Warranties

Definition(of warranty):
A statement or representation made by the seller contemporaneously and
as 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 ensure that certain
facts are or shall be as he then represents.
EXPRESS WARRANTIES
For there to be express warranty, the following requisites must concur:
(1) An affirmation of fact or any promise relating to the thing sold;
(2) The natural tendency of such affirmation or promise is to induce the
buyer to buy;
(3) The buyer buys the thing relying thereon. [Art. 1546]
(4) Made before the sale not upon delivery or any other point
 An express warranty can be made by and also be binding on the seller even
in the sale of a second hand article. [Moles v. IAC, 1989]
 Warranties

Condition Warranty
Goes into the performance of an
Pertains to and affects the existence obligation and may, in itself, be an
of the obligation obligation
Non-happening does not amount to Non-fulfillment constitutes breach of
breach of contract contract

Must be stipulated Stipulation or operation of law

Always relates to the subject matter or

May attach either to the seller’s duty the circumstance seller’s obligations as
to deliver thing or some other to the subject matter
circumstance
 Warranties
 If seller has promised that the condition should happen or be performed,
the buyer may treat the nonperformance of the condition as a breach of
warranty. [Art.1545]
EXPRESS WARRANTIES
 For there to be express warranty, the following requisites must concur:
(APIR)
(1) An affirmation of fact or any promise relating to the thing sold;
(2) The natural tendency of such affirmation or promise is to induce
the buyer to buy;
(3) The buyer buys the thing relying thereon. [Art. 1546]
(4) Made before the sale not upon delivery or any other point
 An express warranty can be made by and also be binding on the seller
even in the sale of a second hand article. [Moles v. IAC, 1989]
Express Warranty
 What is specifically represented as true in said document cannot be considered as
mere dealer's talk. [Moles v. IAC, 1989]
Dealer’s or Trader’s Talk
a) Affirmation of the value of the thing or statement of the seller’s opinion only is
not a warranty unless:
1) The seller made it as an expert;
2) It was relied upon by the buyer. [Art.1546]
(b) Ordinarily, what does not appear on the face of the written instrument [Moles v.
IAC, 1989]
False Representation
 When concealment of facts comes with an active misstatement of fact or a partial
statement of fact such that withholding of that unsaid portion makes that which is
stated absolutely false
 However, buyer who fails to inspect condition of property despite ample opportunity
to do so when there is no opposition on the part of seller to inspect cannot later on
allege false representation. [
 Reason: buyer’s duty to inspect remains despite false representation by the seller; he
has the duty to exercise due diligence. (Res Perit Domino)
 Warranties
IMPLIED WARRANTIES – ART. 1547
(1) Implied Warranty of Title
(2) Implied Warranty against Encumbrance/NonApparent Servitudes
(3) Implied Warranty against Hidden Defects [Art. 1547]
(a) Implied warranty as to Merchantable Quality and Fitness of Goods
(b) Implied warranty against Redhibitory Defect in the Sale of Animals [Art. 1572]
(c) Quality and Fitness of Goods in Sale by Sample or Description
(4) Other Warranties
IMPLIED WARRANTY OF TITLE
(1) Implied warranty arises by operation of law and need not be stipulated in the contract of sale.
(2) Warranty of Seller’s Right to Sell: Seller warrants his right to sell at the time the ownership is to pass.
(a) Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue
of authority in fact or law. [Art. 1547]
(3) Warranty against Eviction: seller warrants that buyer, from the time ownership passes, shall have and enjoy
legal and peaceful possession of the thing. Its requisites are:
(a) Buyer is deprived of the whole or a part of the thing sold;
(b) Eviction is by final judgment
(c) Final judgment based on a right prior to the sale or an act imputable to the vendor
(d) Seller is summoned and made co-defendant in the suit for eviction at the instance of the buyer. [Power
Commercial and Industrial Corp. v. CA, 1997]
 Warranties
IMPLIED WARRANTY AGAINST ENCUMBRANCE/NONAPPARENT SERVITUDES
Requisites for breach:
(1) Thing sold is an immovable
(2) Burden or servitude encumbering the thing sold is:
(a) Non-apparent to the naked eye
(b) Not mentioned in the agreement
(c) Of such nature that it must be presumed that the buyer would not have bought it had he
been aware of it
(d) Not recorded in the Registry of Property unless there is an express warranty that the thing is
free from all burdens and encumbrances [Art.1560]
IMPLIED WARRANTY AGAINST HIDDEN DEFECTS
Requisites for breach:
(1) The defect renders the thing sold unfit for the use for which it was intended OR diminishes its
fitness for such use to such an extent that had the buyer been aware thereof, he would not have bought
it or would have paid a lower price;
(2) The defect is not patent or visible;
(3) The buyer is not an expert who, by reason of his trade or profession, should have known the
defect
(4) The seller is aware of the hidden fault or defect, OR even if he is not aware thereof, if there is no
stipulation to the contrary [Arts.1561 &1566]
 Warranties
IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF
GOODS Merchantable Quality:
(1) Where the goods are brought by description from a seller who deals in
goods of that description [Art.1562]
(2) In a sale by sample, if the seller is a dealer in goods of that kind and
the defect is not apparent on reasonable examination of the sample [Art.1566]
IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF
ANIMALS (ART. 1572)
Redhibitory defect- a hidden defect of animals of such nature that expert
knowledge is not sufficient to discover it, even in a case where a professional
inspection has been made
 No warranty in case of [Art. 1574]:
(a) Animals sold at fairs or public auctions
(b) Livestock sold as condemned
 Warranties
The following sales are void [Art. 1575]:
(a) Sale of animals suffering from contagious diseases
(b) Sale of animals unfit for the purpose for which they are acquired as
stated in the contract
 Veterinarian liable if he fails to discover or disclose the hidden defect
through ignorance or bad faith [Art 1576]
 Seller liable if animal dies within 3 days after its purchase due to a
disease that existed at the time of sale. [Art 1578]
EFFECTS OF WARRANTIES
(1) Natural tendency is to induce buyer to purchase the subject
matter
(2) Buyer purchases subject matter relying thereon
(3) Seller liable for damages in case of breach
 Warranties
EFFECTS OF WAIVERS
 Only applicable to waiver of warranty against eviction; parties may
increase or decrease warranty against eviction but the effect depends
on good/bad faith of the seller:
(1) Seller in bad faith and there is warranty against eviction – null
and void
(2) Buyer without knowledge of a particular risk and made general
renunciation of warranty – not waiver but merely limits liability of seller in
case of eviction (pay value of subject matter at the time of eviction)
(3) Buyer with knowledge of risk of eviction assumed its
consequences and made a waiver – vendor not liable
(4) Waiver to a specific case of eviction – wipes out warranty as to
that specific risk but not as to eviction caused by other reasons
 Warranties

BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY – ART.

