligation?
No. The law requires default in two or more installments. In here, S is not cancelling the sale, he is only demanding payment.

2. Supposing B failed to pay the 1st and 2nd installments:

a. Can S exact fulfillment of the obligation?
Yes, because of B's failure to pay any of the installments.

b. Can S rescind or cancel the contract of sale?

Yes, because of B's failure to pay two installments.

3. Supposing B, as a security, executed a chattel mortgage on the car, but failed to pay two (2) installments:
a. Can S foreclose the chattel mortgage?
Yes, because of B's failure to pay two (2) installments.

b. In the foreclosure sale, the sum obtained is less than what B owed 3, can S still collect the deficiency? No, even if there is
stipulation, because the stipulation is void, this is the provision of the "Recto Law'.

c. When can S recover the deficiency?

If he did not foreclose, but instead filed an action as an ordinary creditor, the balance
may be recovered.

4. B bought from X Co. a truck, payable in monthly installments. As 'security for the payment of the balance of the purchase price, he
constituted a chattel mortgage on the truck in favor of the company. Because of his failure to pay three consecutive monthly
installments, the company filed a complaint against him to recover the unpaid balance. A writ of attachment was subsequently
issued against his properties. Thereafter, the truck was sold at public auction in which the company was the only bidder for
P50,000. Since there was still a deficiency of more than P60,000, the court condemned B to pay to the company the deficiency plus
the interest. Is this in accordance with law?
Yes, because X Company did not foreclose the mortgaged property; therefore, the deficiency is recoverable. The answer
would be different if he foreclosed the chattel mortgage. In here the company filed en action as an ordinary creditor.

5. Example of sale on straight term.

S sold to B a specific car for P300,000. Upon delivery, B paid S P100,000 and the balance of P200,000 is to be paid one month
after. To secure its payment, B mortgaged the car to S. One month after, B failed to pay. S foreclosed the chattel mortgage on the car and
was sold for the net amount of P180,000, after deducting the expense of the sale. Is S entitled for recover payment of the deficiency
P20,000 from B?

Answer:
Yes, the third paragraph of Article 1484, known as Recto Law, will not apply because this is a sale of personal property on straight term; that
is, one which the balance of the purchase price, after payment of the initial sum is to be paid in its totality at the time stipulated. The law to
apply in this case is the Chattel. Mortgage Law, and the taw states that if the property mortgage is foreclosed and there is deficiency, the
mortgagee may maintain an action against the buyer for the recovery of the deficiency.

ART. 1487. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the
contrary. (1455a)

Payment of expenses.
Unless otherwise agreed, the seller pays for the expense of:
a. Execution of the contract of sale. b. Registration .of the sale.

ART. 1488. The expropriation of property for public use is governed by special laws, (1456)

Requisites for expropriation of property:

a. Private property is taken by competent authority. c. Just compensation is to be paid.
b. Due process of law should be observed. d. The property is taken for public use.

CAPACITY TO BUY OR SELL

ART. 1489. All persons who are authorized in this Code to obligate themselves may enter into a contract of sale, saving the modifications
contained in the following articles.

Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore.
Necessaries ire those referred to in Article 290. (1457a)

1. Capacity to enter into a contract of sale.

As a rule, only persons who may oblige themselves may enter into a contract of sale. Hence, incapacitated persons (like minors,
demented persons, imbeciles, prodigals, deaf and dumb, insane, and those subject to Civil interdiction) cannot enter into a contract because
their personality is restricted. However, when necessaries are sold and delivered to a minor or incapacitated person, the latter is obliged to
pay reasonable price.

Necessaries is everything indispensable for sustenance, dwelling, clothing, medical attendance, and educational expenses

2. Kinds of incapacity to buy.

a. Absolute- when party cannot bind himself in any case.
Example: minors, demented persons, imbeciles.
b. Relative - when certain persons, under certain circumstances cannot buy certain property.
Example: Husband and wife, guardian with respect to the property of the person or
persons under his guardianship.

Special rum for husbands and wives

General Rule: They cannot sell property to each other (otherwise the sale is void).
Exceptions:
1. A separation of property was agreed upon in the marriage settlement, or
2. There has been a judicial separation of property.

