Sales C.

Determinate or at least determinable

3.1 Nature, forms and requisites
Goods
Contract of Sale  Include all but not things in action or money of legal tender in the Philippines.

One of the contracting parties obligates himself to transfer the ownership of and to deliver a Kinds of Goods:
determinate thing and the other to pay therefor a price certain in money or its equivalent.
1. Existing goods – those that are owned or possessed by the seller may be the object of
Elements: sale.

1. Essential – those without which, there can be no valid sale. The elements of an ordinary 2. Future goods – cover goods that are to be manufactured, raised, or acquired by the seller
contract. after the perfection of the contract of sale.
2. Natural – those which are inherent and are deemed to exist even in the absence of a
contrary provision, save those in the contrary stipulation. Emptio Rei Speratae
3. Accidental – those which are dependent on the parties’ stipulation.
Sale of a thing with potential existence, subject to a suspensive condition that the thing will come
Characteristics: into existence. If the subject matter does not come into existence, the contract is deemed
1. Nominate extinguished as soon as the time expires or if it has become indubitable that the event will not
2. Principal take place.
3. Bilateral
4. Onerous Emptio Spei
5. Commutative
6. Consensual Sale of a mere hope or expectancy.
7. Title, not a Mode

Object of Sale Emptio Rei Speratae Emptio Spei

Definition
1. Rights Sale of a thing with potential existence. Sale of a mere hope or expectancy that the
thing will come into existence. Sale of the
Requisites: hope itself.
A. Transmissible or personal; and Effectivity of the Contract
B. Licit Sale is subject to the condition that the thing Sale is effective even if the thing does not
will exist; if it does not, there is no contract. come into existence, unless it is a vain hope.
Exceptions: Uncertainty
A. Future inheritance The uncertainty is with regard to the quantity The uncertainty is with regard to the existence
B. Service and quality of the thing and not the existence of of the thing.
the thing.
2. Things Object of Sale
The object is a future thing. The object is a present thing which is the hope
Requisites: or expectancy.
A. Actual or possible
B. Licit
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General Rule: 2) There is no necessity for a new or further agreement between the parties.

A person cannot sell or convey what he does not have or own.

Price
Exceptions:
The sum stipulated as the equivalent of the thing sold and also every incident taken into
1) Sale of a thing having potential existence. consideration for the fixing of the price, put to the debit of the vendee and agreed to by him.
2) Sale of future goods.
3) Contract for the delivery at a certain price of an article which the vendor in the ordinary
course of the business manufactures or procures for the general market whether the same Requisites for Valid Price
is on hand at the time or not. 1) Real
2) Certain or ascertainable
Licit 3) In money or its equivalent
4) Manner of payment must be agreed upon
A thing is licit when:
1) It is not outside the commerce of men; Real (Not Simulated)
2) It is not intransmissible; and
3) It does not contemplate a future inheritance, unless expressly authorized by law. Price is real when at the perfection of the contract, there is every intention on the part of the buyer
to pay the price, and every intention on the part of the seller to receive such price.
Kinds of Illicit Things:
1) Illicit per se (of its nature); If the Price is Simulated
2) Illicit per accidens (because of some provisions of law declaring it illegal).
General Rule: The sale is void.
Examples of void sale due to being illicit:
1) Sale of animals suffering from contagious diseases. Exception: If it can be shown to be a donation or another contract.
2) Sale of animals if the use or service for which they are acquired has been stated in the
contract, and they are found to be unfit thereof. Simulated Contract vs Simulated Price
3) Sale of future inheritance. Simulated Contract Simulated Price
4) Sale of land in violation of the constitutional prohibition against the transfer of lands to An absolutely simulated or fictitious contract is The contract is not simulated, but the price
aliens. void. A relative simulation, when it does not (cause) is the one simulated. Here, the sale is
prejudice and is not intended for any purpose void, but the act may be shown to have been in
Determinate or At Least Determinable contrary to law, morals, good customs, public reality a donation, or some other act or
order or public policy binds the parties to their contract. (Art. 1471)
Determinate thing – that which is: real agreement. (Art. 1346)
1) Particularly designated; or
2) Physically segregated from all others of the same class. Certain or Ascertainable

Determinable Thing; Requisites: 1) Certain – expressed and agreed in terms of specific pesos and centavos;

1) At the time the contract is entered into, the thing is capable of being made determinate; 2) Ascertainable –
and

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 a. Fixed by specified third person Mere inadequacy of price does not affect validity of the sale if fixed in good faith and without
fraud.
If the third person is unable or unwilling to fix the price, the contract is
inefficacious; unless the parties subsequently agree upon the price. Exceptions:
a) Where low price indicates a vice of consent, sale may be annulled or the contract is
If the third person is prevented from fixing the price by fault of either the seller presumed to be an equitable mortgage;
or the buyer, the party not in fault may have such remedies against the party in b) Where the price is so low as to be “shocking to the conscience”, sale may be set aside;
fault. c) Where the price is simulated such as when the parties intended a donation or some other
act or contract;
Even before the fixing of the price by the designated third person, a contract of d) Where the parties did not intend to be bound at all, the contract is void and inexistent.
sale is deemed to be perfected and existing albeit conditional.
2) Involuntary or Forced Sales
b. Fixed by the courts
Where the third person, fixes the price in bad faith or by mistake. General Rule:
c. Fixed by reference to a definite day, particular exchange or market.
Mere inadequacy of the price is not a sufficient ground for the cancellation of the sale of real
Price of Securities, Grains, Liquid and Things is Considered Certain When: property.