1599
I - EXPRESS WARRANTY
(1) Prescriptive period: Period specified in express warranty OR 4
years, if no period is specified (following the general rule on rescission of
contracts)
(2) Remedies:
(a) Accept goods + demand diminution/ extinction of price
(b) Accept goods + damages
(c) Refuse to accept goods + damages
(d) Rescind (Refuse to accept or return or offer to return) +
recover price paid
 Warranties
BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY – ART. 1599
EXPRESS WARRANTY
3) Rescission not available when buyer:
(a) Knew of breach of warranty when he accepted the goods without protest
(b) Fails to notify the seller about election to rescind within a reasonable period
of time
(c) Fails to return or offer to return the goods to the seller in substantially a good
condition as they were when delivered, unless deterioration was due to breach of
warranty
(4) Measure of damages: Difference between value of goods at the time of delivery
and the value they would have had if they had answered to the warranty
(5) Effects of rescission:
(a) Buyer no longer liable for price - Entitled to the return of any part of price
paid, concurrently with or immediately after an offer to return the goods
(b) If seller refuses to accept offer to return goods: buyer deemed as bailee for
seller and has right of lien to secure payment of part of price paid
 Warranties
Total Eviction
 Enforce liability for eviction
 Demand from seller:
(a) Value of thing sold at time of eviction
(b) Income or fruits, if he has been ordered
to deliver them to the party who won the
eviction suit
(c) Costs of eviction suit and in a proper
case, suit against seller for warranty
(d) Expenses of the contract, if buyer has
paid them
(e) Damages and interests, and ornamental
expenses, IF sale was made in bad faith
Partial Eviction
Enforce liability (demand Value;
Income or fruits; Cost of eviction;
Expenses & Damages VICED) OR
Rescind
(a) If he would not have bought
the thing sold without the part lost;
(b) BUT he must return the
thing without other encumbrances
than those which it had when
 Warranties
(1) Rules: (Warranties against eviction)
(a) Buyer need not appeal from decision to hold seller liable for eviction
(b) When adverse possession commenced before sale, but prescription
period completed after transfer: seller is not liable
(c) If property sold for nonpayment of taxes due and not made known to
the buyer before the sale: seller liable
(d) Judgment debtor also responsible for eviction in judicial sales,
unless it is otherwise decreed in the judgment
(2) If there is waiver of warranty:
(a) Seller acted in bad faith: Waiver is void, seller liable for eviction
(b) Buyer made waiver without knowledge of risks of eviction: Seller liable
only for the value of the thing sold at time of eviction
(c) Buyer made waiver with knowledge of risks: Seller not liable; buyer
assumed the consequences
 Warranties

IMPLIED WARRANTY AGAINST ENCUMBRANCES [ART. 1560]

(1) Rescission: Within 1 year from execution of deed of sale OR
(2) Damages: Within 1 year from execution of deed of sale or
discovery of the burden or servitude
IMPLIED WARRANTY AGAINST HIDDEN DEFECTS [ARTS.1567-1571]
(1) If thing is not lost:
(a) Withdraw from contract (accion redhibitoria) + damages
(b) Demand a proportionate reduction of the price
(accion quanti minoris) + damages
(2) If thing is lost: Due to hidden fault
 Warranties
(2) If thing is lost:
Due to fortuitous event
Due to hidden fault or fault of buyer
If seller aware of defect, buyer may Demand:
demand: (a) Price paid minus value of thing
(a) Return of price when it was lost
(b) Refund of expenses (b) Damages, if seller acted in bad faith
(c) Damages Demand
(a) Buyer may demand price and
expenses BUT NOT damages

Prescriptive period: 6 months from

delivery
 Warranties
IMPLIED WARRANTY AGAINST REDHIBITORY DEFECTS OF ANIMALS
(1) Remedies
(a) Withdraw from contract + damages
(b) Demand a proportionate reduction of the price + damages
(2) If sale is rescinded:
(a) Buyer must return animal in the condition in which it was sold and
delivered
(b) Buyer shall be liable for injury due to his negligence.
(3) Prescriptive period: 40 days from delivery

WARRANTY IN SALE OF CONSUMER GOODS [ RA 7394, SEC .68 ]

If implied warranty accompanies express warranty, both will be of equal
duration.
 Breach of Contract
General Remedies [Art. 1191, CC]
 The following remedies arise from the bilateral nature of the contract of sale:
(1) Specific performance
(2) Rescission
General rule:
Rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental breach as would defeat the very
object of the parties in making the agreement. [Song Fo & Co. vs. Hawaiian-
Philippine Co., 1925]
(3) Damages Neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him [Art
1169, CC]
 Prescriptive periods
(1) 10 years if based on written contract
(2) 6 years if based on oral contract
 Breach of Contract
REMEDIES OF THE SELLER – ARTS. 1636, 1594
(1) SALE OF MOVABLES
Extrajudicial or Self-Help Remedies- No need to resort to the courts as long as
possession of the goods has not yet passed to the buyer
(a) Possessory lien over the goods Right to retain possession of goods until
payment or tender of the whole price, or unless he agrees to sell on credit [Arts.
15261529, 1503, 1535]
(b) Right of stoppage in transitu An extension of the lien for the price; entitles
unpaid seller to resume possession of the goods while they are in transit before the
goods come in possession of the vendee [Arts. 1530-1532, 1535, 1636[2]]
(c) Special right of resale Available to unpaid seller who has a right of lien or who
has stopped the goods in transitu [Art. 1533]
d) Special right to rescind: RETURN of the title over the undelivered goods to the
seller, and right to recover DAMAGES for breach of contract [Art. 1534]
(e) When the whole of the price has not been paid or tendered;
(f) When a bill of exchange or other negotiable instrument has been received as
conditional payment and the condition on which it was received has been broken by
reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.
 Breach of Contract
Possessory lien over the goods
When available:
(1) Goods are sold without stipulation as to credit
(2) Goods are sold on credit, but term of credit has expired
(3) Buyer becomes INSOLVENT
When lost: (when remedy not available)
(1) Seller delivers goods to carrier or other bailee for transmission to the
buyer under a straight or non-negotiable bill of lading
(2) Buyer/his agent lawfully obtains possession of goods
(3) Seller waives it
(a) But it is not lost with respect to the remainder of the goods when only
partial delivery is made (unless such is symbolic delivery of the whole)
(b) It is not lost by the mere fact that seller obtained a judgment for the price
When revived:
Goods are returned by the buyer in a wrongful repudiation of the contract
 Breach of Contract
Right of stoppage in transitu
Available when: Vendee becomes INSOLVENT
 When are goods in transit?
(1) From the time of delivery to the carrier or other bailee by the seller, for
the purpose of transmission to the buyer, until the buyer or his agent takes
such delivery from the carrier.
(2) Even when goods have reached their ultimate destination, if buyer
rejects them and carrier retains possession (a) To terminate transit by delivery
to a middleman, delivery must be to keep, not to transport.

 When are goods no longer in transit?

