 Contract of Sale

 Parties
 Price
 Subject matter
 Incapacitated persons
 Loss of the thing – at the time and after

perfection, before transfer of ownership

 Obligations of the vendor
Place of delivery
• (1) Where there is an agreement, express or implied, the
place of delivery is that agreed upon;
• (2) Where there is no agreement, the place of delivery is
that determined by usage of trade;
• (3) Where there is no agreement and there is also no
prevalent usage, the place of delivery is the seller’s place
of business;
• (4) In any other case, the place of delivery is the seller’s
residence; and
• (5) In case of specific goods, which to the knowledge of
the parties at the time the contract was made were in some
other place, that place is the place of delivery, in the.
absence of any agreement or usage of trade to the contrary
• If no time is fixed by the contract, then the seller
is bound to send the goods to the buyer within a
reasonable time.
• If the contract provides a fixed time for
performance, the question is whether time is of
the essence, and if so, whether correct
performance was offered within that time.
• Where the contract does not specify the time for
delivery so that delivery is to be made within a
reasonable time, time is not of the essence.
• Delivery of goods less than quantity
1. reject
2. accepts - he must pay for their (a) price at
the contract rate if he knew that no more were to
be delivered or (b) the fair value to him of the
goods, if he did not know that the seller is going
to be guilty of a breach of contract.

• Delivery of goods more than quantity contracted.

may accept the quantity contracted for and
reject the excess. However, if he accepts all the
goods delivered, he makes himself liable for the
price of all of them.
• Delivery of goods mixed with others not
included in the contract
may accept those which are in accordance
with the contract and reject the rest. The
buyer, of course, may accept them all if he so
desires.

• Effect of indivisibility of subject matter.

may reject the whole of the goods.
 General Rule: constitutes delivery to the
buyer, whether the carrier is named by the
buyer or not.
 Exceptions: 1. seller reserves the right of

possession or ownership; 2. or when contrary

intent appears.
 To enter contract with the carrier on behalf of
the buyer as may be reasonable under the
circumstances. – if omits, buyer may decline
to treat the delivery to the carrier as a
delivery to himself
 Give notice to buyer regarding necessity to

insure goods.
General Rule. Vendor shall not be bound to
deliver the thing sold if the vendee has not
paid the price.

Exceptions: the thing must be delivered though

the price if a time for such payment has been
fixed in the contract.
• Unpaid Seller One is considered as unpaid
seller when:
1. The whole of the price has not been
paid or tendered;
2. 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.
Q: When is a seller considered unpaid despite
the title of the goods passing to the buyer?

A: Whenever the seller was only paid partially,

he remains an unpaid seller
Remedies of an Unpaid Seller
Ordinary
• 1. Action for Price (NCC, Art. 1595)
– Exercised when:
• a. Ownership has passed to buyer;
• b. Price is payable on a day certain;
• c. Goods cannot readily be resold for reasonable price
and Art. 1596 of NCC is inapplicable.  
• 2. Action for Damages – In case of wrongful
neglect or refusal by the buyer to accept or
pay for the thing sold.
Special (NCC, Art. 1526)
1. Possessory Lien – right to retain
2. Stoppage in Transitu
3. A right to resale
4. A right to rescind
1. Possessory Lien (NCC, Art. 1527) – seller not
bound to deliver the object of the contract of
sale if buyer has not paid him the price. This
remedy presupposes that the sale is on
credit. It is exercisable only in following
circumstances:
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
c. buyer becomes insolvent

NOTE: When part of goods delivered, may still exercise

right on goods undelivered.
◦ a. When he delivers the goods to the carrier or
other bailee for purpose of transmission to the
buyer which reserving the ownership in the goods
or the right to the possession thereof;
◦ b. When the buyer or his agent lawfully obtains
possession of the goods; or
◦ c. By waiver thereof
2. Stoppage in Transitu (NCC, Art. 1530) The seller may
resume possession of the goods at any time while
they are in transit, and he will then become entitled
to the same rights in regard to the goods as he would
have had if he had never parted with the possession
Requisites: (I-SCENT-U)
• a. Insolvent buyer
• b. The sale of goods must be on Credit
• c. Seller must Surrender the negotiable document of
title, if any
• d. Seller must bear the Expenses of delivery of the
goods after the exercise of the right.
• e. Seller must either actually take possession of the
goods sold or give Notice of his claim to the carrier
or other person in possession
• f. Goods must be in Transit
• g. Unpaid seller
Enforcement of right to stoppage in transitu
The seller may: .
1. Take actual possession of the goods;
2. Give notice of his claim to the carrier or other
bailee who is in possession of the goods (NCC,
Art. 1532).
 