Special rules for persons in a fiduciary relation

The following are not allowed to purchase properties (whether the sale is private, public or judicial auction, directly or indirectly, directly or
through another):
1. Guardian - on property of person under his guardianship.
2. Executor or administrator - on estate of the deceased person.
3. Agent - on property entrusted to him for administration or sale, unless there is consent.
4. Public officers and employees - on government property under their charge.
5. Judges and experts - who take part in the judicial sale.
6. Lawyers and judicial officials on properties being litigated to which they are participants.
7. Others specially .disqualified by law.
Any contract executed in violation of the above prohibition is voidable.

Loss of specific goods without seller's knowledge

1. Total loss - the contract is inexistent or without effect.
2. Partial loss - the buyer may choose between the following:
a. withdrawing from the contract (rescission) or
b. specific performance on the remainder and pay its proportional price

Principal obligations of the seller (DTW PP)

1. To deliver a determinate thing (even 'future or 'potential-things)
2. To transfer its ownership (seller need not be the owner upon perfection; but he should be the owner upon delivery).
3. The following implied warranties (unless a contrary intention appears):
a. To warrant against eviction (the seller has a right to sell and transfer ownership to the buyer who shall not be
disturbed in his legal and peaceful possession thereof)
b. To warrant against hidden defects (free from any hidden faults or defects or any charge or
encumbrance not declared or known to the buyer)

4. Pay for the expenses incurred unless there is stipulation to the contrary.
5. Preserve the thing from the moment of perfection up to the time of delivery.

Kinds of delivery
1. Actual or real
2. Legal or constructive
a. Execution of public instrument
b. Traditio symbolic-a (symbolical tradition) - e.g. delivery of key where the thing sold is stored.
c. Traditio longa manu (mere consent or agreement) - the vendor merely points to the thing sold.
d. Traditio brevi manu (buyer had already possession of the object even before the purchase) - e.g. sale of a
thing leased to the lessee
e. Traditio constitutum possessorium (opposite of traditio brevi manu) - vendor continuous possession of
the property sold.
3. Quasi-delivery (quasi-traditio) - delivery of rights, credits, or incorporeal property made by:
a. Placing titles of ownership in the hands of the buyer; or
b. Allowing the buyer to make use of the rights.

Special sales
1. “On sale or return" sale subject to a resolutory condition. The buyer becomes the owner upon delivery but he
can return ownership by returning the goods.
2. "On approval- or "on trial" or "on satisfaction- sale with a suspensive condition. The buyer becomes the
owner only if he signifies his approval or acceptance to the sale.

Who bears the risk of loss?

 1. The seller - if the object has been lost before perfection of the contract.
2. The buyer - if the object was lost after delivery to the buyer (res perit domino - the owner bears the loss).
3. The seller - if the object is lost after perfection but before delivery. Exceptions:
a. When there is stipulation between the parties;
b. Ownership of the goods is retained by the seller merely to secure the performance by the buyer of his
obligation under the contract;
c. When actual delivery has been delayed through the fault of the buyer.
4. Neither the buyer nor the seller - if the object is lost at the time of perfection (contract is void),

Case 7
Salpit sold his motorcycle to Baraero for P40,000. It was stipulated that the motorcycle will be delivered to Baraero on
June 30 of the current year. Before the end of June, it was completely destroyed without the fault of Salpit. Can Baraero,
now recover the P40,000 which he had paid to Salpit?

Yes. Salpit being still the owner of the thing must bear the risk of loss. This is in accordance with the principle of “res
perit domino”

Sale by a person not the owner

Rule: The buyer acquires no better title to the goods than the seller had.
Exceptions:
1. Where the owner is precluded from denying the seller's authority to sell;
2. Where the sale was made in accordance with recording of registration laws;
3. Where the sale was done under statutory or under the order or a court of competent jurisdiction;
4. Where the purchase was made at a merchant’s store, or in fairs or markets

Time and place of delivery

Seller must deliver within a reasonable time:
1. On the place agreed upon
2. If there is no agreement - the usage of trade
3. If there, is no Prevalent usage - buyer must get them at seller's place of business or residence except if specific goods are sold and
the parties know where they are, that place is the place of delivery.

Quantity/Quality delivered does not conform with that agreed upon

1. Quantity of goods is less than that agreed upon
a. Buyer may reject all
b. Buyer may accept the goods delivered at the contract rate.