(1) Buyer obtained delivery of the goods before they have reached their
ultimate destination
(2) Goods have arrived at ultimate destination, but carrier refuses to
deliver
(3) Carrier enters into a new contract with the buyer upon arrival of the
goods at their ultimate destination
 Breach of Contract
Right of stoppage in transitu
How exercised?
(1) By obtaining actual possession of the goods
(2) By giving notice of his claim to the carrier/other bailee who has
possession of the goods
(a) Carrier must redeliver goods to seller, or according to his
instructions
(b) Carrier not obliged to redeliver until the negotiable document of
title, if any, has been surrendered for cancellation
 Seller’s right to stoppage in transitu is not affected even if buyer has
sold or disposed of the goods unless the seller has given his assent
thereto.
 Breach of Contract
Special right of resale
• Available to unpaid seller who has a right of lien or who has stopped
the goods in transitu [Art. 1533]
• Purpose:
For seller to liquidate his damages
(1) He must do so within a reasonable time and in such manner as
to obtain the best price possible.
(2) Resale is deemed to be a fair sale if it is undertaken in
accordance with established business practices, with no attempt to take
advantage of the original buyer.
(3) Resale may be in a private or public sale, but seller cannot buy
directly or indirectly. (4) For resale to be valid, buyer need not be notified
of an intention to resell or the time and place of the resale.
 Breach of Contract
Special right of resale

 Effects:
(1) Seller is no longer liable to the original buyer upon the contract of
sale or for any profit made by the resale
(2) Buyer at resale acquires good title as against the original owner
(3) In case resale is at a loss, seller is entitled to recover the difference
from the original buyer
(4) Seller may recover damages from original buyer for breach of
contract
 Breach of Contract
Special right to rescind:
RETURN of the title over the undelivered goods to the seller, and right to
recover DAMAGES for breach of contract [Art. 1534]
Available to unpaid seller who has a right of lien or who has stopped the
goods in transitu
When available:
(1) Seller expressly reserved his right to rescind in case buyer defaults
(2) Buyer has been in default in payment for an unreasonable time

Transfer of title shall not be held to have been rescinded by the unpaid
seller until he manifests by notice to the buyer or some other overt act an
intention to rescind.
 RECTO LAW: SALE OF MOVABLES ON INSTALLMENT
RECTO LAW ARTS. 1484 – 1486
 Applies in cases of:
(1) Sale of movables in installment
(a) The rule is intended to apply to sales of movables, the price of
which is payable in 2 or more installments, but not to straight-term
sales where the price is payable in full, after making a down
payment because the law aims to protect improvident buyers who
may be tempted to buy beyond their means. [Levy Hermanos vs.
Gervacio, 1939]
(2) Lease of personal property with option to buy
(a) When lessor has deprived the lessee of the possession or
enjoyment of the thing (Ex.: When lessor files a complaint
for replevin against lessee)
(b) Also applies when seller assigns his credit to someone else
 RECTO LAW: SALE OF MOVABLES ON INSTALLMENT
RECTO LAW ARTS. 1484 – 1486

 Alternative Remedies of the unpaid seller under Recto Law

(1) Specific Performance
(2) Cancellation of sale: If vendee fails to pay 2 or more installments
(a) When the seller cancels the sale by repossessing the
property sold, he is barred from exacting payment for its price.

(3) Foreclosure of Chattel Mortgage: If vendee fails to pay 2 or

more installments
 RECTO LAW
Foreclosure of Chattel Mortgage:
 If vendee fails to pay 2 or more installments
(a) If seller chooses this remedy, he shall have no further action to recover any
unpaid balance, and any stipulation to the contrary shall be void
(b) What Art 1484 (3) prohibits is “further action against the purchaser to recover any
unpaid balance of the price;” and although this Court has construed the word “action” to
mean “any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be
enabled to exact recovery of the supposed unsatisfied balance of the purchase price from
the purchaser or his privy,” there is no occasion at this stage to apply the restrictive
provision of the said article because there has not yet been a foreclosure sale resulting in
a deficiency. The payment of the sum of P1,250 of Sapinoso was a voluntary act on his
part and did not result from a “further action” instituted by Northern Motors. [Motors vs.
Sapinoso, 1970]
(c) The purpose of the law is to remedy the abuses committed in foreclosure of
chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it
at foreclosure sale for a low price and then bringing the suit against the mortgagor for a
deficiency judgment. The almost invariable result of this procedure was that the mortgagor
found himself minus the property and still owing practically the full amount of his original
indebtedness. [Bachrach Motor Co., Inc. v. Millan, 1935]
(d) Remedies are ALTERNATIVE, not cumulative, i.e. exercise of one bars exercise
of the others. [Nonato vs. IAC, 1985]
 SALE OF IMMOVABLES
SALE OF IMMOVABLES
(A) PD 957, sec. 23, 24 Non-forfeiture of payments
(1) No installment payment made by the buyer shall be forfeited in
favor of the owner or developer of the condominium or subdivision project,
after due notice, when the buyer desists from paying due to the failure of
the developer or owner to develop the project according to the approved
plans or within the time limit stated.
(2) Buyer’s Remedy: At his option, he may reimburse the total
amount paid including amortization interest with interest thereon at the
legal rate
(3) If the buyer fails to pay the installments for reasons other than
the failure of the owner or developer to develop the project, his rights shall
be governed by RA 6552.
(B) MACEDA LAW
 SALE OF IMMOVABLES

Maceda Law: Sale of Immovables on Installment

 RA 6552: An Act To Provide Protection for Buyers of Real Estate on
Installment Payments

 DOES not apply to:

(1) Industrial lots
(2) Commercial buildings
(3) Sale to tenants under Agricultural Reform Code [RA 3844]
 SALE OF IMMOVABLES
Maceda Law: Sale of Immovables on Installment
 Imposes ADDITIONAL REQUIREMENTS FOR A VALID RESCISSION:
(1) If buyer has paid at least 2 years of installments: (GRN)
(a) Grace period: 1 month per year of installment payments made. BUT
buyer may only avail of it only once in every 5 years
(b) Refund of Cash Surrender Value (CSV): 50% of total amount paid + 5%
for every year after the 1st 5 years of installments i. BUT not greater than
90% of total amount paid
(c) Notice of cancellation of demand for rescission by notarial act is effective
30 days from the buyer’s receipt thereof and upon full payment of CSV
(2) If buyer has paid less than 2 years: (GN)
(a) Grace period: at least 60 days
(b) Notice of cancellation or demand for rescission by notarial act, effective
30 days upon receipt thereof
(3) Down payments, deposits, or options on the contract shall be included in the
total number of installments made
 MACEDA LAW

ADDITIONAL REQUIREMENTS FOR A VALID RESCISSION:

(4) Seller may go to court for judicial rescission in lieu of a notarial act of
rescission
(5) During the grace period, buyer shall have the right:
(a) To sell or assign his rights, to be evidenced in a notarial
instrument
(b) To update his account
(c) To pay in advance any installment, or the full unpaid balance of
the price, without any interest
In the sale of immovables
(1) Rescission for Anticipatory Breach [Art. 1591]
(a) Available when seller has reasonable grounds to fear the loss of the immovable property sold
and its price
(b) Example: Buyer destroys the building sold, there being no security therefor, and buyer
becomes insolvent
(c) Court has no discretion to compel the seller to wait for the expiration of the period to pay, or
to grant the buyer more time to pay
(2) Specific Performance + Damages [Art. 1191]
(a) Seller may choose b/n specific performance and rescission, with damages in either case
(b) Court has discretion, for a just cause, to give the buyer more time to pay even if the seller
chooses rescission
(3) Rescission + Damages [Art. 1191]
(a) If seller chose specific performance, and such becomes impossible, he may still avail of
rescission
(b) If absolute sale, seller must make a demand for rescission i. Judicially, OR ii. By a notarial act
(c) Necessary even if automatic rescission is stipulated
(d) Effect of lack of demand: Buyer can still pay
(e) Effect of demand: Court may not grant buyer a new term
 DOUBLE SALES – ART. 1544