Effect of the exercise of this right:
1. The goods are no longer in transit;
2. Contract of carriage end. The carrier now
becomes a mere bailee, and will be liable as
such; and
3. Seller would have the same rights to the goods
as if he had never had never parted possession
with it.
3. Right to Resell the Goods (NCC, Art. 1533)
Exercised when:
a. Goods are perishable,
b. Stipulated the right of resale in case of
default, or
c. Buyer in default for unreasonable time
 
Effect of exercising the special right of resale
• The unpaid seller shall not be liable to the
original buyer upon the sale or for any profit
made by such resale, but may recover from
the buyer damages for any loss occasioned
by the breach of the sale
NOTE: The seller cannot, however, directly or
indirectly buy the goods.
Exceptions: Cases in which it is allowed:
1. Where the goods are of perishable in
nature;
2. Where the seller has expressly reserves the
right of resale in case the buyer should make
default; or
3. Where the buyer has been in default in
payment of the price for unreasonable time
Notice to the defaulting buyer
GR: Notice to the defaulting buyer NOT
required in the resale of goods
XPN: Where the right to resell is not based on
the perishable nature of the goods or upon
an express provision of the sale.
NOTE: Notice of time and place of resale is not
essential to the validity of such resale (NCC,
Art. 1533).
Right to Rescind (NCC, Art. 1534)
Requisites:
a. Goods have not been delivered to the buyer;
b. Buyer has repudiated the contract of sale; or
c. Has manifested his inability to perform his
obligations thereunder; or
d. Has committed a breach thereof, which must
be substantial.

NOTE: Here, the seller may thereafter totally

rescind the contract of sale by giving notice of
his election to do so to the buyer.
Effect of exercising the special right to rescind
The unpaid seller shall not be liable to the
buyer upon the sale, but may recover from
the buyer damages for any loss occasioned
by the breach of the sale (NCC, Art. 1534).
 