Case 9
Bantogan bought 100 cavans of commercial rice from Sala at P1,200 per cavan. Sala delivered only 95 cavans. What are the rights of
Bantogan?
The rights of Bantoaan are as follows:
a. He may reject all the 95 cavans.
b. He may accept the 95 cavans and pay P114,000 (P1,200 x 95).
2. Quantity of goods is more than that agreed upon
a. He may accept the goods agreed upon and reject the rest.
b. If he accepts the whole of the goods so delivered, he must pay for them at the contract rate.

Case 10
Baesa bought 100 cavans of commercial rice from Soriano at P1,200 per cavan. Soriano delivered 110 cavans. What are the rights of Baesa?
The rights of Baesa are as follows:
a. He may accept the 100 cavans and reject the other 10.
b. He may accept all the 110 cavans and pay Soriano P132,000 (1,200 x 110).
3. Quality is different (the goods contracted have been mixed with goods of a different description not included in the contract):
a. Accept the goods which are in accordance with the contract.
b. Reject the rest. If the sale is indivisible, the buyer may reject all.

Saldaria sold to Bolivar 100 cavans of commercial rice at P1,200 per cavan. However, Saldana delivered 80 cavans of commercial rice and 20
cavans of NFA rice. What are the rights of Bolivar?
Bolivar has the following rights:
1. Accept the 80 cavans of commercial rice and pay Saldana P96,000; and
2. Reject The 20 cavans, and if the sale is indivisible, he may reject the entire 100 cavans

Unpaid seller
A seller of goods is deemed to be an unpaid seller when:
1. Only a part of the price pas been tendered or paid;
2. When a negotiable instrument has been received as a conditional payment, and the condition in which it was received is broken by
dishonor of the instrument,

Septimo sold to Bonto a specific parcel of land measuring 250 square meters at P1,000 per square meter. Upon delivery, it was found out that
the lot measures only 200 meters:
What are the rights of Bonto?
The rights of Banta are the following
1. Pay P200,000 only for the 200 square meters without demanding for the deficiency, or
2. Pay P200,000 representing the 200 square meters and demand for the delivery of the deficiency of 50 square meters;
3. If delivery of the deficiency is not possible, Bonto may rescind the contract because the lack in the area is more than 1/10 of the
total area.

Suppose the area of the land is 230 square meters. What are the rights of Bonto? Can he ask for rescission of the contract?
1. His fight is, to pay P230,000 only based on the 230 square meters delivered to him.
 2. He cannot ask tor rescission because the lack in the area is less than 1/10 of the area stated. However, if he had previously
manifested that he needs exactly 250 meters and he would not buy the (and if the area is less than that specified, he can exercise the
right of rescission.

Q3: Suppose the total area of the land is 280 square meters. What are the rights of Bonto?
1. Accept the 250 square meters and pay Septimo P250, 003, or
2. Accept the entire 280 square meters and pay Septimo P280,000.

Delivery of thing of inferior quality

a. Rescind the sate if the inferior value of the thing exceeds 1/1 of the price agreed upon.
b. Proportionate reduction of the price if the inferior value or any part of the thing does not exceed 1/10 of the value agreed.

Sale Of real estate for a lump sum price (LSP)

There shall be no increase or decrease of the price, although there be a greater area or less area or number than that stated in the contract. If
the vendor cannot deliver what is stated within the boundary, the buyer may:
1. Rescind the contract for the seller's failure to deliver what has been stipulated, or
2. Pay a reduced proportional price.

Case 14
Salcedo sold to Brondial a parcel of land measuring 10,000 square meters, with stated boundaries, for a lump sum price of P200,000.

Q1. Suppose it turns out that the land measures 10,100 square meters. Is Salcedo bound to deliver the excess of 100 square meters?
Yes, because the sale was made for a lump sum price, with stated boundaries. Brondial is not required to make an additional
payment provided that the excess is within the stated boundaries.

Remedies of seller in case of non-payment of the price

1. Sue for specific performance plus damages or interest
2. Sue for cancellation of contract plus damages;
3. Have a possessory lien (right to retain the object until the seller is Paid)
4. Exercise right of stoppage in transitu (when the property Is already on its way)
5. Have the property resold (if it is still with the seller)
6. If buyer is insolvent and property is already with the buyer:
a. demand return of the property,
b. have, buyer's other properties attached
c. have contracts entered into by the buyer in fraud of the seller's right rescinded or cancelled
d. be subrogated or substituted in place of buyer in the exercise of buyer's rights (accion subrogatoria) if they’re not purely
personal and intransmissible.

