PART ONE.

SALES

I. NATURE AND FORM OF CONTRACT

A.       Nature and Characteristics

          A.      Definition of sale; concept (1458)

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer
the ownership and to deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

         A contract of sale is consensual contract and, thus, is perfected by mere consent which is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract.  Until the contract of sale is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.

 By definition, the elements are:

1. Consent or meeting of minds, that is, consent to transfer ownership in exchange for the
price;

2. Object or subject matter (determinate)

3. Cause or consideration (price certain in money or its equivalent)

The absence of any of the essential elements shall negate the existence of a perfected contract of
sale.

         

         Example: A agrees to sell his car to B and made it appear that the price is for
P1,000,000.00, when in truth there is no consideration that is to be paid by B.  In which case,
price is fictitious, hence, contract of sale is void.  The contract, however, may be
treated as donation.

         It would be different if the purchase price is fixed by the parties at P1,000,000.00, but B,
the buyer failed to pay the same.  The contract is valid because there is an amount agreed upon as
purchase price albeit not paid.

Case law: Spouses Lucia Orozco and Cresente Orozco vs. Florante Lozano, et al., 3 April
2019, GRN 222616

On 23 May 1980, Spouses Cresente R. Orozco and Lucia A. Orozco (Spouses Orozco)
purchased from Spouses Reynaldo and Floriana Fuentes (Spouses Fuentes) two residential lots
both situated in Barangay 2, San Francisco, Agusan del Sur. The lots are identified as Lot No.
3780, Pls-67 and Lot No. 3105, Pls-67. On 4 September 1980, Spouses Orozco sold half of Lot
No. 3780 to Florante G. Lozano, Sr. (Lozano) for ₱5,000.00. Half of Lot No. 3780 which was
sold by Spouses Orozco to Lozano was assigned as Lot No. 3780-A while the other half retained
by Spouses Orozco was designated as Lot No. 3780-B. At the time of the sale, Cresente Orozco
(Orozco) used a rope to measure Lot No. 3780, which Orozco thought had an area of 570 square
meters. Lozano constructed a building between Lot No. 3780-A and Lot No. 3780-B which
Lozano used as a boarding house. Spouses Orozco did not prevent Lozano from building the
boarding house because Spouses Orozco thought that the said boarding house was constructed
within the 285 square meter portion which Spouses Orozco sold to Lozano. Allegedly, Spouses
Orozco were surprised when Lozano asked them to sign a piece of paper, purportedly an
acknowledgment receipt of the payment of ₱500.00 for the additional area on top of the 285
square meters principally sold. Spouses Orozco claimed that they did not sign such
acknowledgment receipt because according to them there was no additional area sold to Lozano.
On the other hand, Lozano claimed that Spouses Orozco agreed to sell to him an additional 62
square meters of Spouses Orozco's 325.5 square meter portion and that Lozano agreed to make
an additional payment of ₱1,000.00 in consideration for the said added portion. On 24 April
1981, evidenced by an acknowledgment receipt, Lozano paid Spouses Orozco P400.00.
Subsequently, Lozano paid Spouses Orozco ₱300.00, totaling ₱700.00, leaving ₱300.00 as the
remaining unpaid balance for the 62 square meter added portion. Without receiving the full
payment, Spouses Orozco made repeated demands to Lozano to vacate the portion of Spouses
Orozco's lot that Lozano allegedly encroached upon but the latter refused to vacate. Spouses
Orozco and Lozano then brought their dispute for barangay conciliation.

On 2 September 1998, Spouses Orozco filed a complaint for Recovery of Possession and
Damages with Application for Writ of Preliminary Injunction, docketed as Civil Case No. 648.

 
Issue: Is there a valid contract of sale?

Ruling: YES.

In Del Prado v. Spouses Caballero, this Court held that a perfected contract of sale of real estate
effectively gives rise to the right to transfer ownership of the real estate from the vendor to the
vendee. This Court discussed the essential elements of a contract of sale of real estate, to wit:

Contracts are the law between the contracting parties. Sale, by its very nature, is a consensual
contract, because it is perfected by mere consent. The essential elements of a contract of sale are
the following: (a) consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; (b) determinate subject matter; and (c) price certain in money or its
equivalent. All these elements are present in the instant case.

In the present case, there was a perfected contract of sale for the 62 square meter portion of Lot
No. 3780-B from Spouses Orozco to Lozano. There was a meeting of the minds between
Spouses Orozco and Lozano when the latter offered to purchase for ₱1,000.00 an additional 62
square meters of Lot No. 3780-B from Spouses Orozco to extend the boundary of his property,
Lot No. 3780-A, up to the mango tree. Lozano's offer was accepted by Spouses Orozco and the
initial payment of P400.00 was made by Lozano as evidenced by the handwritten
acknowledgment receipt dated 24 April 1981 signed by Orozco. Subsequently, another payment
of ₱300.00 by Lozano was made to Lucia Orozco, totaling the payment of Lozano to ₱700.00,
leaving a remaining unpaid balance of ₱300.00, before the dispute was brought to the barangay
by Spouses Orozco for resolution.

As a rule, forgery cannot be presumed and must be proved by clear, positive, and convincing
evidence. The burden of proof lies on the party alleging forgery. One who alleges forgery has the
burden to establish his case by a preponderance of evidence, or evidence which is of greater
weight or more convincing than that which is offered in opposition to it. The fact of forgery can
only be established by a comparison between the alleged forged signature and the authentic and
genuine signature of the person whose signature is theorized to have been forged.

We agree with the CA that Spouses Orozco failed to prove that the signature of Orozco in the
acknowledgment receipt dated 24 April 1981 was forged. During the proceedings in the RTC,
Romeo O. Varona, a document examiner of the Philippine National Police Crime Laboratory of
Cebu City, testified that the signature in the Deed of Sale and the signature appearing in the
acknowledgment receipt were written by one and the same person.
 

Case law: HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-

INTAC, Petitioners,
vs. COURT OF APPEALS and SPOUSES MARCELO ROY, JR. and JOSEFINA
MENDOZA-ROY and SPOUSES DOMINADOR LOZADA and MARTINA MENDOZA-
LOZADA, 11 October 2012, GRN 173211

From the records, it appears that Ireneo Mendoza (Ireneo), married to Salvacion Fermin
(Salvacion), was the owner of the subject property, presently covered by TCT No. 242655 of the
Registry of Deeds of Quezon City and situated at No. 36, Road 8, Bagong Pag-asa, Quezon City,
which he purchased in 1954. Ireneo had two children: respondents Josefina and Martina
(respondents), Salvacion being their stepmother. When he was still alive, Ireneo, also took care
of his niece, Angelina, since she was three years old until she got married. The property was then
covered by TCT No. 106530 of the Registry of Deeds of Quezon City. On October 25, 1977,
Ireneo, with the consent of Salvacion, executed a deed of absolute sale of the property in favor of
Angelina and her husband, Mario (Spouses Intac). Despite the sale, Ireneo and his family,
including the respondents, continued staying in the premises and paying the realty taxes. After
Ireneo died intestate in 1982, his widow and the respondents remained in the premises. After 3 

Salvacion died, respondents still maintained their residence there. Up to the present, they are in
the premises, paying the real estate taxes thereon, leasing out portions of the property, and
collecting the rentals. The controversy arose when respondents sought the cancellation of TCT
No. 242655, claiming that the sale was only simulated and, therefore, void. Spouses Intac
resisted, claiming that it was a valid sale for a consideration. On February 22, 1994, respondents
filed the Complaint for Cancellation of Transfer Certificate of Title (TCT) No. 242655 against
5 

Spouses Intac before the RTC. The complaint prayed not only for the cancellation of the title, but
also for its reconveyance to them.

Issue: Is there a valid contract of sale?

Ruling: YES.

Petitioners primarily argue that the subject deed of sale was a valid and binding contract between
the parties. They claim that all the elements of a valid contract of sale were present. Respondents
are of the position that the RTC and the CA were correct in ruling that the questioned deed of
absolute sale was a simulated one considering that Ireneo and Salvacion had no intention of
selling the subject property. The true intention rather was that Spouses Intac would just borrow
the title of the subject property and offer it as a collateral to secure a loan. No money actually
changed hands.