Cases in which it is allowed:
1. Where the seller has expressly reserved the
right to rescind in case the buyer should
make default; or
2. Where the buyer has been in default in the
payment of the price for unreasonable length
of time
A condition is an uncertain event or
contingency on the happening of which the
obligation (or right) of the contract depends.
In such a case, the obligation of the contract
does not attach until the condition is
performed.
Effect of non-fulfillment of condition.
A contract of sale may be absolute or
conditional. (Art. 1458.)
(1) If the obligation of either party is subject to
any condition and such condition is not
fulfilled, such party may either:
(a) refuse to proceed with the contract; or
(b) proceed with the contract, waiving the
performance of the condition.
(2) If the condition is in the nature of a promise
that it should happen, the non-performance
of such condition may be treated by the other
party as a breach of warranty
A warranty is a statement or representation
made by the seller of goods,
contemporaneously and as a part of the
contract of sale, having reference to the
character, quality, or title of the goods, and
by which he promises or undertakes to insure
that certain facts are or shall be as he then
represents them.
Express warranty is any affirmation of fact or any
promise by the seller relating to the thing if the
natural tendency of such affirmation or promise
is to induce the buyer to purchase the same, and
if the buyer purchases the thing relying thereon.
Prescriptive period of actions based on express
warranty:
1. That specified in the contract and in the
absence thereof
2. 4 years
Implied warranty is inherent in a contract of sale. It
is presumed to exist although nothing has been
mentioned about it.
Implied Warranties in Sale (Art. 1547, CC)
a) Implied warranty on the part of the seller
that he has a right to sell the thing at the
time when the ownership is to pass, and that
the buyer shall from that time have and enjoy
the legal and peaceful possession of the thing
(implied warranty against eviction);
b) Implied warranty that the thing shall be
free from any hidden faults or defects, or any
charge or encumbrance not declared or
known to the buyer.
Requisites: (JPENS)
a) The vendee is deprived in whole or in part of the thing
purchased (Art. 1557, CC);
b) He is so deprived by virtue of a final judgment (Art. 1557, CC);
c) The vendor was summoned in the suit for eviction at the
instance of the vendee (Art. 1558, CC);
 The vendor/s should be made parties to the suit at the
instance of vendees, either by way of asking that the former be
made a co-defendant or by the filing of a third-party complaint
against said vendors. (Escaler vs. Court of Appeals, L-42636,
August 1, 1985)
d) There is no waiver on the part of the vendee (Art. 1554, CC);
e) The vendee is in good faith (J.M. Tuason vs. Court of Appeals,
L-41233, November 21, 1979)
.
a) The return of the value which the thing sold
had at the time of the eviction, be it greater
or less than the price of the sale;
b) The income or fruits, if he has not been
ordered to deliver them to the party who
won the suit against him
c) The costs of suit which caused the eviction
and, in proper case, those of the suit
brought against the vendor for the warranty;
d) The damages and interests and ornamental
expenses, if the sale was made in bad faith.
Requisites:
a) The defect must be such that it renders the thing
unfit for the use for which it is intended, or it
diminishes its fitness for such use to such an extent
that, had the vendee been aware thereof, he would
not have acquired it or would have given a lower
price for it (Art. 1561, CC);
b) The defect must be hidden or cannot be
discovered by ordinary inspection or examination
(Art. 1561, CC);
c) The defect must be present at the time of the
execution of the sale;
d) The vendee has not waived the warranty (Art.
1566, CC).
a) If the vendor was aware thereof:
 Return the price and refund the expenses
of the contract, with damages
b) If the vendor was not aware thereof:
 Return the price and interest thereon, and
reimburse the expenses of the contract which
the vendee might have paid.

Note: applicable to judicial sales except, the

judgment debtor shall not be liable to
damages
a) 6 months from delivery
b) 40 days (in case of animals) from delivery

Non-applicability of implied warranty:

• 1. “As is and where is” sale;
• 2. Sale of second hand articles;
• 3. Sale by virtue of authority in fact or law;
• 4. Sale at public auction for tax delinquency
Warranty of Fitness for a Particular Purpose is a
warranty that the goods are suitable for the
particular or special purpose disclosed by the
buyer which will not be satisfied by the mere
fitness of the goods for general purposes.
Warranty of Merchantability is a warranty that
the goods purchased are reasonably fit for
the general purposes for which they are sold.
Requisites:
a. Immovable sold is encumbered with non-
apparent burden or servitude not mentioned
in the agreement;
b. Nature of non-apparent servitude or burden
is such that it must be presumed that the
buyer would not have acquired it had he been
aware thereof.
XPN: Warranty not applicable when non-
apparent burden or servitude is recorded in
the Registry of Property – unless there is
expressed warranty that the thing is free
from all burdens and encumbrances
1. Seller in bad faith and there is waiver against
eviction – void.
2. When buyer without knowledge of a
particular risk, made general renunciation of
warranty – is not a waiver but merely limits
liability of seller in case of eviction.
3. When buyer with knowledge of risk of
eviction assumed its consequences and made
a waiver – seller not liable (applicable only to
waiver of warranty against eviction).
1. Accept goods and set up breach of warranty
by way of recoupment in diminution or
extinction or the price;
2. Accept goods and maintain action against
seller for damages;
3. Refuse to accept goods and maintain action
against seller for damages; or
4. Rescind contract of sale and refuse to
receive goods/return them when already
received
 may either be to withdraw from the contract
(accion redhibitoria) or demand a
proportionate reduction of the price (accion
quanti minoris), with damages in either case.
 The vendee may also ask for the annulment

of the contract upon proof of error or fraud,

in which case the ordinary rule on obligations
shall be applicable.
1. If he knew of the breach of warranty;
2. If he fails to return or offer to return goods
to seller in substantially as good condition as
they
were at time ownership was transferred; or
3. If he fails to notify the seller within a
reasonable time of his election to rescind.
 Redhibitory defect – if the hidden defect of
animals, even in case a professional
inspection has been made, should be of such
nature that expert knowledge is not sufficient
to discover it
When 2 or more animals have been sold at the
same time and redhibitory defect is in one of
or some of them but not all:

GR: The redhibition will not affect the others

without it.
Exception: If it is shown by the vendee that he
would not have purchased the sound ones
without those which are defective.
Vendor is liable where animal dies within 3
days after purchased. If by fortuitous event
but animal has defect, Art. 1567 will apply –
withdraw or reduction, with damages.
a) To accept delivery;
b) To pay the price.
NOTE: A grace period granted the buyer in
case of failure to pay is a right not an
obligation. Non-payment would still generally
require judicial or extrajudicial demand
before default can arise.
3. Bear expenses for the execution and
registration of the sale and putting the goods
in a deliverable state, if such is the stipulation
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 (NCC, Art.1587);
NOTE: The goods in the buyer’s possession are at the
seller’s risk.
2. To be liable as a depositary if he voluntarily constituted
himself as such (NCC, Art.1587);
3. To pay interest for the period between delivery of the
thing and the payment of the price in the following cases
(NCC, Art.1589):
a. Should it have been stipulated;
b. Should the thing sold and delivered produces fruits
or income; or
c. Should he be in default, from the time of judicial or
extra-judicial demand for the payment of the price.
a) The buyer has a right to a reasonable
opportunity to examine the goods to
ascertain whether they are in conformity
with the contract.
b) Unless a specific period is agreed upon, the
buyer should examine the goods within a
reasonable time.
a) When he communicates with the seller
expressly manifesting his acceptance
thereof;
b) When he performs an act in relation to the
goods inconsistent with the ownership of the
seller; and
c) When, after the lapse of a reasonable time
following the delivery, he retains the goods
without complaining to the seller or without
intimating that he has rejected them.
a) If he is disturbed in the possession or
ownership of the thing bought;
b) If he has a well-grounded fear that his
possession or ownership would be disturbed
by a vindicatory action or foreclosure of
mortgage.
In sale of real property
• 1. Absolute Sale – Apply Art. 1191 and 1592

of the Civil Code, Spouses Garcia vs. Court of

Appeals (G.R. No. 172036, April 23, 2010)
• GR: if vendee fail to pay the price, vendor demand
should be made, judicial or by notarial act but vendee
may still pay after expiration of the period for
payment. The court may extend the period
• 2. Sale on Installment/ Contract to Sell –
Apply Republic Act 6552 (installment sales)
In sale of personal property (Art. 1593, CC)
a) The vendee, upon the expiration of the
period fixed for the delivery of the thing
purchased, refused to receive it without
justifiable cause; or
b) He failed to pay the price, unless granted a
longer period within which to pay.
c) Sale on Installment – Apply Art. 1484, CC
If breach is in the part of the vendee: (Read De
Leon)
a) Action for payment of the price of the
goods (Art. 1595, CC)
b) Action for damages due to wrongful
neglect and refusal to accept and pay for the
goods (Art. 1596, CC)
c) Action for rescission if buyer has
repudiated the contracts or has manifested
his inability to perform his obligation (Art.
1597, CC)
If breach is on the part of the vendor:
a) Accept the goods and set-up the seller’s
reach to reduce or extinguish the price
b) Action for damages for breach of warranty
but accepting the goods (Art. 1599, CC)
c) Refuse to accept the goods and maintain an
action for damages of the warranty.
c) Action for rescission for breach of warranty
where the vendee may validly refuse
acceptance of the goods, or even if the goods
had already been received, he may return
them and recover the price (Art. 1599, CC)
 If the buyer accepts the goods knowing of the
breach of warranty without protest
 If he fails to notify the seller within a