DOUBLE SALES – ART. 1544

 General Rule: Prior tempore, potior jure (“he who is first in time is
preferred in right”) applies.
 Requisites [Cheng v Genato, 1998]:
(1) 2 or more valid sales;
(2) Same subject matter;
(3) 2 or more buyers with conflicting interests at odds over the rightful
ownership of the thing sold;
(4) Same seller
RULES GOVERNING SALE OF MOVABLES, I
(1) Sale of Movables Ownership shall be transferred to the person
who may have first taken possession in good faith.
 DOUBLE SALES – ART. 1544
2) RULES GOVERNING SALE OF IMMOVABLES AND UNREGISTERED
LANDS
(a) Ownership belongs to the person who:
1) In good faith first recorded it in the Registry of Property; OR
2) If there is no inscription, ownership passes to the person who in good
faith was first in possession; OR
3) In the absence thereof, to the person who presents the oldest title,
PROVIDED there is good faith.
“Oldest Title” – any public document showing acquisition of the land in good
faith. To constitute “title,” the transmission of ownership must appear in a public
document [Art. 1358 (1)]
(b) Registration includes any entry made in the Primary Entry Book of the
registry, including both registration in its ordinary and strict sense and
cancellation, annotation, and even marginal notes. [Cheng v. Genato, 1998] i.
Pencilled entries on the title are not considered registration [AFPMBAI v. Court
of Appeals, 1999].
 DOUBLE SALES – ART. 1544

(3) Sale by Virtue of Execution and Attachment Art. 1544 does NOT apply to
the sale of unregistered land at an execution sale because a buyer of
unregistered land at an execution sale only steps into the shoes of the judgment
debtor, and merely acquires the latter's interest in the property sold as of the
time the property was levied upon. [Carumba v. CA, 1970]

(4) Sale of Unregistered Land

(a) Instrument or deeds establishing, transmitting, acknowledging,
modifying or extinguishing rights with respect to lands not registered
under the Land Registration Act or the Spanish Mortgage Law, are
required to be registered in the Registry of Property to prejudice 3rd
persons, although such registration is understood to be “w/o prejudice to
a 3rd party with a better right”. [PD 1528 Sec 113]
(b) Art. 1544 applies to unregistered land subject to a conventional sale
(because of Art. 1358) but NOT to unregistered land subject to judicial
sale.
PROPERTY REGISTRATION DECREE

(1) REQUISITES FOR REGISTRATION OF DEED OF SALE IN GOOD FAITH

 Purchaser in good faith
(a) GeneralCharacteristics
One who buys the property of another, without notice that some
other person has a right to or interest in such property, and who pays a
full and fair price for the sale, at the time of the purchase or before he
has notice of the claim/interest of some other person in the property.
[Agricultural and Home Extension Development Group v CA, 1992]
(b) Presumption
General Rule: As a rule, he who asserts the status of a
purchaser in good faith and for value has the burden of proving such
assertion. This onus probandi cannot be discharged by mere
invocation of the legal presumption of good faith, i.e., that everyone is
presumed to act in good faith [Mathay v CA, 1998]
When buyer is presumed to be in bad faith:
1) Annotation of adverse claim: Places any subsequent buyer of the
registered land in bad faith. [Balatbat v CA, 1996]
2) Annotation of Lis Pendens: Buyer cannot be considered an innocent
purchaser for value where it ignored the lis pendens on the title.
3) A purchaser of a parcel of land cannot close his eyes to facts which
should put a reasonable man upon his guard, such as when the property
subject of the purchase is in the possession of persons other than the seller. A
buyer who could not have failed to know or discover that the land sold to him
was in the adverse possession of another is a buyer in bad faith. (Heirs of
Ramon Durano v Uy, 2010)
Lis Pendens vs Annotation of Adverse Claim
 Lis Pendens- May be cancelled even before the action is finally terminated
forcauses which may not be attributable to the claimant
Adverse Claim -May be cancelled only in one instance, i.e., after the claim
is adjudged invalid or unmeritorious by the Court .
Lis Pendens & Adverse claim:
 Both are intended to protect the interest of a claimant by notifying and
cautioning other persons that said property is subject to a claim.
 The two are not contradictory or repugnant to one another; nor does the
existence of one automatically nullify the other, and if any of the
registrations should be considered unnecessary or superfluous, it would
be the notice of lis pendens [A. Doronila Resources Development Inc v
CA, 1988]
(2) ACCOMPANIED BY VENDORS DUPLICATE CERTIFICATE OF TITLE,
PAYMENT OF CAPITAL GAINS TAX, AND DOCUMENTARY TAX
REGISTRATION FEES
Must be accompanied by:
(a) Vendor’s duplicate certificate of title
(b) Payment of capital gains tax – 6% of the selling price or zonal value,
whichever is higher
(c) Documentary tax registration fees – 1.5% of the selling price or zonal
value, whichever is higher
 Risk of Loss
RISK OF LOSS:
 GENERAL RULE – ARTS . 1263, 1189
 Res perit domino: Owner bears risk of loss
 BASIS: Ownership is not transferred until delivery.
 WHEN LOSS OCCURRED BEFORE PERFECTION Such loss is borne by
seller
 WHEN LOSS OCCURRED AT TIME OF PERFECTION – ARTS. 1493 AND
1494
 Loss must have occurred before the contract was entered into, without the
knowledge of both parties
 EFFECT OF LOSS OF THE SUBJECT:
Total Loss - Contract is ineffective.
 Because there can be no contract without an object
Partial Loss (Or loss which results in substantial change in character)
Buyer may withdraw from the contract OR Buy the remainder at a
proportionate price
 Risk of Loss