Right of stoppage in transit

The right of the unpaid seller to resume possession of the goods at any time while they are in transit by virtue of which he will then be
entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession.

1. Goods are in transitu;

a. After delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them; and
b. If ,the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them

2. Goods are no longer it transitu:

a. After delivery to the buyer or his agent in that behalf;
b. If the carrier or his agent obtains possession of the goods at a point before the destination originally fixed;
c. If the carrier or bailee acknowledges to hold the goods on behalf of the buyer;
d. If the carrier or bailee wrongfully refuses to deliver the goods to the buyer.

Obligations to deliver accessions and accessories

The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of
the contract.
All the fruits shall pertain to the vendee from the day on which the contract was perfected unless otherwise stipulated.

Case 12
Sanchez sold a hybrid hen to Bagalacsa to be delivered after 30 days. Before the delivery, the hen laid ten eggs. Who is entitled to the eggs?
Bagalacsa because the vendee shall be entitled to the fruits of the object from the day on which the contract is perfected, unless otherwise
stipulated.

Sale of real estate at the rate of a certain price per unit

1. For a unit of measure (PUM) - The vendor is bound to deliver the area stated in the contract of sale
a. If the vendor fails to deliver the whole area - vendee may rescind the sale if the lack in area in 1/10 or more of that stated.
b. If the deficiency in area is less than 1/10 - vendee may ask for a proportionate reduction in the price he cannot rescind
unless it is apparent that the vendee would not have bought the land had he known of its smaller area.
c. If the area delivered is greater than the area agreed upon - the buyer may accept the area stipulated and reject the rest, or
accept the whole area and pay for them at the contract rate.

Q2: If Salcedo cannot deliver the excess of 100 square meters, what are the rights of Brondial?
1. To rescind the contract or
2. To ask for proportionate reduction in the price equivalent to 1/100 or P2,000.

Q3: Suppose it turns out that the area of the land is 9,800 meters, how much should Brondial pay to Salcedo?
P200,000 and cannot ask for a reduction in the price because the sale is for a lump sum price.

Rules on double sale

Who is the owner of the property if:
 1. Personal property - ownership shall be transferred to the person who may have first taken possession thereof in good faith.
2. Real property
a. The buyer who first registers in good faith the sale in the Registry of Deeds.
b. Absence of registration - the first possessor in good faith
c. Absence of possession - the buyer with the oldest title in good faith

Case 15
Sacuesa sold his land to Bauan but the deed of sale was not registered. Thereafter, he sold the same land to Batotoy who registered the
document and obtained title over it. Who has a better right over the land if Batotoy is in good faith? In bad faith?

Batotoy has a better right because the property is an immovable and he is the first registrant in good faith.

if Batotoy is in bad faith, Bauan has a better right because good faith must concur with registration. Bad faith renders the registration nothing
but an exercise in futility.

Warranty against eviction

Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing purchased.

Rules on warranty against eviction:

1. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.
2. The vendor is liable for breach of warranty against eviction if the property is sold for nonpayment of taxes due and not made
known to the vendee before the sale.
3. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment.
4. Any stipulation exempting the vendor from the obligation to answer for eviction shall be Void, if he acted in bad faith.
5. If at the time of waiver the vendor is in good faith, that is, without knowledge giving rise to eviction; the vendor is not liable.

Kinds of waiver in case of eviction

1. Waiver consciente - waiver without knowledge of the risk of eviction. The vendor shall only pay the value which the thing sold at
the time of eviction.
2. Waiver intentionada -- waiver with knowledge of the risks of eviction coupled with en assumption of its consequences. The vendor
is not liable.

Requisites to recover due to hidden defects

The defect must::
1. be hidden (not known and could not have been know
2. exist at the time the sale was made;
3. ordinarily have been excluded from the contract;
4. render the thing unfit or considerably decreases fitness;
5. the action must be instituted within the statute of limitations.