reasonable time of his election to rescind

 If he fails to return or offer to return the

goods in substantially as good condition as

they were in at the time of the transfer of
ownership to him
A contract of sale is extinguished by:
1. Same causes as how an obligation is extinguished, namely:
a. Payment or performance;
b. Loss of the thing due;
c. Condonation or remission of the debt;
d. Confusion or merger of the rights of creditor and debtor;
e. Compensation;
f. Novation;
g. Annulment;
h. Rescission;
i. Fulfillment of resolutory condition; or
j. Prescription.
2. Conventional Redemption; and
3. Legal Redemption
Conventional Redemption – It takes place when
the 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.
Equitable mortgage – It is 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, there being no impossibility nor
anything contrary to law in this intent.
a) When the price of a sale with right to repurchase is unusually
inadequate;
b) When the vendor remains in possession as lessee or otherwise;
c) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or
granting a new period is executed;
d) When the purchaser retains for himself a part of the purchase
price;
e) When the vendor binds himself to pay the taxes on the thing
sold;
f) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.

NOTE: This is not an exclusive list.

a) It is purely contractual.
b) It is an accidental stipulation.
c) It is a real right when it is registered.
d) It is potestative, as it depends upon the will of the
vendor.
e) It is a resolutory condition.
f) It is not an obligation but a power or privilege of the
vendor.
g) It is reserved at the moment of the perfection of the
contract.
h) The person entitled to exercise the right is the
owner of the property sold and not any third party.
i) It gives rise to reciprocal obligations.
a) Price of the sale;
b) Expenses of the contract;
c) Any other legitimate payments made by
reason of the sale; and
d) The necessary and useful expenses made on
the thing sold.
Legal Redemption - the right to be subrogated,
upon the same terms and conditions
stipulated in the contract, in the place of one
who acquires a thing by purchase or dation in
payment, or by any other transaction whereby
ownership is transmitted by onerous title.
a) There must be co-ownership of a thing;
b) There must be alienation of all or of any of the
shares of the other co-owners;
c) The sale must be to a third person or stranger,
i.e., not a co-owner; and
d) The sale must be before partition.
 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 of redemption, they may only
do so in proportion to the share they may
respectively have in the thing owned in common.
a) Both the land of the one exercising the right
of redemption and the land sought to be
redeemed must be rural;
b) The lands must be adjacent;
c) There must be an alienation;
d) The piece of rural land alienated must not
exceed one (1) hectare;
e) The grantee or vendee must already own
another rural land; and
f) The rural land sold must not be separated by brooks,
drains, ravines, roads and other apparent servitudes from
the adjoining lands.
 The right cannot be exercised against a vendee if he
is also an adjacent owner.
 In case two or more adjacent owners desire to
exercise the right of redemption, the law gives preference
to the owner of the adjoining land of smaller area but if
both lands have the same area, to the one who first
requested the redemption.
 The reason for the law in question is to foster the
development of agricultural areas by adjacent owners who
may desire the increase for the improvement of their own
land." The intention of the law in giving this right of
redemption is to protect agriculture, by the union of small
agricultural lands and those adjoining thereto under one
single owner for their better exploitation. (Fabia vs.
Intermediate Appellate Court, L-66101, November 21,
1984)
Pre-Emption and Legal Redemption by
Adjacent Owners of Urban Lands:
a) The one exercising the right must be an
adjacent owner;
b) The piece of land sold must be so small
and so situated that a major portion thereof
cannot be used for any practical purpose
within a reasonable time; and
c) Such urban land was bought merely for
speculation.
 The right of legal pre-emption or
redemption shall not be exercised except
within thirty days from the notice in writing
by the prospective vendor, or by the vendor,
as the case may be. (Art. 1623, CC)
a) The deed of sale shall not be recorded in
the Registry of Property, unless accompanied
by an affidavit of the vendor that he has given
written notice thereof to all possible
redemptioners.
b) But!!! Co-owners with actual notice of the
sale are not entitled to written notice. x x x A
written notice of a fact already known to
them, would be superfluous. (Spouses Si vs.
Court of Appeals, G.R. No. 122047, October
12, 2000)
Tender of a Check is Sufficient to Exercise
Right of Redemption
A check may be used for the
exercise of the right of redemption, the same
being a right and not an obligation. The
tender of a check is sufficient to compel
redemption but is not in itself a payment that
relieves the redemptioner from his liability to
pay the redemption price. (Fortunado vs.
Court of Appeals, 196 SCRA 269, 279 [1991])
It is a contract by which the owner of a credit
transfers to another his rights and actions
against a third person in consideration of a
price certain in money or its equivalent. It
shall be perfected in the same manner as a
simple contract of sale.
a. He warrants the existence of the credit;
b. He warrants the legality of the credit at the
perfection of the contract.