WHEN LOSS OCCURRED AFTER PERFECTION BUT BEFORE DELIVERY

 Seller bears risk of loss Buyer does not bear risk of loss until goods are
delivered to him
WHEN OWNERSHIP IS TRANSFERRED – ART. 1504
 WHEN OWNERSHIP IS TRANSFERRED TO THE BUYER, THE
GOODS ARE AT THE BUYER’S RISK
(1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership in the
goods has been retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the goods are at the
buyer’s risk from the time of such delivery
(2) Where actual delivery has been delayed through the fault of either
the buyer or seller the goods are at the risk of the party in fault. [Art 1504,
CC]
 Risk of Loss
Effect of Loss of Thing After Perfection but prior to Delivery
A] In sale of things other than “goods”
1) Non fungible goods
 Refer to the general rule – the vendor is freed from the obligation to
deliver the thing because the obligation is extinguished if the loss
occurs without his fault & before he incurs in delay.
In so far as the counter prestation of the vendee to pay:
o 2 Conflicting views:
 Tolentino: When a fortuitous event makes impossible the
performance of the obligation of one of the parties, the obligation
of the other is extinguished at the same time necessarily. As a
consequence the risk is imputed to the vender. He losses the
right to claim the price & the contract would be extinguished. This
follows the principle or res perit domino
 Risk of Loss
2 Conflicting views:
 Paras & Padilla: The vendor becomes exempt from his obligation to
deliver the thing sold but the contract subsits, & hence the vendee remains
obliged to pay the price, & cannot recover if he paid the same. Here it is the
buyer who assumes the risk.
NOTE: In Chrysler Phils Corporation vs CA (133 SCRA 567, 1984) the
court applied the general rule that before delivery, the risk of loss is
borned by the seller who is still the owner, under the principle of res
perit domino.
2) Fungible goods
a) If sale is made independently & for a single price, wto consideration of
their weight, number or measure: (same rule as non fungible goods)
b) If sold for a price fixed according to weight, number or measure: The
risk shall not be imputed to vendee until they have been weighed, counted, or
measured, & delivered, UNLESS THE VENDEE HAS INCURRED IN DELAY
(Article 1480 par 3)
 Risk of Loss
RULES IN SALE OF “GOODS”:
GENERAL RULE: The goods remain at the sellers risk until the
ownership therein is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are the buyer’s risk whether
actual delivery has been made or not (Article 1504 par 1 NCC) This rule
is in accord with the principle of res perit domino.
EXCEPTIONS: Rule does not apply in the following
1) When the contrary is expressly agreed (Article 1504 par 1 NCC)
2) When delivery of the goods has been made to the buyer or to the bailee for the
buyer, in pursuance of the contract & the ownership in the goods has been retained by
the seller merely to secure performance by the buyer of his obligations under the
contract, goods are at the buyer’s risk from the time of such delivery
3) Where actual delivery has been delayed through the fault of either the buyer or
seller the goods are at the risk of the party at fault.
4) Unless otherwise agreed, where the goods are sent by the seller to the buyer
under circumstances in which the seller knows or ought to know that it is usual to
insure: The seller must give notice to the buyer to enable him to insure them in transit,
& if the seller fails to do so, the goods shall be deemed to be at his rish during such
transit.
 Risk of Loss
 Goods
“Goods” includes all chattels, personal but not things in action. The term
includes growing fruits or crops.
 Specific goods
“Specific goods” means goods identified & agreed upon at the time the
contract of sale is made.
 Things in action
The bunndle of personal rights over property which can only be claimed or
enforced by action, and not by taking physical possession, for example, a cash
balance at a bank or money due on a bond.
 Fungible goods
•Movable goods which may be estimated and replaced accordingto weight,
measure, and number. Things belonging to a class,
• A description applied to items of which each unit is identical to every other
unit, such as in the case of grain, oil, or flour. Fungible goods are those that
can readily be estimated and replaced according to weight, measure, and
amount.
 Remedies of an Unpaid Seller

DEFINITION OF UNPAID SELLER – ART. 1525

A seller is considered to be an unpaid seller if the whole price has not
been paid or tendered, or when check received as a conditional payment
was dishonored by non-payment or insolvency of the buyer [Baviera]
Term also includes:
(1) The agent of the seller to whom the bill of lading was endorsed,
(2) The consignor or agent who had paid the price or is responsible for
the price
(3) Any other person who is in the position of a seller (i.e. buyer who
paid the price and had a right to return the goods). [Baviera]
 Remedies of an Unpaid Seller
REMEDIES OF UNPAID SELLER
JUDICIAL REMEDIES OF AN UNPAID SELLER
(1) Action for the price or specific performance [Art. 1595]—
Conditions:
(a) The goods has passed to the buyer
(b) Price is payable on a certain day, irrespective of delivery of the
goods
(c) Buyer can set up the defense that seller could not or did not intend
to deliver the goods
(d) Seller was notified by the buyer of his repudiation of the contract
after the seller has completed the manufacture of the goods or had
procured the goods to be delivered and the goods could not readily be
resold for a reasonable price
 Remedies of an Unpaid Seller
(2) Action for damages for non-acceptance, if buyer wrongfully neglects or
refuses to accept and pay for the goods (Art. 1596)
Measure of damages: Estimated loss directly and naturally resulting in
the ordinary course of events from the buyer’s breach
(a) Where there is available market for goods: Difference between the
contract price and the market price at the time the goods ought to have
been accepted or if no time was fixed, at the time of refusal to accept
(b) If the resale was made with diligence: resale price is evidence of
market value, taking into account whether or not the goods could be
readily sold
(c) Where labor/expense was necessary for seller to fulfill his obligation:
Labor performed and expenses made by seller before receiving notice of
buyer’s repudiation or countermand
d) Profit that the seller would have made if sale had been fully
performed
 Remedies of an Unpaid Seller

(3) Rescission by giving the buyer notice of the election to rescind [Art. 1597]
 Under this rule, rescission would bar an action on the contract because it means
cancellation of the contractual obligations between the parties. [Baviera]
(4) Special rule for sale of movables by installments – Recto Law [Arts. 1484, 1485]
 Applies in cases of:
(a) Sale of movables in installment
1) The rule is intended to apply to sales of movables, the price of which is
payable in two or more installments, but not to straight-term sales where the price
is payable in full, after making a down payment because the law aims to protect
improvident buyers who may be tempted to buy beyond their means. [Levy
Hermanos vs. Gervacio, 1939]
(b) Lease of personal property with option to buy
1) When lessor has deprived the lessee of the possession or enjoyment of
the thing (Ex.: When lessor files a complaint for replevin against lessee)
2) Also applies when seller assigns his credit to someone else
 Performance of Contract
DELIVERY OF THING SOLD
(1) SALE OF MOVABLES – ARTS. 1522, 1537, 1480
(a) When Quantity less than expected i. Buyer may reject all ii. Buyer
accepts with knowledge of seller’s inability to deliver the rest – buyer pays at
contract price iii. Buyer has used or disposed prior to knowing seller’s inability to
deliver the rest – buyer pays fair value
(b) Quantity more than expected i. If divisible, buyer may reject excess ii.
If indivisible, buyer may reject all
(c) Quality different or different goods i. If divisible, buyer may accept the
goods compliant with contract and reject those that are not ii. If indivisible,
buyer may reject all [Art. 1522]
(d) Sale of specific mass of goods i. In the sale of fungibles where the
measure or weight has not been agreed upon nor is there a fixed rate based
upon a measurement, the subject matter of the sale is a determinate object –
the specific mass; seller is merely required to deliver such mass even if actual
quantity falls short of parties’ estimate [Art. 1480]
(e) Delivery by installments i. By default, buyer is not bound to accept
delivery of goods by installments
 Performance of Contract
Delivery by installments
1) By default, buyer is not bound to accept delivery of goods by installments
2) In a contract of delivery by installment to be paid by installment as well, delay or
breach may not necessarily mean breach of the entire contract; depending on the
circumstances, breach may be severable and the aggrieved party is entitled to
damages and not rescission. [Art. 1583]
(2) SALE OF IMMOVABLES – ARTS. 1539, 1543
(a) Sale at a fixed rate per unit of measure
1) Seller bound to deliver entire land
2) If the area is less than that stated, buyer may rescind or demand a
proportionate reduction in price
3) If a part of the land is not of the quality stated in the contract, buyer may
rescind or demand a proportionate reduction in price
4) Buyer may only avail of rescission if the area deficiency is 10% or more of
total area or if the inferior value of the part of the land exceeds 10% of the price
agreed upon. [Art. 1539] v. If the area turns out to be greater than that stated, buyer
may accept area included and reject the excess or accept all and pay a proportionate
increase in price [Art. 1540]
 Performance of Contract