1) The price fixed is that which the thing would have on a definite day, or in a particular Exceptions:
exchange or market;
2) An amount is fixed above or below the price of such day, or in exchange or market, a) Where the price is so low as to be shocking to the moral conscience, judicial sale of
provided said amount be certain. personal property will be set aside; or
3) Fixed by reference to another thing certain.
b) If in the event of a resale, a better price can be obtained.

In Money or its Equivalent

3) Rescissible Contract of Sale
Art. 1468 recognizes that if the consideration consists partly in money and partly in another thing,
the transaction can still be considered a contract of sale when it is the manifest intention of the Inadequacy of price is a ground for rescission of conventional sale in case of rescissible contracts
parties. covered under Art. 1381, namely:

Meaning of “or its equivalent” a) Those entered into by guardians whenever the ward whom they represent suffer lesion by
more than ¼ of the value of the object of the sale; and
This means that there is certainty as to the price but what is given as payment is an object. b) Those agreed upon in representation of absentees, if the latter should suffer by more than
¼ of the value of the object of the sale.
Gross Inadequacy of Price

1) Voluntary Sales When There is Sale Even When No Price is Agreed Upon

General Rule: General Rule:

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When the price cannot be determined in accordance with Articles 1469 to 1473, the contract is
inefficacious. An unaccepted unilateral promise to buy or sell. This produces no juridical effect and creates no
legal bond. This is a mere offer, and has not yet been converted into a contract.
Exception:
Option Contract
The thing or a part thereof has been delivered to and appropriated by the buyer, in which case the
buyer has to pay a reasonable price therefor. It is a contract granting a privilege in one person, for which he has paid a consideration, giving
him the right to buy certain property at any time within the agreed period at a fixed price.
Requisites for the applicability of the exception:
1) Meeting of the minds as to the subject matter; Elements of a Valid Option Contract:
2) Agreement that a price will be paid; and 1) Consent
3) Delivery by the seller and appropriation by the buyer of the subject matter. 2) Subject Matter
3) Prestation
Formalities of Contract of Sale
Consideration in an Option Contract
General Rule: A contract of sale may be entered into in any form provided all the essential
requisites for its validity are present. 1) It may be anything of value, unlike in sale where it must be the price certain in money or
its equivalent;
Exception: The following must be in writing to be enforceable: 2) It is separate and distinct from the purchase price.
1) Sale of personal property at a price not less than P500.
2) Sale of real property or an interest therein. Perfection
3) Sale of property not to be performed within a year from the date thereof.
4) When an applicable statute requires that the contract of sale be in a certain form. It is the stage where the validity of the contract of sale is determined; the moment when the
parties come to agree on the terms of the contract.
Note:
A contract of sale is perfected by mere consent.
If sale of a piece of land or interest therein is made through an agent, the agent’s authority must
be in writing, otherwise, the sale is void. (Art. 1874) General Rule:

Sale is perfected at the moment there is a meeting of the minds upon a determinate thing (object)
Formation of Contract of Sale and a certain price (consideration).

Phases or Stages of Contract of Sale Exception:

1) Preparation, conception or generation
2) Perfection of contract When the sale is subject to a susceptible condition because perfection takes place from the
3) Consummation moment the condition is fulfilled.

Preparation Consent

The period of negotiation and bargaining, entering at the moment of agreement of the parties. Meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract .
Policitation
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Elements: b. The auctioneer may withdraw the goods from the sale unless the auction has been
1) Subjects / contracting parties; announced to be without reserve.
2) Concurrence of offer and acceptance.
3) Legal capacity of the contracting parties. 3) Seller has the right to bid in the auction, provided:
4) The consent must be intelligent, free and spontaneous. a. Such right was reserved;
b. Notice was given that the sale was subject to a right to bid on behalf of the seller;
Form of Offer and
c. Right is not prohibited by law or by stipulation.
Offer must be certain, definite and intentional.

Business advertisements of things for sale are not definite offers, but mere invitations to make an
offer. 3.2 Earnest money as distinguished from option money

Advertisements for bidders are merely invitations to make proposals; the advertiser is not bound Earnest Money Option Money
to accept the highest or lowest bidders. Transfer of Ownership
Title passes to the buyer upon delivery of Ownership is reserved to the seller and is not to
the thing sold. pass until full payment.
Form of Acceptance Effect of Non-Payment
In case of non-payment, an action for In case of non-payment, there can be an action for
The acceptance must be absolute. A qualified acceptance constitutes a counter-offer. specific performance or for rescission can specific performance.
be filed by the injured party.
An acceptance may be express or implied. Consideration
Part of the purchase price. Money is given as a distinct consideration for an
The person making the offer may fix the time, place and manner of acceptance, all of which must option contract.
be complied with. Obligation of the Buyer Upon Payment of Consideration
When given, the buyer is bound to pay the The would-be buyer is not required to buy.
An offer made through an agent is accepted from the time acceptance is communicated to him. balance.
Perfection of Sale
When Offer Becomes Ineffective There is already a sale. Applies to a sale not yet perfected.
An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either
Capacity to Buy or Sell
party before acceptance is conveyed.
General Rule:
Rules Governing Auction Sales .
All persons, whether natural or juridical, who can bind themselves, have legal capacity to buy and
1) Sales of separate lots by auction are separate contracts of sale;
sell.
2) Sale is perfected when the auctioneer announces its perfection by the fall of the hammer
or in other customary manner;
Exceptions:
Until such announcement is made:
A. Absolute incapacity
a. Any bidder may retract his bid; and