Note: There is no warranty as to the solvency

of the debtor unless it is expressly stipulated
or unless the insolvency was already existing
and of public knowledge at the time of the
assignment.
Debtor has the right of legal redemption in
case of sale of credit or incorporeal rights in
litigation, the exercise of which will
extinguish the obligation. The debtor
exercises the right by reimbursing the
assignee for the price the latter paid
therefore, the judicial costs incurred by him
and the interest on the price from the day on
which the same was paid. The right may be
exercised within 30 days from the date the
assignee demands payment from him.
- One party binds himself to give one thing in
consideration of the other’s promise to give
another thing.
- If one of the contracting parties discover that
the thing received did not belong to the
person who gave it, he cannot be compelled
to deliver what he offered to exchange, and
shall be entitled to damages.
 In case of eviction, the injured party may:
-recover the property he has given in
exchange with damages. (subject to the rights
of innocent 3rd person). Or
- claim an indemnity for damages.
 Installment Sales Law (Recto Law) – Sale of
personal property in installment
It is also applied to contracts purporting
to be leases of personal property with option to
buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing
 Realty Installment Buyer Act (Maceda Law) –
Sale of Real Property in installment
Article 1484, CC – In a contract of sale of personal property
the price of which is payable in installments, the vendor
may exercise any of the following remedies:
a) Exact fulfillment of the obligation, should the vendee
fail to pay;
b) Cancel the sale, should the vendee’s failure to pay cover
two or more installments; or
c) Foreclose the chattel mortgage on the thing sold, if one
has been constituted, should the vendee’s failure to pay
cover two or more installments. In this case, he shall have
no further action against the purchaser to recover any
unpaid balance of the price.

Note: These are alternative remedies if the buyer fails to pay

two or more installments.
GR: If availed of, the unpaid seller cannot anymore choose other
remedies.
XPN: If after choosing specific performance, it has become impossible
to perform it, rescission may be pursued.

NOTE: If vendor elected fulfillment or specific performance.

a. The filing of collection suit barred the foreclosure of the mortgage.
A mortgagee who files a suit for collection abandons the remedy of
foreclosure of the chattel mortgage constituted over the personal
properties or security for the debt or value of the promissory note
which he seeks to recover in the said suit;
b. Filing of B.P. 22 does not bar foreclosure of mortgage
c. Action for recovery of possession with replevin as provisional
remedy preparatory to extrajudicial foreclosure is not an action for
collection much less for foreclosure.
Cancel the sale if buyer fails to pay two or
more installments. Deemed chosen when:
a. Notice of rescission is sent;
b. Takes possession of subject matter of sale;
and
c. Files action for rescission.

NOTE: The stipulation that the installments or

rents already paid shall not be returned to
the vendee shall be valid insofar as the
same may not be unconscionable under the
circumstances.
GR: Actual foreclosure is necessary to bar
recovery of balance.
XPN: Mortgagor refuses to deliver property to
effect foreclosure; expenses incurred in
attorney’s fees, etc. in obtaining the
property may be recovered by the vendor.