In the case at bench, the Court is one with the courts below that no valid sale of the subject
property actually took place between the alleged vendors, Ireneo and Salvacion; and the alleged
vendees, Spouses Intac. There was simply no consideration and no intent to sell it. Critical is the
testimony of Marietto, a witness to the execution of the subject absolute deed of sale. He testified
that Ireneo personally told him that he was going to execute a document of sale because Spouses
Intac needed to borrow the title to the property and use it as collateral for their loan application.
Ireneo and Salvacion never intended to sell or permanently transfer the full ownership of the
subject property to Spouses Intac. Marietto was characterized by the RTC as a credible witness.

Aside from their plain denial, petitioners failed to present any concrete evidence to disprove
Marietto’s testimony. They claimed that they actually paid P150,000.00 for the subject property.
They, however, failed to adduce proof, even by circumstantial evidence, that they did, in fact,
pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not
show any tangible evidence of any payment therefor. Their failure to prove their payment only
strengthened Marietto’s story that there was no payment made because Ireneo had no intention to
sell the subject property.

Angelina’s story, except on the consideration, was consistent with that of Marietto. Angelina
testified that she and her husband mortgaged the subject property sometime in July 1978 to
finance the construction of a small hospital in Sta. Cruz, Laguna. Angelina claimed that Ireneo
offered the property as he was in deep financial need.

 Stages of a contract of sale:

1.Negotiation: covers the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is perfected

2.Perfection: it takes place upon the concurrence of the essential elements of the sale, which is
the meeting of the minds of the parties as to the object of the contract and upon the price

3 Consummation: it begins when the parties perform their respective undertakings under the
contract of sale, culminating in the extinguishment thereof.

The perfection of the contract of sale does not, however, transfer the ownership of the property,
it merely creates the obligation to transfer the ownership.  In case of sale of a piece of land, it is
the execution of the contract of sale by the seller, the consequent delivery of the owner’s copy of
the transfer certificate of title and the registration of the property in the name of the buyer that
effectively transfers the ownership.  In other words, it is delivery that effectively transfers the
ownership that is, when the contract of sale is consummated.
B.      Characteristics of a contract of sale

1. Consensual: perfected by mere consent. No particular form is required for its validity.  Upon
perfection of the contract, the parties may reciprocally demand performance, such that the
buyer/vendee may compel transfer of ownership of the object of the sale and the seller/vendor
may require the buyer/vendee to pay the thing sold.

Example: If A offers to buys burger from the canteen and the sales lady accepts A’s offer, there
is already a valid contract of sale, in which case, A, the buyer, can compel the sales lady to give
him the burger.

 2. Bilateral: the seller and the buyer are bound by obligations dependent upon each other.

 3. Onerous: it imposes a valuable consideration, which is a price certain in money or its
equivalent.

4. Commutative: the thing of value is exchanged for equal value.  It requires the parties to
assume a correlative obligation that is, the seller to deliver and transfer ownership of the thing
and the buyer to pay the price. Each party also anticipates performance by the other from the
very start. The contract may be aleatory2 as in the case of the sale of a hope ( e . g . ,
sweepstakes ticket)

 5. Nominate: it has a name that is, contract of sale, not merely du ut des, du et facias.

 6. Principal: it can stand on its own and does not depend on another contract for its validity.

C.      Sale distinguished from

a.   Agency to sell (1466)

Art. 1466. In construing a contract containing provisions characteristic of both the contract
of sale and of the contract of agency to sell, the essential clauses of the whole instrument
shall be considered. (n)

 
Sale Agency To Sell
Buyer receives the goods as owner The agent receives the goods as the goods of
the principal who retains his ownership over
them.
Buyer has to pay the price Agent has simply to account for the proceeds of
the sale he may make on the principal’s behalf.
Buyer, as a general rule, cannot return the The agent can return the object in case he is
object sold. unable to sell the same to a third person.
The buyer can deal with the thing sold as he The agent in dealing with the thing received,
pleases, being the owner. must act and is bound according to the
instructions of his principal.

                       

b.   Contract for a piece of work (1467)

Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market, whether
the same is on hand at the time or not, is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon his special order, and not for the general
market, it is a contract for a piece of work. (n)

By the contract for a piece of work, the contractor binds himself to execute a piece of work for
the employer, in consideration of a certain price or compensation.  The contractor may either
employ his labor or skill, or also furnish the material.

From the wordings of Article 1467 above, what determines whether the contract is one of work
or of sale is whether the thing has been manufactured specially for the customer and upon his
special order.  Thus, if the thing is specially done at the order of another, this is a contract for a
piece of work.  If, on the other hand, the thing is manufactured or procured for the general
market in the ordinary course of business, it is a contract of sale.

Case law: Commissioner of Internal Revenue vs. Arnoldus Carpentry Shop, Inc. and Court of
Tax Appeals, 25 March 1988, GRN 71122
Arnuldos "designs and makes samples or models that are 'displayed' or presented or 'submitted'
to prospective buyers who 'might choose' therefrom".  If there are no orders placed for goods as
represented by the sample or model, the shop does not produce anything; on the other hand, if
there are orders placed, the shop goes into fall production to fill up the quantity ordered.  The
Court of Tax Appeals (CTA), however, found out that Arnoldus  had a ready stock of its shop
products for sale to its foreign and local buyers. As a matter of fact, the purchase orders from its
foreign buyers showed that they ordered by referring to the models designated by Arnoldus.
Even purchases by local buyers for television cabinets  were by orders for existing models except
only for some adjustments in sizes and accessories utilized.

Arnoldus, therefore, is a manufacturer and not a contractor and, as such, it is deemed to have
engaged in the contract of sale and not for a piece of work.

The distinction between a contract of sale and one for work, labor and materials is tested by the
inquiry whether the thing transferred is one not in existence and which never would have existed
but for the order of the party desiring to acquire it, or a thing which would have existed and has
been the subject of sale to some other persons even if the order had not been given.

Sale Contract for Piece of Work

The thing transferred is one which would Labor or materials or for a piece of work, the
have existed and been the subject of sale thing transferred is one not in existence and
to some other person, even if the order which never would have existed but for the
had not been given. order of the party desiring to acquire it.
Risk of loss is borne by the buyer. The risk of loss before delivery is borne by the
worker or contractor, not by the employer or the
person who ordered.
Within the Statute of Frauds. Not within the Statue of Frauds.

c.    Barter (1468, 1638)

Art. 1468. If the consideration of the contract consists partly in money, and partly in
another thing, the transaction shall be characterized by the manifest intention of the
parties. If such intention does not clearly appear, it shall be considered a barter if the
value of the thing given as a part of the consideration exceeds the amount of the money or
its equivalent; otherwise, it is a sale. (1446a)

Art. 1638. By the contract of barter or exchange one of the parties binds himself to give
one thing in consideration of the other's promise to give another thing. (1538a)

      Note: Intention determines nature of the contract if it is manifest, otherwise, look into the
value of the thing as opposed to the money equivalent.

d.   Dation in payment (1245)

Art. 1245. Dation in payment, whereby property is alienated to the creditor in satisfaction
of a debt in money, shall be governed by the law of sales. (n)

Dacion en pago or dation in payment is a special mode of payment of obligations in general,

whereby the debtor offers another thing to the creditor who accepts is as equivalent of payment
of the outstanding debt.

Sale distinguished from dacion en pago:

1.     Sale, there is no pre-existing credit while dacion en pago there is a pre-existing credit.

2.     Sale creates obligation while dacion en pago extinguishes obligation.

3.     Sale the cause or consideration is the price and delivery of the object, while dacion en
pago the cause is extinguishment of obligation.

4.     Sale greater freedom from fixing the price while dacion en pago less freedom in fixing the
price because the amount of pre-existing credit which the parties seek to extinguish.
 