b) Sale for a lump sum

1) Follows the same rule as the sale of a specific mass which is
explained above
2) There is no change in price even if area or number turns out to be
greater or lesser than that stated [Art. 1542]
3) Exception: when the excess or deficiency is no longer reasonable
[Asian v Jalandoni, 1923: 644 m2 was unreasonable]
4) Exception to the exception: when buyer expressly assumes risk on
actual area of the land. [Garcia v Veloso, 1941]
5) If the price per unit or measure is not provided for in the contract,
then the rules of lump sum sale should prevail. [Sta. Ana v Hernandez,
1966]
 Performance of Contract
(3) INSPECTIONS AND ACCEPTANCE
Inspections Right of Inspection: The buyer has reasonable opportunity to
examine the goods upon delivery. If there is a stipulation that delivery is
preconditioned on payment, then buyer has no right of inspection until he has
paid. [Art.1584]
Exception: in case such right of inspection is permitted by agreement or usage
of trade.
Acceptance
Accept Delivery—
(1) Form
(a) Express: buyer intimates acceptance
(b) Implied:
1) Goods are delivered to the buyer and he does any act in relation
to the goods delivered that is inconsistent with the ownership of the seller.
2) After the lapse of a reasonable time, the buyer retains the goods
without intimating to the seller that he has rejected them. [Art.1585]
 Performance of Contract

(2) Effect of Refusal to accept

(a) If buyer refuses to accept 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
1) If he voluntarily constitutes himself a depositary of the
goods, he shall be liable as such. [Art.1587]
2) Unjust refusal to accept still results to transfer of
ownership. In such case, title to the goods passes to the buyer
from the moment they are placed at his disposal, except if
ownership has been reserved by the seller [Art.1588]
 PAYMENT OF PRICE