Note: The only remedy which bars the

recovery of the unpaid balance.
 Q: A mortgaged a diamond ring to M as a
security for a loan which was to be paid two
years thereafter. Since A failed to pay M, she
then foreclosed the mortgaged property.
However, it turned out that the proceeds of
the sale were insufficient, thus, M filed an
action for specific performance. A contends
that this is a violation of the Recto law since
the foreclosure of the chattel bars
subsequent recovery. Is this correct?
A: NO. A is not correct in invoking the Recto
law since it is only applicable in case of sale
of personal property through installment. In
the given case, the amount being claimed by
A was to be paid two years thereafter as a
lump sum, not through installments.
Moreover, the transaction is a loan not a sale.
The law involves the sale of immovable on
installment:
1. Coverage: Residential Real Estate
(Villanueva, 2009).
2. Excluded:
a. Industrial lots;
b. Commercial buildings (and commercial lots
by implication);
c. Sale to tenants under agrarian laws; and
d. Sale of lands payable in straight terms
Features:
 1. Grace Period - After having paid
installments for at least two years, the
buyer is entitled to a mandatory grace
period of one month for every year of
installment payments made, to pay the
unpaid installments without interest.
2. Need for notarial act of cancellation
3. Refund of cash surrender value - If the
contract is cancelled, the seller shall refund
to the buyer the cash surrender value
equivalent to 50% of the total payments
made, and after five years of installments,
an additional 5% every year but not to
exceed 90% of the total payments made.
In case the installments paid were less than
two years, the seller shall give the buyer a
grace period of not less than 60 days. 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
demand for rescission by notarial act.
1. Sell or assign rights to another;
2. Reinstate contract by updating within 30
days before and cancellation;
3. Deed of Sale to be done by notarial act;
4. Pay full installment in advance the balance
of price anytime without interest; and
5. Have full payment annotated in certificate of
title.
Q: Spouses Dakila entered into a contract to sell with
Honorio Cruz over a parcel of industrial land in
Valenzuela, Bulacan for a price of P3, 500, 000.00.
The spouses would give a downpayment of P500,
000. 00 upon the signing of the contract, while the
balance would be paid for the next three
consecutive months in the amount of P1, 000, 000.
00 per month. The spouses paid the first two
installments but not the last installment. After one
year, the spouses offered to pay the unpaid balance
which Honorio refused to accept. The spouses filed
a complaint for specific performance against
Honorio invoking the application of the Maceda
Law. If you are the judge, how will you decide the
case
A. The invocation of the Maceda Law is
misplaced. The law applies only to sale or
financing of realty on installment payments
including residential units or residential
condominium apartments and does not apply
to sales of industrial units or industrial lands
like in the case presented. The sale to the
Spouses Dakila is not a sale on installment
but more of a straight sale where a
downpayment is to be made and the balance
to be paid in a relatively short period of three
months.
Promulgated to encompass all questions
regarding subdivisions and condominiums. It
is aimed at providing for an appropriate
government agency, the HLURB, to which all
parties aggrieved in the implementation of its
provisions and the enforcement of
contractual rights with respect to said
category of real estate may take recourse.
 Not every case involving buyers and sellers of
real estate may be filed with the HLURB. Its
jurisdiction is limited to those cases filed by
the buyer or owner of a subdivision or
condominium and based on any of the causes
of action enumerated under Sec. 1 of P.D. No.
1344, and which jurisdictional facts must be
clearly alleged in the complaint.
1. Every disposition, or attempt to dispose, for a valuable consideration, of
a subdivision lot, including the building and other improvements
thereof, if any, in a subdivision project or a condominium unit in a
condominium project;
2. Contract to sell;
3. Contract of purchase and sale;
4. Exchange;
5. Attempt to sell;
6. Option of sale or purchase;
7. Solicitation of a sale;
8. Offer to sell, directly or by an agent, or by a circular, letter,
advertisement or otherwise; and
9. A. Privilege given to a member of a cooperative, corporation,
partnership, or any association; and/or
B. The issuance of a certificate or receipt evidencing or giving the right of
participation in, or right to, any land in consideration of payment of the
membership fee or dues (deemed sale).
It shall include any contract to buy, purchase,
or otherwise acquire for a valuable
consideration a subdivision lot, including the
building and other improvements, if any, in a
subdivision project or a condominium unit in
a condominium project.
Subdivision project - A tract or a parcel of land registered
under Act No. 496 which is partitioned primarily for
residential purposes into individual lots with or without
improvements thereon, and offered to the public for sale, In
cash or in installment terms.
Subdivision lot - Any of the lots, whether residential,
commercial, industrial, or recreational, in a subdivision
project.
Complex subdivision plan - A subdivision plan of a registered
land wherein a street, passageway or open space is
delineated on the plan.
Condominium project - The entire parcel of real property
divided or to be divided primarily for residential purposes
into condominium units, including all structures thereon.
Condominium unit - 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 of parts of floors) in a building or
buildings and such accessories as may be appended thereto.