1. Where the buyer, expressly or by implication, makes, known to the seller the particular purpose for which the s
good are acquired, and it appears that the buyer relied on the seller’s skill or judgment (whether he be the
grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such
purpose;
2. Where the goods are bought 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
3. In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as
to its fitness for any particular purpose, unless there is stipulation to the contrary.
4. In a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that
the goods shall be free from any defect rendering them unmerchantable which would not be apparent on
reasonable examination of the sample.
5. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was
not aware thereof. This 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,

Alternative remedies available to buyer in case of hidden defects on the thing

1. Accion redhibitoria - rescission with damages
2. Accion quanti minoris - reduction of the price with demages

Obligation of vendor in case of loss of the thing with hidden defects

1. Cause of the loss is the defect
With knowledge of the vendor
a. Return the price.
b. Refund the expenses of the contract.
c. Pay darned.
Without knowledge of the vendor
1. Return the price.
2. Refund the expenses of the contract
3. Pay the interest thereon.

2. Cause of the loss is a fortuitous event or fault of the vendee –

With knowledge of the vendor
1. Return the price paid less the value of the thing at the time of loss
2. Pay damages

Without knowledge of the vendor

1. Return the price paid less the value of the thing at the time of loss

Redhibitory defects
I t i s a d e fe c t o f s u c h n a t u re t h a t e x p e r t k n o w l e d g e , e ve n a f t e r a p ro fe s s i o n a l i n s p e c t i o n h a s b e e n m a d e , i s n o t
s u f f i c i e n t t o d i s c o ve r i t .

Rules on redhibitory defect

1 . I f t w o o r m o re a n i m a l s a re s o l d t o g e t h e r, w h e t h e r fo r a l u m p s u m o r fo r a s e p a ra t e p r i c e fo r e a c h o f
t h e m , t h e r e d h i b i t o r y d e fe c t o f o n e s h a l l g i ve r i s e t o i t s re d h i b i t i o n , a n d n o t t h a t o f t h e o t h e r s ; u n l e s s
i t s h o u l d a p p e a r t h a t t h e ve n d e e w o u l d n o t h ave p u rc h a s e d t h e s o u n d a n i m a l o r a n i m a l s w i t h o u t t h e
d e fe c t i ve o n e .
T h e l a t t e r c a s e s h a l l b e p re s u m e d w h e n a t e a m , yo ke , p a i r, o r s e t i s b o u g h t , e ve n i f a s e p a ra t e
h a s b e e n f i x e d fo r e a c h o f o n e o f t h e a n i m a l s c o m p o s i n g t h e s a m e .
2 . T h e re i s n o w a r ra n t y a g a i n s t h i d d e n d e fe c t s o f a n i m a l s s o l d a t fa i r s o r a t p u b l i c a u c t i o n s , o r o f l ive
stock sold as condemned.
3 . T h e s a l e o f a n i m a l s s u f fe r i n g f ro m c o n t a g i o u s d i s e a s e s s h a l l b e vo i d .
4 . A c o n t ra c t o f s a l e o f a n i m a l s s h a l l a l s o b e vo i d i f t h e u s e o r s e r v i c e fo r w h i c h t h e y a re a c q u i re d h a s
b e e n s t a t e d i n t h e c o n t ra c t , a n d t h e y a re b o u n d t o b e u n f i t t h e re fo re :
5 . I f t h e ve t e r i n a r i a n t h o u g h i g n o ra n c e o r b a d f a i t h s h o u l d f a i l t o d i s c o ve r o r d i s c l o s e t h e r e d h i b i t o r y
d e fe c t , h e s h a l l b e l i a b l e fo r d a m a g e s .
6 . T h e re h i d b i t o r y a c t i o n , b a s e d o n t h e fa u l t s , d e fe c t s o r a n i m a l s , m u s t b e b ro u g h t w i t h i n fo r t y d ay s f ro m
t h e d a t e o f t h e i r d e l i ve r y t o t h e ve n d e e . T h i s a c t i o n c a n o n l y b e e x e rc i s e d w i t h re s p e c t t o f a u l t s a n d
d e fe c t s w h i c h a re d e t e r m i n e d b y l a w o r by l o c a l c u s t o m s .

P r i n c i p a l o b l i g a t i o n s o f b uye r
1 . To a c c e p t d e l i ve r y ;
2 . To p a y t h e p r i c e a t t h e t i m e s t i p u l a t e d i n t h e c o n t ra c t ; a n d
3. Other obligations stated in the contract.