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Purchase by Minor 1) Legal redemption
2) Compromises
General Rule: The contract is voidable. 3) Renunciations

Exception: Where necessaries are sold and delivered to a minor or other person without capacity Sale by Non-Owner
to act, the incapacitated person must pay a reasonable price therefor (Art. 1489, par. 2) A. Perfection Stage
1) Sale by owner – valid
Necessaries cover everything indispensable for sustenance, dwelling, clothing, medical 2) Sale by non-owner - valid
attendance, education and transportation (Art. 194, Family Code).
B. Consummation Stage
B. Relative incapacity 1) Sale by owner – the contract is valid; the transfer of title is also valid.
2) Sale by non-owner – the contract is valid because it has passed perfection stage;
1) Husband and Wife the transfer of title is void.

General Rule: A sale by one spouse to another is void. General Rule: In a sale by the non-owner, the buyer acquires no better title to the goods than the
seller had.
Exceptions:
a) Regime of separation of property governs them. Exceptions:
b) A judicial separation of has been decreed. 1) Owner is stopped or precluded by his conduct.
2) Sale made by the registered or apparent owner in accordance with registration laws.
2) Incapacity by reason of relation to property 3) Sales sanctioned by judicial or statutory authority.
4) Purchases in a merchant’s store, fairs or markets.
The following cannot acquire property by purchase, even at a public auction, either in person or 5) When a person who is not the owner sells and delivers a thing, and subsequently acquires
through the mediation of another: title thereto.
6) When the seller has a voidable title which has not been avoided at the time of the sale,
a) Guardian, with respect to the property of his ward. provided that the buyer acquires the goods –
b) Agents, with respect to the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given. a. In good faith;
b. For value; and
c) Executor or administrator, with respect to the property of the estate under administration; c. Without notice of the seller’s defect of title.

d) Public officers and employees, with respect to the properties of the government, its 7) Sale by co-owner of whole property or a definite portion thereof.
political subdivisions, or GOCCs, that are entrusted to them. 8) Special rights of unpaid seller.

e) Judges, justices, prosecuting attorneys, clerks of courts, etc. with respect to the property Sale by Seller with Voidable Title
in custodia legis.  When a buyer buys a property from a seller with voidable title to property, he acquires a
good title to the property if:
f) Any other person specially disqualified by law. 1) He is in good faith;
2) He paid something of value for the property; and
Note: 3) He is not aware of the seller’s defect or flaw on the title.

The prohibitions are applicable to sale in: Title as to Movable Properties

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 1. Contractual Reservation of Title
General Rule: Possession of movable property acquired in good faith is equivalent to title. 2. Contract to Sell
3. Sale on Acceptance/Trial/Approval/Satisfaction
Exceptions:
4. Implied Reservation of Ownership (under Art. 1503)
1) Owner lost the movable – owner may recover the movable without reimbursement. a. Where goods are shipped and by the bill of lading the goods are deliverable to the
2) Owner is unlawfully deprived of the movable – owner may recover the movable without seller or his agent, or to the order of the seller or agent – seller reserves ownership in
reimbursement. the goods;
b. Where goods are shipped and by the bill of lading the goods are deliverable to the
Exceptions to the Exceptions: order of the buyer or his agent but the possession of the bill of lading is retained by
the seller or his agent – seller reserves a right to the possession of the goods;
1) The person who possesses the movable property has acquired the same in good faith at a
c. Where the seller of goods draws on the buyer for the price and transmits the bill of
public sale.
2) The buyer bought the movable at a merchant store. lading and bill of exchange to the buyer to secure acceptance or payment of the bill of
exchange, and the buyer does not honor the bill of exchange. Here, the seller is the
drawer and the buyer is the drawee. If the buyer, as drawee, does not honor the bill
3.3 Rights/obligations of vendor and vendee of exchange, he shall return the bill of lading. If he retains the same, he acquires no
added right thereby.
Obligations of the Vendor:
Deliver the thing sold.
1. Transfer of ownership.
2. Deliver the thing sold. A mode of acquiring ownership, as a consequence of certain contracts such as sale, by virtue of
3. Deliver the fruits and accessories. which, actually or constructively, the object is placed in the control and possession of the vendee.
4. Make warranties.
5. Take care of the thing, pending delivery with proper diligence. Kinds of Delivery:
6. Pay for the expenses for the execution and registration of the sale, unless there is
stipulation to the contrary. 1. Actual or Real
7. Accord the buyer the right to examine the goods. 2. Legal or Constructive
3. Quasi-Tradition
8. Enter into contract with the carrier on behalf of the buyer as may be reasonable under the
4. Tradition by Operation of Law
circumstances.
9. Notify the buyer regarding necessity to insure goods if it is usual to insure them. 5. Delivery through Document of Title
6. Delivery through Carrier

Transfer of ownership. Actual or Real

General Rule:  Placing the thing under the control and possession of the buyer.