          D.     Absolute Sale vs. Conditional contract of sale vs. Contract to sell

Absolute: where the sale is not subject to any condition whatsoever and where title or ownership
passes to the buyer upon delivery of the thing sold.

        

         A deed of absolute sale is considered absolute in nature because there is no agreement in
the deed/document that the seller reserves the right to retain title/right over the property sold
until the full payment of the price or any agreement that the seller can unilaterally rescind the
moment the buyer fails to pay within a fixed period.

Conditional: where the sale contemplates a contingency, and in general, where the contract is
subject to certain conditions, usually the full payment of the purchase price.  The delivery of the
thing sold does not transfer ownership until the condition is fulfilled.

Contract to Sell: First element – consent or meeting of minds – is lacking.  In this kind of
contract, the prospective seller explicitly reserves the transfer of title/right to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of
the property subject of the contract to sell until the happening of an event, which is usually for
the full payment of the purchase price.

Illustration:

If A wants to sell his piece of land to B for P1,000,000.00 and B is willing, ready and able to pay
the purchase price in full, the contract to be executed is Deed of Absolute Sale, because the seller
is to transfer the ownership and such undertaking is no longer subject to the condition because,
after all, the buyer is to pay the purchase price in full. 

If, however, the buyer would pay the purchase price in 10 equal monthly instalments that is,
P100,000.00 per month, the seller’s obligation to transfer the ownership of the piece of land
would take place only after the condition is met that is, the 10 equal monthly instalments are
paid.  In which case, the contract to be executed is a Contract to Sell.
 

B.       Elements

A.    Essential

1.     Consent or meeting of the minds

2.     Object or subject matter: the determine thing

3.     Cause or consideration: price certain in money or its equivalent

CONSENT

I. Parties and their consent (Arts. 1489-1492)

A. Capacity in general (1489)

B.

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

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

B.    Special disqualifications to buy

                  a.      Husband and wife (1490)

 

Art. 1490. The husband and the wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation or property under Article 191. (1458a)

Case law: MARIA B. CHING vs. JOSEPH C. GOYANKO, JR., EVELYN GOYANKO,

JERRY GOYANKO, IMELDA GOYANKO, JULIUS GOYANKO, MARY ELLEN GOYANKO
AND JESS GOYANKO, 10 November 2006, GRN 165879

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz (Epifania) were
married.  Out of the union were born respondents Joseph, Jr., Evelyn, Jerry, Imelda, Julius, Mary
1

Ellen and Jess, all surnamed Goyanko.

Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29
F. Cabahug St., Cebu City but that as they (the parents) were Chinese citizens at the time, the
property was registered in the name of their aunt, Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale  over the property in favor of respondents’
2

father Goyanko. In turn, Goyanko executed on October 12, 1993 a deed of sale  over the property
3

in favor of his common-law-wife-herein petitioner Maria B. Ching. Transfer Certificate of Title

(TCT) No. 138405 was thus issued in petitioner’s name.

Issue: Is the deed of sale executed by Goyanko in favor of his common-law-wife, Maria Ching
valid?

Ruling: No, husband has no capacity to execute a contract of sale in favor of his wife and this
proscription applies to common-law spouses

 
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be
waived.

ARTICLE 1490. The husband and wife cannot sell property to each other, except:

(1) When a separation of property was agreed upon in the marriage settlements; or

(2) When there has been a judicial separation of property under Article 191. (Underscoring
supplied)

The proscription against sale of property between spouses applies even to common law
relationships. So this Court ruled in Calimlim-Canullas v. Hon. Fortun, etc., et al.: Anent the
second issue, we find that the contract of sale was null and void for being contrary to morals and
public policy. The sale was made by a husband in favor of a concubine after he had abandoned
his family and left the conjugal home where his wife and children lived and from whence they
derived their support. The sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects.

 Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes
is contrary to law, morals, good customs, public order, or public policy
are void and inexistent from the very beginning. Article 1352 also provides that: "Contracts
without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it
is contrary to law, morals, good customs, public order, or public policy." Additionally, the law
emphatically prohibits the spouses from selling property to each other subject to certain
exceptions.1âwphi1 Similarly, donations between spouses during marriage are prohibited. And
this is so because if transfers or conveyances between spouses were allowed during marriage,
that would destroy the system of conjugal partnership, a basic policy in civil law. It was also
designed to prevent the exercise of undue influence by one spouse over the other, as well as to
protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply
to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of
those who incurred guilt would turn out to be better than those in legal union." Those provisions
are dictated by public interest and their criterion must be imposed upon the will of the
parties. . . .

                  b.      Persons in trust relation (1491)

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial
auction, either in person or through the mediation of another:

  (1) The guardian, the property of the person or persons who may be under his
guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to them,
unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, the property of the State or of any subdivision thereof, or
of any government-owned or controlled corporation, or institution, the administration of
which has been entrusted to them; this provision shall apply to judges and government
experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and rights
in litigation or levied upon an execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with respect to the property and rights
which may be the object of any litigation in which they may take part by virtue of their
profession.

(6) Any others specially disqualified by law. (1459a)

                  c.      In auctions (1476)

Art. 1476. In the case of a sale by auction:

(1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate
contract of sale.

(2) A sale by auction is perfected when the auctioneer announces its perfection by the fall
of the hammer, or in other customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless
the auction has been announced to be without reserve.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise
provided by law or by stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid on
behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce
any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any
person to bid at such sale on behalf of the seller or knowingly to take any bid from the
seller or any person employed by him. Any sale contravening this rule may be treated as
fraudulent by the buyer. (n)

          C.      Rule when an incompetent buys (1489)

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

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

OBJECT (Arts. 1459-1465)

          A.      Qualities – The object must be

                  a.      Existing, future or contingent (1462)

 

Art. 1462. The goods which form the subject of a contract of sale may be either existing
goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired
by the seller after the perfection of the contract of sale, in this Title called "future goods."

There may be a contract of sale of goods, whose acquisition by the seller depends upon a
contingency which may or may not happen. (n)

                           Goods which may be object of sale:

1.     existing goods: goods owned or possessed by the seller;

2.     future goods: goods to be manufactured, raised or acquired by the seller (vs. contract for a
piece of work)

Sale of future goods shall be valid as contract to be fulfilled by the acquisition and delivery of
the goods specified therein.

                   Rationale: one cannot sell what he does not own, exceptions:

1. sale of thing having a potential existence;

2. future goods; and

3. contract for delivery at a price certain of an article which the vendor in the ordinary course of
business manufactures or procures for the general market, whether the same is on hand at the
time or not

b.     Potential existence (1461)

Art. 1461. Things having a potential existence may be the object of the contract of sale.
 

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition
that the thing will come into existence.

The sale of a vain hope or expectancy is void. (n)

Potential existence: object with possible existence, that is, it is reasonably certain to come into
existence as the natural increment or usual incident of something in existence already belonging
to the seller, and the title will vest in the buyer the moment the object comes into existence.

However, sale of a mere hope or expectancy is void, like sale of sweepstakes ticket or lotto ticket
of the past days/years.

Example of things with potential existence: Produce of the farm, harvest from the field, young of
animals

Emptio Rei Speratae Emptio Spei

Sale of a thing with potential existence Sale of mere hope or expectancy that the
thing will come to existence. Sale of the
hope itself.
Sale is subject to the condition that the thing Sale is effective even if the thing does not
will exist; if it does not, there is no contract. come into existence unless it is a vain
hope.
The object is a future thing. The object is a present thing which is the
hope or expectancy.

 
c.     Things under resolutory condition (1465)

Art. 1465. Things subject to a resolutory condition may be the object of the contract of
sale. (n)

Resolutory condition: an uncertain event upon the happening of which the obligation or
right subject is extinguished.

Example: S and B entered into a Contract of Sale with a Right of Repurchase within 1 year over
the former’s parcel of land.  S then delivered said parcel of land to B. In this case, the condition
or uncertain event is whether S will repurchase the sale parcel of land within 1 year.  In the
meantime, however, B can sell this parcel of land to C, a third person.