PAY THE PRICE OF THE THING SOLD (ART. 1582)—

 Payment of interest: Buyer is liable for interest when:
(1) Interest is stipulated;
(2) Thing sold produces fruits or income;
(3) Buyer is in default - interest accrues from the time of judicial or
extrajudicial demand for payment.
 TIME & PLACE OF PAYMENT:
a) The time and place of payment shall be that which is fixed in the
contract.
b) In the absence of stipulation, it must be made at the time and
place of delivery of the thing sold (Article 1582 par 2 NCC)
 Obligation to Pay the Price
Suspension of payments: Buyer may suspend payment when:
(1) His ownership or possession of the thing is disturbed; OR
(2) He has reasonable grounds to fear such disturbance by a vindicatory action or a
foreclosure of mortgage
Buyer may suspend payment of the price until the vendor has caused the
disturbance or danger to cease
Exceptions: buyer cannot suspend payment when:
(1) Seller gives security for the return of the price in a proper case
(2) It has been stipulated that, notwithstanding any such contingency, the buyer shall
be bound to pay [Art. 1590]
(a) Suspension may continue until the seller has caused the disturbance or danger
to cease
(b) However, a mere act of trespass shall not authorize the suspension of the
payment. [Art.1590]
 PAYMENT OF PRICE
Rule in sale of subdivision lots or condominium units:
 For failure of the owner developer to develop the subdivision or condominium
project according to the approved plans & within the time limit for complying the
same, THE BUYER MAY EXERCISE THE FOLLOWING ALTERNATIVE REMEDIES:
1) He may suspend payment & wait for further development;
• In case of the first option, the owner/ developer may not forfeit instalment
payments made by the buyer (Section 23, PD 957)
•And the buyer may not be ousted from the subdivision
2) He may demand reimbursement of the total amount paid.
• In case of option # 2 , the notice informing the developer of the intention
not to remit further payments on account of non-development of the
subdivision, & the demand for refund, can be made at the same time.
 PAYMENT OF PRICE
Sale of real property
(1) In the sale of immovable property, buyer may pay even beyond the expiration of the
period agreed upon, as long as no demand for rescission of the contract has been made
upon him either judicially or by a notarial act, despite a stipulation providing for ipso jure
rescission [Art.1592]
(2) After demand, court may not grant him a new term [Heirs of Escanlar, et.al. v. CA,
1997]
(3) R.A. 6552 (Maceda Law) applies to sale or financing of real estate on installment
[Rillo v. Court of Appeals,1997]
(a) Buyer is awarded a grace period of 1 month per year of installments paid or 60 days,
whichever is higher, within which he may pay without additional interest
 May be used once every 5 years of the life of the contract or any of its extensions
(b) If contract is to be cancelled, seller must first:
 Given a 30-day notice of cancellation, and
. Refund cash surrender value to buyer;
 CSV is equivalent to 50% of total payments made including deposits, options and
down-payments plus 5% for every year in excess of 5 years of the life of the contract
or any of its extensions.
 PAYMENT OF PRICE
EFFECT OF FAILURE TO PAY WITHIN THE PERIOD STIPULATED:
A] In sale of Immovable Property:
 Even though it may have been stipulated that upon failure to pay the price at
the time agreed upon the rescission of the contract shall of right take place, the
VENDEE may pay, even after the period, AS LONG AS NO DEMAND, either
judicially of by notarial act, FOR RESCISSION OF THE CONTRACT HAS BEEN MADE
UPON HIM.
 After the demand, the court may not grant him a new term (Article 1592 NCC)
 An offer to pay prior to the demand for remission is sufficient to defeat the
seller’s right to rescind under Article 1592 of the iCivil Code
Rescission must be either judicial or by notarial act. A letter informing the
buyer of the automatic rescission does not amount to a demand for rescission if
it is not notarized
Article 1592 is not applicable to contract to sell
In contracts to sell over immovable property, the Maceda Law applies.
 Prescriptive period of action for rescission in Article 1592. Article 1144 apples,
which provides that the action upon a written contract is 10 years.
 PAYMENT OF PRICE
B] IN SALE OF MOVABLE PROPERTY:
RULE: The rescission of the sale shall of right take place in the interest of the
vendor IF”
 Vendee should not have appeared to receive the thing, upon the
expiration of the period fixed for the delivery of the thing.
If having appeared, he did not tender the price at the same time, unless a
longer period has been stipulated for its payment.
 Extinguishment of Sale
CAUSES – ARTS. 1600, 1231
 Generally, extinguished by the same causes as all other obligations [Arts.1600, 1231]
(1) Payment/performance
(2) Prescription
(3) Loss of thing due
(4) Annulment
(5) Novation
(6) Condonation/remission
(7) Confusion/merger
(8) Compensation
(9) Rescission
(10) Resolutory condition fulfilled
(11) Redemption (Conventional or Legal)
 CONVENTIONAL REDEMPTION – ART. 1601
CONVENTIONAL REDEMPTION
DEFINITION:
(1) Vendor reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which may have
been agreed upon. [Art 1601,CC]
(2) Available when the seller reserves the right to repurchase the thing sold in the
same instrument of sale as one of the stipulations of the contract [Villarica v CA, 1968]
PERIOD General Rule:
 Follow period stipulated in contract, but should not exceed 10 years.
(1) If no period stipulated, then it shall be four years from the execution of the
contract
(2) But vendor may still exercise the right to repurchase within thirty days from
the time final judgment was rendered in a civil action on the basis that the contract
was a true .
 CONVENTIONAL REDEMPTION
BY WHOM EXERCISED
(1) Vendor
(2) His heirs, assigns or agents
(3) Creditor, if he has exhausted the property of the vendor
(4) Co-owners of an immovable, if they sold their interests to the same person, may only redeem
their respective shares
(a) Vendee cannot be compelled to agree to a partial redemption
(b) If the co-owners sold their interest to the same person who previously bought the share of
a co-owner subject to a right of redemption, then the latter may be compelled to redeem the whole
property
FROM WHOM TO REDEEM
(1) Vendee a retro
(2) His heirs, assigns or agents
(3) Subsequent purchaser of property, even if the right to redeem was not mentioned in the
subsequent contract; except if registered land, where the right to redeem must be annotated on the
title
(4) If several heirs, then the right of redemption can be exercised against each heir for his share of
the property
 CONVENTIONAL REDEMPTION
HOW EXERCISED
(1) By returning the ff. to the buyer:
(a) Price of the sale;
(b) Expenses of the contract and other legitimate payments made by
reason of the sale;
(c) Necessary and useful expenses made on the thing sold (2) Complying
with any other stipulation agreed upon, if any.
 The general rule in redemption is that it is not sufficient that a person offering
to redeem manifests his desire to do so. The statement of intention must be
accompanied by an actual and simultaneous tender of payment for the full
amount of the repurchase price. [BPI Family Savings Bank, Inc. v. Veloso, 2004]
 Tender of payment is enough (i.e., consignation is not necessary), if made on
time, as a basis for action against the buyer to compel him to resell. But that
tender does not in itself relieve the buyer from his obligation to pay the price
when redemption is allowed by the court. [Paez v. Magno, 1949]
 CONVENTIONAL REDEMPTION
EFFECT OF REDEMPTION
(1) The seller shall receive the thing free from all charges or mortgages
constituted by the buyer BUT he shall respect leases executed by the buyer in
good faith and in accordance with local custom.
(2) If there are growing fruits at the time of sale and at the time of
redemption: no reimbursement or prorating if the buyer did not pay indemnity
at the time of sale
(3) If there were no growing fruits at the time of sale, but some exist at the
time of redemption: fruits prorated (buyer entitled to part corresponding to
time he possessed the land in the last year, counted from the anniversary of the
date of sale)
EFFECT OF NON-REDEMPTION Ownership is consolidated in the buyer BUT the
consolidation shall not be recorded in the Registry of property without a judicial
order, after the vendor has been duly heard.
 RIGHT TO REDEEM VS. OPTION TO PURCHASE (VILLANUEVA)
Right to Redeem Option to Purchase
Right to Redeem Not a separate contract
Not a separate contract but part of a main Generally a principal contract and may be
contract of sale, and cannot exist unless created independent of another contract
reserved at the time of the perfection of the
main contract of sale
Does not need its separate consideration to be Must have a consideration separate and
valid distinct from the purchase price to be valid and
effective [Arts. 1324 and 1479]
The maximum period for the exercise of the The period of the option contract may be
right to repurchase cannot exceed 10 years beyond the 10-year period
Requires in addition a tender of payment of the May be exercised by notice of its exercise to the
amount required by law, including consignment offeror
thereof if tender of payment cannot be made
effectively on the buyer
 EQUITABLE MORTGAGE – ARTS. 1602 - 1604
Definition:
 An equitable mortgage is defined as one which, although lacking in some
formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to law. [Molina
v. CA, 2003]
The Valdehuezas having remained in possession of the land and the realty
taxes having been paid by them, the contracts which purported to be pacto de
retro transactions are presumed to be equitable mortgages, whether
registered or not, there being no third parties involved. [Tan v. Valdehueza,
2003]
A pactum commissorium is a stipulation enabling the mortgagee to acquire
ownership of the mortgaged properties without need of foreclosure
proceedings which is a nullity being contrary to the provisions of Article 2088
of the Civil Code. The inclusion of such stipulation in the deed shows the
intention to mortgage rather than to sell. [Legaspi v. Spouses Ong, 2005]
 EQUITABLE MORTGAGE
 A pactum commissorium is contrary to the nature of a true pacto de retro sale
since ownership of the property sold is immediately transferred to the vendee
a retro upon execution of the sale, subject only to the repurchase of a vendor
a retro within the stipulated period.
PRESUMPTION THAT A CONTRACT IS AN EQUITABLE MORTGAGE ARISES WHEN
— ART. 1602
(1) Price unusually inadequate;
(2) Possession retained by the seller as lessee or otherwise;
(3) Period of redemption extended (or granted anew) upon or after the
expiration of the right to repurchase;
(4) Part of the purchase price retained by the seller;
(5) Payment of taxes on the thing sold borne by the seller;
(6) Any other case where it may be fairly inferred that the Real intention of
the parties is for the transaction to secure a debt or other obligation.
 EQUITABLE MORTGAGE
FOR THE PRESUMPTION OF AN EQUITABLE MORTGAGE TO ARISE UNDER ART.
1602, 2 REQUISITES MUST CONCUR (MOLINA V. CA, 2003)
(1) That the parties entered into a contract denominated as a contract of
sale, and
(2) That their intention was to secure an existing debt by way of a mortgage.
 In case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage [Art. 1603]
RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE
(1) Circumvention of usury law
(2) Circumvention of prohibition against pactum commissorium – creditor
cannot appropriate the things given by way of pledge or mortgage since remedy
is foreclosure.
 EQUITABLE MORTGAGE
REMEDIES OF APPARENT VENDOR
(1) If the instrument does not reflect the true agreement: remedy is
reformation
(2) If decreed to be an equitable mortgage: any money, fruits or other benefit
to be received by the buyer as rent or otherwise considered as interest.
(3) If decreed as a true sale with right to purchase: seller may redeem within
30 days from finality of judgment, even if the period for redemption has expired.
PERIOD OF REDEMPTION – ART. 1606 Art. 1606.
 The right referred to in Article 1601, in the absence of an express agreement,
shall last four years from the date of the contract.
 Should there be an agreement, the period cannot exceed ten years.
 However, the vendor may still exercise the right to repurchase within thirty
days from the time final judgment was rendered in a civil action on the basis
that the contract was a true sale with right to repurchase.
 EQUITABLE MORTGAGE
Period of Redemption
(a) No stipulation: 4 years from the date of contract
(b) When there is agreement: Period not to exceed 10 years
(c) General Rule: Period starts to run from the date of the execution of the
contract
(d) Exception: When the efficacy of the sale is subject to a suspensive
condition, period should be counted not from the date appearing on the
instrument, but from the date when the condition is fulfilled, marking the
consummation of the sale [Tolentino citing Manresa].