Ownership of the thing sold is acquired only upon its delivery, actual or constructive, to the Legal or Constructive
buyer.
 Delivery is represented by other signs or acts indicative thereof.
Exceptions: When there is reservation of ownership despite delivery.
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Types:  At the time of perfection, the seller held possession of the subject matter in the concept of
owner, and pursuant to the contract, the seller continues to hold physical possession
1) Delivery by execution of public instrument thereof as lessee or other form of possession other than the concept of owner.
2) Traditio symbolica
3) Traditio longa manu
4) Traditio brevi manu Quasi-Tradition
5) Traditio constitutum possessorium
 Delivery of rights, credits or incorporeal property, made by:

1) Execution of public instrument;

Delivery by execution of public instrument. 2) Placing titles of ownership in the hands of buyer; or
 Gives rise to prima facie presumption of delivery, which is destroyed when actual 3) Allowing buyer to made use of rights.
delivery is not effected due to legal impediment.
Tradition by Operation of Law
Exceptions:

a) There is a stipulation in the instrument to the contrary.  When a non-owner who sells and delivers a thing subsequently acquires title thereto, the
b) When at the time of the execution of the public instrument, the subject matter was not title passes by operation of law to the buyer.
subject to the control of the seller.
Delivery through Document of Title
Traditio Symbolica

 To effect delivery, parties use a token or symbol to represent the thing delivered Delivery through Carrier

General Rule: Where the seller is authorized or required to send the goods to the buyer, delivery
Traditio Longa Manu to the carrier is delivery to the buyer.

 Delivery of thing by mere agreement; seller points out to the buyer the property without Exceptions:
need of actually delivering. 1) When a contrary intention appears, i.e. the parties did not intend the delivery of the goods
through the carrier.
Traditio Brevi Manu 2) Implied reservation of ownership.

 Opposite of constitutum possessorium; before contract of sale, the would-be buyer was Kinds of Delivery to Carrier:
already in possession of the would-be subject matter of the sale, and pursuant to sale, he
would now hold possession in the concept of an owner. 1) F.A.S. (Free Along Side)
2) F.O.B. (Free on Board)
3) C.I.F. (Cost, Insurance, Freight)
Traditio Constitutum Possessorium 4) C.O.D. (Collect on Delivery)
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 5) In case of specific goods known by the parties at some place at the time of the perfection
of the sale, such is the place of delivery, in the absence of agreement or usage of trade to
F.A.S. (Free Along Side) the contrary.
 The seller pays all charges and is subject to risk until the goods are placed along side the Time of Delivery:
vessel.
1) Stipulated time;
F.O.B. (Free on Board) 2) In the absence thereof, within a reasonable time.
 Goods are to be delivered free of expenses to the buyer to the point where they are F.O.B.
The point of F.O.B. (either at the point of shipment or the point of destination) Sale on Acceptance, Trial, Approval, or Satisfaction
determines when the ownership passes (e.g. FOB shipping point – the title passes to the
buyer when the goods arrive at the port of pier, or truck). A contract is in the nature of an option to purchase if the goods prove to be satisfactory, the
approval of the buyer being a condition precedent; the sale is dependent upon the quality of
C.I.F. (Cost, Insurance, Freight) goods.
 Signifies that the price fixed covers the costs of goods, the expense of the freight and the Rules:
insurance to be paid by the seller.
1) Title remains in the seller until sale becomes absolute by:
C.O.D. (Collect on Delivery) a. Buyer’s approval of the goods; or
 Carrier acts for the seller in collecting purchase price, which buyer must pay to obtain b. Buyer’s failure to comply with the express or implied conditions of the contract
possession of the goods. as to giving notice of dissatisfaction or as to returning the goods;
2) Risk of loss remains with seller except when the buyer is at fault or has agreed to bear the
When Vendor Not Bound to Deliver loss:
3) Buyer must give the goods a trial, except where it is evident that it cannot perform the
The vendor is not bound to deliver the thing sold: work intended;
4) Period within which the buyer must signify acceptance runs only when all parts essential
1) If vendee has not paid him the price unless a period of payment has been fixed;
for the operation of the object have been delivered;
2) If no period of payment has been fixed in the contract;
5) If it is stipulated that a third person must signify approval or satisfaction, the provision is
3) A period for payment has been fixed in the contract but the vendee has lost the right to
valid, but the third person must be in good faith. If refusal to accept is not justified, seller
make use of the same.
may still sue;
Place of Delivery: 6) Generally, the sale and delivery to a buyer who is an expert on the object purchased is not
a sale on approval, trial, or satisfaction.
1) The place of delivery agreed upon;
2) In the absence of agreement, place is determined by usage of trade; Sale or Return
3) In the absence of agreement and prevalent usage, the seller’s place;
Property is sold, but the buyer, who becomes the owner of the property on delivery, has the
4) In any other case, place of delivery is the seller’s residence;
option to return the same to the seller instead of paying the price; such sale depends upon the
discretion of the buyer.
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Rules: Rights of buyer in sale by sale:

1) Title passes to the buyer upon delivery; 1) Return the thing and recover the money paid, or
2) Retain the thing and sue for the breach of warranty.
2) Buyer bears the risk of loss;
3) The option to purchase or return the goods rests entirely on the buyer without reference to Sale by Sample and by Description, Distinguished
the quality of the goods; In the former, the thing is shown to the buyer, whereas in the latter, the thing is only described.
4) The buyer may revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract or within a reasonable time if no time is fixed; Two-fold warranty in sale by sample and description
5) The buyer must comply with the express or implied conditions attached to the return
privilege; otherwise, the sale becomes absolute. 1) That the goods purchased matched with the description;
2) That the goods matched in kind, quality and character with the samples exhibited to the
Sale or Return vs Sale on Trial buyer.
Sale or Return Sale on Trial
Condition Imposed Completeness of Delivery
Subject to a resolutory condition. Subject to a suspensive condition.
Option of Buyer to Purchase A. Movables
Depends entirely on the will of the buyer. Depends on the character or quality of the
goods. Where, in relation to what is contracted to sell, the quantity of goods delivered is:
Transfer of Ownership
Ownership passes to the buyer on delivery and Ownership remains in the seller until buyer 1) Less
subsequent return reverts ownership in the signifies his approval or acceptance to the Buyer has 2 options:
seller. seller. a) Reject the goods; or
Risk of Loss
b) Accept them.
Risk of loss or injury rests upon the buyer. Risk of loss remains with the seller.

2) Larger
Sale by Description
Buyer has 3 options:
A sale where a seller sells a thing as being of a certain kind, the buyer merely relying on the a) Accept per contract and reject the rest
seller’s representations or descriptions. b) Accept the whole and pay at contract rate
c) If indivisible, reject the whole or accept it entirely
Warranty: That the thing sold corresponds to the representations or descriptions.
3) Mixed with goods of different description
Buyer has 2 options:
Sale by Sample a) Accept the goods which are in accordance with the contract and reject the
rest.
A sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the b) If indivisible, reject the goods entirely or accept them entirely.
bulk, which is not present and as to which there is no opportunity to inspect or examine.

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 B. Immovables Prescription of Action: Action arising from Arts. 1539 and 1542 shall prescribe in 6 months
1) Sold per unit or number counted from the day of delivery.

With statement of area at the rate of a certain price for a unit or measure or number. Double Sale

If the vendee should demand, the vendor shall deliver all that may have been stated in the Requisites:
contract.
1) Two or more transactions must constitute valid sales;
If what is delivered is: 2) They must pertain exactly to the same object or subject matter;
3) They must be bought from the same or immediate seller; and
1) Less in area or of inferior or different quality 4) Two or more buyers who are at odds over the rightful ownership of the subject matter
must represent conflicting interests.
Buyer may seek:
a) Rescission, if: Rules on Preference:
a. Lack in area is at least 1/10 of area agreed upon;
b. The deficiency in quality specified in the contract exceeds 1/10 of the 1) Personal Property – first possessor in good faith.
price agreed upon;
c. The vendee would not have bought the immovable had he known of its 2) Real Property
smaller area or inferior quality; a. First registrant in good faith; second buyer must register the document in good
d. Proportional reduction of price. faith, otherwise he does not have a better right.
b. First possessor in good faith.
2) Greater in area c. Person with oldest title in good faith.
a. Accept per stipulation and reject the rest Delivery of Fruits and Accessories
b. Accept the whole and pay at contract price.
 The seller is bound to deliver the accessions and accessories in the condition in which
they were upon the perfection of the contract.
Sold for lump sum.  The buyer has a right to the fruits of the thing from the time the obligation to deliver it
When two or more real estates are sold for a single price, the rule is the same as when the real arises. However, he shall acquire no real right over it until the same has been delivered to
estate is sold for a lump sum. There shall be no increase or decrease in the area actually delivered him.
and the area stated in the contract.  The fruits pertain to the buyer from the day on which the contract was perfected
 The obligation to give a determinate thing includes the delivery of all its accessions and
accessories, even though they may not have been mentioned.
c. Where price per unit is not indicated

 Whether greater or lesser: no rescission or adjustment of price, unless there is a gross Obligations of the Vendee:
mistake.
Principal Obligations:
1. To accept delivery