Example: Sale with right of repurchase

1)        Sale of mere hope or expectancy (1461)

Sale of a mere hope or expectancy is deemed subject to the condition that the thing contemplated
or expected will come into existence.  The sale refers to an expected thing which is not yet in
existence, and not to the hope or expectancy which already exists, in view of the condition that
the thing will come into existence.

Sale of hope of expectancy itself is valid even if the thing hoped or expected does not come
into existence, unless the hope or expectancy is vain.

                  b.      Lawful (1459)

 
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership
thereof at the time it is delivered. (n)

Object must be within the commerce of men. It must not be contrary to law, morals, good
customs, public order or public policy.

                  c.      Determinate or determinable (1460)

Art. 1460. A thing is determinate when it is particularly designated or physical segregated

from all other of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into,
the thing is capable of being made determinate without the necessity of a new or further
agreement between the parties. (n)

                  Requisites:

1.     At the time the contract is entered into, the thing is capable of being made
determinate; and

2.     There is no necessity of a new or further agreement between the parties.

Case law: AURORA FE B. CAMACHO vs. COURT OF APPEALS and ANGELINO

BANZON, 9 February 2007, GR No. 127520

Camacho was the owner of Lot 261, a 7.5-hectare parcel of land situated in Balanga, Bataan and
covered by Transfer Certificate of Title No. T-10,185. On July 14, 1968, Camacho and
respondent Atty. Angelino Banzon entered into a contract for legal services denominated as a
"Contract of Attorney’s Fee” which authorizes Atty. Banzon, among others, to o negotiate with
the Municipal Government of Balanga so that the above-mentioned lot shall be the site of the
proposed Balanga Public Market; 2. To sell 1200 sq. m. for the sum of TWENTY- FOUR
THOUSAND PESOS (₱24,000.00) right at the Market Site…
Issue: is the object of the contract considered determinate?

Ruling: YES

Article 1460. A thing is determinate when it is particularly designated and/or physically

segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the
thing is capable of being made determinate without the necessity of a new or further agreement
between the parties.

In this case, the object of the contract is the 5,000-sq-m portion of Lot 261, Balanga Cadastre.
The failure of the parties to state its exact location in the contract is of no moment; this is a mere
error occasioned by the parties’ failure to describe with particularity the subject property, which
does not indicate the absence of the principal object as to render the contract void.  Since 52

Camacho bound herself to deliver a portion of Lot 261 to Atty. Banzon, the description of the
property subject of the contract is sufficient to validate the same.

d.     Undivided interest as object (1463)

Art. 1463. The sole owner of a thing may sell an undivided interest therein. (n)

The legal effect of the sale of an undivided interest in a thing is to make the buyer a co-
owner in the thing sold.  As such co-owner, he qcquires full ownership of his part and he
may, therefore, subsequently sell it.

Example: B owns a piece of land with an area of 400 square meters.  If B decides to sell 100
square meters to C, they they will become co-owners of the said land. 

e.     Undivided share in a mass (1464)

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

Fungible goods: goods of which any unit is, from its nature or by mercantile usage, treated as the
equivalent of any other unit.

Effect of sale: 

1.     The owner of a mass of goods may sell only an undivided share thereof, provided the mass
is specific of capable of being made determinate.

2.     By such sale, the buyer becomes co-owner with the seller of the whole mass in the
proportion in which the definite share bough bears to the mass.

3.     If later it be discovered that the mass of fungible goods contains less than what was sold, the
buyer becomes the owner of the whole mass.

Example: S is engaged in the business of buy and sell of rice and he owns a bodega filled with
undetermined sacks of rice.  Subsequently, B buys 100 sacks of rice.  If there are 300 sacks of
rice stored in the bodega, then S and B will be co-owners where S owns 200 sacks while B owns
100 sacks of rice.  However, if there are only 95 sacks of rice stored in the bodega, S is liable for
the deficiency of 5 sacks to B because the contract of sale is still valid.  The 5 sacks of rice
should be of the same kind and quality.

          B. Transferability of ownership

1.     When it must exist

2.     Subsequent acquisition of title (1434)

Art. 1434. When a person who is not the owner of a thing sells or alienates and delivers it,
and later the seller or grantor acquires title thereto, such title passes by operation of law
to the buyer or grantee.

          C. Acquisition of title upon a contingency (1462)

Art. 1462. The goods which form the subject of a contract of sale may be either existing
goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired
by the seller after the perfection of the contract of sale, in this Title called "future goods."

There may be a contract of sale of goods, whose acquisition by the seller depends upon a
contingency which may or may not happen. (n)

CAUSE (Arts. 1469-1474)

A. Price

          Requisites

a.        Real (1471)

b.        In money or equivalent (1458)

c.        Certain or ascertainable

          Price must be real (1471)

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

GR: Mere inadequacy of the price or alleged hardness of the bargain do not affect validity of the
sale when both parties are in a position to form an independent judgment concerning the
transaction.

Case law: RIDO MONTECILLO vs. IGNACIA REYNES AND SPS. REDEMPTOR AND
ELISA ABUCAY, 26 July 2002, GRN 138018

Respondents Ignacia Reynes ("Reynes" for brevity) and Spouses Abucay ("Abucay Spouses" for
brevity) filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting of Title
against petitioner Rido Montecillo ("Montecillo" for brevity). Reynes asserted that she is the
owner of a lot situated in Mabolo, Cebu City, covered by Transfer Certificate of Title No. 74196
and containing an area of 448 square meters ("Mabolo Lot" for brevity). In 1981, Reynes sold
185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the
lot they bought. Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the
Mabolo Lot in favor of Montecillo ("Montecillo’s Deed of Sale" for brevity). Reynes, being
illiterate,  signed by affixing her thumb-mark  on the document. Montecillo promised to pay the
6 7

agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. 
Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of the one-
month period, prompting Reynes to demand from Montecillo the return of the Deed of Sale.
Since Montecillo refused to return the Deed of Sale,  Reynes executed a document unilaterally
9

revoking the sale and gave a copy of the document to Montecillo. Reynes and the Abucay
Spouses alleged that on June 18, 1984 they received information that the Register of Deeds of
Cebu City issued Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot.
Reynes and the Abucay Spouses argued that "for lack of consideration there (was) no meeting of
the minds"  between Reynes and Montecillo. Thus, the trial court should declare null and
11

void ab initio Montecillo’s Deed of Sale, and order the cancellation of Certificate of Title No.
90805 in the name of Montecillo.

Issue: W/N sale was void ab initio or only rescissible with a valid purchase price agreed upon.

Ruling: Contract of sale was void ab initio, as it lacks consideration.

 
Montecillo argues that his Deed of Sale has all the requisites of a valid contract. Montecillo
points out that he agreed to purchase, and Reynes agreed to sell, the Mabolo Lot at the price
of P47,000.00. Thus, the three requisites for a valid contract concur: consent, object certain and
consideration. Montecillo asserts there is no lack of consideration that would prevent the
existence of a valid contract. Rather, there is only non-payment of the consideration within the
period agreed upon for payment.

Montecillo argues there is only a breach of his obligation to pay the full purchase price on time.
Such breach merely gives Reynes a right to ask for specific performance, or for annulment of the
obligation to sell the Mabolo Lot.

 This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can
only amount to a breach of obligation with rescission as the proper remedy. What we have here
is a purported contract that lacks a cause - one of the three essential requisites of a valid contract.
Failure to pay the consideration is different from lack of consideration. The former results in a
right to demand the fulfillment or cancellation of the obligation under an existing valid
contract  while the latter prevents the existence of a valid contract
26

Where the deed of sale states that the purchase price has been paid but in fact has never been
paid, the deed of sale is null and void ab initio for lack of consideration. This has been the well-
settled rule as early as Ocejo Perez & Co. v. Flores,  a 1920 case. As subsequently explained
27

in Mapalo v. Mapalo  –28

"In our view, therefore, the ruling of this Court in Ocejo Perez & Co. vs. Flores, 40 Phil. 921, is
squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and
void and produces no effect whatsoever where the same is without cause or consideration in that
the purchase price which appears thereon as paid has in fact never been paid by the purchaser to
the vendor."