D e l ive r y o f g o o d s i n i n s t a l l m e n t
U n l e s s o t h e r w i s e , a g r e e d , t h e b u ye r o f g o o d s i s n o t b o u n d t o a c c e p t d e l ive r y t h e re o f by i n s t a l l m e n t s . O n t h e
o t h e r h a n d , t h e s e l l e r c a n n o t a l s o b e c o m p e l l e d t o , a c c e p t p ay m e n t o f t h e p r i c e b y i n s t a l l m e n t

B uye r i s l i a b l e t o p ay i n t e r e s t
B u ye r s h a l l p a y i n t e re s t f o r t h e p e r i o d b e t w e e n d e l ive r y a n d p ay m e n t o f t h e p r i c e :
1 . I f s t i p u l a t e d i n t h e c o n t ra c t .
2 . I f t h e t h i n g s o l d a n d d e l i ve r e d s h o u l d p ro d u c e f r u i t s o r i n c o m e .
3 . I f t h e b u ye r s h o u l d b e i n d e fa u l t ( a f t e r d e m a n d ) f o r t h e p ay m e n t o f t h e p r i c e .

R e m e d i e s o f b uye r
1. Sue for specific performance plus damages- if seller unjustifiably refuses to deliver;
2. Sue for rescission of the contract plus damages- if seller does not comply with his obligations
3. Suspend the payment of the price
4. Refuse to accept the goods
5. Sue for damages- in case of breach of warranty
6. Ask for reduction of the price in certain cases

Kinds of Redemption
1. Conventional Redemption (pacto de retro)- takes place when the vendor reserves the right to repurchase the thing sold, with the
obligation to return the price delivered as well as the expenses of the contract and necessary and useful expenses made on the
thing.
Here, the ownership over the property is transferred to the buyer upon delivery.
2. Legal Redemption- the right to be subrogated, upon the same terms and conditions stipulated in the contract in the place of one who
acquires a thing by purchase or dation in payment or by any other transaction whereby ownership is transmitted by onerous title.

Period within which to redeem the thing sold

1. No stipulation granting the right to redeem- no right of redemption (this would be an absolute sale)
2. With stipulation about redemption but no period given- exercise the right within four (4) years from the date of the contract
3. With agreement on the period – the period agreed upon but not exceeding 10 years.

CASE 16
Alonzo, Bertulfo and Cabredo are co-owners of an individual land. They sold the property to Deodato jointly with right to repurchase. Alonzo
tried to repurchase the entire parcel. Can Deodato refuse?

Yes. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may
exercise this right for more than his respective share.

To be returned by seller a retro upon redemption

1. P- price of the sale
2. E- expenses of the contract
3. L- legitimate expenses
4. N- necessary expenses on the thing sold
5. U- useful expenses made on the thing sold

Legal redemption
The process whereby the law (not the stipulation) automatically grants to certain persons the right to get back from a buyer the property
purchased (upon reimbursement of the price), because of reasons of public policy.

Persons entitled to legal redemption

1. The co-owner of the property involved- in case the shares of all the other co- owners or of any of them, are sold to third person.
a. If the price of alienation is grossly excessive- the redemptioner shall pay only a reasonable one;
b. Should two or more co- owners desire to exercise the right- they may only do so in proportion to the share they may
respectively have in the thing owned in common.
2. The adjacent owner of the rural property has been sold in view of tax delinquency.
CASE 17
Castor, Culasa and Cederia are co- owners of a parcel of land. Castor sold his share to Bobos. When Culasa sold his share, Castor wanted to
exercise the right of redemption but the buyer, Dandansoy refused. Is the refusal proper?

Yes because Castor had already ceased to be a co-owner of the land when he sold his share to Bobos.

Equitable mortgage
One which though lacking in formalities nevertheless shows the real intention of the parties to create a specific property to secure the
performance of an obligation.

Cases where the contract shall be presumed to be equitable mortgage

1. The price of a sale with a right to repurchase is unusually inadequate.
2. The vendor remains in possession as lessee or otherwise.
3. The period for the exercise of the right to repurchase is extended.
4. The purchaser retains for himself a part of the purchase price.
5. The vendor binds himself to pay the taxes on the thing sold.
6. The real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other
obligation.

In case of doubt, contract purporting to be a sale with right to repurchase shall be constructed as an equitable mortgage.