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 2. To pay the price of the thing sold in legal tender unless another mode has been agreed
upon.
Other Obligations:
1. To take care of the goods without the obligation to return, where the goods are delivered
to the buyer and he rightfully refuses to accept.
2. To be liable as a depositary if he voluntarily constituted himself as such.
3. To pay interest for the period between delivery of the thing and the payment of the price
in the following cases:
a. Interest is stipulated; Maybe oral. Requirement that interest must be in writing
refers only to loan
b. Fruits or income are received by vendee from the thing sold;
c. Vendee is guilty of default.
Rights of the Buyer
1. Not bound to accept delivery of goods by installments.
2. Reasonable opportunity to examine the goods upon delivery to ascertain whether they
are in conformity with the contract before accepting the same.
3. Acceptance of the goods shall not discharge the seller from liability for breach of any
promise or warranty but the buyer must give the seller notice of the breach of
promise or warranty within a reasonable time after the buyer knows or ought to know
of such breach, otherwise the seller shall not be liable therefor.
4. Reject delivery of a wrong quantity of goods or of goods of a different description
not included in the contract which are mixed with the goods sold.
5. If he refuses to accept the goods, having the right to do so, he is not bound to return
them to the seller; it being sufficient that he notifies the seller of his refusal to accept.
3.4 Warranties (in relation to consumer laws)
Warranty
A statement or representation made by the seller contemporaneously and as a part of the contract
of sale, having reference to the character, quality, or title of the goods, and by which he promises
or undertakes to insure that certain facts are or shall be as he then represents.
Kinds:
1. Express – any affirmation of fact or any promise by the seller relating to the thing,
inducing the buyer to purchase the same and if the buyer purchases the thing relying
thereon.
Requisites:
a. It must be an affirmation of fact or any promise by the seller relating to the subject
matter of the sale;
b. The natural tendency of such affirmation or promise is to induce the buyer to
purchase the thing; and
c. The buyer purchases the thing relying on such affirmation or promise.
2. Implied – that which the law derives from the nature of the transaction or the relative
situation or circumstances of the parties, irrespective of any intention of the seller to
create it .
a. Warranty that seller has a right to sell;
b. Warranty against eviction;
c. Warranty against non-apparent burden or servitudes;
d. Warranty against hidden defects;
e. Warranty against redhibitory defects on animals;
f. Warranties in sale of goods / Warranties of quality;
g. Warranties for consumer goods.
Warranty that Seller has a Right to Sell
 Although Art. 1547 uses the phrase “unless a contrary intention appears”, there can be no
legal waiver of such warranty without changing the basic nature of the relationship, for
the warranty on the part of the seller that he has the capacity to sell, is the essence of the
sale, unless it amounts to clear assumption of risk on the part of the buyer.
Warranty Against Eviction
 The seller guarantees that he has the right to sell the thing sold and to transfer ownership
to the buyer, who shall not be disturbed in his legal and peaceful possession thereof.
Elements:
a. Vendee is deprived, in whole or in part, of the thing purchased;
b. Deprivation is by virtue of a final judgment;
c. Judgment is based on a right prior to the sale or an act imputable to the vendor;
d. Vendor was summoned in the suit for eviction at the instance of the vendee –
i. To enable the seller to prove his claim;
ii. To avoid multiplicity of suits; and
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 iii. To satisfy due process. 2. Indemnity
e. No waiver of warranty by the vendee.
When Warranty Not Applicable:
Vendor’s Liability Against Eviction Shall Consist Of: 1. Servitude is apparent;
2. Non-apparent burden or servitude is recorded in the Registry of Property except when
a. Total Eviction there is express warranty that the thing is free from all burdens and encumbrances;
i. Value of the ting at the time of eviction; 3. The servitude is mentioned in the agreement;
ii. Income or fruits if he has been ordered to deliver them to the party who won the 4. Vendee had knowledge of servitude.
suit;
iii. Costs of the suit; Prescriptive Period (Rescission): 1 year
iv. Expenses of the contract; and
v. Damages and interests if the sale was in bad faith. Warranty Against Hidden Defects

 Seller guarantees that the thing sold is free from any hidden faults or defects or any
b. Parital Eviction – vendee may: charge or encumbrance not declared or known to the buyer.
i. Enforce vendor’s liability for eviction; or
ii. Demand rescission of contract. Elements:
1. Defect is serious or important;
Waiver of Liability: 2. Defect is hidden;
3. Defect exists at the time of the sale;
Vendor’s liability is waivable but any stipulation exempting the vendor from the obligation to 4. Vendee must give notice of the defect to the vendor within a reasonable time;
answer for eviction shall be void if he acted in bad faith. 5. Remedies must be brought within the period of 6 months from delivery of the thing or 40
days from date of delivery in case of animals; and
Kinds of Waiver: 6. No waiver of the warranty.

1. Consciente – voluntarily made by the vendee without the knowledge and assumption of Vendor is Not Liable For:
the risks of eviction.
2. Intencionada – made by the vendee with knowledge of the risk of eviction and 1. Patent defects; or
assumption of its consequences, in which case vendor is not liable provided he did not act 2. Those that are not visible but the buyer is an expert who, by reason of his profession,
in bad faith. should have known them.

Warranty Against Non-Apparent Burden or Servitudes General Rule: Seller is liable even though he is not aware of the hidden defect.

Requisites: Exception: There is a stipulation to the contrary and the seller is not aware of it.

1. Immovable sold is encumbered with non-apparent burden or servitude not mentioned in

the agreement; and Obligation of Seller in Case of Breach:
2. Nature of non-apparent servitude or burden is such that it must be presumed that the
buyer would not have acquired it had he been aware thereof. A. If there was no waiver of warranty and the thing was lost due to hidden defects:

Remedy of Buyer in Case of Breach: 1. When the seller is aware of the hidden defects:
1. Rescission; or a. Bear the loss
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 b. Return the price
c. Refund the expenses of the contract Sale of Team:
d. Pay damages
General Rule: The defect of one will only give rise to its redhibition.
2. When the seller is not aware of the hidden defects:
a. Bear the loss Exception: When the buyer would not buy them if one is defective.
b. Return the price
c. Return the interest Remedy:
d. Reimburse the expenses of the contract 1. Accion Redhibitoria; or
2. Accion Quanti Minoris.
B. If there was a waiver of warranty:
Void Sales:
1. When seller is aware of the hidden defects: Waiver is in bad faith, as corollary, 1. Sale of animals with contagious diseases.
seller is still liable. 2. Sale of unfit animals.
2. When seller is not aware of the hidden defects: Seller is not liable.
Obligation of Buyer to Return:

C. If the defective thing is lost through fortuitous event or fault of buyer, buyer may demand In case of rescission, the animal shall be returned in the condition in which it was sold and
of the seller of the price paid less the value of the thing at the time of loss. delivered, the vendee being answerable for any injury due to his negligence, and not arising from
the redhibitory fault or defect.
Remedy of Buyer:
Prescriptive Period: 40 days from the date of delivery to buyer.
Buyer may choose between the following:
Warranties in Sale of Goods / Warranties of Quality
1. Action Redhibitoria
2. Accion Quanti Minoris 1. Warranty of Fitness
2. Warranty of Merchantability