Applying this well-entrenched doctrine to the instant case, we rule that Montecillo’s Deed of
Sale is null and void ab initio for lack of consideration.

Montecillo asserts that the only issue in controversy is "the mode and/or manner of payment
and/or whether or not payment has been made."  Montecillo implies that the mode or manner of
30

payment is separate from the consideration and does not affect the validity of the contract. In the
recent case of San Miguel Properties Philippines, Inc. v. Huang,  we ruled that –"In Navarro v.
31

Sugar Producers Cooperative Marketing Association, Inc. (1 SCRA 1181 [1961]), we laid down
the rule that the manner of payment of the purchase price is an essential element before a valid
and binding contract of sale can exist. Although the Civil Code does not expressly state that the
minds of the parties must also meet on the terms or manner of payment of the price, the same is
needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244 SCRA
320 [1995]), agreement on the manner of payment goes into the price such that a disagreement
on the manner of payment is tantamount to a failure to agree on the price." (Emphasis supplied)

One of the three essential requisites of a valid contract is consent of the parties on the object and
cause of the contract. In a contract of sale, the parties must agree not only on the price, but also
on the manner of payment of the price. An agreement on the price but a disagreement on the
manner of its payment will not result in consent, thus preventing the existence of a valid contract
for lack of consent. This lack of consent is separate and distinct from lack of consideration where
the contract states that the price has been paid when in fact it has never been paid.

Reynes expected Montecillo to pay him directly the P47,000.00 purchase price within one month
after the signing of the Deed of Sale. On the other hand, Montecillo thought that his agreement
with Reynes required him to pay the P47,000.00 purchase price to Cebu Ice Storage to settle
Jayag’s mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in favor of
Reynes although this amount is not stated in Montecillo’s Deed of Sale. Thus, there was no
consent, or meeting of the minds, between Reynes and Montecillo on the manner of payment.
This prevented the existence of a valid contract because of lack of consent.

In summary, Montecillo’s Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of
Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot
from Reynes to Montecillo.

          Price must be in money or equivalent (1458)

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.

A contract of sale may be absolute or conditional. (1445a)

          Price must be certain or ascertainable

                  How determined                 

                                     i)          By a third person (1469)

Art. 1469. In order that the price may be considered certain, it shall be sufficient that it be so
with reference to another thing certain, or that the determination thereof be left to the judgment
of a special person or persons.

Should such person or persons be unable or unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently agree upon the price.

If the third person or persons acted in bad faith or by mistake, the courts may fix the price.

Where such third person or persons are prevented from fixing the price or terms by fault of the
seller or the buyer, the party not in fault may have such remedies against the party in fault as
are allowed the seller or the buyer, as the case may be. (1447a)

ii)        By the courts (1469)

iii)       By reference (1472)

Art. 1472. The price of securities, grain, liquids, and other things shall also be considered
certain, when the price fixed is that which the thing sold would have on a definite day, or in a
particular exchange or market, or when an amount is fixed above or below the price on such
day, or in such exchange or market, provided said amount be certain. (1448)

iv)       By one of the parties (1473)

Art. 1473. The fixing of the price can never be left to the discretion of one of the contracting
parties. However, if the price fixed by one of the parties is accepted by the other, the sale is
perfected. (1449a)
 

          Effect of indeterminability (1474)

Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or
in any other manner, the contract is inefficacious. However, if the thing or any part thereof has
been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What
is a reasonable price is a question of fact dependent on the circumstances of each particular
case. (n)

GR: where price cannot be determined, contract is inefficacious or one that does produce the
desired effect.

EXC: if the thing or any part thereof has been delivered to and appropriated by the buyer, he
must pay a reasonable price therefor.

          Effect of inadequacy of price (1470)

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

B.    Natural Elements

Concept: those which exist in certain contracts, in the absence of any contrary stipulations, eg

1.     warranty against eviction

2.     warranty against hidden defects

 
Vs. Accidental elements: those which may be present or absent depending on the stipulations of
the parties, eg

1.     conditions

2.     interest

3.     penalty

4.     time of payment

5.     place of payment

RFBT 3
CONDITIONS AND WARRANTIES

Arts. 1545-1547

I. Conditions (see 1179 et seq.)

Please review your RFBT 1 on Conditional Obligations.

Condition  is an uncertain event or contingency on the happening of which the obligation of the
contract depends.

1. Suspensive  is an uncertain event upon the happening of which the obligation (or right) subject
to it becomes demandable.
2. Resolutory  is an uncertain event upon the happening of which the obligation (or right) subject
to it is extinguished.

A. Effect of non-fulfillment of condition (1545)

Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is
not performed, such party may refuse to proceed with the contract or he may waive performance of the
condition. If the other party has promised that the condition should happen or be performed, such first
mentioned party may also treat the nonperformance of the condition as a breach of warranty.

Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as warranted expressly or by implication in the contract
of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the
thing.

A. If the obligation of either party is subject to any condition and such condition is not fulfilled, such
party may either:
1) refuse to proceed with the contract; or
2) proceed with the contract, waiving the performance of the condition.

B. 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.

II. Warranties; Kinds

Warranty  is any representation made by the seller of thing with respect to its character, quality, or
ownership, by which he induces the buyer to purchase the same relying on said representation.

1. Express warranty  is any affirmation of fact or any promise by the seller relating to the thing,
the natural tendency of which is to induce the buyer to purchase the thing, and the buyer thus
induced, does purchase the same.
2. Implied warranty  is that by which the law derives from implication or inference from the nature
of the transaction or the relative situation or circumstances of the parties, irrespective of any
intention of the seller to create it.
 A. Express (1546, 1st sentence)

Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty
if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if
the buyer purchase the thing relying thereon. xxx

B. Implied (1547, 1562)

Art. 1547. In a contract of sale, unless a contrary intention appears, there is:

(1) An 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;

(2) An 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.

This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or
other person professing to sell by virtue of authority in fact or law, for the sale of a thing in
which a third person has a legal or equitable interest.

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the
goods, as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose;

(2) Where the goods are brought by description from a seller who deals in goods of that description
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be
of merchantable quality.

INSTANCES WHERE IMPLIED WARRANTY IS NOT APPLICABLE:

1. “As is and where is” Sale – where the Vendor makes no warranty as to the quality or workable
condition of the goods, and the Vendee takes them in the condition in which they are found and from
the place where they are located.
2. Sale of second-hand articles (Note: But there may be express warranty in this instance.)
3. Sale by virtue of authority in fact or law (Article 1547, last par.)
 Caveat emptor  Let the buyer beware.
 This doctrine applies when one who buys real property without checking the vendor’s title
where persons other than the vendor are in possession takes all the risks and losses
consequent to such failure in case the vendor’s title is defective.
 This also applies to execution sales since the sheriff does not warrant the title to real
property sold by him as sheriff and it is not incumbent upon him to place the purchaser in
possession of such property.

a. Effect of seller’s opinion (1546, 2nd sentence)

Art. 1546. xxx. No affirmation of the value of the thing, nor any statement purporting to be a statement
of the seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or
statement as an expert and it was relied upon by the buyer.

1.) WARRANTY IN CASE OF EVICTION

Arts. 1548-1559

I. Requisites of warranty:

A. Eviction of the buyer (1548)

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an
act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on the
subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor.

Eviction  is the judicial process whereby the vendee is deprived of the whole or part of the thing
purchased by virtue of a final judgment based on a right prior to the sale or an act imputable to the
vendor.

ESSENTIAL ELEMENTS:

1. The vendee is deprived in whole or in part of the thing purchased.

 Disturbance in law  requires that a person go to the courts of justice claiming the thing sold, or
part thereof, and giving reasons.

 -vs- Mere trespass in fact  when the trespasser claims no right whatsoever.

2. He is so deprived by virtue of a final judgment.

Art. 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.

Art. 1549. The vendee need not appeal from the decision in order that the vendor may become liable for
eviction.