 Additional 30 days for Repurchase The last paragraph of Art. 1606 giving the
vendor the right to repurchase within 30 days from the time of the rendition of
final judgment applies only where the nature and the character of the
transaction, whether as a pacto de retro or an equitable mortgage, was put in
issue before the court [Gonzales v. De Leon, 4 SCRA 33
 EQUITABLE MORTGAGE
EXERCISE OF THE RIGHT TO REDEEM – ART. 1616
The seller can avail himself of the right of repurchase by returning to the buyer:
(a) the price of the sale
(b) the expenses of the contract and any other legitimate payments made by reason of
the sale
(c) the necessary and useful expenses made on the thing sold [Art.1616].
How redemption is exercised
(a) The vendor de retro must complete the repurchase before the expiration of the
redemption period [Panganiban v. Cuevas, 7 Phil 477].
(b) A sincere or genuine tender of payment is enough. The deposit of the amount of the
repurchase money with the Clerk of Court was simply and additional security [Legazpi v. Court
of Appeals, 1986]
(c) When tender of payment cannot be validly made because the buyer cannot be located,
it becomes imperative for the seller a retro to file a suit for consignation with the courts of the
redemption price [Catangcatang v. Legayada, 1978].
(d) If the offer or tender of payment for repurchase is refused, it is not necessary for the
vendor a retro to consign in court or make judicial deposit of the repurchase price [Rosales v.
Reyes, 25 Phil 495].
 EQUITABLE MORTGAGE
LEGAL REDEMPTION – ART. 1619
 DEFINITION
(1) Right to be subrogated:
(a) upon the same terms and conditions stipulated in the contract,
(b) 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 [Art
1619, CC]
(2) Applies to transfers of ownership by onerous title where subrogation is
possible. Hence, it cannot apply to barter or to transfer by gratuitous title or
hereditary succession.
(3) Applies to sales with pacto de retro [Baviera citing MANRESA]
 MANNER
(1) a formal offer to redeem or
(2) filing of an action in court together with the consignation of the redemption
price within the reglementary period
 PERIOD TO REDEEM

To whom granted Period

((a) Co-owner [Art 1620] 30 days from notice
(a) In writing
(b) Adjoining owner of Rural Land (b) By the seller
[Art 1621] (c) Of the actual execution and delivery of the deed of sale
 Actual knowledge of the sale is immaterial , absent any
(c) Adjoining owner of urban land showing that the co-owner has been shown a copy of the
[Art. 1622] deed of sale through a written communication. [Doromal v.
CA, 1975]
 The law did not provide for a particular mode of written
notice, thus any compliance with “written notice” should
suffice, including the giving of a copy of the deed of sale.
[Conejero v. CA, 1966]
Debtor in case a credit or incorporeal 30 days from the date the assignee demands payment from
right in litigation is sold [Art.1634] debtor
 od PERIOD PERIOD TO PERIOD TO REDEEM REDEEM TO
To whom granted REDEEM Period
Taxpayer in case of tax sale [Sec. 215, NIRC] 1 year from date of forfeiture
Judgment debtor successor–in- interest, or creditor with 1 year from the
subsequent lien, in case of execution sale [Rule 39, Sec.27, date of registration of the
ROC] certificate of sale
Debtor-mortgagor, successors-in- interest, 1 year from the
judicial/judgment creditor, any person having a lien on the date of the sale
property, in case of extrajudicial foreclosure of mortgage
[Act No. 3135. Sec. 6.]
Debtor-mortgagor in case of judicial foreclosure of real 90 days from
estate mortgage IF the mortgagee is a bank or a banking finality of judgment
institution. [The General Banking Law of 2000]
Agricultural lessee w/o knowledge of sale of landholding 2 years from the
[Agrarian Land Reform Code, Sec.12] registration of the sale
 EQUITABLE MORTGAGE
INSTANCES OF LEGAL REDEMPTION
(1) Redemption by Co-owners [Art. 1621]
 A co-owner of a thing may exercise the right of redemption in case the shares of all
the coowners or any of them are sold to a third person
(a) “Third person” refers to all persons who are not heirs of the vendor, by will or
intestate succession
(b) The right is available not only to original coowners, but to those who had later
acquired the share of the co-owner
(c) But the right of redemption may be exercised by a co-owner only when part of
the community property is sold to a stranger. When the portion is sold to another co-
owner, the right does not arise because a new participant is not added to the co-
ownership [Fernandez v. Tarun, 2002]
 If the price of the alienation is grossly excessive, the redemptioner shall pay only a
reasonable one.
Should two or more co-owners desire to exercise the right, they may also do so in
proportion to the share they may respectively have in the thing owned in common.
Rationale: Public Policy, since co-ownership is a hindrance to the development and
administration of the property. [Baviera]
 EQUITABLE MORTGAGE
(2) Redemption by Adjoining Land-owners of rural land [Art. 1621]
 The ff. Requisites must concur:
(a) A piece of rural land is alienated (b) Area does not exceed one hectare
When not applicable:
(a) The grantee does not own any rural land
(b) Adjacent lands are separated by brooks, drains, roads and other apparent
servitudes for the benefit of other estates
 Order of preference if two or more wishes to exercise the right:
(a) Owner with smaller land area
(b) If same land area, then the one who first requested the redemption
 What constitutes “rural” or “urban” is to be determined from the character of the
community or vicinity in which it is found, and NOT from the nature of the land itself
nor the purpose to which it is devoted. [Ortega v. Orcine, 1971]
 EQUITABLE MORTGAGE
(3) Redemption by adjoining land-owners of urban land (applies only to small
portions of urban land) [Art. 1621]
(4) Redemption of Credit Available when it is sold while in litigation (From the
time the complaint is answered)
 NOT available when the assignment is in favor of:
(a) Co-heir/co-owner of right assigned
(b) Creditor in payment of his credit (c) Possessor of a tenement or piece of
land which is subject to the right assigned
How exercised: reimburse the assignee for the:
(a) Price paid
(b) Judicial expenses incurred
(c) Interest on the price from date of payment
 EQUITABLE MORTGAGE
(5) Under the Public Land Act
 Coverage:
(a) Every conveyance of land acquired under a free patent or homestead
(b) The ownership of the land must have been transferred to another. If the
transaction is a mere promise to sell, there is no right yet to redeem
(c) This refers to conveyances made after the prohibited 5 years from the issuance
of the patent or grant
 Period:
(a) Within 5 years from the date of conveyance
(b) If pacto de retro sale, the period to redeem cannot be less than 5 years
 Who may redeem:
(a) General Rule: Applicant, widow, or heirs
(b) Exception: land is sold to another member of the family of the applicant, or his
direct descendant or heir (c) From whom: Subsequent purchasers
 EQUITABLE MORTGAGE
6) Redemption in Foreclosure and Execution Sales
 Who may redeem
 In extra judicial foreclosure
(a) Debtor
(b) Successor in interest
(c) Judicial or judgment creditor of said debtor

 In execution sales
(a) Judgment debtor
(b) Successor in interest
(c) Creditor having a lien on the property sold by attachment, judgment or
mortgage on the property subsequent to the judgment Period