Prescriptive Period: 6 months from the delivery of the thing sold. Warranty of Fitness

Warranty Against Redhibitory Defects on Animals The seller guarantees that the thing sold is reasonably fit for the known particular purpose for
which it was acquired by the buyer. It exists in the following instances:
Instances when there is redhibitory defect:
1. Expert knowledge is not sufficient to discover it; or a. Where the buyer, expressly or by implication manifests to the seller the particular
2. The veterinarian failed to discover or disclose it through ignorance or bad faith; or purpose for which the goods are acquired.
3. The animal dies within 3 days after its purchase and the disease which caused the death b. Where the buyer relies upon the seller’s skill or judgment.
existed at the time of the contract.
Warranty of Merchantability
Animals Sold at Fairs or Public Auction:
The seller guarantees, where the goods were bought by description, that they are reasonably fit for
 There is no warranty against hidden defect of animals sold at public auctions, or of the general purpose for which they are sold.
livestock sold as condemned.
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Instances Where Implied Warranties are Inapplicable: Art. 1484 does not apply to:
1. As-is and where-is sale 1. Sale of personal property payable on straight terms.
2. Sale of second-hand articles. 2. Sale or mortgage of real estate.
3. Sale by virtue of authority in fact or law. 3. Action for replevin.

Preservation of the Thing Pending Delivery:

 Pending delivery, the seller is bound to take care of the thing with the diligence of a good Alternative and Exclusive Remedies:
father of a family.
1. Specific performance upon vendee’s failure to pay.
Expenses for the Execution and Registration of Sale:
 In the absence of agreement to the contrary, the seller has the duty to pay for: When Demand Chosen:

1. Execution of the sale. The seller is deemed to have chosen specific performance when he files an action in court for
2. Registration of the sale. recovery.

Buyer’s Right to Examine the Goods Resort to Rescission After Choosing Specific Performance