3. The judgment is based on a right prior to the sale or an act imputable to the vendor.

Art. 1550. When adverse possession had been commenced before the sale but the prescriptive period is
completed after the transfer, the vendor shall not be liable for eviction.

Art. 1551. If the property is sold for non-payment of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction.

4. The vendor was summoned in the suit for eviction at the instances of the vendee.
5. There is no waiver on the part of the vendee.

Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise
decreed in the judgment.

B. No express waiver (1554)

Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take
place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the
vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the
vendor shall not be liable.

KINDS OF WAIVER:

1. Consciente  the waiver is voluntarily made by the vendee without the knowledge and assumption
of the risks of eviction.
2. Intencionada  the waiver is made by the vendee with knowledge of the risk of eviction and
assumption of its consequences.
 C. Seller duly summoned (1558, 1559)

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee.

PURPOSE OF SUMMON: To give him an opportunity to show that the action interposed against the
vendee is unjust and to defend his title that he has transferred.

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the
complaint, that the vendor be made a co-defendant.

II. Effect of warranty (1555)

Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case
eviction occurs, the vendee shall have the right to demand of the vendor:

(1) The return of the value which the thing sold had at the time of the eviction, be it greater/less than
the price of sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit
against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought
against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.

A. If the seller is in good faith

 Value, Income/fruits, Costs of suit, and Expenses of contract (VICE)

B. If the seller is in bad faith

 Value, Income/fruits, Costs of suit, and Expenses of contract (VICE)

 PLUS Damages, Interests, and Ornamental expenses (+DIO)

C. Effect of loss of an important part (1556)

Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance,
in relation to the whole, that he would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the thing without other encumbrances than
those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the vendor's liability for eviction.

The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a
separate price for each of them, if it should clearly appear that the vendee would not have purchased
one without the other.

D. Obligation of the vendee

 to return the thing w/o other encumbrances than those which it had when he acquired it.

III. Waiver of warranty

A. Must be express
a. Effect if made with knowledge of risk (1554, supra.)
 vendor shall not be liable.

b. Effect if made without knowledge of risk (1554, supra.)

 vendor shall only pay the value which the thing sold had at the time of the eviction

B. Effect if seller is in bad faith (1553)

Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void,
if he acted in bad faith.

2.) WARRANTY AGAINST HIDDEN DEFECT OF OR ENCUMBRANCES UPON THE THING SOLD

Arts. 1561-1571

I. Warranty against hidden defects

A. Requisites

a. Serious (1561)

b. Not visible (1561)

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold
may have, should they render it unfit for the use for which it is intended, or should they diminish 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; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known them.

c. Not known to buyer

d. Existed prior to the sale

e. Notified to seller

f. Action must be within 6 months or 40 days

g. No stipulation against warranty has been agreed

ESSENTIAL ELEMENTS:

1. The defect must be important or serious.

a. if it renders the thing sold unfit for the use for which it is intended; or
b. if it diminishes its fitness for such use to such an extent that the vendee would not have acquired
it had he been aware thereof or would have given a lower price for it.
2. It must be hidden or latent.
Latent defect  if it was not known and could not have been known to the vendee. Defect of such
character that inspection will reveal not it.
-vs- Patent defect  Defect of such character that inspection will reveal it.
3. It must exist at the time of the sale.
4. The vendee must give notice of the defect to the vendor within a reasonable time.
5. The actions for rescission or reduction of the price must be brought within the proper period.
a. 6 months from the delivery of the thing sold
b. 40 days from the date of delivery in case of animals

B. Vice need not be known to vendor (1566)

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the
hidden faults or defects in the thing sold.

The ignorance of the vendor does not relieve him from liability to the vendee for any hidden faults or
defects in the thing sold. Good faith cannot be availed of as a defense by the vendor. However, the
parties may provide otherwise in their contract provided the vendor acted in good faith, that is, he was
unaware of the existence of the hidden fault or defect.
Caveat venditor  Let the seller beware.

 This doctrine is adopted in accordance with which the vendor is liable to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware thereof.

C. Effects of warranty

a. Options of vendee (1567)

Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages in
either case.

1. Accion redhibitoria  is the remedy chosen by the buyer to enforce the vendor’s warranty
against hidden defects resulting in the withdrawal from the contract.

2. Accion quanti minoris  is the remedy chosen by the buyer to enforce the vendor’s warranty
against hidden defects resulting in the proportionate reduction of the price.

1561: Requisites for warranty against hidden defects

1562: Implied warranties of quality – Fitness and Merchantability

1564: Warranty of fitness may be annexed by usage of trade

1565: Merchantability of goods sold by sample

1566: Effect of ignorance of vendor of hidden defects

b. Rule if the thing is lost (1568)

Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware
of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the
contract, with damages. If he was not aware of them, he shall only return the price and interest thereon,
and reimburse the expenses of the contract which the vendee might have paid.

1. If the vendor is aware

 he shall bear the loss, and shall be obliged to return the price and refund the
expenses of the contract, with damages. (LPED)

2. If the vendor is not aware

 he shall only return the price and interest thereon, and reimburse the expenses
of the contract which the vendee might have paid. (PIE)

c. Rule if the thing is lost by fortuitous event (1569)

Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by
a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price
which he paid, less the value which the thing had when it was lost.

If the vendor acted in bad faith, he shall pay damages to the vendee.

1. If vendor is in good faith  price LESS value at the time of loss

2. If vendor is in bad faith  damages
Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the
judgment debtor shall not be liable for damages.

Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six
months, from the delivery of the thing sold.

Arts. 1572-1581

I. Warranty against hidden vices of animals

Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for
each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the
others; unless it should appear that the vendee would not have purchased the sound animal or animals
without the defective one.

The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has
been fixed for each one of the animals composing the same.

Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner
be applicable to the sale of other things.

Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should
be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered
as redhibitory.

But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be
liable for damages.
Redhibitory vice or defect  is a defect in the article sold against which the seller is bound to warrant.

Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty
days from the date of their delivery to the vendee. This action can only be exercised with respect to
faults and defects which are determined by law or by local customs.

A. When no warranty exists (1574)

Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of
live stock sold as condemned.

B. When sale of animals is void (1575)

Art. 1575. The sale of animals suffering from contagious diseases shall be void.

A contract of sale of animals shall also be void if the use or service for which they are acquired has been
stated in the contract, and they are found to be unfit therefor.

C. When redhibitory vice is presumed (1578)

Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the
disease which cause the death existed at the time of the contract.

D. Effects of warranty (1579)

Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and
delivered, the vendee being answerable for any injury due to his negligence, and not arising from the
redhibitory fault or defect.

a. Options of the vendee (1580)

Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned
in article 1567; but he must make use thereof within the same period which has been fixed for the
exercise of the redhibitory action.
Art. 1560

II. Warranty against hidden encumbrance (1560, par. 1)

Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not
mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should
prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude
is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all
burdens and encumbrances.

ESSENTIAL ELEMENTS:

1. The immovable sold should be encumbered with any non-apparent burden or servitude, not
mentioned in the agreement.
2. The nature of the non-apparent burden or servitude is such that it must be presumed that the vendee
would not have acquired it had he been aware there of.
3. Within the prescriptive period.

Servitude or easement  is an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner.

1. Apparent easement  those which are made known and are continually kept in view by external
signs that reveal the use and enjoyment of the same.
2. Non-apparent easement  those which shown no external indication of their existence.

EXAMPLES OF LEGAL EASEMENTS:

1. Easements relating to waters

2. Easement of right of way
3. Easement of party wall
4. Easement of light and view
5. Easement against nuisance

A. Requisites

a. Must be important

b. Is not recorded

c. Is claimed in due time (1586)

Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the
buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give
notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller shall not be liable therefor.
 B. Effects: Buyer’s action

a. Rescission or damages (1560, par. 2)

Within one year, to be computed from the execution of the deed, the vendee may bring the action for
rescission, or sue for damages.

b. Damages only (1560, par. 3)

One year having elapsed, he may only bring an action for damages within an equal period, to be counted
from the date on which he discovered the burden or servitude.

Rights of the vendee cannot be exercised:

1. if the burden or servitude is apparent, that is made known and is continually kept in view by
external signs that reveal the use and enjoyment of the same;
2. if the non-apparent burden or servitude is registered; or
3. if the vendee had knowledge of the encumbrance whether it is registered or not.

Registration of non-apparent burden or servitude in the Registry of Property operates as a constructive

notice to the vendee.

Action for rescission must be brought within one (1) year form the execution of the deed of sale.
Thereafter, the vendee may only bring an action for damages within one year from the date of the
discovery of the non-apparent burden or servitude.

3.) WARRANTY OF FITNESS OR MERCHANTABILITY (1562-1565)

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the
goods, as follows:

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall
be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals in goods of that description
(whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall
be of merchantable quality.
RESTATEMENT OF THE PROVISION:

 There is no implied warranty as to the quality or fitness for any particular purpose of goods under a
contract of sale, except as follows:

1. the buyer expressly or impliedly manifests to the seller the particular purpose for which the goods
are acquired
2. the buyer relies upon the seller’s skill or judgment whether he be the grower or manufacturer or
not, there is implied warranty

 Quality of goods refers to the state or condition of the goods.

 Merchantability is not a warranty of quality in the sense of requiring a particular grade, but it does
require identity between what is described in the contract and what is tendered.

Warranty of merchantability  is a warranty that the goods are reasonably fit for the general purpose
for which they are sold.

Warranty of fitness  is a warranty that the goods are suitable for the special purpose of the buyer
which will not satisfied by mere fitness for general purposes.

Art. 1563. In the case of contract of sale of a specified article under its patent or other trade name, there
is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary.

Art. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be
annexed by the usage of trade.

Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there
is an implied warranty that the goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the sample.
 OBLIGATIONS OF THE VENDOR

 The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of the sale. (1495)
 The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him
(actual or constructive) or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee. (1496)
a. Actual - The thing sold shall be understood as delivered, when it is placed in the control and
possession of the vendee. (1497)
b. Constructive
1. Execution of public instrument (1498)
2. Traditio symbolica – in case of movable property the delivery of the keys of the place or
depository where it is stored or kept.
a. Traditio longa manu - by the mere consent or agreement of the contracting parties, if the
thing sold cannot be transferred to the possession of the vendee at the time of the sale.
(1499) (pointing out the object)
3. Traditio brevi manu - if the vendor already in the possession of the object for any other
reason. (1499) A possessor of a thing not as an owner, becomes the possessor as owner
(i.e. Lessor sells the thing leased to the lessee)
b. Tradition constitutum possessorium. (1500) A possessor of a thing as an owner retains
possession no longer as an owner, but in some other capacity. This is the opposite of
tradition brevi manu. (i.e. A possessor vendor stay as tenant on the vendee)
 4. Quasi delivery or quasi tradition (1501)

 Sale or return or on approval (1502)

a. On sale or return - the ownership passes to the buyer of delivery, but he may revest
the ownership in the seller by returning or tendering the goods within the time fixed in the
contract, or, if no time has been fixed, within a reasonable time. (Resolutory condition)
b. Sale on Approval or on Trial or on Satisfaction, or other similar terms, the ownership do
not pass to the buyer except: (Suspensive condition)
1. When he signifies his approval or acceptance to the seller or does any other act adopting
the transaction;
2. If he does not signify his approval or acceptance to the seller, but retains the goods
without giving notice of rejection, then if a time has been fixed for the return of the goods,
on the expiration of such time, and, if no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact.

 General Rule: Ownership of the goods sold passes to the buyer upon their delivery to
the carrier
Exception: (1503)

a. The seller reserves the right of possession or ownership in the goods until certain
conditions have been fulfilled.
b. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller
or his agent, or to the order of the seller or of his agent. But, if except for the form of the bill
of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's
property in the goods shall be deemed to be only for the purpose of securing performance by
the buyer of his obligations under the contract.
c. Where goods are shipped, and by the bill of lading the goods are deliverable to order of
the buyer or of his agent, but possession of the bill of lading is retained by the seller
or his agent.
d. Where the seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or payment of
the bill of exchange (Title is retained until the bill of exchange is paid), the buyer is bound
to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein,
one who purchases in good faith (acquire ownership), for value, the bill of lading, or
goods from the buyer will obtain the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods, without notice of the facts making
the transfer wrongful.

 General Rule: Where goods are sold by a person who is not the owner thereof, and who does not
sell them under authority or with the consent of the owner, the buyer acquires no better title
to the goods than the seller had (1505)
Exception:

a. The owner of the goods is by his conduct precluded from denying the seller's authority to sell.
(Estoppel)
b. The provisions of any factors' act, recording laws, or any other provision of law enabling
the apparent owner of goods to dispose of them as if he were the true owner thereof;
c. The validity of any contract of sale under statutory power of sale or under the order of a
court of competent jurisdiction;
 Art. 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same.

If the possessor of a movable lost or which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

d. Purchases made in a merchant's store, or in fairs, or markets, in accordance with the

Code of Commerce and special laws.
e. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the goods, provided he buys them in good
faith, for value, and without notice of the seller's defect of title. (1506)
f. Where the seller subsequently acquires title

 Negotiable document of title – a document of title in which it is stated that the goods referred
therein will be delivered to the bearer or to the order of any person named in such document.
 Non-negotiable Document of Title – a document of title which does not state that the goods
referred to therein will be delivered either to bearer or to the order of any person named therein.

 Kinds of negotiable documents of title

1. bill of lading
2. dock warrant;
3. quedan;
4. warehouse receipts or order; and
5. any other document used as proof of possession or as authority to transfer the goods
represented by it.

 IMPLIED Warranties of the person who negotiates a document of title by indorsement or delivery
1. That the document is genuine;
2. That he has legal right to negotiate or transfer it;
3. That he has knowledge of no fact which would impair validity or worth of the document; and
4. That he has a right to transfer the title to the goods and that the goods are merchantable or
fit for particular purpose. (Art. 1516, CC)
 Unpaid seller:
1. When the whole of the price has not been paid or tendered; and
2. When a bill of exchange or other negotiable instrument has been received as a conditional
payment and the condition was broken by reason of dishonor, insolvency of the buyer or
otherwise. (Art. 1525, CC)

 The vendor is not bound to deliver the thing sold in case the vendee should lose the right
to make use of the terms as provided in Article 1198 (Debtor lose every right to make use of
the period) (Art. 1536, CC)
 The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in
which they were upon the perfection of the contract. (Art. 1537, CC)
 All the fruits shall pertain to the vendee from the day on which the contract was perfected.
a. No date stipulated for the delivery – From the perfection of the contract
b. Date stipulated – from the obligation to deliver arise.
 The rules in Article 1189 shall be observed in case of loss deterioration or improvement of the
thing before its delivery, the vendor being considered the debtor. (Art. 1538, CC)
 Sale of real estate
1. With statement of its area at the rate of a certain price for a unit of measure or
number
 The vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that
may have been stated in the contract; but, should this be not possible, the vendee may
choose between. (1539)

a. A proportional reduction of the price

b. Rescission of the contract
a. If the lack in area is at least 1/10 than that stated or stipulated (Applies to area
stated in the contract, not to the true or actual are)
b. If the deficiency in quality specified in the contract exceeds 1/10 of the price agreed
upon.
c. If the vendee would not have bought the immovable had he known of its smaller
area or inferior quality irrespective of the extent of the lack in area or quality.
2. Made for a lump sum and not at the rate of a certain sum for a unit of measure or
number or When two or more immovables as sold for a single price
There shall be no increase or decrease of the price, although there be a greater or less area or
number than that stated in the contract. (Reason: The parties ascertained its area and quality
before the contract was perfected)

3. When area or number stated together with boundaries

The vendor shall be bound to deliver all that is included within said boundaries, even when it
exceeds the area or number specified in the contract; and, should he not be able to do so,

a. Reduction in the price, in proportion to what is lacking in the area or number,

b. Contract is rescinded because the vendee does not accede to the failure to deliver what
has been stipulated. (1542)

Nota bene: The actions for recission or reduction in price shall prescribe in six months, counted
from the day of delivery

 If there is a greater area or number in the immovable than that stated in the contract, the vendee
may accept the area included in the contract and reject the rest. If he accepts the whole area, he
must pay for the same at the contract rate. (1540)
 Requisites of Double Sales
a. The two (or more) sales transactions must constitute valid sales.
b. The two (or more) sales transactions must pertain to exactly the same subject matter.
c. The two (or more) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests.
d. The two (or more) buyers at odds over the rightful ownership of the subject matter must each
have bought from the very same seller.