General Rule: General Rule: When the seller has chosen specific performance, he can no longer seek for
The buyer has a right to examine the goods before accepting delivery to determine whether they rescission or foreclosure of the chattel mortgage constituted on the thing sold.
conform to the contract.
Exception: Even if the seller had chosen specific performance, if the same has become
Exceptions: impossible, the seller may still choose rescission.
1. There is a stipulation to the contrary; or
2. In case of C.O.D (Collect on Delivery) – buyer is not entitled to examine until payment is 2. Rescission of the sale if vendee shall have failed to pay two or more installments.
made, except:
a. There is an agreement permitting examination; or When deemed chosen:
b. The usage of trade permits the examination.
When the seller has clearly indicated to end the contract such as when –
a. He sends a notice of rescission, or
3.5 Installment sales b. He takes possession of the subject matter of the sale, or
c. He files an action for rescission.
3.5.1 Personal property – Recto Law
Forfeiture of installments or rentals paid:
Recto Law
General Rule:
Requisites:
1. Contract of sale Rescission creates the obligation to return the thing which were the object of the contract,
2. Personal property together with the fruits, and the price with interests. It can be carried out only when he who
3. Payable in installments demands rescission can return whatever he may be obliged to restore.
4. In the case of the second and third remedies, that there has been a failure to pay two or
more installments. Exception:
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A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall
be valid insofar as the same may not be unconscionable under the circumstances.
3. Foreclosure of the chattel mortgage on the thing sold if vendee shall have failed to pay
two or more installments.
When deemed chosen:
At the time of actual sale of the subject property at public auction pursuant to the foreclosure
proceedings commenced.
Barring Effect of Foreclosure:
It is the foreclosure and actual sale at public auction of the mortgaged chattel that shall bar further
recovery by the seller of any balance on the purchaser’s outstanding obligation not satisfied by
the sale.
Barring Effect on Other Securities Given for Payment of Price:
After the foreclosure, the vendor cannot proceed against any third party who may have
guaranteed the vendee’s performance of his obligation, for if the guarantor will be entitled to
recover what he has paid from the debtor-vendee, so that ultimately, it will be the vendee who
will be made to bear the payment of the balance of the price.
3.5.2 Real Property – Maceda Law
Maceda Law (R.A. No. 6552)
Governs the sale or financing of real estate on installment payment.
Does Not Apply to:
1. Sale covering industrial lots;
2. Sale covering commercial buildings;
3. Sale to tenants under agrarian reform laws;
4. Sale of lands payable in straight terms.
Requisites:
1. Transactions or contracts involving the sale or financing of real estate on installment
payments including residential condominium apartments; and
2. Buyer defaults in payment of succeeding installments.
Rights of the Buyer:
1. If buyer has paid at least two years of installments:
a. The buyer must pay, without additional interest, the unpaid installments due
within the total grace period earned by him. There shall be one month grace
period for every one year of installment payments made.
b. Actual cancellation can only take place after 30 days from receipt by the buyer of
the notice of cancellation or demand for rescission by a notarial act and upon full
payment of the cash surrender value to the buyer.
c. The buyer shall have the right to sell his rights or assign the same to another
person or to reinstate the contract by updating the account during the grace period
and before actual cancellation of the contract.
d. The buyer shall have the right to pay in advance any installment or the full
unpaid balance of the purchase price any time without interest and to have such
full payment of the purchase price annotated in the certificate of title covering the
property.
2. If buyer has paid less than 2 years of installments:
a. The seller shall give the buyer a grace period of not less than 60 days from the
date the installments became due. If the buyer fails to pay the installments due at
the expiration of the grace period the seller may cancel the contract after 30 days
from receipt by the buyer of the notice of cancellation or the demand for
rescission of contract by a notarial act.
b. The buyer shall have the right to sell his rights or assign the same to another
person or to reinstate the contract by updating the account during the grace period
and before actual cancellation of the contract.
c. The buyer shall have the right to pay in advance any installment or the full
unpaid balance of the purchase price any time without interest and to have such
full payment of the purchase price annotated in the certificate of title covering the
property.
3.5.3 PD 957 / Condominium Act
The Condominium Act (R.A. 4726)
Condominium:
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A condominium is an interest in real property consisting of separate interest in a unit in a
residential, industrial or commercial building and an undivided interest in common, directly or
indirectly, in the land on which it is located and in other common areas of the building. A
condominium may include, in addition, a separate interest in other portions of such real property.
Title to the common areas, including the land, or the appurtenant interests in such areas, may be
held by a corporation specially formed for the purpose (hereinafter known as the "condominium
corporation") in which the holders of separate interest shall automatically be members or
shareholders, to the exclusion of others, in proportion to the appurtenant interest of their
respective units in the common areas.
Unit:
Means a part of the condominium project intended for any type of independent use or ownership,
including one or more rooms or spaces located in one or more floors (or part or parts of floors) in
a building or buildings and such accessories as may be appended thereto.
Project:
Means the entire parcel of real property divided or to be divided in condominiums, including all
structures thereon.
Common Areas:
Means the entire project excepting all units separately granted or held or reserved.
Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall
include the transfer or conveyance of the undivided interests in the common areas or, in a proper
case, the membership or shareholdings in the condominium corporation:
Conditions:
1. Where the common areas in the condominium project are owned by the owners of
separate units as co-owners thereof, no condominium unit therein shall be conveyed or
transferred to persons other than Filipino citizens, or corporations at least sixty percent of
the capital stock of which belong to Filipino citizens, except in cases of hereditary
succession.
2. Where the common areas in a condominium project are held by a corporation, no transfer
or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant
membership or stockholding in the corporation will cause the alien interest in such
corporation to exceed the limits imposed by existing laws.
Incidents of a Condominium Grant: Unless otherwise expressly provided in the enabling or
master deed or the declaration of restrictions:
1. The boundary of the unit granted are the interior surfaces of the perimeter walls, floors,
ceilings, windows and doors thereof. The following are not part of the unit bearing walls,
columns, floors, roofs, foundations and other common structural elements of the building;
lobbies, stairways, hallways, and other areas of common use, elevator equipment and
shafts, central heating, central refrigeration and central air-conditioning equipment,
reservoirs, tanks, pumps and other central services and facilities, pipes, ducts, flues,
chutes, conduits, wires and other utility installations, wherever located, except the outlets
thereof when located within the unit.
2. There shall pass with the unit, as an appurtenance thereof, an exclusive easement for the
use of the air space encompassed by the boundaries of the unit as it exists at any
particular time and as the unit may lawfully be altered or reconstructed from time to time.
Such easement shall be automatically terminated in any air space upon destruction of the
unit as to render it untenantable.
3. Unless otherwise, provided, the common areas are held in common by the holders of
units, in equal shares, one for each unit.
4. A non-exclusive easement for ingress, egress and support through the common areas is
appurtenant to each unit and the common areas are subject to such easements.
5. Each condominium owner shall have the exclusive right to paint, repaint, tile, wax, paper
or otherwise refinish and decorate the inner surfaces of the walls, ceilings, floors,
windows and doors bounding his own unit.
6. Each condominium owner shall have the exclusive right to mortgage, pledge or encumber
his condominium and to have the same appraised independently of the other
condominiums but any obligation incurred by such condominium owner is personal to
him.
7. Each condominium owner has also the absolute right to sell or dispose of his
condominium unless the master deed contains a requirement that the property be first
offered to the condominium owners within a reasonable period of time before the same is
offered to outside parties.
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Partition:

Where several persons own condominiums in a condominium project, an action may be brought
by one or more such persons for partition thereof by sale of the entire project, as if the owners of
all of the condominiums in such project were co-owners of the entire project in the same
proportion as their interests in the common areas.

Conditions:

1. That three years after damage or destruction to the project which renders material part
thereof unit for its use prior thereto, the project has not been rebuilt or repaired
substantially to its state prior to its damage or destruction, or

2. That damage or destruction to the project has rendered one-half or more of the units
therein untenantable and that condominium owners holding in aggregate more than thirty
percent interest in the common areas are opposed to repair or restoration of the project; or

3. That the project has been in existence in excess of fifty years, that it is obsolete and
uneconomic, and that condominium owners holding in aggregate more than fifty percent
interest in the common areas are opposed to repair or restoration or remodeling or
modernizing of the project; or

4. That the project or a material part thereof has been condemned or expropriated and that
the project is no longer viable, or that the condominium owners holding in aggregate
more than seventy percent interest in the common areas are opposed to continuation of
the condominium regime after expropriation or condemnation of a material portion
thereof; or

5. That the conditions for such partition by sale set forth in the declaration of restrictions,
duly registered in accordance with the terms of the Condominium Act, have been met.

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