 Rules of preference in case of double sale (1544)

1. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
2. Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
3. Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and in the absence thereof, to the person who presents the oldest title,
provided there is good faith. (Art 1544, CC)
 OBLIGATIONS OF THE VENDOR

 The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing
which is the object of the sale. (1495)
 The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him
(actual or constructive) or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee. (1496)
c. Actual - The thing sold shall be understood as delivered, when it is placed in the control and
possession of the vendee. (1497)
d. Constructive
5. Execution of public instrument (1498)
6. Traditio symbolica – in case of movable property the delivery of the keys of the place or
depository where it is stored or kept.
c. Traditio longa manu - by the mere consent or agreement of the contracting parties, if the
thing sold cannot be transferred to the possession of the vendee at the time of the sale.
(1499) (pointing out the object)
7. Traditio brevi manu - if the vendor already in the possession of the object for any other
reason. (1499) A possessor of a thing not as an owner, becomes the possessor as owner
 (i.e. Lessor sells the thing leased to the lessee)
d. Tradition constitutum possessorium. (1500) A possessor of a thing as an owner retains
possession no longer as an owner, but in some other capacity. This is the opposite of
tradition brevi manu. (i.e. A possessor vendor stay as tenant on the vendee)
8. Quasi delivery or quasi tradition (1501)

 Sale or return or on approval (1502)

c. On sale or return - the ownership passes to the buyer of delivery, but he may revest
the ownership in the seller by returning or tendering the goods within the time fixed in the
contract, or, if no time has been fixed, within a reasonable time. (Resolutory condition)
d. Sale on Approval or on Trial or on Satisfaction, or other similar terms, the ownership do
not pass to the buyer except: (Suspensive condition)
3. When he signifies his approval or acceptance to the seller or does any other act adopting
the transaction;
4. If he does not signify his approval or acceptance to the seller, but retains the goods
without giving notice of rejection, then if a time has been fixed for the return of the goods,
on the expiration of such time, and, if no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact.

 General Rule: Ownership of the goods sold passes to the buyer upon their delivery to
the carrier
Exception: (1503)

e. The seller reserves the right of possession or ownership in the goods until certain
conditions have been fulfilled.
f. Where goods are shipped, and by the bill of lading the goods are deliverable to the seller
or his agent, or to the order of the seller or of his agent. But, if except for the form of the bill
of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's
property in the goods shall be deemed to be only for the purpose of securing performance by
the buyer of his obligations under the contract.
g. Where goods are shipped, and by the bill of lading the goods are deliverable to order of
the buyer or of his agent, but possession of the bill of lading is retained by the seller
or his agent.
h. Where the seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or payment of
the bill of exchange (Title is retained until the bill of exchange is paid), the buyer is bound
to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right thereby.
If, however, the bill of lading provides that the goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein,
one who purchases in good faith (acquire ownership), for value, the bill of lading, or
goods from the buyer will obtain the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods, without notice of the facts making
the transfer wrongful.

 General Rule: Where goods are sold by a person who is not the owner thereof, and who does not
sell them under authority or with the consent of the owner, the buyer acquires no better title
to the goods than the seller had (1505)
Exception:

g. The owner of the goods is by his conduct precluded from denying the seller's authority to sell.
(Estoppel)
h. The provisions of any factors' act, recording laws, or any other provision of law enabling
the apparent owner of goods to dispose of them as if he were the true owner thereof;
 i. The validity of any contract of sale under statutory power of sale or under the order of a
court of competent jurisdiction;
Art. 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same.

If the possessor of a movable lost or which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

j. Purchases made in a merchant's store, or in fairs, or markets, in accordance with the

Code of Commerce and special laws.
k. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the goods, provided he buys them in good
faith, for value, and without notice of the seller's defect of title. (1506)
l. Where the seller subsequently acquires title

 Negotiable document of title – a document of title in which it is stated that the goods referred
therein will be delivered to the bearer or to the order of any person named in such document.
 Non-negotiable Document of Title – a document of title which does not state that the goods
referred to therein will be delivered either to bearer or to the order of any person named therein.

 Kinds of negotiable documents of title

6. bill of lading
7. dock warrant;
8. quedan;
9. warehouse receipts or order; and
10. any other document used as proof of possession or as authority to transfer the goods
represented by it.

 IMPLIED Warranties of the person who negotiates a document of title by indorsement or delivery
5. That the document is genuine;
6. That he has legal right to negotiate or transfer it;
7. That he has knowledge of no fact which would impair validity or worth of the document; and
8. That he has a right to transfer the title to the goods and that the goods are merchantable or
fit for particular purpose. (Art. 1516, CC)
 Unpaid seller:
3. When the whole of the price has not been paid or tendered; and
4. When a bill of exchange or other negotiable instrument has been received as a conditional
payment and the condition was broken by reason of dishonor, insolvency of the buyer or
otherwise. (Art. 1525, CC)

 The vendor is not bound to deliver the thing sold in case the vendee should lose the right
to make use of the terms as provided in Article 1198 (Debtor lose every right to make use of
the period) (Art. 1536, CC)
 The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in
which they were upon the perfection of the contract. (Art. 1537, CC)
 All the fruits shall pertain to the vendee from the day on which the contract was perfected.
c. No date stipulated for the delivery – From the perfection of the contract
d. Date stipulated – from the obligation to deliver arise.
 The rules in Article 1189 shall be observed in case of loss deterioration or improvement of the
thing before its delivery, the vendor being considered the debtor. (Art. 1538, CC)
 Sale of real estate
 4. With statement of its area at the rate of a certain price for a unit of measure or
number
The vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that
may have been stated in the contract; but, should this be not possible, the vendee may
choose between. (1539)

c. A proportional reduction of the price

d. Rescission of the contract
d. If the lack in area is at least 1/10 than that stated or stipulated (Applies to area
stated in the contract, not to the true or actual are)
e. If the deficiency in quality specified in the contract exceeds 1/10 of the price agreed
upon.
f. If the vendee would not have bought the immovable had he known of its smaller
area or inferior quality irrespective of the extent of the lack in area or quality.
5. Made for a lump sum and not at the rate of a certain sum for a unit of measure or
number or When two or more immovables as sold for a single price
There shall be no increase or decrease of the price, although there be a greater or less area or
number than that stated in the contract. (Reason: The parties ascertained its area and quality
before the contract was perfected)

6. When area or number stated together with boundaries

The vendor shall be bound to deliver all that is included within said boundaries, even when it
exceeds the area or number specified in the contract; and, should he not be able to do so,

c. Reduction in the price, in proportion to what is lacking in the area or number,

d. Contract is rescinded because the vendee does not accede to the failure to deliver what
has been stipulated. (1542)

Nota bene: The actions for recission or reduction in price shall prescribe in six months, counted
from the day of delivery

 If there is a greater area or number in the immovable than that stated in the contract, the vendee
may accept the area included in the contract and reject the rest. If he accepts the whole area, he
must pay for the same at the contract rate. (1540)
 Requisites of Double Sales
e. The two (or more) sales transactions must constitute valid sales.
f. The two (or more) sales transactions must pertain to exactly the same subject matter.
g. The two (or more) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests.
h. The two (or more) buyers at odds over the rightful ownership of the subject matter must each
have bought from the very same seller.

 Rules of preference in case of double sale (1544)

4. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
5. Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
6. Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and in the absence thereof, to the person who presents the oldest title,
provided there is good faith. (Art 1544, CC)